Exhibit 2.1
Execution Copy
PURCHASE AGREEMENT
AMONG
ROYAL NUMICO N.V.,
NUMICO USA, INC.
AND
NBTY, INC.
DATED AS OF JUNE 9, 2003
TABLE OF CONTENTS
Page
----
Article 1 SALE OF INTERESTS AND PURCHASED ASSETS; CLOSING 1
1.01 Purchase and Sale 1
1.02 Purchase Price 1
1.03 Closing 2
1.04 Post-Closing Purchase Price Adjustment 2
1.05 Purchase Price Allocation 4
Article 2 REPRESENTATIONS AND WARRANTIES OF SELLER 4
2.01 Organization of Seller 4
2.02 Authority 4
2.03 Organization of the Company 5
2.04 Interests 5
2.05 Subsidiaries 5
2.06 Noncontravention 6
2.07 Title to Tangible Assets 7
2.08 Brokers' Fees 7
2.09 Audited Financial Statements 7
2.10 Absence of Certain Material Developments 7
2.11 Undisclosed Liabilities 8
2.12 Legal Compliance 8
2.13 Tax Matters 9
2.14 Real Property 9
2.15 Intellectual Property 10
2.16 Tangible Assets 11
2.17 Contracts 11
2.18 Accounts Receivable 12
2.19 Powers of Attorney 12
2.20 Insurance 12
2.21 Litigation 13
2.22 Employees 13
2.23 Employee Benefits 13
2.24 Environmental Laws 15
2.25 Certain Business Relationships With Seller 15
i
TABLE OF CONTENTS
(CONT'D)
Page
----
2.26 Customers 15
2.27 Inventory 16
2.28 Transferees 17
2.29 Disclosure 17
Article 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER 17
3.01 Organization and Power 17
3.02 Authority 17
3.03 No Breach 17
3.04 Governmental Consents, etc 17
3.05 Litigation 18
3.06 Broker's Fees 18
3.07 Investment Representation 18
3.08 Financing 18
3.09 No Knowledge of Misrepresentations or Omissions 18
3.10 Solvency 19
Article 4 SELLER PRE-CLOSING COVENANTS 19
4.01 General 19
4.02 Notices and Consents 19
4.03 Operation and Preservation of Business 20
4.04 Access 22
4.05 Restructuring 22
4.06 Notice and Cure 23
4.07 Regulatory Filings 23
4.08 Exclusive Dealing 23
4.09 Interim Financial Statements 23
4.10 Documentation Relating to Affiliate Intellectual Property 24
Article 5 PURCHASER'S PRE-CLOSING COVENANTS 24
5.01 General 24
5.02 Regulatory Filings 24
5.03 Contact with Customers and Suppliers 24
5.04 Purchaser's Solvency 24
5.05 Acknowledgment by Purchaser 24
ii
TABLE OF CONTENTS
(CONT'D)
Page
----
5.06 Notification 25
5.07 Disclosure Generally 25
5.08 Nonsolicitation 25
Article 6 POST-CLOSING COVENANTS 26
6.01 General 26
6.02 Covenant Not to Compete 26
6.03 Payment Obligations 27
6.04 Certain Activities 27
6.05 Patent Action 27
6.06 European Inventory 28
6.07 Seller Payment Obligations 28
6.08 Name Change 29
6.09 Direct Sales 29
6.10 Extran Professional 29
Article 7 CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE 29
7.01 Representations and Warranties 29
7.02 Performance 30
7.03 Third Party Consents 30
7.04 No Litigation 30
7.05 Officer's Certificate 30
7.06 Governmental Consents 30
7.07 Opinions of Counsels 31
7.08 Resignations of Directors and Officers 31
7.09 Ancillary Agreements 31
7.10 Other Actions 31
Article 8 CONDITIONS TO SELLER'S OBLIGATION 31
8.01 Representations and Warranties 31
8.02 Performance 31
8.03 Litigation 32
8.04 Officer's Certificate 32
8.05 Governmental Consents 32
8.06 Opinions of Counsels 32
iii
TABLE OF CONTENTS
(CONT'D)
Page
----
8.07 Guarantees 32
8.08 Third Party Consents 32
8.09 Sales Persons 32
8.10 Other Actions 33
Article 9 INDEMNIFICATION 33
9.01 Indemnification by Seller 33
9.02 Indemnification by Purchaser 35
9.03 Method of Asserting Claims 36
9.04 Adjustments 39
9.05 Arbitration Procedure 39
9.06 Remedies 41
9.07 Joint and Several Liability 41
9.08 Investigation 41
Article 10 TAX MATTERS 42
10.01 Tax Indemnity 42
10.02 Tax Contests 43
10.03 Payments for Certain Adjustments 44
10.04 Refunds 44
10.05 Cooperation and Exchange of Information 45
Article 11 TERMINATION 45
11.01 Termination 45
11.02 Effect of Termination 46
11.03 Break-Up Fee 46
Article 12 DEFINITIONS 46
12.01 Definitions 46
12.02 Cross-Reference of Other Definitions 52
Article 13 ADDITIONAL POST-CLOSING COVENANTS 54
13.01 Employee Benefit Matters 54
13.02 Excluded Litigation 55
13.03 Benefits Relating to Amended and Restated 2000 Management
Stock Purchase Plan and Other Employee Benefit Plans 56
13.04 Retention, Severance, Stock Purchase Plan
and Incentive Plans 57
iv
TABLE OF CONTENTS
(CONT'D)
Page
----
Article 14 MISCELLANEOUS 58
14.01 No Assignment; Binding Effect 58
14.02 Headings 59
14.03 Press Releases and Communications 59
14.04 No Third-Party Beneficiaries 59
14.05 Entire Agreement 59
14.06 Counterparts 59
14.07 Notices 59
14.08 Governing Law; Venue 60
14.09 Amendments and Waivers 61
14.10 Severability 61
14.11 Expenses 61
14.12 Construction 61
14.13 Incorporation of Exhibits, Annexes and Schedules 61
14.14 Governing Language 62
Exhibit A - Intentionally Omitted
Exhibit B - Required Consents for Company and Subsidiaries
Exhibits C 1-3 - Forms of Opinions of Seller's Counsels
Exhibits D 1-2 - Forms of Opinions of Purchaser's Counsels
Exhibit E - Company Accounting Policies
Disclosure Schedule - Exceptions to Seller's Representations and
Warranties, and Other Information
v
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") dated as of June 9, 2003
is made and entered into by and among NBTY, Inc., a Delaware corporation
("Purchaser"), ROYAL NUMICO N.V., a company organized under the laws of The
Netherlands ("Royal Numico") and NUMICO USA, INC., a Delaware corporation
(hereinafter referred to as "Numico USA" or "Seller"). Capitalized terms
not otherwise defined herein have the meanings set forth in Section 12.01.
WHEREAS, Seller owns all the sole membership interest in Rexall US
Newco 1 LLC, a Delaware limited liability company ("Newco 1 LLC"), and a
partnership interest in Rexall US Newco DGP 1, a Delaware general
partnership ("Newco DGP 1"), of which Newco 1 LLC is the only other partner
(such limited liability company and the partnership being referred to
together as the "Company", and such interests being referred to herein as
the "Interests"); and
WHEREAS, Seller desires to sell, and Purchaser desires to purchase,
the Interests and certain Intellectual Property owned by Numico Financial
Services, S.A., a Swiss corporation ("NFS"), and certain other Affiliates
of Seller on the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, the parties contemplate that prior to consummation of such
sale and purchase the Company's Subsidiaries will undergo an internal
reorganization as described in Section 4.05 of the Disclosure Schedule;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
SALE OF INTERESTS AND PURCHASED ASSETS; CLOSING
1.01 Purchase and Sale. On the terms and subject to the conditions
set forth in this Agreement, at the Closing, (a) Seller agrees to sell to
Purchaser, and Purchaser agrees to purchase from Seller, all of the right,
title and interest of Seller in and to the Interests, and (b) Seller agrees
to cause NFS and the appropriate Affiliates of Seller (collectively with
NFS, referred to herein individually as an "Affiliate Seller" and
collectively as the "Affiliate Sellers") to sell to Purchaser, and
Purchaser agrees to purchase from the Affiliate Sellers, all of the
respective right, title and interest of the relevant Affiliate Seller in
the Intellectual Property described in Sections 2.15(a)(i)(A) and (B) of
the Disclosure Schedule as being owned by NFS or any other Affiliate of
Seller other than the Company and the Subsidiaries (the "Affiliate
Intellectual Property").
1.02 Purchase Price. Subject to adjustment pursuant to Section
1.04, the aggregate purchase price for the Interests and the Affiliate
Intellectual Property is Two Hundred Fifty Million Dollars ($250,000,000)
(the "Purchase Price"), payable in immediately available United States
funds at the Closing in the manner provided in Section 1.03.
1.03 Closing. The Closing will take place at the offices of Vedder,
Price, Kaufman & Kammholz, 805 Third Avenue, New York, New York 10022, or
at such other place as Purchaser and Seller mutually agree, at 10:00 A.M.
local time, on the Closing Date. At the Closing, Purchaser will pay the
Purchase Price by wire transfer of immediately available funds to such
account as Seller directs by written notice delivered to Purchaser by
Seller at least two (2) Business Days before the Closing Date.
Simultaneously, Seller will assign and transfer, and will cause each
Affiliate Seller to assign and transfer, to Purchaser all of Seller's and
such Affiliate Seller's right, title and interest in and to the Interests
and such Affiliate Seller's Affiliate Intellectual Property, respectively,
by delivering to Purchaser such duly executed instruments of conveyance,
assignment and transfer, in form and substance reasonably satisfactory to
Purchaser, as shall be effective to vest in Purchaser good title, free and
clear of all Liens (other than Liens arising through Purchaser, and the
terms and conditions of the LLC Agreement and the GP Agreement), to the
Interests and such Affiliate Intellectual Property. At the Closing, there
shall also be delivered to Seller and Purchaser the opinions, certificates
and other Contracts, documents and instruments to be delivered under
Articles 7 and 8.
1.04 Post-Closing Purchase Price Adjustment.
(a) As soon as practicable, but in no event later than thirty
(30) Business Days after the Closing Date, Purchaser shall deliver to
Seller a schedule (the "Adjustment Schedule") setting forth (i) the
Working Capital Assets (as defined below) and the Working Capital
Liabilities (as defined below), in each case as of the opening of
business on the Closing Date ("Closing Date Working Capital Amount"),
and (ii) the amount by which the Purchase Price should be adjusted
(A) upward to the extent that the Closing Date Working Capital Amount
is greater than the WC Target and (B) downward to the extent that the
Closing Date Working Capital Amount is less than the WC Target (such
upward or downward adjustment is hereinafter referred to as the
"Adjustment Amount Due"). The Adjustment Amount Due shall equal
$0.00 if the Closing Date Working Capital Amount is equal to the WC
Target. For purposes of this Agreement, the "WC Target" is Eighty-
Three Million Dollars ($83,000,000). Seller shall cooperate
reasonably with Purchaser and its Representatives in order to
facilitate preparation of the Adjustment Schedule and determination
of the Adjustment Amount Due, and Seller and its Representatives
shall have the right to perform reasonable procedures necessary to
verify the accuracy thereof.
(b) At any time and from time to time after receipt of the
Adjustment Schedule, Seller may request, and Purchaser shall provide
upon reasonable notice, reasonable access during normal business
hours to the information, data and work papers used to prepare the
Adjustment Schedule and to calculate the Adjustment Amount Due and
will make its personnel and accountants reasonably available to
explain any information, data or work papers used to prepare the
Adjustment Schedule and to calculate the Adjustment Amount Due.
Seller may notify Purchaser in writing within thirty (30) Business
Days following delivery of the Adjustment Schedule (the "Dispute
Period") that (i) Seller agrees with the Adjustment Schedule and the
Adjustment Amount Due (an "Approval Notice") or (ii) Seller disagrees
with such calculations, identifying with reasonable specificity the
items with which Seller disagrees (a "Dispute Notice"). Upon receipt
by Purchaser of a Dispute Notice, Purchaser and Purchaser's
2
accountants, on the one hand, and Seller and Seller's accountants, on
the other hand, will use good faith efforts during the twenty
Business Day period following the date of Purchaser's receipt of a
Dispute Notice (the "Resolution Period") to resolve any differences
they may have as to the calculations of the Adjustment Schedule
and/or the Adjustment Amount Due. If Purchaser and Seller cannot
reach written agreement during the Resolution Period, within five (5)
Business Days thereafter, their disagreements, limited to only those
issues still in dispute ("Remaining Disputes"), shall be promptly
submitted to Deloitte & Touche (the "Independent Accountant"), which
firm shall conduct such additional review as is necessary to resolve
the specific Remaining Disputes referred to it. Seller and Purchaser
will cooperate fully with the Independent Accountant to facilitate
its resolution of the Remaining Disputes, including by providing the
information, data and work papers used by each party to calculate the
Adjustment Amount Due and the Remaining Disputes, and making its
personnel and accountants available to explain any such information,
data or work papers. Based upon such review and other information,
the Independent Accountant shall determine the Closing Date Working
Capital Amount and the Adjustment Amount Due strictly in accordance
with the terms of this Section 1.04 and the Company Accounting
Policies (the "Independent Accountant Determination"). Such
determination shall be completed as promptly as practicable but in no
event later than sixty (60) days following the submission of the
Remaining Disputes to the Independent Accountant and shall be
explained in reasonable detail and confirmed by the Independent
Accountant in writing to, and shall be final and binding on, Seller
and Purchaser for purposes of this Section 1.04, except to correct
manifest clerical or mathematical errors.
(c) The fees and expenses of the Independent Accountant shall
be paid by the party whose calculation of the Adjustment Amount Due
as submitted to the Independent Accountant differs most from the
Independent Accountant Determination.
(d) On the fifth Business Day after the earlier of (i) the
receipt by Purchaser of an Approval Notice, (ii) the expiration of
the Dispute Period if Purchaser has not received an Approval Notice
or a Dispute Notice within such period, (iii) the resolution by
Seller and Purchaser of all differences regarding the Adjustment
Schedule and the Adjustment Amount Due within the Resolution Period
and (iv) the receipt of the Independent Accountant Determination,
Seller or Purchaser, as applicable, shall pay any Adjustment Amount
Due, plus interest calculated from the Closing Date through, but not
including, the date of such payment at the Interest Rate, by wire
transfer of immediately available funds without set-off or deduction
of any kind.
For purposes of this Section, the following defined terms have the
following meanings:
"Interest Rate" shall mean, on any date, a variable rate per
annum, equal to the rate of interest published from time to time by
the Wall Street Journal as the "prime rate" at large U.S. money
center banks.
"Working Capital Assets" shall mean the accounts receivable,
inventory and all other current assets (which shall include, among
other items, prepaid expenses) of the Company
3
and the Subsidiaries as of the opening of business on the Closing
Date, determined in accordance with the Company Accounting Policies,
except that the Investment Assets (to the extent otherwise included
in cash or cash equivalents) shall be the only cash or cash
equivalents included therein.
"Working Capital Liabilities" shall mean accounts payable,
accrued expenses, deferred revenue and all other current liabilities
of the Company and the Subsidiaries as of the opening of business on
the Closing Date, determined in accordance with Company Accounting
Policies.
1.05 Purchase Price Allocation. The Purchase Price shall be
allocated among the Interests and the Affiliate Intellectual Property, as
set forth on Schedule 1.05 (the "Allocation"). Each party to this
Agreement agrees that it will (a) be bound by the Allocation for the
purposes of determining any Taxes, (b) report the transactions consummated
pursuant to this Agreement in accordance with the Allocation, (c) timely
complete and file the statement required by IRS Form 8594 consistent with
such Allocation, and promptly after filing with the IRS, provide a copy of
such form to the other party hereto and file a copy of such form with its
federal Income Tax Returns for the period that includes the Closing Date,
and (d) not take a position inconsistent with the Allocation on any
applicable Tax Return in any proceeding before any Governmental Authority
except with the prior written consent of the other party(ies) hereto. In
the event that the Allocation is disputed by any Governmental Authority,
the party receiving notice of such dispute will promptly notify the other
party(ies) hereto and the parties hereto will consult in good faith how to
resolve such dispute in a manner consistent with the Allocation. The
parties agree and acknowledge that the Allocation was determined on an
arms'-length basis upon a good faith determination of the respective fair
market value of the Interests and the Affiliate Intellectual Property.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
2.01 Organization of Seller. Royal Numico is a company duly
organized, validly existing and in good standing under the Laws of The
Netherlands, and Seller is a corporation duly organized, validly existing
and in good standing under the Laws of the State of Delaware. Royal Numico
and Seller have the requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby.
2.02 Authority. The execution and delivery by Royal Numico and
Seller of this Agreement, and the performance by Royal Numico and Seller of
its obligations hereunder, have been duly and validly authorized by the
respective Supervisory Board and Board of Directors of Royal Numico and
Seller, no other corporate action on the part of Royal Numico or Seller or
their respective stockholders being necessary. This Agreement has been
duly executed and
4
delivered by Royal Numico and Seller and constitutes the valid and binding
obligations of Royal Numico and Seller enforceable against Royal Numico and
Seller in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally and except as
such enforceability of this Agreement is subject to the application of
general principles of equity (regardless of whether considered in a
proceeding in equity or at law).
2.03 Organization of the Company. Newco 1 LLC has been duly formed
and is validly existing in good standing as a limited liability company
under the Delaware Limited Liability Company Act (6 Del. C. '18-101, et
seq.) (the "LLC Act"), with all requisite limited liability company power
and authority under the LLC Act and the limited liability company agreement
of Newco 1 LLC (the "LLC Agreement") to own its Assets and to carry on its
business, all as described in the LLC Agreement. Newco DGP 1 has been duly
formed and is validly existing as a general partnership under the Delaware
Revised Uniform Partnership Act (6 Del. C. '15-101, et seq.) (the "GP
Act"), with all requisite partnership power and authority under the GP Act
and the partnership agreement of Newco DGP 1 (the "GP Agreement") to own
its Assets and to carry on its business, all as described in the GP
Agreement. The Company is duly qualified to do business and is in good
standing in each jurisdiction in which the ownership or leasing of its
Assets or the conduct of its business, makes such qualification necessary,
except for those jurisdictions in which all such failures by the Company to
be qualified would not have a Material Adverse Effect.
2.04 Interests. There are no membership or economic interests (as
defined in the LLC Act) in Newco 1 LLC other than the Interests. Under the
LLC Act and the LLC Agreement, Seller has been duly admitted to Newco 1 LLC
as the sole member of Newco 1 LLC. Under the GP Act and the GP Agreement,
Seller and Newco 1 LLC have been duly admitted to Newco DGP 1 as the only
partners of Newco DGP 1. Seller owns the Interests, beneficially and of
record, free and clear of all Liens, other than the restrictions on
transfer set forth in the LLC Agreement and the GP Agreement. The Interest
in Newco 1 LLC issued to Seller has been duly authorized and validly issued
by Newco 1 LLC and is a fully paid and nonassessable limited liability
company interest in Newco 1 LLC, except that Seller may be obligated to
make payments provided for in the LLC Agreement, to repay any funds
wrongfully distributed to it and may be liable for the tortious or wrongful
conduct of Newco 1 LLC. The Interest in Newco DGP 1 issued to Seller and
the partnership interest in Newco DGP 1 issued to Newco 1 LLC have been
duly authorized and validly issued. Except for this Agreement and as
disclosed in Section 2.04 of the Disclosure Schedule, there are (a) no
outstanding Options that have been issued by the Company, and (b) no
Contracts relating to any ownership or economic interest in the Company or
obligating the Company or Seller to issue, sell, redeem or otherwise
acquire any ownership or economic interest in the Company or any Option.
The delivery of instruments in the manner provided in Section 1.03 will
transfer to Purchaser good and valid title to the Interests, free and clear
of all Liens, other than Liens arising through Purchaser, and the terms and
conditions of the LLC Agreement and GP Agreement.
2.05 Subsidiaries. Section 2.05 of the Disclosure Schedule lists
the name of each Subsidiary and its principal business lines. Each
Subsidiary is a corporation, limited liability
5
company or partnership duly organized or formed, validly existing and, with
respect to each corporate and limited liability company Subsidiary, in good
standing under the Laws of its jurisdiction of incorporation or
organization identified in Section 2.05 of the Disclosure Schedule, and has
the requisite corporate, limited liability or partnership power and
authority to conduct its business as now conducted and to own and lease its
Assets. Each Subsidiary is duly qualified to do business and, with respect
to each corporate and limited liability company Subsidiary, is in good
standing in each jurisdiction in which the ownership or leasing of such
Subsidiary's Assets or the conduct of its business, makes such
qualification necessary, except for those jurisdictions in which the
adverse effects of all such failures to be so qualified by the Subsidiaries
would not have a Material Adverse Effect. Section 2.05 of the Disclosure
Schedule lists for each Subsidiary the amount of its authorized capital
stock, the amount of its outstanding capital stock and the record owners of
such outstanding capital stock (or in the case of non-corporate Persons
comparable capitalization information). Except as disclosed in Section
2.05 of the Disclosure Schedule, all of the outstanding shares of capital
stock of or membership, partnership and economic interests in each
Subsidiary have been duly authorized and, with respect to each corporate
Subsidiary, validly issued, and are fully paid and nonassessable, and are
owned, beneficially and of record, by the Company or Subsidiaries directly
or indirectly wholly owned by the Company, free and clear of all Liens.
Except as disclosed in Section 2.05 of the Disclosure Schedule, there are
(a) no outstanding Options that have been issued by any Subsidiary, or (b)
no Contracts obligating any Person to issue, sell, repurchase, redeem or
otherwise acquire any shares of any Subsidiary's capital stock or any
Option.
2.06 Noncontravention. Except as set forth in Section 2.06 of the
Disclosure Schedule, neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby or
performance of its obligations hereunder by Royal Numico or Seller, will
(a) violate any Law or Order to which Royal Numico, any Affiliate Seller,
Seller, the Company or any of the Subsidiaries is subject or any provision
of the Constituent Documents of Royal Numico, any Affiliate Seller, Seller,
the Company or any of the Subsidiaries, or (b) result in a breach of,
constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify or cancel any Contract to
which Seller, any Affiliate Seller, the Company or any Subsidiary is a
party or by which it is bound or to which any of its Assets or Affiliate
Intellectual Property is subject (or result in the imposition of any Lien
upon any of its Assets or Affiliate Intellectual Property), except where
the violations, breaches, defaults, accelerations, terminations,
modifications, cancellations or Liens would not in the aggregate have a
Material Adverse Effect. None of Royal Numico, any Affiliate Seller,
Seller, the Company or any Subsidiary is required to give any notice to,
make any filing with or obtain any authorization, consent or approval of
any Governmental Authority in order for it to consummate the transactions
contemplated by this Agreement, except as disclosed in Section 2.06 of the
Disclosure Schedule, and except where the failures to give notice, to file
or to obtain any authorization, consent or approval would not in the
aggregate have a Material Adverse Effect.
6
2.07 Title to Tangible Assets. Except for Permitted Liens and as
set forth in Section 2.07 of the Disclosure Schedule, the Company and the
Subsidiaries have good and marketable title to or a valid leasehold
interest in, their material tangible Assets.
2.08 Brokers' Fees. Other than fees payable to Goldman, Sachs &
Co., none of Royal Numico, any Affiliate Seller, Seller, the Company or any
Subsidiary has any liability or obligation to pay any fees or commissions
to any investment banker, broker, finder or agent with respect to the
transactions contemplated by this Agreement.
2.09 Audited Financial Statements. Seller has delivered to
Purchaser true and complete copies of the audited balance sheets of the
Company and its consolidated subsidiaries as of December 31, 2002 (the
"Most Recent Balance Sheet"), and 2001, and the related audited
consolidated statements of operations, stockholders' equity and cash flows
for the fiscal years ended December 31, 2002 and 2001 and the seven-month
period that commenced June 1, 2000 and ended December 31, 2000, together
with a true and correct copy of the report on such audited information by
PricewaterhouseCoopers LLP (the "Audited Financial Statements"). Except
as set forth in the notes thereto, and as disclosed in Section 2.09 of the
Disclosure Schedule, the Audited Financial Statements (a) were prepared in
accordance with GAAP, (b) fairly present the consolidated financial
condition and results of operations of the Company and its consolidated
subsidiaries as of the respective dates thereof and for the respective
periods covered thereby, and (c) were compiled from the books and records
of the Company and the Subsidiaries regularly maintained by management and
used to prepare the financial statements of the Company and the
Subsidiaries in accordance with the principles stated therein.
2.10 Absence of Certain Material Developments. Except as set forth
in Section 2.10 of the Disclosure Schedule, since the date of the Most
Recent Balance Sheet, there has not been any Material Adverse Change. In
addition, except as set forth in Section 2.10 of the Disclosure Schedule,
and except as expressly contemplated or permitted by this Agreement, since
the date of the Most Recent Balance Sheet, neither the Company nor any
Subsidiary has:
(a) borrowed any amount of money or incurred or become subject
to any material Liabilities (other than Liabilities incurred in the
Ordinary Course of Business, Liabilities under Contracts entered into
in the Ordinary Course of Business and borrowings from Affiliates
necessary to meet Ordinary Course of Business working capital
requirements);
(b) mortgaged, pledged or subjected to any material Lien any
material portion of its Assets, except Permitted Liens;
(c) sold, assigned or transferred any material portion of its
tangible Assets, except in the Ordinary Course of Business;
(d) sold, assigned, licensed or transferred any Intellectual
Property or other material intangible assets, except in the Ordinary
Course of Business;
(e) suffered any material extraordinary losses or waived any
rights of material value;
7
(f) issued, granted, sold or transferred any of its capital
stock or other equity securities, securities convertible into its
(g) capital stock or other equity securities or Options or any
bonds or debt securities;
(h) made any material capital expenditures or commitments
therefor that are not provided for in the 2003 Budget; (A)
established or modified any (1) targets, goals, pools or similar
provisions in respect of any fiscal year under any Employee Benefit
Plan or (2) salary ranges, increase guidelines or similar provisions
in respect of any Employee Benefit Plan, (B) increased the overall
compensation by more than five percent (5%) or made a material change
in the fringe benefits of any present or former director, officer,
employee or consultant of the Company or the Subsidiaries, (C)
granted any severance or termination pay to any present or former
director, officer, employee or consultant of the Company or the
Subsidiaries other than pursuant to the Rexall Sundown, Inc. Human
Resources Policy and Management Practices Manual (including HR-430)
as currently in effect, (D) except for customary travel and similar
advances for business purposes, loaned or advanced money or other
property to any of their present or former directors, officers,
employees or consultants, or (E) established, adopted, entered into,
amended or terminated any Employee Benefit Plan;
(i) other than on an arms'-length basis and on commercially
reasonable terms, engaged in any transaction with Seller or any
officer, director or Affiliate (other than the Company or any
Subsidiary) of Seller other than pursuant to any Contract in effect
on the date of the Most Recent Balance Sheet or disclosed pursuant to
Section 2.25 of the Disclosure Schedule; or
(j) entered into any other material transaction, except in the
Ordinary Course of Business.
2.11 Undisclosed Liabilities. Except as set forth in Section 2.11
of the Disclosure Schedule, the Company and the Subsidiaries, taken as a
whole, have no material Liabilities (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated and whether due or to become
due, including any Liability for Taxes) which are required under GAAP to be
set forth on the face of a consolidated balance sheet of the Company and
the Subsidiaries, except for Liabilities which are set forth on the face of
the Most Recent Balance Sheet, have arisen after such date in the Ordinary
Course of Business or would not in the aggregate have a Material Adverse
Effect.
2.12 Legal Compliance. Except as set forth in Section 2.12 of the
Disclosure Schedule, since December 31, 2001, the Company and the
Subsidiaries have complied in all material respects with all applicable
Laws and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed or commenced against any
of them alleging any failure so to comply.
8
2.13 Tax Matters.
(a) Except as set forth in Section 2.13 of the Disclosure
Schedule, (i) the Company and the Subsidiaries have filed all federal
Income Tax Returns and all other material Tax Returns (or such Tax
Returns have been filed on behalf of the Company and the
Subsidiaries) that any of them were required to file prior to the
date hereof, all of which were true, complete and accurate in all
material respects, (ii) all Taxes due and owing by the Company and
the Subsidiaries (whether or not shown on any Tax Return) have been
paid or accrued on the Most Recent Balance Sheet, and (iii) neither
the Company nor any Subsidiary currently is the beneficiary of any
extension of time within which to file any Tax Return. There are no
Liens for Taxes (other than Taxes not yet due and payable) upon any
of the Assets of the Company or any Subsidiary that arose in
connection with any failure (or alleged failure) to pay any Tax.
(b) Except as set forth in Section 2.13 of the Disclosure
Schedule, there is no dispute or claim concerning any Tax liability
of or any assessment for Taxes against the Company and the
Subsidiaries (A) claimed or raised by any Governmental Authority in
writing or (B) of which Seller has Knowledge.
(c) Section 2.13 of the Disclosure Schedule (i) lists all
federal and state Income Tax Returns filed with respect to Company
and the Subsidiaries for taxable periods ended on or after December
31, 2000, (ii) indicates any Tax Returns that have been audited,
(iii) indicates all Tax Returns that currently are the subject of
audit and (iv) lists the tax period through which the statute of
limitations has run in respect of all Tax Returns. Except as set
forth in Section 2.13 of the Disclosure Schedule, neither the Company
nor any Subsidiary has waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(d) Except as set forth in Section 2.13 of the Disclosure
Schedule, neither Company nor any Subsidiary is a party to or bound
by any tax allocation or sharing agreement.
(e) Neither the Company nor any Subsidiary has been a United
States real property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii).
2.14 Real Property.
(a) Section 2.14 of the Disclosure Schedule contains a true
and correct list of (i) each parcel of real property owned by the
Company or any Subsidiary, (ii) each lease entered into by the
Company or any Subsidiary (as lessor or lessee) for the occupancy of
any real property and (iii) all Liens (other than Permitted Liens) on
any parcel of real property referred to in clause (i).
(b) Except as disclosed in Section 2.14 of the Disclosure
Schedule, the Company or a Subsidiary has good and marketable fee
simple title to each parcel of real property owned by it, free and
clear of all Liens other than Permitted Liens. Except for the real
property leased to others referred to in Section 2.14(a)(ii) above,
the Company or a Subsidiary is in
9
possession of each parcel of real property owned by it, together with
all buildings, structures, facilities, fixtures and other
improvements thereon.
(c) The Company or a Subsidiary has a valid leasehold estate
in the real properties leased by it for the full term of the lease
thereof. Each lease referred to in Section 2.14(a)(ii) above is a
valid and binding agreement, enforceable in accordance with its terms
against the Company or a Subsidiary, except, in each case, as may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar law relating to or affecting the rights of creditors
generally and except as such enforceability of any such lease is
subject to the application of general principles of equity
(regardless of whether considered in a proceeding in equity or at
law). Except as set forth in Section 2.14 of the Disclosure
Schedule, none of Seller, the Company nor any Subsidiary has received
written notice of any default thereunder.
2.15 Intellectual Property.
(a) All of the patents, Internet domain names, registered
trademarks, registered service marks, registered copyrights,
applications for any of the foregoing and material unregistered
trademarks, service marks, trade names and corporate names
(collectively, "Intellectual Property") used in the conduct of the
respective businesses of the Company or the Subsidiaries
(collectively, "Company Intellectual Property") are set forth in
Section 2.15 of the Disclosure Schedule. Except as set forth in
Section 2.15 of the Disclosure Schedule or as would not in the
aggregate have a Material Adverse Effect: (i) the Company or its
Subsidiaries owns and possesses all right, title and interest in and
to, or possesses the valid right to use, the Intellectual Property,
(ii) neither the Company nor any Subsidiary has received any written
notices of material infringement or misappropriation from any third
Person with respect to the Company Intellectual Property and (iii) to
Seller's Knowledge, neither the Company nor any Subsidiary is
currently infringing on the Intellectual Property rights of any other
Person. Notwithstanding the foregoing, with respect to the Major
Intellectual Property, the references in the preceding sentence to
"Material Adverse Effect" and "Seller's Knowledge" shall not apply.
(b) Section 2.15 of the Disclosure Schedule identifies each
material item of Company Intellectual Property that any third Person
owns and that Company or any Subsidiary uses pursuant to any
Contract. With respect to each such item of Company Intellectual
Property identified in Section 2.15 of the Disclosure Schedule:
(i) the Contract covering the item is valid, binding,
enforceable against the Company or a Subsidiary (except as may
be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the
rights of creditors generally and except as such enforceability
of any such Contract is subject to the application of general
principles of equity (regardless of whether considered in a
proceeding in equity or at law)), and is in full force and
effect in all material respects; and
(ii) neither the Company nor any Subsidiary or, to
Seller's Knowledge, any other party to any such Contract is in
material breach or default and no event has
10
occurred which with notice or lapse of time would constitute a
material breach or default or permit termination, modification
or acceleration thereof.
2.16 Tangible Assets. The buildings, machinery, equipment and other
tangible assets (other than inventory) that the Company and the
Subsidiaries own or lease, taken as a whole, are free from material defects
(patent and latent), have been maintained in accordance with normal
industry practice and are, in all material respects, in good operating
condition and repair (subject to normal wear and tear).
2.17 Contracts. Section 2.17 of the Disclosure Schedule lists the
following Contracts to which the Company or any Subsidiary is a party:
(a) any Contract (or group of related Contracts) for the lease
of personal property to or from any Person providing for lease
payments in excess of $100,000 per annum;
(b) any Contract (or group of related Contracts) for the
purchase or sale of raw materials, commodities, supplies, products or
other personal property or for the furnishing or receipt of services
which involve consideration in excess of $100,000;
(c) any Contract concerning a partnership or joint venture;
(d) any Contract (or group of related Contracts) under which
it has created, incurred, assumed or guaranteed any indebtedness for
borrowed money or any capitalized lease obligation, in excess of
$100,000 or under which it has imposed a Lien on any of its Assets;
(e) any material Contract concerning confidentiality or
noncompetition;
(f) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other material plan
or arrangement for the benefit of its current or former directors,
officers and employees;
(g) any Contract for the employment of any individual on a
full-time, part-time, consulting or other basis;
(h) any Contract under which Company or any Subsidiary has
advanced or loaned any other Person amounts in the aggregate
exceeding $100,000; or
(i) any other Contract (or group of related Contracts) the
performance of which involves consideration in excess of $100,000.
With respect to each Contract that is required to be set forth on Section
2.17 of the Disclosure Schedule: (i) the Contract is valid, binding,
enforceable against the Company or a Subsidiary (except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally and except as
such enforceability of any such Contract is subject to the application of
general principles of equity (regardless of whether considered in a
proceeding in equity or at law)) and in full force and
11
effect in all material respects; and (ii) to Seller's Knowledge, none of
Seller, any Affiliate of Seller or any other party thereto is in material
breach or default and no events have occurred which with notice or lapse of
time would constitute a material breach or default or permit termination,
modification or acceleration, of such Contract, except as would not
individually or in the aggregate have a Material Adverse Effect or except
as set forth in Section 2.17 of the Disclosure Schedule.
2.18 Accounts Receivable. Except as set forth in Section 2.18 of
the Disclosure Schedule, the accounts and notes receivable of the Company
and the Subsidiaries reflected on the Most Recent Balance Sheet, and all
accounts and notes receivable arising subsequent to the date of the Most
Recent Balance Sheet, (a) arose from bona fide sales transactions in the
Ordinary Course of Business and are payable on ordinary trade terms, (b)
are legal, valid and binding obligations of the respective debtors
enforceable in accordance with their terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally and except as
the enforceability thereof is subject to the application of general
principles of equity (regardless of whether considered in a proceeding in
equity or at law), (c) to Seller's Knowledge, are not subject to any valid
set-off or counterclaim, (d) do not represent obligations for goods sold on
consignment, on approval or on a sale-or-return basis or subject to any
other repurchase or return arrangement, and (e) to Seller's Knowledge, are
collectible in the Ordinary Course of Business in the aggregate recorded
amounts thereof, net of any applicable reserve reflected in the Most Recent
Balance Sheet.
2.19 Powers of Attorney. Except as set forth in Section 2.19 of the
Disclosure Schedule, there are no outstanding powers of attorney executed
on behalf of the Company or the Subsidiaries.
2.20 Insurance. Section 2.20 of the Disclosure Schedule sets forth
a summary of the following information with respect to each insurance
policy (including policies providing property, products, casualty,
liability and workers' compensation coverage and bond and surety
arrangements) with respect to which either the Company or any Subsidiary is
a party, a named insured or otherwise the beneficiary of coverage:
(a) the name of the insurer, the name of the policyholder and
the name of each covered insured;
(b) the policy number and the period of coverage; and
(c) the scope and amount of coverage.
With respect to each such insurance policy: (i) the policy is legal,
valid, binding and enforceable, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally and except as such
enforceability of any such policy is subject to the application of general
principles of equity (regardless of whether considered in a proceeding in
equity or at law), and in full force and effect in all material respects;
(ii) neither the Company nor any Subsidiary or, to Seller's Knowledge, any
other party to the policy is in material breach or default (including with
respect to the
12
payment of premiums or the giving of notices) and no event has occurred
which, with notice or the lapse of time, would constitute such a material
breach or default or permit termination, modification or acceleration,
under the policy; and (iii) no party to the policy has repudiated any
provision thereof. Except as set forth in Section 2.20 of the Disclosure
Schedule, (1) none of the Company, any Subsidiary or the Person to whom
such policy has been issued has received any notice of cancellation or
termination in respect of any such policy or is in default thereunder, (2)
since June 1, 2000, none of the Company, any Subsidiary or the Person to
whom such policy has been issued has received notice that any insurer under
any policy referred to in this Section has denied liability with respect to
a claim thereunder or has agreed to defend any Retained Litigation under a
reservation of rights, and (3) neither Seller nor any of its Affiliates
participates in or reinsures any insurance coverage of the Company or any
Subsidiary. Seller or one of its Affiliates shall take all action required
of it under Zurich Insurance Company insurance policies V0100031366 and
V0100031367 to continue such policies in effect after the Closing Date in
accordance with their terms as currently in effect with respect to Seller
in order to provide products liability coverage for Seller's liability for
products (including products which contain ephedra) sold by the Company and
the Subsidiaries prior to the Closing for occurrences that have occurred or
may occur after the commencement date of such policies and prior to
December 31, 2003.
2.21 Litigation. Section 2.21 of the Disclosure Schedule sets forth
each instance in which the Company or any Subsidiary (a) is subject to any
outstanding Order or (b) is a party or, to the Knowledge of Seller, has
been threatened in writing since December 31, 2001 to be made a party, to
any action, suit, proceeding, hearing or investigation of, in or before any
Governmental Authority or arbitrator.
2.22 Employees. Except as disclosed on Section 2.22 of the
Disclosure Schedule, neither the Company nor any Subsidiary is a party to
or bound by any collective bargaining agreement, nor has any of them
experienced any strike, organized work stoppage or work slowdown or
material grievance, claim of unfair labor practices or other collective
bargaining dispute within the past two (2) years. Seller has no Knowledge
of any organizational effort presently being made or threatened by or on
behalf of any labor union with respect to employees of the Company or any
Subsidiary.
2.23 Employee Benefits.
(a) Section 2.23 of the Disclosure Schedule lists each
Employee Benefit Plan that the Company or any Subsidiary maintains or
to which the Company or a Subsidiary is a party or to which the
Company or any Subsidiary has contributed or had any obligation to
contribute or for which the Company or any Subsidiary could have any
Liability, in any case, since December 31, 2001. Except as disclosed
in Section 2.23 of the Disclosure Schedule:
(i) Each such Employee Benefit Plan (and each related
trust, insurance contract or fund) has been maintained, funded
and administered in all material respects in accordance with
the terms of such Employee Benefit Plan and complies in
13
form and in operation in all material respects with the
applicable requirements of ERISA, the Code and other applicable
Laws.
(ii) All required reports and descriptions (including
annual reports (IRS Form 5500), summary annual reports and
summary plan descriptions) have been timely filed and/or
distributed in accordance with the applicable requirements of
ERISA and the Code with respect to each such Employee Benefit
Plan. The requirements of COBRA have been met in all material
respects with respect to each such Employee Benefit Plan which
is an Employee Welfare Benefit Plan subject to COBRA.
(iii) All contributions (including all employer
contributions and employee salary reduction contributions) that
are due have been made to each such Employee Benefit Plan that
is an Employee Pension Benefit Plan and all contributions for
any period ending on or before the Closing Date that are not
yet due have been made to each such Employee Pension Benefit
Plan or accrued in accordance with the past custom and practice
of the Company and any Subsidiary. All premiums or other
payments for all periods ending on or before the Closing Date
have been paid or accrued with respect to each such Employee
Benefit Plan that is an Employee Welfare Benefit Plan.
(iv) Each such Employee Benefit Plan which is intended
to meet the requirements of a "qualified plan" under Code
Section 401(a) has received a determination from the IRS that
such Employee Benefit Plan is so qualified or is a prototype
plan for which a favorable opinion letter was issued by the IRS
and there are no facts or circumstances that could adversely
affect the qualified status of any such Employee Benefit Plan.
(v) No such Employee Benefit Plan is a defined benefit
plan (as defined in ERISA Section 3(35)), and neither the
Company nor any ERISA Affiliate has incurred any Liability
under Title IV of ERISA with respect to such Employee Benefit
Plan.
(vi) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No Fiduciary has
any liability for material breach of fiduciary duty or any
other material failure to act or comply in connection with the
administration or investment of the assets of any such Employee
Benefit Plan. No action, suit, proceeding, hearing or
investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending or, to the
Knowledge of Seller, threatened.
(b) Neither the Company nor any Subsidiary has ever
contributed to or had any obligation to contribute to any
Multiemployer Plan.
(c) Except as disclosed in Section 2.23 of the Disclosure
Schedule, neither the Company nor any Subsidiary maintains,
contributes to or has an obligation to contribute to or has any
material liability or potential liability with respect to, any
Employee Welfare Benefit Plan providing medical, health or life
insurance or other welfare-type benefits for current or future
14
retired or terminated employees of the Company or the Subsidiaries
(or any spouse or other dependent thereof) other than in accordance
with COBRA.
(d) Except as disclosed in Section 2.23 of the Disclosure
Schedule, no Employee Benefit Plan could result in the payment to any
present or former employee of the Company or the Subsidiaries of any
money or other property, or accelerate, modify or provide any other
rights or benefits to any present or former employee of the Company
or the Subsidiaries, as a result of the transactions contemplated by
this Agreement, whether or not such payment would constitute a
parachute payment within the meaning of Code Section 280G.
2.24 Environmental Laws. The representations and warranties
contained in this Section 2.24 are the sole and exclusive representations
and warranties of Seller pertaining or relating to any environmental,
health or safety matters, including without limitation, any arising under
any Environmental Laws. Except as set forth in Section 2.24 of the
Disclosure Schedule:
(a) The Company and the Subsidiaries have complied with all
Environmental Laws, except for any such noncompliance that would not
in the aggregate have a Material Adverse Effect.
(b) Without limiting the generality of the foregoing, the
Company and the Subsidiaries have obtained and have complied with all
permits, licenses and other authorizations that are required pursuant
to Environmental Laws for the occupation of its facilities and the
operation of its business, except for any such noncompliance that
would not in the aggregate have a Material Adverse Effect.
(c) Neither the Company nor any Subsidiary has received any
written notice, report or other information regarding any actual or
alleged material violation of Environmental Laws or any material
Liabilities or potential Liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), including any investigatory,
remedial or corrective obligations, relating to the Company or any
Subsidiary or their facilities arising under Environmental Laws.
2.25 Certain Business Relationships With Seller. Except as
disclosed in Section 2.25 of the Disclosure Schedule, none of Seller or its
Affiliates has been involved in any material transaction, business
arrangement or relationship (other than employment) with either the Company
or any Subsidiary since January 1, 2002, and neither Seller nor its
Affiliates owns an interest in any Asset which is used in the business of,
or is a party to any Contract with or has any dispute with the Company or
any Subsidiary; provided, however, that, for greater clarity, the return of
products, adjustments of payments (except for disputes over quality of
products) and other transactions pursuant to Contracts disclosed on the
Disclosure Schedule shall not be deemed to be "disputes" for purposes of
this Section 2.25. Section 2.25(g) of the Disclosure Schedule contains a
true, correct and complete list of all purchase orders issued to Nutraco by
the Company or any Subsidiary as of the date hereof, which list shall be
updated as of the Closing Date and delivered to Purchaser at Closing.
2.26 Customers. Section 2.26 of the Disclosure Schedule lists the
ten (10) largest customers of the Company and the Subsidiaries for the
fiscal year ended December 31, 2002 and
15
sets forth opposite the name of each such customer the gross sales
attributable to such customer during such fiscal year. Except as set forth
in Section 2.26 of the Disclosure Schedule, since the date of the Most
Recent Balance Sheet, no customer listed on Section 2.26 of the Disclosure
Schedule, has given written notice to the Company or any Subsidiary that it
shall stop or materially decrease the rate of buying materials, products or
services from the Company and the Subsidiaries, taken as a whole.
2.27 Inventory. (a) Except as disclosed in Section 2.27(a) of the
Disclosure Schedule and without taking into account the potential effects
of Sections 2.27(c) or 6.04, all inventory of the Company and the
Subsidiaries reflected on the Most Recent Balance Sheet consisted, and all
such inventory acquired since the date of the Most Recent Balance Sheet
consists, of a quality and quantity usable and saleable in the Ordinary
Course of Business consistent with past practice, subject to normal and
customary allowances of the Company and the Subsidiaries determined in
accordance with the Company Accounting Policies for spoilage, damage and
outdated items. The value of all inventory items, including finished
goods, work-in-process and raw materials, has been recorded on the books of
the Company and the Subsidiaries as reflected in the Most Recent Balance
Sheet at the lower of cost (FIFO) (determined in accordance with the
Company Accounting Policies) or fair market value.
(b) Except as disclosed in Section 2.27(b) of the Disclosure
Schedules, to Seller's Knowledge, the raw materials, food, herbal and
dietary supplements of the Company and the Subsidiaries (i) are not
adulterated or misbranded within the meaning of the Federal Food,
Drug and Cosmetic Act, as amended ("FFDC Act"), or within the meaning
of any applicable Law within which the definitions of adulteration or
misbranding are substantially the same as those contained in the FFDC
Act; and (ii) are not articles which may not, under the provisions of
Sections 404, 505 and 512 of the FFDC Act, be introduced into
interstate commerce.
(c) As of April 30, 2003, the Company and the Subsidiaries
ceased all sales and distribution of products containing ephedra, and
have requested their retailers to remove such products from their
stores by June 30, 2003.
(d) The pricing for products under the Purchasing Agreement
between Rexall Sundown, Inc. ("Rexall Sundown") and General Nutrition
Distribution, L.P. ("GN") (the term of which agreement will begin on
the Closing Date and which agreement constitutes one of the Ancillary
Agreements), contains the same or higher pricing for the sales of
such products to GN than is reflected on the Audited Financial
Statements for the fiscal year ended December 31, 2002. The
representations and warranties of Rexall Sundown in paragraph A of
the General Terms of said Purchasing Agreement are true and correct.
The pricing for products under the Supply Agreement between Rexall
Sundown and GN (which constitutes one of the Ancillary Agreements)
contains pricing for the sales of such products to GN which provides
margins to Rexall Sundown which are the same or better than is
reflected on the Audited Financial Statements for the fiscal year
ended December 31, 2002. As of the date hereof, Rexall Sundown has
no material quantity of inventory of the products that it will supply
pursuant to the Supply Agreement between Rexall Sundown and Unicity
Network, Inc. that also constitutes one of the Ancillary Agreements.
16
2.28 Transferees. Each Transferee referred to in Section 4.05
hereof has been or will be formed solely for purposes of effectuating the
Restructuring, and prior to the Closing has not and will not engage in any
activity except as contemplated by the Restructuring.
2.29 Disclosure. No representation or warranty of Seller contained
in this Agreement, and no statement contained in Exhibits B or E, the
Disclosure Schedule or in any certificate furnished to Purchaser pursuant
to any provision of this Agreement by Seller or any Affiliate of Seller,
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein,
in the light of the circumstances under which they were made, not
misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that:
3.01 Organization and Power. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
state of its incorporation, with full corporate power and authority to
enter into this Agreement and perform its obligations hereunder. Purchaser
has the requisite corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby.
3.02 Authority. The execution and delivery by Purchaser of this
Agreement and the performance by Purchaser of its obligations hereunder,
have been duly and validly authorized by the Board of Directors of
Purchaser, no other corporate action on the part of Purchaser or its
stockholders being necessary. This Agreement has been duly executed and
delivered by Purchaser and constitutes the valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights of
creditors generally and except as such enforceability of this Agreement is
subject to the application of general principles of equity (regardless of
whether considered in a proceeding in equity or at law).
3.03 No Breach. Purchaser is not subject to or obligated, under its
Constituent Documents, any applicable Law, Order or any material Contract
which would be breached or violated in any material respect by Purchaser's
execution, delivery or performance of this Agreement.
3.04 Governmental Consents, etc. Except for the applicable
requirements of the HSR Act, the filing of a Form 8-K under Federal
securities laws and for filings required under certain FTC consent decrees
to which the Company is a party, Purchaser is not required to submit any
notice, report or other filing with any Governmental Authority in
connection with the execution, delivery or performance by Purchaser of this
Agreement or the consummation of the transactions contemplated hereby.
Except as provided in Schedule 3.04 to this Agreement, no consent,
17
approval or authorization of any Governmental Authority or any other Person
is required to be obtained by Purchaser in connection with its execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby. Purchaser is not subject to any
outstanding Order that would prevent it from performing its obligations
hereunder. Purchaser has no reason to believe that it will be unable to
obtain the consent listed as item 3 in Schedule 3.04 prior to the Closing.
3.05 Litigation. There are no actions, suits or proceedings pending
or, to Purchaser's Knowledge, threatened against or affecting Purchaser at
law or in equity, or before or by any Governmental Authority which,
individually or in the aggregate, would materially adversely affect
Purchaser's performance under this Agreement or the consummation of the
transactions contemplated hereby.
3.06 Broker's Fees. Other than fees payable to Deutsche Bank,
neither Purchaser nor any of its Affiliates has any liability or obligation
to pay any fees or commissions to any investment banker, broker, finder or
agent with respect to the transactions contemplated by this Agreement.
3.07 Investment Representation. Assuming that the Interests
constitute "securities" within the meaning of the Securities Act, which
Purchaser does not admit, Purchaser (a) is purchasing the Interests for its
own account with the present intention of holding such Interests for
investment purposes and not with a view to or for sale in connection with
any public distribution of such Interests in violation of any federal or
state securities laws, (b) is an "accredited investor" as defined in
Regulation D promulgated by the Securities and Exchange Commission under
the Securities Act, (c) has such knowledge and experience in financial and
business matters that it is capable of evaluating and has been informed as
to the risks of the transactions contemplated hereby and of ownership of
the Interests, and (d) further acknowledges that the Interests have not
been registered under the Securities Act, or any state or foreign
securities laws and that the Interests may not be sold, transferred,
offered for sale, pledged hypothecated or otherwise disposed of unless such
transfer, sale, assignment, pledge, hypothecation or other disposition is
pursuant to the terms of an effective registration statement under the
Securities Act and are registered under any applicable state or foreign
securities laws or pursuant to an exemption from registration under the
Securities Act and any applicable state or foreign securities laws.
3.08 Financing. Purchaser has obtained a debt financing commitment
letter dated May 21, 2003 from certain lenders, in the form furnished to
Seller, providing for, subject to certain conditions set forth therein, a
commitment to provide all funds necessary to consummate the transactions
contemplated hereby. Purchaser has no reason to believe that such
commitment shall not be funded, and Purchaser has not made any
misrepresentation in connection with obtaining such debt financing
commitment.
3.09 No Knowledge of Misrepresentations or Omissions. Purchaser has
no Knowledge that any of the representations and warranties of Seller in
this Agreement and the Disclosure
18
Schedule (including any updated Disclosure Schedule) hereto are untrue or
incorrect in any material respect.
3.10 Solvency.
(a) Immediately after giving effect to the acquisition of the
Interests and Affiliate Intellectual Property, and the other
transactions contemplated by this Agreement (including, without
limitation, the financings being entered into in connection
therewith), and assuming the truth of Seller's representations and
warranties and performance of its obligations hereunder, in each case
in all material respects:
(i) the fair saleable value (determined on a going
concern basis) of the assets of Purchaser, its subsidiaries,
the Company and the Subsidiaries shall be greater than the
total amount of their liabilities (including all liabilities,
whether or not reflected in a balance sheet prepared in
accordance with GAAP, and whether direct or indirect, fixed or
contingent, secured or unsecured, disputed or undisputed);
(ii) Purchaser, its subsidiaries, the Company and the
Subsidiaries shall be able to pay their debts and obligations
in the Ordinary Course of Business as they become due; and
(iii) Purchaser, its subsidiaries, the Company and the
Subsidiaries shall have adequate capital to carry on their
businesses and all businesses in which they are about to
engage.
(b) In completing the transactions contemplated by this
Agreement, Purchaser does not intend to hinder, delay or defraud any
present or future creditors of Purchaser, the Company or the
Subsidiaries.
ARTICLE 4
SELLER PRE-CLOSING COVENANTS
The parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
4.01 General. Seller shall use its commercially reasonable efforts
to take all action and to do all things necessary, proper or advisable in
order to consummate and make effective the transactions contemplated by
this Agreement (including satisfaction, but not waiver, of the closing
conditions set forth in Article 7 below).
4.02 Notices and Consents. Seller will cause the Company and the
Subsidiaries to use their commercially reasonable efforts to obtain any
third party consents set forth on Exhibit B hereto and to give any notices
to, make any filings with and use commercially reasonable efforts to obtain
any authorizations, consents and approvals of Governmental Authorities in
connection with the matters referred to in Section 2.06 above, if any.
19
4.03 Operation and Preservation of Business.
(a) From the date hereof until the Closing Date, Seller shall
cause the Company and the Subsidiaries to use commercially reasonable
efforts to carry on their businesses in the Ordinary Course of
Business and substantially in the same manner as heretofore
conducted; provided that, the foregoing notwithstanding, the Company
and Subsidiaries may complete the Restructuring and may use all
available cash (including without limitation the proceeds of any
capital contribution) to repay any intercompany payables prior to the
Closing. Seller will cause the Company and the Subsidiaries to take
commercially reasonable efforts to keep their business and properties
substantially intact, including their present operations, physical
facilities, working conditions, insurance policies and relationships
with lessors, licensors, suppliers, customers and employees.
(b) From the date hereof until the Closing Date, except as
otherwise provided for by the Restructuring or consented to in
writing by Purchaser (which consent Purchaser agrees not to
unreasonably withhold or delay with respect to any matter set forth
in clause (v) below), Seller shall not permit the Company or any
Subsidiary to (i) amend their certificates or articles of
incorporation or by-laws (or other comparable charter documents) or
take any action with respect to any such amendment or any
recapitalization, reorganization, liquidation or dissolution of any
such Person; (ii) authorize, issue, sell or otherwise dispose of any
interests in or shares of capital stock of or any Option with respect
to the Company or any Subsidiary, or modify or amend any right of any
holder of outstanding interests in or shares of capital stock of or
Option with respect to the Company or any Subsidiary; provided,
however, that the foregoing shall not prohibit Seller from making any
capital contribution to the Company; (iii) declare, set aside or pay
any dividend or other distribution in respect of the interests in or
capital stock of the Company or any Subsidiary not wholly owned by
the Company, or directly or indirectly redeem, purchase or otherwise
acquire any interests in or capital stock of or any Option with
respect to the Company or any Subsidiary not wholly owned by the
Company; (iv) acquire or dispose of, or incur any Lien (other than a
Permitted Lien) on, any Assets other than in the Ordinary Course of
Business; (v) except for any Ancillary Agreement and except in the
Ordinary Course of Business (which latter exception shall not apply
to any Contract with Nutraco) (A) enter into, amend, modify,
terminate (partially or completely), grant any waiver under or give
any consent with respect to (1) any Contract that would, if in
existence on the date of this Agreement, be required to be disclosed
in the Disclosure Schedule pursuant to Section 2.17 or (2) except as
required by Law, any material license or permit held by the Company
or any Subsidiary or (B) grant any irrevocable powers of attorney;
(vi) violate, breach or default under in any material respect, or
take or fail to take any action that (with or without notice or lapse
of time or both) would constitute a material violation or breach of,
or default under, any term or provision of any license or permit held
or used by the Company or any Subsidiary or any Contract to which the
Company or any Subsidiary is a party or by which any of their
respective Assets is bound, except for any violations, breaches or
defaults that would not in the aggregate have a Material Adverse
Effect; (vii) (A) incur indebtedness for money borrowed, or (B)
voluntarily purchase, cancel, prepay or otherwise provide for a
complete or partial discharge in advance of a scheduled payment date
with respect to, or waive any right of the Company or any Subsidiary
under, any material indebtedness of or owing to the Company or any
Subsidiary except in the Ordinary Course of
20
Business; (viii) engage with any Person in any merger or other
business combination; (ix) except pursuant to the commitments
disclosed in Section 2.10(g) of the Disclosure Schedule or in the
2003 Budget, make capital expenditures or commitments for additions
to property, plant or equipment constituting capital assets in an
aggregate amount exceeding $500,000; (x) make any change in the lines
of business in which they participate or are engaged; (xi) write off
or write down any of their Assets outside the Ordinary Course of
Business; (xii) settle any claim, action or proceeding outside the
Ordinary Course of Business or any Excluded Litigation except on the
same terms and conditions as Seller has the right to settle the
Excluded Litigation subsequent to the Closing under Section 13.02;
(xiii) accelerate or delay collection of notes or accounts receivable
generated by the Company or any Subsidiary in advance of or beyond
their regular due dates or the date when the same otherwise would
have been collected, except for compromises of notes and accounts
receivable in the Ordinary Course of Business; (xiv) engage in any
transaction with the Seller or any officer, director or Affiliate
(other than the Company or any Subsidiary) of Seller which, if
occurring on or after December 31, 2002 and before the date hereof,
would have to be disclosed in Section 2.10 of the Disclosure
Schedule; or (xv) enter into any Contract to do or engage in any of
the foregoing. Anything in the foregoing to the contrary
notwithstanding, Seller and its Affiliates shall not be prohibited
from forgiving any intercompany accounts payable due from the Company
or any Subsidiary in order to meet the WC Target in whole or in part.
(c) Except as may be required by Law, from the date hereof to
the Closing Date, Seller will refrain, and will cause the Company and
the Subsidiaries to refrain, from directly or indirectly, other than
with the consent of Purchaser, which consent shall not be
unreasonably withheld or delayed: (i) making any material
representation or promise, oral or written, to any officer, employee
or consultant of the Company or any Subsidiary that would reasonably
give rise to an expectation of an increase in benefits under any
Employee Benefit Plan, except for statements as to the rights or
accrued benefits of any officer, employee or consultant under the
terms of any Employee Benefit Plan as in effect on the date hereof or
amended hereafter in accordance with the terms of this Agreement;
(ii) (A) increasing the compensation or fringe benefits of any
present or former director or officer or increasing the compensation
or fringe benefits of any employee or consultant of the Company or
any Subsidiary except as a result of promotions set forth in Section
4.03(c)(ii) of the Disclosure Schedule or annual reviews in the
Ordinary Course of Business and in no event in excess of the
guidelines set forth in the Company's Exempt and Non-Exempt 2003
Merit Increase Recommendation Guide as in effect on the date hereof
and as set forth in Section 2.10 of the Disclosure Schedule, (B)
granting any severance or termination pay to any present or former
director, officer, employee or consultant of the Company or its
Subsidiaries except in accordance with the Rexall Sundown, Inc. Human
Resources Policy and Management Practices Manual (including HR-430)
as in effect on the date hereof, (C) except for customary travel and
similar advances for business purposes, loaning or advancing any
money or other property to any present or former director, officer,
employee or consultant of the Company or its Subsidiaries, (D)
establishing, adopting, entering into, amending or terminating any
Employee Benefit Plan or any plan, agreement, program, policy, trust,
fund or other arrangement that would be an Employee Benefit Plan if
it were in existence as of the date of this Agreement, or (E)
establishing or modifying any (1) targets, goals, pools or similar
provisions in respect of any
21
fiscal year under any Employee Benefit Plan, or (2) salary ranges,
increase guidelines or similar provisions in respect of any Employee
Benefit Plan. Seller will cause the Company and the Subsidiaries to
administer each Employee Benefit Plan, or cause the same to be so
administered, in accordance with the applicable provisions of the
Code, ERISA and all other applicable Laws, except for any such
failures to administer that would not in the aggregate have a
Material Adverse Effect. Seller will promptly notify Purchaser in
writing of each receipt by Seller, the Company or any Subsidiary (and
furnish Purchaser with copies) of any notice of investigation or
administrative proceeding by the IRS, Department of Labor, Pension
Benefit Guaranty Corporation or other Person involving any Employee
Benefit Plan.
4.04 Access. Upon reasonable prior notification and subject to
Purchaser's execution of, and compliance with the terms of, the Data Room
Access Agreement, Seller will cause the Company and the Subsidiaries to
permit Representatives of Purchaser to have access at all reasonable times
and in a manner so as not to interfere with the normal business operations
of the Company and the Subsidiaries, to all premises, properties,
personnel, books, records, contracts and documents of or pertaining to the
Company and the Subsidiaries except for materials subject to the attorney-
client privilege. Seller will promptly furnish to such Representatives all
other information and data concerning the operations and business of the
Company and its Subsidiaries as they may reasonably request. Purchaser
shall treat and hold as such any Confidential Information it receives from
any of Seller, Company or any Subsidiary in the course of the reviews
contemplated by this Section 4.04, shall not use any of the Confidential
Information except in connection with this Agreement and in compliance with
the terms of the Confidentiality Agreement and Data Room Access Agreement,
and, if this Agreement is terminated for any reason whatsoever, shall
return to Seller, Company and the Subsidiaries all tangible embodiments
(and all copies) of the Confidential Information which are in its
possession, all in accordance with the terms and conditions of the
Confidentiality Agreement.
4.05 Restructuring. Prior to the Closing, Seller shall effect the
Restructuring. In the Restructuring, Seller shall cause each Person
required to make a transfer of its Assets to sell, transfer, convey, assign
and deliver to the appropriate transferee (individually, a "Transferee" and
collectively, the "Transferees") all of the transferor's right, title and
interest in, to and under all its respective Assets (except as otherwise
disclosed in Section 4.05 of the Disclosure Schedule), and each such
Transferee shall assume and agree to pay, perform and discharge when due
all such transferor's Liabilities then existing (except for the Excluded
Liabilities, which shall be assumed by Seller or one of its Affiliates
other than the Transferees prior to the Restructuring), but shall pay no
other consideration except as disclosed on Section 4.05 of the Disclosure
Schedule. The transfers shall be effected by delivery of such good and
sufficient instruments of conveyance, assignment and transfer, in form and
substance reasonably acceptable to Seller and Purchaser, as shall be
effective to vest in each Transferee good title to the Assets being
transferred to it, and each Transferee shall assume from its transferor the
due payment, performance and discharge of such transferor's aforedescribed
Liabilities by delivery of good and sufficient instruments of assumption,
in form and substance reasonably acceptable to Purchaser and Seller.
22
4.06 Notice and Cure. Seller shall notify Purchaser in writing
(where appropriate, through updates to the Disclosure Schedule) of, and, if
reasonably capable of being cured, shall use all commercially reasonable
efforts to cure before the Closing, any event, transaction or circumstance,
as soon as practicable after it becomes Known to Seller after the date of
this Agreement, that causes or shall cause any covenant or agreement of
Seller under this Agreement to be breached or that renders or shall render
untrue as of the date of this Agreement any representation or warranty of
Seller contained in this Agreement which was not Known to Seller to be
untrue as of the date of this Agreement. Each such notice given pursuant
to this Section shall have the same effect on the representations,
warranties, covenants and agreements of Seller contained in this Agreement
as if such notice had been incorporated into the Disclosure Schedule, and
had constituted an exception to, and had qualified, the representations,
warranties, covenants and agreements of Seller from and after the date of
this Agreement and, except as otherwise specifically set forth in Sections
7.01 and 7.02, shall have no effect on this Agreement for purposes of
determining satisfaction of any condition contained herein and shall
preclude Purchaser's right to seek indemnity under Sections 9.01(a)(i) and
(with respect to covenants and agreements to be performed before Closing)
9.01(a)(ii) with respect to any matter disclosed in such notice.
4.07 Regulatory Filings. Seller shall make or cause to be made all
filings and submissions under the HSR Act and any other material Laws
applicable to Seller, the Company and the Subsidiaries as may be required
for the consummation of the transactions contemplated herein. Seller shall
coordinate and cooperate with Purchaser in exchanging such information and
assistance as Purchaser may reasonably request in connection with all of
the foregoing.
4.08 Exclusive Dealing. During the period from the date of this
Agreement through the Closing or the earlier termination of this Agreement
pursuant to Section 11.01 hereof, Seller shall not take, or permit the
Company, any Subsidiary or any other Person on its behalf to take, any
action to encourage, initiate or engage in discussions or negotiations
with, or provide any information to, any Person (other than Purchaser and
Purchaser's Representatives) concerning any purchase of the Interests, any
merger involving the Company or any of the Subsidiaries, any sale of
substantially all of the assets of the Company or any of the Subsidiaries
or similar transaction involving the Company or any of the Subsidiaries
(other than assets sold in the Ordinary Course of Business or pursuant to
the Restructuring).
4.09 Interim Financial Statements. Promptly when available, but in
no event later than five (5) Business Days prior to Closing, Seller shall
deliver to Purchaser (a) the unaudited consolidated balance sheet of the
Company and its consolidated subsidiaries as of March 31, 2003, and the
related unaudited consolidated statements of operations, stockholders'
equity and cash flows for the three-month periods ended March 31, 2003 and
2002 (the "Interim Financial Statements"), and (b) a certificate of Seller
to the effect that, except as disclosed in Section 2.09 of the Disclosure
Schedule (which exceptions shall be deemed to apply to the Interim
Financial Statements to the same extent that they apply to the Audited
Financial Statements) and except for the absence of foot notes and subject
to normal year end adjustments, the Interim Financial Statements (i) were
prepared in accordance with GAAP, (ii) fairly present the consolidated
financial condition and results of operations of the Company and its
consolidated subsidiaries as
23
of the respective dates thereof and for the respective periods covered
thereby, and (iii) were compiled from the books and records of the Company
and the Subsidiaries regularly maintained by management and used to prepare
the financial statements of the Company and the Subsidiaries in accordance
with the principles stated therein.
4.10 Documentation Relating to Affiliate Intellectual Property. On
or prior to Closing, Seller agrees to cause the Affiliate Sellers to
deliver to the Company's headquarters all files and documentation relating
to the Affiliate Intellectual Property then in existence.
ARTICLE 5
PURCHASER'S PRE-CLOSING COVENANTS
5.01 General. Purchaser shall use its commercially reasonable
efforts to take all action and to do all things necessary, proper or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of
the closing conditions set forth in Article 8 below).
5.02 Regulatory Filings. Purchaser shall make or cause to be made
all filings and submissions under the HSR Act and any other Laws applicable
to Purchaser as may be required of Purchaser for the consummation of the
transactions contemplated herein, and Purchaser shall be responsible for
all filing fees under the HSR Act. Purchaser shall coordinate and
cooperate with Seller in exchanging such information and assistance as
Seller may reasonably request in connection with all of the foregoing.
5.03 Contact with Customers and Suppliers. Prior to the Closing,
Purchaser and Purchaser's Representatives shall contact the employees,
customers and suppliers of the Company and the Subsidiaries in connection
with the transactions contemplated hereby only with the prior consent of
Seller, which will not be unreasonably withheld.
5.04 Purchaser's Solvency. Purchaser shall furnish or cause to be
furnished to Seller copies of any solvency opinions obtained by Purchaser
from third parties in connection with the financing of the transactions
contemplated by this Agreement, to the extent contractually permitted by
the issuer of such opinion. Purchaser shall use commercially reasonable
efforts to cause the firms issuing any such solvency opinions to allow
Seller to rely thereon; provided that, Purchaser shall have no obligation
to do so if any material fee or expense is associated with obtaining such
reliance.
5.05 Acknowledgment by Purchaser. Purchaser acknowledges that it
has conducted to its satisfaction, an independent review of the financial
condition, results of operations, Assets, Liabilities and projected
operations of the Company and the Subsidiaries and, in making its
determination to proceed with the transactions contemplated by this
Agreement, Purchaser has relied on the results of its own independent
review and the representations and warranties of Seller expressly and
specifically set forth in this Agreement, including the Disclosure Schedule
(and updates thereto). SUBJECT TO SECTION 9.08, SUCH REPRESENTATIONS AND
WARRANTIES BY SELLER CONSTITUTE THE SOLE
24
AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF SELLER TO PURCHASER IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, AND PURCHASER
UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS AND
WARRANTIES OF ANY KIND OR NATURE EXPRESS OR IMPLIED (INCLUDING, BUT NOT
LIMITED TO, THOSE SET FORTH IN THE OFFERING MEMORANDUM DATED DECEMBER, 2002
AND ANY SUPPLEMENTS THERETO AND ANY RELATING TO THE FUTURE OR HISTORICAL
FINANCIAL CONDITION, RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OF THE
COMPANY AND THE SUBSIDIARIES) ARE SPECIFICALLY DISCLAIMED BY SELLER.
5.06 Notification. From the date hereof until the Closing Date,
Purchaser shall disclose to Seller in writing any material variances from
Purchaser's representations and warranties contained in Article 3 hereof
promptly upon discovery thereof, and Purchaser shall promptly notify Seller
if Purchaser obtains Knowledge that any of the representations and
warranties of Seller in this Agreement and the Disclosure Schedule are not
true and correct in all material respects, or if Purchaser obtains
Knowledge of any material errors in, or omissions from, the Disclosure
Schedule to this Agreement.
5.07 Disclosure Generally. Purchaser agrees that if and to the
extent any information required to be furnished in any section of the
Disclosure Schedule is contained in this Agreement or in any other section
of the Disclosure Schedule (or updated section of the Disclosure Schedule),
such information shall be deemed to be included in all sections of the
Disclosure Schedule (or updated sections of the Disclosure Schedule) with
respect to which the applicability of such information is reasonably
apparent. The inclusion of any information in any section of the
Disclosure Schedule (or updated section of the Disclosure Schedule) shall
not be deemed to be an admission or acknowledgment by Seller, in and of
itself, that such information is material to or outside the Ordinary Course
of Business of the Company and the Subsidiaries, or an admission against
the interest of the Company or any Subsidiary against any third party.
5.08 Nonsolicitation. (a) Commencing on the date hereof and for a
period of two (2) years from the date hereof or until the Closing is
consummated, whichever occurs first, and in addition to Purchaser's
obligations under the Confidentiality Agreement, Purchaser shall refrain
from, either alone or in conjunction with any other Person, or directly or
indirectly through any of its Affiliates, causing or attempting to cause
(i) any supplier of the Company or any Subsidiary to terminate or
materially reduce its business with the Company or such Subsidiary or (ii)
any officer, employee or consultant of the Company or any Subsidiary to
resign or sever a relationship with the Company or a Subsidiary.
(b) The parties hereto acknowledge and agree that any remedy
at law for any breach of the provisions of this Section would be
inadequate, and Purchaser hereby consents to the granting by any
court of an injunction or other equitable relief, without the
necessity of actual monetary loss being proved, in order that the
breach or threatened breach of such provisions may be effectively
restrained.
25
ARTICLE 6
POST-CLOSING COVENANTS
The parties agree as follows with respect to the period following the
Closing.
6.01 General. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of
the parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other party
reasonably may request for such purpose, all at the sole cost and expense
of the requesting party (unless the requesting party is entitled to
indemnification therefor under Article 9 below).
6.02 Covenant Not to Compete. For a period of three (3) years from
and after the Closing Date, Seller shall not and shall cause its current
Affiliates not to engage directly or indirectly in the business of
manufacturing, distributing or selling of vitamins, herbal, diet or sport
nutrition products to the consumer health market anywhere in North America
or Europe (the "Business"), provided, however, that the foregoing
prohibition shall not (a) apply to GNC or Unicity and their respective
subsidiaries, (b) prohibit Nutraco or any of its Affiliates from continuing
to supply any kind of products or services to GNC or Unicity and their
respective subsidiaries, (c) prohibit Seller or any of its Affiliates from
owning less than 5% of the outstanding stock of any publicly-traded
corporation, (d) prohibit Seller or any of its Affiliates from exercising
its rights under Section 6.06 hereof or from continuing to own and engage
in the Business in Europe through the businesses currently conducted (i) by
Vitamex AB or Efamol, or (ii) by Seller or any of its Affiliates with
respect to health bars and cereals in Austria or with respect to private
label diet products ("Weight Watchers") anywhere in Europe, (e) prohibit
Seller and its Affiliates that currently conduct any business (other than
those referred to in clauses (a)-(d) above) anywhere in Europe that is
competitive with the Business from continuing to conduct such business
until December 31, 2003, but not thereafter; provided, however, that
nothing in this Section 6.02 shall prohibit Seller or any of its Affiliates
from engaging anywhere in the world in the infant formula, baby food or
clinical nutrition businesses, or (f) for greater clarity, apply to any
third Person and such third Person's Affiliates that may acquire Royal
Numico and/or any of Royal Numico's Affiliates by means of merger,
consolidation, acquisition of all or substantially all of its or their
assets or other form of business combination or to any third Person that
Royal Numico or any of its Affiliates acquire by means of merger,
consolidation, acquisition of all or substantially all of the assets of
such third Person or other form of business combination. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this Section 6.02 is invalid or unenforceable, the parties
agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration or area
of the term or provision, to delete specific words or phrases or to replace
any invalid or unenforceable term or provision with a term or provision
that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision and this
Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed. The parties hereto
acknowledge and agree that any remedy at Law for any breach of the
provisions of this Section is inadequate, and each of Royal Numico and
Seller hereby consents to the granting by any court of appropriate
26
jurisdiction of an injunction or other equitable relief, without the
necessity of actual monetary loss being proved, in order that the breach or
threatened breach of such provisions may be effectively restrained.
6.03 Payment Obligations. Purchaser and Seller agree that at or
prior to Closing all intercompany accounts among the Company and the
Subsidiaries, on the one hand, and any other Affiliates of Royal Numico
(other than Nutraco) shall be settled in full by means of set off against
such accounts or in cash, but only to the extent such settlement in the
aggregate (after taking into account any intercompany payables forgiven by
Nutraco) will not have the effect of reducing the Closing Date Working
Capital Amount below the WC Target. Except for (a) the guarantees,
indemnity and other agreements listed in Section 8.07 of the Disclosure
Schedule which shall remain subject to Section 8.07 hereof, (b) the
Contracts to which Nutraco is a party, (c) the intercompany arrangements
referred to in Sections 2.17(i)(2)4.b. and 4.05 of the Disclosure Schedule
and Attachments 2.17(i)4 and 2.25(f) to the Disclosure Schedule and (d) the
Ancillary Agreements which shall be executed at or prior to Closing, all
intercompany arrangements in effect on the date hereof between the Company
and any Subsidiary, on the one hand, and Seller and any of its Affiliates
(other than the Company and the Subsidiaries), on the other hand, shall be
terminated as of Closing with respect to the Company and the Subsidiaries.
Subsequent to the Closing, Purchaser shall cause the Company and the
Subsidiaries to pay all amounts due Nutraco that are disclosed or referred
to in Section 6.03 of the Disclosure Schedule as in effect as of May 31,
2003 and any similar obligations that arise in the Ordinary Course of
Business between such date and the Closing Date (provided, that the
products for which such amounts are due have been delivered to the Company
or its Subsidiaries), in accordance with applicable terms of payment, but
in no event later than sixty (60) days after the Closing without any right
of set-off against or non-payment of any amount that may be due and payable
after the Closing by Royal Numico, Seller, Nutraco or any other Affiliate
of Seller to Purchaser, the Company or the Subsidiaries. Any such amounts
not paid when due by the Company or any Subsidiary to Nutraco shall bear
interest at the Interest Rate from the date due until paid, which interest
shall be payable upon demand by Seller.
6.04 Certain Activities. Purchaser shall not, and shall not permit
the Company, any Subsidiary or any other Affiliate of Purchaser to (a) from
and after the Closing, manufacture, distribute or sell any products under
the trademark "Metab-O-Lite," or (b) from and after the sixth (6th) month
anniversary of the Closing, use the trademark or corporate name "Nutricia"
or any other trademark or corporate name that contains the name "Nutricia."
The parties hereto acknowledge and agree that any remedy at Law for any
breach of the provisions of this Section 6.04 would be inadequate, and
Purchaser, on behalf of itself and each of its Affiliates, hereby consents
to the granting by any court of appropriate jurisdiction of an injunction
or other equitable relief, without the necessity of actual monetary loss
being proved, in order that the breach or threatened breach of such
provisions may be effectively restrained.
6.05 Patent Action. (a) In the event that after the Closing, the
Company, any Subsidiary, Purchaser or any other Affiliate of Purchaser
determines to institute any action or proceeding for, among other things,
patent (including, without limitation, U.S. Patent No. 6,358,526) or other
Intellectual Property infringement relating to the glucosamine-
27
chondroitin small tablet against any third Person, Purchaser shall cause
such Person to prosecute such action or proceeding diligently and in good
faith and shall further cause an amount equal to fifty percent (50%) of the
difference between the aggregate recovery in such action or proceedings and
all attorneys' fees and costs of litigation related thereto, to be paid to
Seller promptly upon receipt of such recovery by Purchaser or any Affiliate
of Purchaser. Upon request by Seller, Purchaser shall make available all
books and records relating to such action or proceeding in order to enable
Seller to verify that it has been paid the correct amount of such recovery.
(b) In the event none of the Company, any Subsidiary,
Purchaser or any other Affiliate of Purchaser institutes such action
within such six-month period after the Closing Date or institutes
such action and thereafter fails diligently and in good faith to
prosecute such action, Seller shall have the right, but not the
obligation, exercisable by written notice thereof to Purchaser, to
institute or assume reasonable control, as may be appropriate, of any
such action at its own expense and to retain one hundred percent
(100%) of the recovery in any such action. In such event, Purchaser
shall cause the Company and the Subsidiaries to cooperate reasonably
with Seller in such action, at Seller's expense, including without
limitation, by empowering Seller and its counsel through appropriate
documentation to represent the Company and the Subsidiaries in such
action. For greater clarity, nothing in this Section 6.05(b) is
intended to limit the rights of any party hereto under Article 9.
6.06 European Inventory. Notwithstanding any provision of this
Agreement to the contrary, effective as of and from the Closing, Purchaser
hereby grants (or shall cause the Company and the Subsidiaries to grant) to
Seller and its Affiliates, without representation or warranty of any kind,
a non-exclusive, royalty-free and nontransferable license to use, for a
period of twenty-four (24) months after the Closing, the trademarks
included in the Affiliate Intellectual Property and used by Seller and its
Affiliates in Europe prior to the Closing which are set forth on Schedule
6.06 of the Disclosure Schedule, to sell or otherwise dispose of all
inventory of Seller and its Affiliates that has been marketed in Europe
under such trademarks and is in existence as of the Closing Date or for
which Seller or any of its Affiliates have binding commitments to purchase
as of the Closing Date. All goodwill generated by the use of such
trademarks shall inure to the benefit of Purchaser. Such trademarks shall
at all times be used in a form and manner that is consistent with past
practices of Seller and its Affiliates, and otherwise in a form and manner
prescribed by Purchaser that is not inconsistent with such past practices.
Upon Purchaser's request, Seller shall, and shall cause its Affiliates to,
provide representative samples of its use of each of the trademarks to
Purchaser, in order to enable Purchaser to ensure the use of the trademarks
is consistent with Seller's current quality standards for such products.
Seller agrees not to use or register any marks, designs, colors and color
combinations, or devices which are visually, phonetically or connotatively
similar, or otherwise confusingly similar, to the trademarks included in
the Intellectual Property.
6.07 Seller Payment Obligations. Subsequent to the Closing, Seller
shall cause Nutraco to pay all amounts due the Company or any Subsidiary
under the Contracts referred to in Section 2.25(e) of the Disclosure
Schedule in the ordinary course of business consistent with past practice,
but in no event later than sixty (60) days after they are due, without any
right of set-off.
28
Any such amount not paid when due to the Company or the Subsidiaries will
bear interest at the Interest Rate from the date due until paid, which
interest will be payable upon demand.
6.08 Name Change. Immediately following Closing, Seller and Royal
Numico will change the names of their subsidiaries so that they do not
contain the words "Rexall" or "Sundown" or any confusingly similar word;
provided, however, that the foregoing shall not prohibit the use of the
trademark "Rexall Showcase" as permitted under that certain Trademark
License Agreement, which agreement constitutes one of the Ancillary
Agreements. The parties acknowledge that any remedy at law for the breach
of this agreement would be inadequate, and Seller and Royal Numico hereby
consent to the granting of an injunction or equitable relief in order that
any such breach may be effectively restrained.
6.09 Direct Sales. Notwithstanding any provision of this Agreement
to the contrary, Purchaser agrees, and agrees to cause each of its
Affiliates, for a period of five (5) years following the Closing Date, to
continuously refrain from, directly or indirectly, using, or authorizing or
permitting any third party to use, the trademark "Rexall" or any other
trademark that contains the name "Rexall" in any to engage in or otherwise
conduct any kind of MLM Business anywhere in the world. The parties hereto
acknowledge and agree that any remedy at Law for any breach of the
provisions of this Section 6.09 would be inadequate, and Purchaser, on
behalf of itself and each of its Affiliates, hereby consents to the
granting by any court of appropriate jurisdiction of an injunction or other
equitable relief, without the necessity of actual monetary loss being
proved, in order that the breach or threatened breach of such provisions
may be effectively restrained.
6.10 Extran Professional. Provided that Seller is able to obtain
all necessary third party consents to such assignment and upon Purchaser's
request therefor, on or before December 31, 2003, Seller shall, or shall
cause its appropriate Affiliate to, assign and quit claim to Purchaser
without representation or warranty of any kind, all of Seller's or such
Affiliate's rights and obligations under that certain license agreement for
the trademark "Extran Professional."
ARTICLE 7
CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE
The obligation of Purchaser to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction
of the following conditions:
7.01 Representations and Warranties. After taking into account all
disclosures by Seller set forth in the Disclosure Schedule and any updated
sections to the Disclosure Schedule relating to Seller's representations
and warranties that are delivered to Purchaser pursuant to Section 4.06
hereof, each of the representations and warranties set forth in Article 2
hereof shall be true and correct (without regard to any "material,"
"materiality" or "Material Adverse Effect" qualifiers set forth therein) at
and as of the Closing Date as though then made and as though the Closing
Date was substituted for the date of this Agreement throughout such
representations and warranties (except to the extent that such
representations and warranties by
29
their terms speak as of an earlier date, in which case they shall be true
and correct as of such earlier date (without regard to any "material,"
"materiality" or "Material Adverse Effect" qualifiers set forth therein)),
except in each case to the extent that the failure of any such
representations and warranties to be true and correct and any such
disclosure in any updated sections to the Disclosure Schedule (other than
updates to the Disclosure Schedule to disclose any action or other matter
permitted by Section 4.03 hereof or required to be updated as of the
Closing under the last sentence of Section 2.25) that are delivered to
Purchaser pursuant to Section 4.06 hereof would not, individually or in the
aggregate with all such other failures and updated disclosures, have a
Material Adverse Effect.
7.02 Performance. The Restructuring shall have occurred in
accordance with Section 4.05 of the Disclosure Schedule in all material
respects; and after taking into account all disclosures by Seller in any
updated sections to the Disclosure Schedule relating to Seller's
agreements, covenants and obligations that are delivered to Purchaser
pursuant to Section 4.06 hereof, Seller shall have performed and complied
with each agreement, covenant and obligation required by this Agreement to
be so performed or complied with by Seller at or before Closing, except in
each case to the extent that the failure to comply with such agreement,
covenant or obligation and any such disclosure in any updated sections to
the Disclosure Schedule (other than updates to the Disclosure Schedule to
disclose any action or other matter permitted by Section 4.03 hereof or
required to be updated as of the Closing under the last sentence of Section
2.25) that are delivered to Purchaser pursuant to Section 4.06 hereof,
individually or in the aggregate with other such failures and updated
disclosures, would not have a material adverse effect on Purchaser or its
exercise of material rights under this Agreement or a Material Adverse
Effect on Royal Numico, on Seller or on the Company and the Subsidiaries
taken as a whole.
7.03 Third Party Consents. There shall have been procured all of
the third party consents set forth on Exhibit B hereto and in item 1 of
Schedule 3.04 hereto.
7.04 No Litigation. No action, suit or proceeding shall be pending
before any Governmental Authority wherein an unfavorable Order would (a)
prevent consummation of any of the transactions contemplated by this
Agreement, (b) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, (c) affect materially and adversely
the right of Purchaser to own the Interests and to control Company and the
Subsidiaries or (d) affect materially and adversely the right of any of
Company and the Subsidiaries to continue to own their Assets and to operate
their businesses (and no such Order shall be in effect).
7.05 Officer's Certificate. Seller shall have delivered to
Purchaser an officer's certificate to the effect that each of the
conditions specified above in Section 7.01-7.04 is satisfied in all
respects.
7.06 Governmental Consents. The applicable waiting periods under
the HSR Act shall have expired or been terminated, and Purchaser and Seller
shall have received all other
30
authorizations, consents and approvals of Governmental Authorities referred
to in item 1 of Schedule 3.04, if any.
7.07 Opinions of Counsels. Purchaser shall have received the
opinion of Vedder, Price, Kaufman & Kammholz, special counsel to Royal
Numico and Seller, Richards, Layton & Finger, P.A., Delaware counsel to the
Company and certain of the Subsidiaries, and Marco Bijl, Advocaat and
General Counsel of Royal Numico each dated as of the Closing Date,
substantially in the form and to the effect of Exhibits C 1-3 hereto,
respectively.
7.08 Resignations of Directors and Officers. Such managers and
members of the boards of directors and such officers of the Company and the
Subsidiaries as are designated in a written notice delivered at least five
(5) Business Days prior to the Closing Date by Purchaser to Seller shall
have tendered, effective at the Closing, their resignations as such
managers, directors and officers.
7.09 Ancillary Agreements. Seller shall have caused the Company,
the Subsidiaries and Seller's other Affiliates to have executed and
delivered to Purchaser the Ancillary Agreements to which the Company, any
Subsidiary or any of Seller's other Affiliates is a party.
7.10 Other Actions. All actions to be taken by Seller in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to effect
the transactions contemplated hereby will be reasonably satisfactory in
form and substance, and the financing referred to in Section 3.08 shall be
available, to Purchaser.
Purchaser may waive any condition specified in this Article 7 if it
executes a writing so stating at or prior to the Closing.
ARTICLE 8
CONDITIONS TO SELLER'S OBLIGATION
Seller's obligation to consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the
following conditions:
8.01 Representations and Warranties. Each of the representations
and warranties set forth in Article 3 hereof shall be true and correct in
all material respects (without regard to any "material" or "materiality"
qualifiers set forth therein) at and as of the Closing Date as though then
made and as though the Closing Date was substituted for the date of this
Agreement throughout such representations and warranties (except to the
extent that such representations and warranties by their terms speak as of
an earlier date, in which case they shall be true and correct in all
material respects as of such earlier date (without regard to any "material"
or "materiality" qualifiers set forth therein)).
8.02 Performance. Purchaser shall have performed and complied with,
in all material respects, each agreement, covenant and obligation required
by this Agreement to be so
31
performed or complied with by Purchaser at or before the Closing (except
for such agreements, covenants and obligations that are qualified by their
terms by reference to "materiality" or "material adverse effect," which
agreements, covenants and obligations as so qualified shall be performed
and complied with in all respects).
8.03 Litigation. No action, suit or proceeding shall be pending
before any Governmental Authority wherein an unfavorable Order would (a)
prevent consummation of any of the transactions contemplated by this
Agreement or (b) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such Order shall
be in effect).
8.04 Officer's Certificate. Purchaser shall have delivered to
Seller an officer's certificate to the effect that each of the conditions
specified above in Sections 8.01-8.03 is satisfied in all respects.
8.05 Governmental Consents. The applicable waiting periods under
the HSR Act shall have expired or been terminated, and Seller and Purchaser
shall have received all other authorizations, consents and approvals of
Governmental Authorities referred to in Section 2.06, if any.
8.06 Opinions of Counsels. Seller shall have received the opinion
of Milbank, Tweed, Hadley & McCloy LLP, counsel to Purchaser, and Irene
Fisher, General Counsel of Purchaser, in form and substance as set forth in
Exhibits D 1-2 hereto, respectively, each addressed to Royal Numico and
Seller and dated as of the Closing Date.
8.07 Guarantees. Seller, Royal Numico, Nutraco and their Affiliates
shall have been released from any guarantees, indemnity or other agreements
listed in Section 8.07 of the Disclosure Schedule pursuant to which Seller,
Royal Numico, Nutraco and their Affiliates (except for the payments
required under Section 13.04) has guaranteed any obligation or has agreed
to indemnify or otherwise compensate any third party on behalf of the
Company or any Subsidiary or is liable for any early termination or
inventory purchase obligation under any Contract for the benefit of the
Company or any Subsidiary, or Purchaser shall have agreed to indemnify
Seller, Royal Numico, Nutraco and their Affiliates against any Losses that
any of them may suffer or incur by reason of recourse being had or sought
against any of them under any such guarantee, indemnity or other agreement
(except for payments required under Section 13.04), in each case pursuant
to releases, indemnity agreements and other documents in form and substance
reasonably acceptable to Seller.
8.08 Third Party Consents. There shall have been procured all of
the third party consents set forth on Exhibit B hereto and in Sections
2.06(b)(D) and 8.08 of the Disclosure Schedule.
8.09 Sales Persons. Purchaser shall have agreed in writing to
assume the employment contracts (as they exist on the date hereof and have
been furnished to Purchaser) of the two sales persons (i.e. Messrs. Lamers
and van der Maar) currently employed by Seller or one of its
32
Affiliates with respect to the business conducted by Seller in Europe of
selling products that bear certain of the trademarks that are included in
the Affiliate Intellectual Property (i.e., MET-Rx).
8.10 Other Actions. All actions to be taken by Purchaser in
connection with consummation of the transactions contemplated hereby and
all certificates, opinions, instruments and other documents required to
effect the transactions contemplated hereby will be reasonably satisfactory
in form and substance to Seller.
Seller may waive any condition specified in this Article 8 on behalf of
Seller if it executes a writing so stating at or prior to the Closing.
ARTICLE 9
INDEMNIFICATION
9.01 Indemnification by Seller.
(a) Seller agrees to and shall indemnify in full Purchaser
(and its officers, directors, employees, agents, Affiliates and
shareholders) (collectively, the "Purchaser Indemnified Parties") and
defend and hold the Purchaser Indemnified Parties harmless against
any Losses that the Purchaser Indemnified Parties suffer, sustain or
become subject to as a result of (i) any misrepresentation in any of
the representations or breach of any of the warranties of Seller
contained in this Agreement (including the Disclosure Schedule and
certificates delivered by Seller hereunder), (ii) any breach of, or
failure to perform, any agreement or covenant of Seller contained in
this Agreement (including any agreement or covenant of Seller
contained in the Disclosure Schedule and certificates delivered by
Seller hereunder), (iii) the Excluded Litigation, (iv) Seller's
failure to make any of the payments set forth in Section 13.04 and
(v) any Losses arising out of the Restructuring (collectively,
"Purchaser Losses").
(b) The indemnification obligations of Seller under Section
9.01(a)(i) and (ii) shall be limited as follows:
(i) Seller shall not be required to indemnify the
Purchaser Indemnified Parties thereunder unless and until the
aggregate amount of Purchaser Losses for which the Purchaser
Indemnified Parties are otherwise entitled to indemnification
thereunder exceeds one percent of the Purchase Price set forth
in Section 1.02 (the "Seller Basket"), whereupon the Purchaser
Indemnified Parties shall be entitled to indemnification for
all Purchaser Losses in excess of the Seller Basket and up to
the Seller Cap.
(ii) Purchaser Losses shall be reduced by the aggregate
amount (net of any reasonable costs incurred in connection
therewith) of (A) any insurance proceeds actually recovered or
reasonably recoverable by the Purchaser Indemnified Parties
with respect to such Purchaser Losses; provided that the
relevant insurer has not denied coverage (in which case this
clause (A) shall not apply, but Purchaser shall assign to
Seller Purchaser's rights under the relevant insurance policy
to the extent Purchaser may do so pursuant to the terms of the
policy; provided, however, that such assignment shall
33
not relieve Seller of its obligation to make indemnity payments
to the Purchaser Indemnified Parties), (B) the aggregate amount
recovered or reasonably recoverable under any indemnity
agreement, contribution agreement or other Contract between
Purchaser, the Company or any Subsidiary, on the one hand, and
any third party, on the other hand, and (C) the aggregate
amount of any income tax benefit actually realized by the
Purchaser Indemnified Parties with respect to such Purchaser
Losses in the tax year such Purchaser Losses are incurred or
any subsequent year, assuming recognition of all other tax
benefits in any such year before recognition of a tax benefit
with respect to such Purchaser Losses, as determined after
taking into account the income tax detriment of any
indemnification payment made or to be made in connection with
such Purchaser Losses ("Purchaser Net Tax Effect"), which
determination shall initially be made by the firm of
independent public accountants employed by the applicable
Purchaser Indemnified Party to prepare its income tax returns.
Within thirty (30) days after such determination of the
Purchaser Net Tax Effect, Purchaser shall prepare and deliver
to Seller a computation thereof. At any time and from time to
time after receipt of Purchaser's determination of the
Purchaser Net Tax Effect, Seller may request, and Purchaser
shall provide upon reasonable notice, reasonable access during
normal business hours to the information, data and work papers
used to determine such Purchaser Net Tax Effect and will make
its personnel and accountants available to explain any
information, data or work papers used to determine such
Purchaser Net Tax Effect. Seller may notify Purchaser in
writing within thirty (30) Business Days following delivery of
such determination (the "Tax Effect Dispute Period") that (i)
Seller agrees with such determination (a "Tax Effect Approval
Notice") or (ii) Seller disagrees with such determination,
identifying with reasonable specificity the items with which
Seller disagrees (a "Tax Effect Dispute Notice"). Upon receipt
by Purchaser of a Tax Effect Dispute Notice, Purchaser and
Purchaser's accountants, on the one hand, and Seller and
Seller's accountants, on the other hand, will use good faith
efforts during the twenty Business Day period following the
date of Purchaser's receipt of a Tax Effect Dispute Notice (the
"Tax Effect Resolution Period") to resolve any differences they
may have as to the calculations of the Purchaser Net Tax
Effect. If Purchaser and Seller cannot reach written agreement
during the Tax Effect Resolution Period, within five (5)
Business Days thereafter, their disagreements, limited to only
those issues still in dispute ("Tax Effect Remaining
Disputes"), shall be promptly submitted to the Independent
Accountant, which firm shall conduct such additional review as
is necessary to resolve the specific Tax Effect Remaining
Disputes referred to it. Seller and Purchaser will cooperate
fully with the Independent Accountant to facilitate its
resolution of the Tax Effect Remaining Disputes, including by
providing the information, data and work papers used by each
party to calculate the Purchaser Net Tax Effect and the Tax
Effect Remaining Disputes, and making its personnel and
accountants available to explain any such information, data or
work papers. Based upon such review and other information, the
Independent Accountant shall determine the Purchaser Net Tax
Effect strictly in accordance with the terms of this Section
9.01(b)(ii) (the "Independent Accountant Tax Effect
Determination"). Such determination shall be completed as
promptly as practicable but in no event later than sixty (60)
days following the submission of the Tax Effect Remaining
Disputes to the Independent Accountant and shall be explained
in reasonable detail and confirmed by the Independent
Accountant in
34
writing to, and shall be final and binding on, Seller and
Purchaser for purposes of this Section 9.01(b)(ii), except to
correct manifest clerical or mathematical errors. The fees and
expenses of the Independent Accountant shall be paid by the
party whose calculation of the Purchaser Net Tax Effect as
submitted to the Independent Accountant differs most from the
Independent Accountant Tax Effect Determination. On the fifth
Business Day after the earlier of (A) the receipt by Purchaser
of a Tax Effect Approval Notice, (B) the expiration of the Tax
Effect Dispute Period if Purchaser has not received a Tax
Effect Approval Notice or a Tax Effect Dispute Notice within
such period, (C) the resolution by Seller and Purchaser of all
differences regarding the Purchaser Net Tax Effect within the
Tax Effect Resolution Period and (D) the receipt of the
Independent Accountant Tax Effect Determination, Purchaser
shall pay the Purchaser Net Tax Effect by wire transfer of
immediately available funds without set-off or deduction of any
kind.
(iii) all representations and warranties of Seller in
this Agreement shall survive the Closing and, subject to
Sections 3.09 and 5.06, any investigation at any time made by
or on behalf of any Purchaser Indemnified Party, but shall
expire, and Seller shall have no liability for any Purchaser
Losses for breach thereof unless a written claim for
indemnification is given by a Purchaser Indemnified Party with
respect thereto prior to (A) the expiration of applicable
statutes of limitation with respect to the representations and
warranties set forth in Section 2.13 (Tax Matters) and 2.23
(Employee Benefits), (B) the fifth (5th) anniversary of the
Closing Date with respect to the representations and warranties
set forth in Section 2.24 (Environmental Laws) and (C) the
first anniversary of the Closing Date with respect to all other
representations and warranties, except that the representations
and warranties in Section 2.02 (Authority), Section 2.08
(Brokers' Fees) and Section 2.28 (Transferees) shall survive
indefinitely. Each covenant or agreement of Seller or Royal
Numico contained herein shall survive the Closing until thirty
(30) days following the last date on which such covenant or
agreement is to be performed or, if no such date is specified,
until the expiration of all applicable statutes of limitations.
(iv) the aggregate maximum liability of Seller for all
Purchaser Losses under Sections 9.01(a)(i) and (ii) shall not
exceed ten percent of the Purchase Price set forth in Section
1.02 ("Seller Cap").
(v) Purchaser shall have no recourse against Seller for
any alleged breach of Sections 2.18(c) or 2.27 to the extent
any Losses arising from such breach shall have been taken into
account (with or without knowledge of such breach) in the
determination of the Adjustment Amount Due, if any, under
Section 1.04.
9.02 Indemnification by Purchaser.
(a) Purchaser agrees to indemnify in full Royal Numico, Seller
and Royal Numico's other Affiliates (and their respective officers,
directors, employees, agents and shareholders) (collectively, the
"Seller Indemnified Parties") and defend and hold them harmless
against any Losses which any of the Seller Indemnified Parties
suffer, sustain or become subject
35
to as a result of (i) any misrepresentation in any of the
representations or breaches of any of the warranties the Purchaser
contained in this Agreement (including the Schedules and certificates
delivered by Purchaser hereunder), (ii) any breach of, or failure to
perform, any agreement or covenant of Purchaser contained in this
Agreement, (iii) any claim for any Liabilities (other than Excluded
Litigation and the payments referred to in Section 13.04) arising out
of the Business as it is conducted after the Closing and (iv) the
Retained Litigation (collectively, "Seller Losses").
(b) All representations and warranties of Purchaser in this
Agreement shall survive the Closing and any investigation at any time
made by or on behalf of any Seller Indemnified Party, but shall
expire, and Purchaser shall have no liability for any Seller Losses
for breach thereof unless a written claim for indemnification is
given by a Seller Indemnified Party with respect thereto prior to the
first anniversary of the Closing Date (except that the
representations and warranties contained in Sections 3.02, 3.06, 3.09
and 3.10 shall survive indefinitely). Each covenant or agreement of
Purchaser contained herein shall survive the Closing, until thirty
(30) days following the last date on which such covenant or agreement
is to be performed or, if no such date is specified, until the
expiration of all applicable statutes of limitation.
9.03 Method of Asserting Claims. As used herein, an "Indemnified
Party" shall refer to a "Purchaser Indemnified Party" or "Seller
Indemnified Party," as applicable and shall be the party hereto whose
Indemnified Parties are entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify
such Indemnified Parties.
(a) Third Party Claims.
(i) In the event that any of the Indemnified Parties is
made a defendant in or party to any action or proceeding,
judicial or administrative, instituted by any third party and
the Losses arising therefrom may constitute Seller Losses or
Purchaser Losses, as the case may be (any such third party
action or proceeding being referred to as a "Third Party
Claim"), for which such Indemnified Party intends to seek
indemnity hereunder, the Indemnified Party shall give the
Indemnifying Party prompt notice thereof. The failure to give
such notice shall not affect the Indemnified Party's ability to
seek reimbursement except to the extent such failure has
adversely affected the Indemnifying Party's ability to defend
successfully such Third Party Claim. The Indemnifying Party
shall be entitled to contest and defend such Third Party Claim;
provided, that the Indemnifying Party (A) consults with the
Indemnified Party with respect to the handling of such Third
Party Claim, and (B) diligently contests and defends such Third
Party Claim. Notice of the intention so to contest and defend
shall be given by the Indemnifying Party to the Indemnified
Party within twenty (20) Business Days after the Indemnified
Party gives notice of such Third Party Claim (but, in all
events, at least five (5) Business Days prior to the date that
an answer to such Third Party Claim is due to be filed). The
Indemnifying Party will be deemed to have waived its right to
dispute its liability to the Indemnified Party under Sections
9.01 or 9.02, as the case may be, with respect to any Third
Party Claims that the Indemnifying Party elects to control
36
the defense, except as otherwise provided in clause (ii) below.
Seller may not dispute its obligation to defend any Third Party
Claim arising under clauses (iii) - (v) of Section 9.01(a) and
shall be bound by the outcome thereof. Purchaser may not
dispute its obligation to defend any Third Party Claim arising
under clause (iv) of Section 9.02(a) and shall be bound by the
outcome thereof. The Indemnified Party may, at its sole cost
and expense, at any time prior to the Indemnifying Party's
delivery of the notice referred to in this clause (i), file any
motion, answer or other pleadings or take any other action that
is reasonably necessary to protect the Indemnified Party's
interests (and the Indemnified Party shall give the
Indemnifying Party prior notice thereof to the extent
practicable). The Indemnified Party shall be entitled at any
time, at its own cost and expense (which expense shall not
constitute a Loss unless such expense is incurred at the
request of the Indemnifying Party), to participate in such
contest and defense and to be represented by attorneys of its
own choosing. If the Indemnified Party elects to participate
in such defense, the Indemnified Party shall cooperate
reasonably with the Indemnifying Party in the conduct of such
defense. If the Indemnified Party does not elect to
participate in the defense of such Third Party Claim, it shall
cooperate with the Indemnifying Party in such defense to the
extent requested by and at the sole expense of the Indemnifying
Party. Neither the Indemnified Party nor the Indemnifying
Party may concede, settle or compromise any Third Party Claim
without the consent of the other party, which consent shall not
be unreasonably withheld or delayed.
(ii) If a Third Party Claim is asserted, the
Indemnifying Party elects to assume the defense thereof
pursuant to Section 9.03(a)(i) and concurrently therewith
notifies the Indemnified Party that the Indemnifying Party has
not waived its right to dispute its liability to the
Indemnified Party under Section 9.01 or 9.02, as the case may
be, with respect to such Third Party Claim, then in any such
case the Indemnified Party may elect, by giving written notice
thereof to the Indemnifying Party within ten (10) days after
the Indemnifying Party gives notice to the Indemnified Party of
the Indemnifying Party's aforementioned election, to
participate in a joint defense of such Third Party Claim (a
"Joint Defense Proceeding") for which the reasonable expenses
of such joint defense shall be shared equally by such
Indemnifying and Indemnified Parties and the employment of
counsel shall be reasonably satisfactory to both of them. The
Indemnifying Party shall not be liable for any settlement of
any Joint Defense Proceeding, which settlement is effected
without its written consent; provided, that no settlement of a
Joint Defense Proceeding may be effected without the written
consent of both the Indemnifying and Indemnified Parties which
shall not be unreasonably withheld or delayed. In the event
the Indemnified Party fails to give notice within said ten-day
period of its election to participate in such Joint Defense
Proceeding, it will be deemed to have waived its right to
participate in such Joint Defense Proceeding and the
Indemnifying Party shall have the right to defend and settle
such Third Party Claim in accordance with Section 9.03(a)(i).
In any Joint Defense Proceeding, the Indemnifying and
Indemnified Parties shall cooperate with one another in the
defense thereof and share equally the expenses of such
cooperation. The provisions of this Section 9.03(a)(ii) shall
not apply to any Third Party Claim arising under clauses (iii),
(iv) or (v) of Section 9.01(a) or clause (iv) of Section
9.02(a).
37
(iii) Notwithstanding the provisions of Section
9.03(a)(i), in the event the Indemnifying Party fails or is not
entitled to contest and defend a Third Party Claim, the
Indemnified Party shall be entitled to contest, defend and
settle such Third Party Claim in a reasonable manner (which
shall bind the Indemnifying Party), and pursue its
indemnification rights hereunder and whatever other legal
remedies may be available to enforce its rights under this
Article 9. The Indemnified Party will have reasonable control
of such defense and proceeding, including any settlement
thereof. If requested by the Indemnified Party, the
Indemnifying Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the
Indemnified Party and its counsel in contesting any Third Party
Claim which the Indemnified Party is contesting. In addition,
the Indemnified Party may retain or take over the control of
the defense or settlement of any Third Party Claim (including
Excluded Litigation) that constitutes a Joint Defense
Proceeding or the defense of which the Indemnifying Party has
elected to control if, in each case, the Indemnified Party
irrevocably waives in writing its right to indemnity under
Section 9.01 with respect to such Third Party Claim. If any
Seller Indemnified Party is or becomes a party to any such
Third Party Claim (including any Excluded Litigation),
Purchaser may elect, by written notice thereof to Seller, to
take over the defense or settlement of such portion of such
Third Party Claim as well, in which case Purchaser shall
indemnify the Seller Indemnified Parties against any Losses
that they may suffer, sustain or become subject to as a result
of such Third Party Claim. Purchaser shall not settle any such
Third Party Claim referred to in the preceding sentence without
the consent of Seller, which consent shall not be unreasonably
withheld or delayed, except that no such consent shall be
required for any settlement that provides for no relief against
the Seller Indemnified Parties other than the payment of
current cash damages (or the current establishment of any kind
of cash fund) as to which Purchaser will indemnify the Seller
Indemnified Parties in full. If the Indemnifying Party fails
to contest and defend any Third Party Claim in accordance with
Section 9.03(a)(i), it will be bound by any determination made
in such Third Party Claim or any compromise or settlement
effected by the Indemnified Party in accordance with the terms
of this Agreement.
(iv) If requested by Seller or Purchaser, the other
party shall and shall cause its Affiliates to, at the expense
of the party specified in Section 9.03(a)(i), (ii) or (iii), as
the case may be, reasonably cooperate in the defense of any
Third Party Claim, including without limitation by furnishing
to the requesting party such records, information and testimony
and attending all such conferences, discovery proceedings,
hearings, trials and appeals as may be reasonably requested in
connection therewith.
(v) Each Indemnifying Party hereby consents to the non-
exclusive jurisdiction of any court to which an action or
proceeding in respect of a Third Party Claim is brought for
purposes of any claim that an Indemnified Party may have under
this Agreement for indemnification with respect to such action
or proceeding or the matters alleged therein and agrees that
process may be served on it with respect to such a claim
anywhere in the world in accordance with applicable Law.
38
(b) In the event any Indemnified Party should have a claim
("Direct Claim") against any Indemnifying Party that does not involve
a Third Party Claim, the Indemnified Party shall deliver a notice of
such Direct Claim to the Indemnifying Party with reasonable
promptness after the Indemnified Party obtains knowledge thereof.
Said notice shall indicate the nature of such Direct Claim with
reasonable specificity. If the Indemnifying Party notifies the
Notifying Party that it does not dispute the Direct Claim described
in such notice, the Loss in the amount specified in the Indemnified
Party's notice shall be conclusively deemed a liability of the
Indemnifying Party and the Indemnifying Party shall pay the amount of
such Loss to the Indemnified Party on demand in accordance with the
terms hereof. If the Indemnifying Party gives notice to the
Notifying Party that it disputes the Direct Claim or fails to respond
to Notifying Party whether the Indemnifying Party disputes such
Direct Claim, the Indemnified Party may pursue its indemnification
rights hereunder and whatever other legal remedies may be available
to enforce its rights under this Article 9.
9.04 Adjustments. Any indemnification payments paid under this
Article 9 will be considered an adjustment to the Purchase Price.
9.05 Arbitration Procedure.
(a) Subject to Section 9.05(f), each of the parties agrees
that the arbitration procedure set forth below shall be the sole and
exclusive method for resolving and remedying claims for Losses
arising out of the provisions of Articles 9 and 10 (the "Disputes").
Nothing in this Section 9.05 shall prohibit a party from instituting
litigation to enforce any Final Determination. The parties hereby
agree and acknowledge that, except as otherwise provided in this
Section 9.05 or in the Commercial Arbitration Rules of the American
Arbitration Association ("AAA Rules") as in effect from time to time,
the arbitration procedures and any Final Determination hereunder
shall be governed by, and shall be enforced pursuant to the Uniform
Arbitration Act and applicable provisions of, the laws of the State
of New York.
(b) In the event that any party asserts that there exists a
Dispute, such party shall deliver a written notice to each other
party involved therein specifying the nature of the asserted Dispute
and requesting a meeting to attempt to resolve the same. If no such
resolution is reached within thirty (30) days after the delivery of
such notice, the party delivering such notice of Dispute (the
"Disputing Person") may, at any time after delivery of such notice,
commence arbitration hereunder by delivering to each other party
involved therein a notice of arbitration (a "Notice of Arbitration")
and by filing a copy of such Notice of Arbitration with the New York,
New York, office of the American Arbitration Association. Such
Notice of Arbitration shall specify the matters as to which
arbitration is sought, the nature of such Dispute, the claims of each
party to the arbitration and the amount and nature of any Losses, if
any, sought to be recovered as a result of any alleged claim, and any
other matters required by the AAA Rules as in effect from time to
time to be included therein, if any.
(c) Seller and Purchaser each shall select one independent
arbitrator reasonably expert in the subject matter of the Dispute
(the arbitrators so selected shall be referred to herein as the
"Seller Arbitrator" and the "Purchaser Arbitrator," respectively).
In the event
39
that either Seller or Purchaser fails to select an independent
arbitrator as set forth herein within fifteen (15) days after
delivery of a Notice of Arbitration, then the matter shall be
resolved by the arbitrator selected by the other party. The Seller
Arbitrator and the Purchaser Arbitrator shall select a third
independent arbitrator reasonably expert in the subject matter of the
Dispute, and the three arbitrators so selected shall resolve the
matter according to the procedures set forth in this Section 9.05.
If the Seller Arbitrator and the Purchaser Arbitrator are unable to
agree on a third arbitrator within fifteen (15) days after their
selection, the Seller Arbitrator and the Purchaser Arbitrator shall
each prepare a list of three independent reasonably expert
arbitrators. The Seller Arbitrator and the Purchaser Arbitrator
shall each have the opportunity to designate as objectionable and
eliminate one arbitrator from the other arbitrator's list within
seven (7) days after submission thereof, and the third arbitrator
shall then be selected by lot from the arbitrators remaining on the
lists submitted by the Seller Arbitrator and the Purchaser
Arbitrator.
(d) The arbitrator(s) selected pursuant to Section 9.05(c)
shall allocate the costs and expenses of arbitration to the party
whose calculation of the Losses in dispute differs the most from the
determination of such Losses by the arbitrator(s).
(e) The arbitration shall be conducted under the AAA Rules as
in effect from time to time, except as otherwise set forth herein or
as modified by the agreement of the parties. The arbitrator(s) shall
determine the arbitrability of any matter submitted to them and shall
be bound by and shall enforce the terms of this Agreement, applying
the law specified in Section 14.08. The arbitrator(s) shall have no
power or authority, under the AAA Rules or otherwise, to (i) modify
or disregard any provision of this Agreement, including the
provisions of this Section 9.05, or (ii) address or resolve any issue
not submitted by the parties. In the event of any conflict between
the AAA Rules as in effect from time to time and the provisions of
this Agreement, the provisions of this Agreement shall prevail and be
controlling. The arbitration shall be conducted in English in New
York, New York. The arbitrator(s) shall so conduct the arbitration
that a final result, determination, finding, judgment and/or award
(the "Final Determination") is made or rendered as soon as
practicable, but in no event later than ninety (90) days after the
delivery of the Notice of Arbitration and not later than ten (10)
days following completion of the arbitration. The Final
Determination must be agreed upon and signed by the sole arbitrator
or by at least two of the three arbitrators (as the case may be).
The Final Determination shall be final and binding on all parties,
and a judgment may be entered on the Final Determination in any court
of the United States or the Netherlands, provided that the
arbitrators shall have no power or authority (1) to award Losses in
excess of the amount that is claimed pursuant to such Dispute, (2) to
award any consequential, punitive, exemplary or other similar damages
that do not constitute Losses, or (3) to the extent prohibited by the
AAA Rules or applicable Law, grant injunctive relief, specific
performance or other equitable relief. There shall be no appeal from
or reexamination of the Final Determination, except for fraud,
perjury, evident partiality or misconduct by an arbitrator
prejudicing the rights of any party and to correct manifest clerical
or mathematical errors.
(f) Any party may, without inconsistency with this Agreement,
seek from any court any interim or provisional relief that may be
necessary to protect the rights or property of that party, pending
the establishment of the arbitral tribunal or pending the arbitral
tribunal's
40
determination of the merits of the controversy. In addition, a party
may, without inconsistency with this Agreement, seek from any court
of appropriate jurisdiction equitable relief to enforce its rights
under, and to recover Losses by reason of any other party's breach
of, Sections 5.08, 6.02, 6.04, 6.08 or 6.09.
9.06 Remedies. The foregoing indemnification provisions shall be
the sole and exclusive remedy for the matters set forth in Article 9 and no
party shall have any cause of action or remedy at law or in equity for
breach of contract, rescission, tort or otherwise against any other party
arising under or in connection with this Agreement, except in the case of
fraud, and except with respect to claims related to Sections 5.08, 6.02,
6.04, 6.08 or 6.09, in which case each of the parties shall each have and
retain all other rights and remedies existing in their favor at law or
equity, including, without limitation, any actions for specific performance
and/or injunctive or other equitable relief.
9.07 Joint and Several Liability. Royal Numico hereby agrees to be
jointly and severally liable with Seller for all obligations of Seller
under this Agreement, except that Royal Numico shall have no obligation to
sell the Interests or Affiliate Intellectual Property under Section 1.01
but agrees to cause Seller and the Affiliate Sellers to do so in accordance
with the terms of this Agreement. For avoidance of doubt, the Seller
Basket, the Seller Cap and all other provisions hereunder that limit,
qualify or condition Seller's liability hereunder shall apply in the same
manner (without duplication) to Royal Numico hereunder. In the event
Seller is liquidated and dissolved, Royal Numico shall remain liable for
all obligations of Seller hereunder and shall be entitled to exercise all
rights of Seller hereunder.
9.08 INVESTIGATION. SUBJECT TO SECTIONS 3.09 AND 5.06, NOTHING IN
THIS AGREEMENT OR OTHERWISE (INCLUDING WITHOUT LIMITATION ANY REVIEW OR
INVESTIGATION CONDUCTED WITH RESPECT TO, OR ANY KNOWLEDGE ACQUIRED OR
CAPABLE OF BEING ACQUIRED AT ANY TIME WHETHER BEFORE OR AFTER THE DATE
HEREOF OR THE CLOSING WITH RESPECT TO, THE ACCURACY OR INACCURACY OF ANY
REPRESENTATION OR WARRANTY SET FORTH IN THIS AGREEMENT, THE DISCLOSURE
SCHEDULE, IF APPLICABLE, AND ANY CERTIFICATE DELIVERED HEREUNDER BY A PARTY
HERETO) SHALL LIMIT A PARTY'S ABSOLUTE AND UNCONDITIONAL RIGHT TO RELY ON
THE OTHER PARTY'S REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS
AGREEMENT, THE DISCLOSURE SCHEDULE, IF APPLICABLE, AND ANY CERTIFICATE
DELIVERED HEREUNDER BY SUCH OTHER PARTY, INCLUDING THROUGH EXERCISE OF
RIGHTS TO INDEMNIFICATION OR OTHER REMEDY PERMITTED HEREUNDER BASED ON SUCH
REPRESENTATIONS AND WARRANTIES.
41
ARTICLE 10
TAX MATTERS
10.01 Tax Indemnity.
(a) (i) Seller shall be responsible for and indemnify and
hold harmless Purchaser, the Company and each Subsidiary (without any
"gross up") from and against all Taxes of the Company and the
Subsidiaries attributable to any taxable year or period (or portion
thereof) ending on or before the Closing Date, including, without
limitation, all Taxes for such taxable years or periods imposed on
the Company or any Subsidiary arising under Treasury Regulation
Section 1.1502-6 or any analogous state, local, or foreign Tax
provision and all Taxes attributable to the Restructuring and the
transfer of the Affiliate Intellectual Property. Purchaser shall be
responsible for all Taxes with respect to any taxable year or period
(or portion thereof beginning after the Closing Date) that begins
after the Closing Date.
(ii) For purposes of this Section 10.01(a), whenever it
is necessary to determine the liability for Taxes of the
Company and the Subsidiaries for a portion of a taxable year or
period that begins before and ends after the Closing Date, the
determination of such Taxes for the portion of the year or
period ending on, and the portion of the year or period
beginning after, the Closing Date shall be determined (x) in
the case of Income Taxes, and any other Taxes not addressed in
clause (y) below, based upon an interim closing of the books of
the Company or the relevant Subsidiary as of the close of
business on the Closing Date and (y) in the case of real and
personal property Taxes, based upon the relative number of days
in the portion of the taxable period up to and including the
Closing Date and the portion of the taxable period subsequent
to the Closing Date.
(b) (i) Seller shall timely prepare (or cause to be prepared)
and timely file (or cause to be timely filed) (including permissible
extensions) all Tax Returns of the Company and the Subsidiaries for
any taxable year or period ending on or before the Closing Date which
are not required to be filed on or before the Closing Date. At least
thirty (30) days prior to the due date (including permissible
extensions) for filing each such Tax Return, Seller shall provide
Purchaser with a copy of such Tax Return for Purchaser's review and
consent, which shall not be unreasonably withheld or delayed. Prior
to the due date for filing any such Tax Return, Seller shall file
such Tax Return and pay the amount of Taxes owed by Seller under
Section 10.01(a) and shown as due thereon.
(ii) Purchaser shall prepare (or cause to be prepared)
(including permissible extensions) and timely file (or cause to
be timely filed) (including permissible extensions) all Tax
Returns of the Company and the Subsidiaries for any taxable
year or period commencing prior to the Closing Date and ending
subsequent to the Closing Date. Purchaser shall provide Seller
with a copy of each such Tax Return for Seller's review and
comment at least thirty (30) days prior to the due date for
filing such Tax Return. Seller shall, at least five (5)
Business Days prior to the due date (including
42
permissible extensions) for filing any such Tax Return, remit
to Purchaser the amount allocated to it with respect to such
period pursuant to Section 10.01(a).
(iii) The Tax Returns referred to in Sections
10.01(b)(i) and (b)(ii) shall, to the extent not otherwise
required by Law, be prepared in a manner consistent with the
Company's or relevant Subsidiary's past practice (including any
Tax elections and methods of accounting).
(c) After the Closing, Purchaser shall not amend or restate
any Tax Return for the Company or any Subsidiary that includes any
period prior to or including the Closing Date without Seller's
written consent.
(d) Anything in this Agreement to the contrary
notwithstanding, the rights and obligations of the parties with
respect to indemnification for any and all Taxes shall be governed
exclusively by this Article 10 and Section 9.05, it being understood
and agreed that all other provisions of Article 9, including without
limitation the Seller Basket and Seller Cap, shall not apply to
Article 10.
10.02 Tax Contests.
(a) After the Closing, Purchaser shall promptly (within
fifteen (15) days) notify Seller in writing of the commencement of
any Tax audit or administrative or judicial proceeding or of any
demand or claim on Purchaser which, if determined adversely to the
taxpayer or after the lapse of time would be grounds for
indemnification under Section 10.01(a). Such notice shall contain
factual information (to the extent known to Purchaser) describing the
asserted Tax liability in reasonable detail and shall include copies
of any notice or other document received from any Governmental
Authority in respect of any such asserted Tax liability. If
Purchaser fails to give Seller prompt notice of an asserted Tax
liability as required by this Section 10.02(a), then (i) if Seller is
precluded by the failure to give prompt notice from contesting the
asserted Tax liability in both the administrative and judicial
forums, then Seller shall have no obligation to indemnify Purchaser,
the Company or any Subsidiary against any loss arising out of such
asserted Tax liability, and (ii) if Seller is not so precluded from
contesting but such failure to give prompt notice results in a
detriment to Seller, then any amount which Seller is otherwise
required to pay Purchaser, the Company or any Subsidiary pursuant to
Section 10.01 with respect to such liability shall be reduced by the
amount caused by such detriment.
(b) Seller may elect to direct, through counsel chosen by
Seller and at its own expense, any audit, claim for refund and
administrative or judicial proceeding involving any asserted
liability with respect to which indemnity may be sought under Section
10.01(a) (any such audit, claim for refund or proceeding relating to
an asserted Tax liability are referred to herein collectively as a
"Contest"). If Seller elects to direct the Contest of an asserted
Tax liability, Seller shall within ninety (90) calendar days after
receipt of written notice of the asserted Tax liability notify
Purchaser of its intent to do so, and Purchaser, the Company and each
affected Subsidiary shall fully cooperate in each phase of such
Contest. If Seller elects not to direct the Contest or Seller fails
to notify Purchaser of its election as herein provided,
43
Purchaser, the Company and each affected Subsidiary may pay,
compromise or contest, at its own expense, such asserted liability
and seek indemnification therefor pursuant to Section 10.01(a).
However, in such case, Purchaser, the Company and each affected
Subsidiary may not settle or compromise any asserted Tax liability
without first giving written notice to Seller of the terms of such
settlement or compromise and receiving the written consent of Seller
to such settlement or compromise; provided, however, that consent to
such settlement or compromise shall not be unreasonably withheld by
Seller. In any event, each of Purchaser and Seller shall have the
right to attend and participate, at their own expense, in the
Contest. If Seller chooses to direct the Contest, Purchaser, the
Company and each affected Subsidiary shall promptly empower (by power
of attorney and such other documentation as may be appropriate) such
representatives of Seller as Seller may designate to represent the
relevant entity or any successor thereto in the Contest insofar as
the Contest involves an asserted Tax liability for which Seller would
be liable under Section 10.01(a).
(c) Except for the proceedings the control of which is
determined pursuant to Section 10.02(b), Purchaser shall, at its own
expense, control, manage and solely be responsible for any audit,
contest, claim, proceeding or inquiry with respect to Taxes for any
taxable year or period ending after the Closing Date, and shall have
the exclusive right to settle or contest any such audit, contest,
claim, proceeding or inquiry without the consent of any other party
and shall be responsible for all Taxes payable for any such year or
period.
10.03 Payments for Certain Adjustments. If an audit adjustment,
claim for refund or amended Tax Return ("Adjustment") after the date hereof
shall both increase a Tax liability for which Seller would be liable under
Section 10.01(a) (or reduce losses or credits otherwise available to
Seller) and decrease a Tax liability of Purchaser or any of its
subsidiaries or their successors for a period (or portion thereof) ending
after the Closing Date, then, when and to the extent that Purchaser or any
of its subsidiaries derives a benefit from such decrease (through a
reduction of Taxes, refund of Taxes paid or credit against Taxes due,
assuming recognition of all other tax benefits in any such year before
recognition of a tax benefit with respect to such Purchaser Losses),
Purchaser shall promptly pay to Seller, an amount equal to the amount of
such refund, reduction or credit. Similarly, if an Adjustment shall both
decrease a Tax liability which is allocated to Seller under Section
10.01(a) and increase the Tax liability of Purchaser, the Company or any of
the Subsidiaries or their successors (or reduce losses or credits otherwise
available to any such corporation) for a period ending after the Closing
Date, then, when and to the extent that Seller derives a benefit from such
decrease (through a refund or reduction of Taxes paid or credit against
Taxes due), Seller shall promptly pay to Purchaser an amount equal to the
amount of such refund, reduction or credit.
10.04 Refunds. Any refunds or overpayment credits received by
Purchaser, the Company or the Subsidiaries or their successors of Taxes
relating to taxable periods or portions thereof ending on or before the
Closing Date shall be for the account of Seller; provided, however, that
Purchaser may waive any carryback to a prior tax year or period of any net
operating loss or other tax attribute arising in a period beginning after
the Closing Date, as provided in Code Section 172 or any similar provision
of state, local or foreign Tax law. Purchaser promptly shall notify Seller
of Purchaser's, the Company's or any Subsidiary's or their
44
successors' receipt of such refund or overpayment credits and Purchaser
shall or shall cause the relevant entity to promptly pay over to Seller any
such refund after receipt thereof. Purchaser shall, if Seller so requests
and at Purchaser's expense, cause the relevant entity to file for and
obtain any refunds or equivalent amounts to which Seller is entitled under
this Section 10.04. Purchaser shall permit Seller to control (at Seller's
expense) the prosecution of any such refund claimed, and shall cause the
relevant entity to authorize by power of attorney and such other
documentation as may be appropriate such persons as Seller shall designate
to represent such entity with respect to such refund claimed.
10.05 Cooperation and Exchange of Information. Seller and Purchaser
shall provide the other with such cooperation and information as either of
them reasonably may request of the other in filing any Tax Return, amended
Tax Return or claim for refund, determining a liability for Taxes or a
right to a refund of Taxes or participating in or conducting any Contest in
respect of Taxes. Such cooperation and information shall include providing
copies of relevant Tax Returns or portions thereof, together with
accompanying schedules and related work papers and documents relating to
rulings or other determinations by any Governmental Authority. Each party
shall, and shall cause its Affiliates to, make its employees, agents or
other Representatives available on a mutually convenient basis to provide
explanations of any documents or information provided hereunder. Each
party shall, and shall cause its Affiliates to, retain all Tax Returns,
schedules and work papers and all material records or other documents
relating to Tax matters of the Company and the Subsidiaries for the taxable
period first ending after the Closing Date and for all prior taxable
periods until the later of (i) the expiration of the statute of limitations
of the taxable periods to which such Tax Returns and other documents
relate, without regard to extensions, except to the extent notified by the
other party in writing of such extensions for the respective Tax periods,
or (ii) six (6) years following the due date (without extension) for such
Tax Returns. Any information obtained under this Section 10.05 shall be
kept confidential, except as may be otherwise necessary in connection with
the filing of Tax Returns or claims for refund or in conducting an audit or
other proceeding.
ARTICLE 11
TERMINATION
11.01 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of Purchaser and Seller;
(b) by Purchaser, if there has been a material violation or
breach by Seller of any covenant, representation or warranty
contained in this Agreement which has prevented the satisfaction of
any condition to the obligations of Purchaser at the Closing and such
violation or breach has not been waived by Purchaser or deemed cured
by Seller pursuant to Section 4.06;
(c) by Seller, if there has been a material violation or
breach by Purchaser of any covenant, representation or warranty
contained in this Agreement which has prevented the satisfaction of
any condition to the obligations of Seller at the Closing and such
violation or
45
breach has not been waived by Seller or, with respect to a covenant
breach, cured by Purchaser within ten (10) Business Days after
written notice thereof by Seller (provided that neither a breach by
Purchaser of Section 3.08 hereof nor the failure to deliver the full
consideration payable to Seller under this Agreement at the Closing
as required hereunder shall be subject to cure hereunder unless
otherwise agreed to in writing by Seller); or
(d) by either Purchaser or Seller if the transactions
contemplated hereby have not been consummated by August 5, 2003;
provided that, neither Purchaser nor Seller shall be entitled to
terminate this Agreement pursuant to this Section 11.01(d) if such
Person's willful breach of this Agreement has prevented the
consummation of the transactions contemplated hereby.
11.02 Effect of Termination. Except as set forth in Section 11.03,
in the event of termination of this Agreement by either Purchaser or Seller
as provided above, the provisions of this Agreement shall immediately
become void and of no further force and effect (other than this Section
11.02, the last sentence of Section 4.04, and Sections 5.03, 5.08 and 11.03
hereof, the Confidentiality Agreement and the Data Room Access Agreement
which shall survive the termination of this Agreement in accordance with
the respective terms thereof), and there shall be no liability on the part
of any party hereto to any other party, except for any willful breaches of
this Agreement prior to the time of such termination.
11.03 Break-Up Fee. In the event of the termination of this
Agreement at any time at or prior to Closing as a result of the financing
referred to in Section 3.08 being unavailable for any reason other than any
event, development, circumstance, effect or change relating to the
business, Assets, conditions (financial or otherwise), operating results or
operations of the Company and its Subsidiaries, Purchaser shall pay Seller
a lump sum amount in immediately available funds equal to Five Million
Dollars ($5,000,000) within three (3) Business Days after such termination
to such account as Seller shall direct in writing. In the event such
amount is not paid when due, it shall bear interest at the Interest Rate
from the date due until paid, which interest shall be payable upon demand
by Seller.
ARTICLE 12
DEFINITIONS
12.01 Definitions. As used in this Agreement:
"2003 Budget" means the budget adopted by the Company and the
Subsidiaries for 2003 as furnished to Purchaser before the date of this
Agreement.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a).
46
"Ancillary Agreements" means the agreements listed in Section 12.01
of the Disclosure Schedule, which in the case of items (a), (b) and (c)(1)
of Section 12.01 of the Disclosure Schedule, shall be in the form attached
to Section 12.01 of the Disclosure Schedule.
"Assets" of any Person means all assets and properties of every kind
(whether real, personal or mixed, whether tangible or intangible and
wherever situated), including the goodwill related thereto, operated, owned
or leased by such Person.
"Business Day" means any day other than a Saturday, Sunday or day
when banks are closed or authorized to be closed in the State of New York.
"Closing" means the closing of the transactions contemplated by
Section 1.03.
"Closing Date" means the later to occur of (a) July 17, 2003, or
(b)(i) the fifth Business Day after the date on which the financing
referred to in Section 3.08 is available and the last of the material
consents, approvals, actions, filings, notices or waiting periods described
in or related to the filings described in Sections 7.03 and 7.06, and
Sections 8.05 and 8.08 has been obtained, made or given or has expired, as
applicable, or (ii) such other date as Purchaser and Seller mutually agree
upon in writing.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code Section 4980B.
"Code" means the Internal Revenue Code of 1986, as amended or now in
effect or as hereafter amended, including but not limited to, any successor
or substitute Federal tax codes or legislation.
"Company Accounting Policies" means the policies and methodologies
set forth on Exhibit E hereto (Seller representing that these were the
policies and methodologies that were applied to certain principles of GAAP
in connection with the preparation of the Audited Financial Statements as
of and for the fiscal year ended December 31, 2002) that, together with the
Pro Forma adjustments referred to on Exhibit E hereto will be applied to
calculate the Closing Date Working Capital Adjustment in a manner
consistent with the manner in which such policies and methodologies were
applied to prepare said Audited Financial Statements. For the avoidance of
doubt, if, in applying the Company Accounting Policies, a conflict arises
between (a) GAAP and the Company's historical accounting policies and
methodologies as set forth on Exhibit E hereto, the Company's historical
accounting policies and methodologies as so set forth shall prevail or (b)
the definitions of Working Capital Assets and Working Capital Liabilities
set forth in this Agreement and such definitions set forth in the Company
Accounting Policies, such definitions in the Company Accounting Policies
shall prevail.
"Confidential Information" means any information concerning the
businesses and affairs of Company, the Subsidiaries and their Affiliates
that is not already generally available to the public.
47
"Confidentiality Agreement" means those certain confidentiality
agreements between Royal Numico and Purchaser dated as of September 23,
2002 and December 9, 2002.
"Constituent Documents" means the certificate or articles of
incorporation and by-laws of any corporate Person, the limited liability
company agreement of any Person that is a limited liability company and the
partnership agreement of any Person that is a partnership.
"Contract" means any note, bond, mortgage, indenture, loan, contract,
factoring arrangement, license, agreement, lease or other instrument or
obligation, to which the party in question is a party or by which it or any
of its assets may be bound.
"Controlled Group" has the meaning set forth in Code Section 1563.
"Data Room Access Agreement" means the Data Room Access Agreement
dated as of April 21, 2003 between Seller and Purchaser pursuant to which
Seller has granted Purchaser access to Seller's virtual data room.
"Disclosure Schedule" means the document delivered to Purchaser by
Seller of even date herewith, and as updated from time to time pursuant to
Section 4.06, containing the exceptions to Seller's representations and
warranties, and other information required by this Agreement.
"Employee Benefit Plan" means any "employee benefit plan" (as such
term is defined in ERISA Section 3(3)), stock purchase, stock option,
incentive compensation, severance employment, change in control, fringe
benefit, bonus, deferred compensation plan, program, arrangement or
agreement and any other employee benefit plan, program, agreement or
arrangement of any kind.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental Laws" shall mean all federal, state, local and foreign
statutes, regulations, ordinances and similar provisions having the force
or effect of law, all judicial and administrative orders and determinations
and all common law concerning public health and safety, worker health and
safety and pollution or protection of the environment, including all those
relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control or
cleanup of any hazardous materials, substances or wastes, chemical
substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, as such requirements are enacted and in
effect on or prior to the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
48
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with the Company, is or has been treated as a
single employer under Section 414 of the Code.
"Excluded Litigation" means the actions and proceedings set forth in
Section 9.01(a)(iii) of the Disclosure Schedule.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"GNC" means General Nutrition Companies, Inc., a Delaware
corporation.
"Governmental Authority" means any foreign, domestic or local court,
administrative agency, bureau, board, commission, office, authority,
department or other governmental entity.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Income Tax" means any federal, state, local or foreign income tax
measured by or imposed on net income, including any interest, penalty or
addition thereto, whether disputed or not.
"Income Tax Return" means any return, declaration, report, claim for
refund or information return or statement relating to Income Taxes,
including any schedule or attachment thereto and including any amendment
thereof.
"Investment Assets" means securities, bonds, certificate of deposits
and similar investment assets.
"IRS" means the Internal Revenue Service and any successor thereto.
"Knowledge of Purchaser" or "Known to Purchaser" means the actual,
conscious knowledge of Irene Fisher, Harvey Kamil, Scott Rudolph, and
Michael Slade.
"Knowledge of Seller" or "Known to Seller" means the actual,
conscious knowledge of John DeSimone, Richard Werber and Ralph Denisco.
"Laws" means all laws, statutes, rules, regulations and ordinances of
the United States, any foreign country or any domestic or foreign state or
political subdivision.
"Liabilities" means all indebtedness, obligations and other
liabilities of a Person (whether known or unknown, absolute, accrued,
contingent, fixed, liquidated, unliquidated or otherwise, or whether due or
to become due).
"Lien" means any mortgage, pledge, lien, encumbrance, charge or other
security interest.
49
"Losses" means all damages, penalties, fines, costs, amounts paid in
settlement, Liabilities, obligations, Taxes, Liens, losses, expenses and
fees, including court costs and reasonable attorneys' fees and expenses;
provided, however, that "Losses" shall include consequential, indirect,
punitive and any similar damages only if payable solely to a Person other
than a Purchaser Indemnified Party pursuant to any Third Party Claim or any
Excluded Litigation.
"Major Intellectual Property" means the following trademarks: Rexall
(1,524,111). Rexall (1,527,754), Sundown (427,783), Sundown (1,525,207),
Osteo-Bi-Flex (2,205,607), Osteo-Bi-Flex (expanded goods) (2,395,667), Carb
Solutions (App. 76/080,392), Carb Solutions (expanded goods) (App.
76/492,215), Worldwide Sport Nutrition (2,424,531), Pure Protein (App.
75/385,048), Pure Protein (2,213,027), Pure Protein (2,277,047), MET-Rx
(447,065), MET-Rx (2,058,523) and MET-Rx (2,169,788).
"Material Adverse Effect" or "Material Adverse Change" means any
event, development, effect or change that would be materially adverse to
the business, Assets, condition (financial or otherwise), operating results
or operations of the Company and the Subsidiaries, taken as a whole, or on
the ability of Seller or Royal Numico to consummate timely the transactions
contemplated hereby; provided that none of the following shall be deemed to
constitute, and none of the following shall be taken into account in
determining whether there has been, a Material Adverse Effect or Material
Adverse Change: (a) any adverse change, event, development or effect
arising from or relating to (i) general business or economic conditions,
including such conditions related to the business of the Company and the
Subsidiaries, (ii) national or international political or social
conditions, including the engagement by the United States in hostilities,
whether or not pursuant to the declaration of a national emergency or war
or the occurrence of any military or terrorist attack upon the United
States or any of its territories, possessions or diplomatic or consular
offices or upon any military installation, equipment or personnel of the
United States, (iii) financial, banking or securities markets (including
any disruption thereof and any decline in the price of any security or any
market index), (iv) changes in GAAP, or (v) any decline in sales or
increases in losses that are substantially consistent with the trends
therein that the Company and the Subsidiaries have been experiencing since
January 1, 2002 or result from (A) the Company's decision to cease selling
products that contain ephedra, (B) the public announcement of Seller's
intent to sell, or of Purchaser's agreement to acquire, the Company and the
Subsidiaries or (C) any act or omission of Purchaser or any of its
Affiliates, or (b) any existing event, occurrence or circumstance Known to
Purchaser as of the date of this Agreement.
"MLM Business" shall mean any multi-level marketing company, as such
business is currently conducted by Unicity, including but not limited to
any network marketing company, direct selling company (other than a
catalogue, mail order or internet company) or other company that is a
member of the United States Direct Selling Association or any direct
selling association in the world. Except as set forth above, MLM Business
shall not include other direct marketing companies or other businesses,
including companies that sell products over the internet, via catalogues,
mail order, television infomercials or the like.
50
"Multiemployer Plan" has the meaning set forth in ERISA Section
3(37).
"Nutraco" means collectively Nutraco S.A., a Swiss corporation, and
Nutraco International SA, a Luxembourg corporation.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to purchase or otherwise be issued any shares of capital
stock of or membership or partnership interests in such Person or any
security of any kind convertible into or exchangeable or exercisable for
any shares of capital stock of or membership or partnership interests in
such Person.
"Order" means any writ, judgment, award, decree, injunction or
similar order of any Governmental Authority or arbitrator.
"Ordinary Course of Business" means the ordinary course of business
of the Company and its Subsidiaries consistent with their past custom and
practice.
"Permitted Liens" means with respect to any Asset: (a) Taxes,
assessments and other governmental levies, fees or charges imposed with
respect to such Asset for which adequate reserves have been established
that (i) are not due and payable as of the Closing Date or (ii) being
contested in good faith; (b) mechanics' liens and similar liens for labor,
materials or supplies provided with respect to such Asset incurred in the
Ordinary Course of Business for amounts for which adequate reserves have
been established that (i) are not due and payable as of the Closing Date or
(ii) being contested in good faith which would not, individually or in the
aggregate, materially impair the use or occupancy of such Asset or the
operation of the business of Company and the Subsidiaries as currently
conducted using such Asset; (c) zoning, building codes and other land use
laws regulating the use or occupancy of such Asset that constitutes real
property or the activities conducted thereon that are imposed by any
Governmental Authority having jurisdiction over such real property and are
not violated by the current use or occupancy of such real property or the
operation of the business of the Company and the Subsidiaries as currently
conducted thereon; and (d) easements, covenants, conditions, restrictions
and other similar matters of record affecting title to such real property
which do not or would not materially impair the use or occupancy of such
real property or the operation of the business of Company and the
Subsidiaries, as currently conducted thereon.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, any other business entity or a
governmental entity (or any department, agency or political subdivision
thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Section
406 and Code Section 4975.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
51
"Representatives" of a party means such party's legal counsel,
investment bankers, accountants and other advisors and those of any Person
providing financing to Purchaser.
"Restructuring" means the transactions described in Section 4.05 of
the Disclosure Schedule hereto.
"Retained Litigation" means all of the actions and proceedings
disclosed on the Disclosure Schedule, except for the Excluded Litigation.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Subsidiary" means any corporation, limited partnership, limited
liability company, or other entity with respect to which the Company (or a
Subsidiary thereof) owns a majority of the common stock, units or other
equity interests or has the power to vote or direct the voting of
sufficient securities to elect a majority of its board of directors or
comparable governing body.
"Tax" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, including any
interest, penalty or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund
or information return or statement relating to Taxes, including any
schedule or attachment thereto and including any amendment thereof.
"Unicity" means Unicity International, Inc., a Delaware corporation.
12.02 Cross-Reference of Other Definitions. Each capitalized term
listed below is defined in the corresponding Section of this Agreement.
Term Section No.
---- -----------
<s> <c>
AAA Rules 9.05(a)
Adjustment 10.03
Adjustment Amount Due 1.04(a)
Adjustment Schedule 1.04(a)
Affiliate Intellectual Property 1.01(b)
Affiliate Seller(s) 1.01(b)
Agreement Preamble
Allocation 1.05
Approval Notice 1.04(b)(i)
52
Term Section No.
---- -----------
<s> <c>
Audited Financial Statements 2.09
Business 6.02
Closing Date Working Capital Amount 1.04(a)
Company Preamble
Company Intellectual Property 2.15
Contest 10.02(b)
Direct Claim 9.03(b)
Dispute Period 1.04(b)
Dispute Notice 1.04(b)(ii)
Disputes 9.05(a)
Disputing Person 9.05(b)
FFDC Act 2.27(b)
Final Determination 9.05(e)
GN 2.27(d)
GP Act 2.03
GP Agreement 2.03
Indemnified Party 9.03
Indemnifying Party 9.03
Independent Accountant 1.04(b)
Independent Accountant Determination 1.04(b)
Independent Accountant Tax Effect Determination 9.01(b)(ii)
Intellectual Property 2.15
Interest Rate 1.04(b)
Interests Preamble
Interim Financial Statements 4.09
Joint Defense Proceeding 9.03(a)(ii)
LLC Act 2.03
LLC Agreement 2.03
Most Recent Balance Sheet 2.09
Newco 1 LLC Preamble
Newco DGP1 Preamble
NFS Preamble
Notice of Arbitration 9.05(b)
Numico USA Preamble
Purchase Price 1.02
Purchaser Preamble
Purchaser Arbitrator 9.05(c)
53
Term Section No.
---- -----------
<s> <c>
Purchaser Indemnified Parties 9.01(a)
Purchaser Losses 9.01(a)
Purchaser Net Tax Effect 9.01(b)(ii)
Remaining Disputes 1.04(b)
Resolution Period 1.04(b)
Rexall Sundown 2.27(d)
Royal Numico Preamble
Seller Preamble
Seller Arbitrator 9.05(c)
Seller Basket 9.01(b)(i)
Seller Cap 9.01(b)(iv)
Seller Indemnified Parties 9.02(a)
Seller Losses 9.02(a)
Tax Effect Approval Notice 9.01(b)(ii)
Tax Effect Dispute Notice 9.01(b)(ii)
Tax Effect Dispute Period 9.01(b)(ii)
Tax Effect Remaining Disputes 9.01(b)(ii)
Tax Effect Resolution Period 9.01(b)(ii)
Third Party Claim 9.03(a)(i)
Transferees 4.05
WC Target 1.04(a)
Working Capital Assets 1.04(b)
Working Capital Liabilities 1.04(b)
ARTICLE 13
ADDITIONAL POST-CLOSING COVENANTS
13.01 Employee Benefit Matters. Following the Closing, Purchaser
shall, or shall cause the Company and each Subsidiary to, (a) waive
limitations as to preexisting conditions, exclusions and waiting periods to
the extent such conditions, exclusions and waiting periods have been
satisfied under the Employee Benefit Plans with respect to participation
and coverage requirements applicable to the employees of the Company and
the Subsidiaries under any welfare plan that such employees may be eligible
to participate in after the Closing Date, (b) provide each employee of the
Company and the Subsidiaries with credit for any co-payments and
deductibles paid prior to the Closing Date in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Closing Date, (c)
provide each employee of the Company and the Subsidiaries with service
credit for their service with the Company and the Subsidiaries for purposes
of eligibility
54
and vesting under each employee benefit plan, program, or arrangement of
Purchaser, the Company or any Subsidiary in which such employees are
eligible to participate; provided, however, that in no event shall the
employees be entitled to any credit to the extent that it would result in a
duplication of benefits with respect to the same period of service, and (d)
to maintain the Rexall Sundown Severance Policy as currently in effect for
not less than one year after the Closing.
13.02 Excluded Litigation. (a) Seller, at its expense, shall have
the right to and shall defend, with current counsel or such other counsel
as Seller may select from time to time which other counsel shall be
reasonably satisfactory to Purchaser, all Excluded Litigation by all
appropriate proceedings, which proceedings shall be prosecuted by Seller
with reasonable diligence to a final conclusion or shall be settled at the
discretion of Seller (but only with the consent of Purchaser, which consent
will not be unreasonably withheld or delayed and which consent shall not be
required in the case of (i) any consent decree, injunctive or other relief
that consists solely of a prohibition on the Company or any Subsidiary,
after the Closing, using the trademark "Metab-O-Lite" (or any tradedress
that bears the name "Metab-O-Lite") or from selling ephedra or products
that contain ephedra or restricting the content of advertisements relating
thereto; provided that such relief does not restrict the right of
Purchaser, the Company or any Subsidiary to advertise ephedra-free
products, or (ii) any settlement that provides for no relief other than the
payment of current cash damages (or the current establishment of any kind
of cash fund) as to which Purchaser will be indemnified by Seller in full.
Seller shall have full control of such defense and prosecution, including
(except as provided in the immediately preceding sentence) any settlement
thereof and shall be bound by the outcome thereof. Seller shall keep
Purchaser reasonably apprised of developments in each Excluded Litigation,
furnishing to Purchaser copies of documents and allowing it to attend
proceedings therein as Purchaser shall reasonably request, except as
otherwise required by applicable Law or Order.
(b) In order to facilitate Seller's defense or settlement of
any Excluded Litigation and in addition to all other rights of Seller
hereunder, upon request from time to time by Seller after the
Closing, Purchaser shall, and shall cause the Company and the
Subsidiaries to, cooperate reasonably with Seller in connection
therewith, including without limitation by: (i) empowering Seller and
its counsel through appropriate documentation to control the defense
and prosecution of all Excluded Litigation and represent the Company
and the Subsidiaries therein before any court or arbitration tribunal
of appropriate jurisdiction, (ii) affording Seller and its
Representatives reasonable access on notice during normal business
hours to the Assets and books and records of the Company and the
Subsidiaries, (iii) furnishing to Seller and its Representatives such
information regarding the Company and the Subsidiaries, including
their Assets and Liabilities as Seller may reasonably request, (iv)
permitting the current in-house counsel and other Representatives of
the Company and the Subsidiaries who are currently managing such
Excluded Litigation to continue (so long as they remain employed by
them) to manage such Excluded Litigation to the extent reasonably
requested by Seller and always as reasonably directed, and subject
to reasonable control of the defense of such Excluded Litigation, by
Seller, and (v) making available to Seller the Representatives of the
Company and the Subsidiaries whose assistance, testimony or presence
is necessary or desirable to assist Seller in defending or
prosecuting any Excluded Litigation, including the presence of such
persons as
55
witnesses at depositions, hearings or trials for such purposes;
provided, that such cooperation does not unreasonably interfere with
the conduct by the Company and its Subsidiaries of their respective
businesses. Seller shall reimburse Purchaser for the reasonable out-
of-pocket costs incurred by Purchaser in providing such cooperation
to Seller, but Seller shall not be charged for the incidental use of
any facility or equipment of the Company or any Subsidiary or the
incidental time spent by any in-house counsel, or by other employees
or Representatives of the Company or any Subsidiary to provide any
such cooperation to Seller or any related general and administrative
expenses. Purchaser agrees to give notice to Seller promptly in the
event the current in-house counsel of the Company and the
Subsidiaries leaves their employ. Notwithstanding any provision of
Section 9.03(a) or this Section 13.02(a) to the contrary, if any
insurer that has issued an insurance policy to Seller or one of its
Affiliates that provides insurance coverage for any of the Excluded
Litigation has asserted or asserts its right to control the defense
and settlement of any Excluded Litigation, none of the terms and
conditions of Section 9.03(a) or this Section 13.02 shall apply to
such Excluded Litigation so long as such insurer continues to defend
against such Excluded Litigation, except that Purchaser shall not
concede, settle or compromise such Excluded Litigation without the
consent of such insurer or Seller, and shall cooperate with such
insurer in such defense, at the expense of Seller, to the same extent
that Purchaser would be obligated under such Sections to cooperate in
such defense if Seller were controlling such defense. Seller shall
be bound by any judgment rendered in any Excluded Litigation which
its insurer defends. Seller will not consent (without Purchaser's
consent which will not be unreasonably withheld or delayed) to a
settlement by an insurer in a situation where Purchaser's consent
would be required under Section 13.02 if Seller were providing the
defense rather than the insurer in question. This Section 13.02
shall supplement and not supersede Section 9.03; provided, however,
that in the event of a conflict between any of the terms of this
Section 13.02 and Section 9.03, the terms of this Section 13.02 shall
prevail.
13.03 Benefits Relating to Amended and Restated 2000 Management
Stock Purchase Plan and Other Employee Benefit Plans. If, as a result of
(i) the voluntary or involuntary cancellation, forgiveness or satisfaction
for less than the full amount due thereunder of any indebtedness due Royal
Numico or its Affiliates (including, without limitation, Seller) from any
current or former employee of the Company or any Subsidiary which was
issued in connection with or relates to the purchase of shares pursuant to
the Royal Numico Amended and Restated 2000 Management Stock Purchase Plan,
any "gross up" payment, and any related "make whole" bonuses required to be
paid in connection with such plan made to any such employee by Royal Numico
or its Affiliates (including, without limitation, Seller) or (ii) any
payment made by Seller pursuant to Section 13.04 (a) or (c), Purchaser,
the Company, or any Affiliate of Purchaser is entitled to a deduction,
subtraction or credit for any federal, state, local or foreign Tax purpose
then, when and to the extent that Purchaser or any of its Affiliates
actually derives a benefit from such deduction, subtraction or credit
(through a reduction of Taxes, refund of Taxes paid or credit against Taxes
due), Purchaser shall promptly pay to Seller in cash an amount equal to the
amount of such refund, reduction or credit net of any reasonable expenses
incurred in connection therewith. Purchaser shall permit Seller to control
(at Seller's expense) the prosecution of any such refund claimed, and shall
cause the relevant entity to authorize by appropriate power of attorney
such persons as Seller shall designate to represent such entity with
respect to such refund claimed. Without limiting the generality of the
provisions of Section 10.05, such
56
provisions shall be applicable with respect to the calculation and
determination of amounts due under this Section 13.03. Any payments made
pursuant to this Section 13.03 shall be treated as additional Purchase
Price.
13.04 Retention, Severance, Stock Purchase Plan and Incentive Plans.
(a) After the Closing, Seller will pay the employee entitled
thereto or reimburse the Company (as the Company may request), when
and to the extent due as advised by the Company (i) for all costs
incurred by the Company after the Closing with respect to any current
or former employee to provide them with benefits under the Executive
Lifetime Medical and Dental Benefits Plan referred to in Section 2.23
of the Disclosure Schedule as item 12(c) as in effect as of Closing,
(ii) all retention amounts referred to in Section 2.17(f)(ii) items 2
and 3 of the Disclosure Schedule, and (iii) all severance pay, re-
relocation expenses and other mandatory termination benefits due
after the Closing under all employment agreements and offer letters
set forth in Sections 2.10(h)(C) and 2.17(g) of the Disclosure
Schedule and all other mandatory amounts due upon termination of
employment (including without limitation, mandatory severance,
retention, re-relocation, medical or other benefits and similar
amounts) under any other employment arrangements entered into by the
Company, any Subsidiary, Royal Numico or any Affiliate of the
foregoing, in each case, as in effect as of Closing with respect to
any employee employed thereunder whose employment is terminated prior
to or after the Closing, to the extent the amount of such severance
pay, re-relocation expenses, other mandatory termination benefits and
other mandatory amounts due thereunder upon termination of employment
are in excess of the amount of severance pay, re-relocation expenses,
other mandatory termination benefits and other mandatory amounts due
thereunder upon termination of employment, that would have been
payable with respect to such employee upon termination of his
employment with the Company or any Subsidiary under the Rexall
Sundown, Inc. Human Resources Policy and Management Practices Manual
(including HR-430) as in effect on the date hereof (assuming for this
purpose that all officers above the level of vice president will be
treated as "most VP's" providing in the case of severance for
severance of sixteen (16) weeks plus two (2) weeks for each year of
completed service, notwithstanding employment letters or contracts
establishing other arrangements for them); provided, however, that
for any employee of the Company or any Subsidiary who is entitled,
pursuant to such an employment agreement, offer letter or other
employment arrangement, to severance pay, re-relocation expenses,
other mandatory termination benefits or other mandatory amounts due
upon termination of employment in excess of those provided under said
Manual and who remains employed by the Company, any Subsidiary,
Purchaser, or any Affiliate thereof after December 31, 2003, Seller
shall not be liable for any severance pay, re-relocation expenses,
other mandatory termination benefits or other mandatory amounts
payable to such employee, including without limitation said excess.
In the event any benefit for which Seller is liable hereunder is
provided by or through a third party (e.g. the insurer under the
Executive Lifetime Medical and Dental Benefits Plan referred to in
Section 2.23 of the Disclosure Schedule as item 12(c)), Purchaser
shall not, and shall not permit the Company or any Subsidiary, to
terminate or modify the terms of any Contract applicable to such
benefit without the consent of Seller, which shall not be
unreasonably withheld or delayed. Upon request from time to time by
Seller, Purchaser agrees to cause the Company to promptly provide
Seller with such information as may be reasonably
57
necessary for Seller to verify any amount payable under this Section
13.04. For greater clarity, Seller shall have no obligation to pay
any amount under this Section 13.04 with respect to any discretionary
severance, re-relocation, other termination benefits or other amounts
due any such employee, any Employee Benefit Plan or other benefit, in
each case, instituted after the Closing by the Company, any
Subsidiary or any ERISA Affiliate thereof or any increase in benefits
made after the Closing to any currently existing Employee Benefit
Plan or other benefits of the Company or any Subsidiary.
(b) In connection with the Royal Numico N.V. Amended and
Restated 2000 Management Stock Purchase Plan, Royal Numico or Seller
shall pay, or Seller shall cause one of its Affiliates to pay, to the
extent due under such plan (as modified by any agreement between
Royal Numico or Seller and any participant in such plan), the
payments referred to in Section 13.03.
(c) After the Closing, Seller will pay, if earned, the bonuses
pro-rated for the period from January 1, 2003 through the Closing
Date, payable by the Company to its employees for the fiscal year
ending December 31, 2003 pursuant to the 2003 Rexall Sundown, Inc.
Corporate and NNAO Florida Incentive Plan and the 2003 Rexall
Sundown, Inc., Sales Incentive Plan as in effect on the date hereof.
ARTICLE 14
MISCELLANEOUS
14.01 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party(ies) hereto and any
attempt to do so will be void, except:
(a) For assignments and transfers by operation of Law;
(b) That Purchaser may assign any or all of its rights,
interests and obligations hereunder (including without limitation its
rights under Article 9) to (i) a wholly-owned subsidiary, provided
that any such subsidiary agrees in writing to be bound by all of the
terms, conditions and provisions contained herein, (ii) any post-
Closing purchaser of all of the issued and outstanding Interests in
the Company or all or substantially all of its Assets or (iii) any
financial institution providing purchase money or other financing to
Purchaser or the Company from time to time as collateral security for
such financing;
(c) That Seller may assign any or all of its rights, interests
and obligations hereunder (including without limitation its rights
under Article 9) to (i) Royal Numico or any wholly-owned subsidiary
of Royal Numico; provided that any such subsidiary agrees in writing
to be bound by all of the terms, conditions and provisions contained
herein, or (ii) any post-Closing successor-in-interest to Royal
Numico, whether by merger, consolidation, acquisition of all or
substantially all of its assets or other business combination; and
58
(d) That Royal Numico may assign any or all of its rights,
interests and obligations hereunder (including, without limitation,
its rights under Article 9) to (i) any wholly-owned subsidiary of
Royal Numico; provided that any such subsidiary agrees in writing to
be bound by all of the terms, conditions and provisions contained
herein, or (ii) any post-Closing acquirer of all of the issued and
outstanding shares of capital stock in Royal Numico by merger,
consolidation or acquisition of all or substantially all of Royal
Numico's assets or other business combination;
but no such assignment referred to in clause (b), (c) (unless such
assignment is made in connection with the liquidation and dissolution of
Seller) or (d) shall relieve Purchaser, Seller or Royal Numico of its
respective obligations hereunder. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by
the parties hereto and their respective successors and permitted assigns.
14.02 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
14.03 Press Releases and Communications. No press release or public
announcement related to this Agreement or the transactions contemplated
herein, or prior to the Closing, any other general announcement or
communication to the employees, customers or suppliers of the Company or
any of the Subsidiaries, shall be issued or made by any party hereto
without the joint approval of Purchaser and Seller, unless required by law
(in the reasonable opinion of counsel) in which case Purchaser and Seller
shall have the right to review and comment upon such press release,
announcement or communication prior to its issuance, distribution or
publication.
14.04 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the parties and their
respective successors and permitted assigns.
14.05 Entire Agreement. This Agreement (including the Ancillary
Agreements and other documents referred to herein), the Confidentiality
Agreement and the Data Room Access Agreement constitute the entire
agreement among the parties and supersedes any prior understandings,
agreements or representations by or among the parties, written or oral, to
the extent they relate in any way to the subject matter hereof.
14.06 Counterparts. This Agreement may be executed in one or more
counterparts (including by means of facsimile), each of which shall be
deemed an original but all of which together will constitute one and the
same instrument.
14.07 Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand,
claim or other communication hereunder shall be deemed duly given (a) when
delivered personally to the recipient, (b) one Business Day after being
sent to the recipient by reputable overnight courier service (charges
prepaid), (c) one Business Day after being sent to the recipient by
facsimile transmission or (d) four (4) Business Days after being mailed to
the recipient by certified or registered mail,
59
return receipt requested and postage prepaid and addressed to the intended
recipient as set forth below:
If to Seller: Copy to:
Royal Numico N.V. Guy E. Snyder, Esq.
Rokkeveenseweg 49 Dalius F. Vasys, Esq.
NL-2712 PJ Zoetermeer Vedder, Price, Kaufman & Kammholz
Netherlands 222 N. LaSalle St., Suite 2400
Facsimile No.: 31-79-353-9000 Chicago, IL 60601
Attn: President Facsimile No.: 312-609-5005
and
Numico USA, Inc.
6111 Broken Sound Parkway NW
Boca Raton, FL 33487
Facsimile No.: 561-999-4729
Attn: President
If to Purchaser: Copy to:
NBTY, Inc. NBTY, Inc.
90 Orville Drive 90 Orville Drive
Bohemia, NY 11716 Bohemia, NY 11716
Facsimile No.: (631) 218-7148 Facsimile No.: (631) 218-7341
Attn: President Attn: Irene Fisher, Esq.
and
Milbank, Tweed, Hadley & McCloy LLP
One Chase Manhattan Plaza
New York, NY 10005
Facsimile No.: (212) 822-5446
Attn: Mark Weissler
Any party may change the address to which notices, requests, demands,
claims and other communications hereunder are to be delivered by giving the
other parties notice in the manner herein set forth.
14.08 Governing Law; Venue. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State
of New York.
60
Subject to Sections 9.03(a)(ii) and 9.05, any action or proceeding seeking
to enforce any provision of or based on any right arising out of or
otherwise relating to, this Agreement may be brought against Royal Numico,
Seller or Purchaser in the courts of the State of New York or, if it has or
can acquire subject matter jurisdiction, in the United States District
Court for the Southern District of New York and each of the parties, for
itself and its stockholders, hereby submits to the non-exclusive
jurisdiction of such courts (and of the appropriate appellate courts) in
any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in this Section
14.08 may be served on any party hereto anywhere in the world, whether
within or without the State of New York, by personal service or by
overnight delivery service to the address herein provided for notices in
Section 14.07. The prevailing party(ies) in any such litigation shall be
entitled to recover its reasonable attorneys' fees and costs of litigation
from the nonprevailing party(ies).
14.09 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
Purchaser, Seller and Royal Numico. No waiver by any party of any
provision of this Agreement or any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be valid
unless the same shall be in writing and signed by the party making such
waiver nor shall such waiver be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
14.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
14.11 Expenses. Purchaser will bear its own costs and expenses
(including legal fees and expenses and those referred to in Section 3.06)
incurred in connection with this Agreement and the transactions
contemplated hereby. Except as otherwise specifically set forth herein,
Seller shall bear its and the Company's and the Subsidiaries' costs and
expenses (including investment banking and legal fees and expenses and
those referred to in Section 2.08) incurred in connection with this
Agreement and the transactions contemplated hereby.
14.12 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to
any federal, state, local or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" shall mean including
without limitation.
14.13 Incorporation of Exhibits, Annexes and Schedules. The
Exhibits and Schedules identified in this Agreement are incorporated herein
by reference and made a part hereof.
61
14.14 Governing Language. This Agreement has been negotiated and
executed by the parties in English. In the event any translation of this
Agreement is prepared for convenience or any other purpose, the provisions
of the English version shall prevail.
* * * * *
62
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
ROYAL NUMICO N.V.
By: _______________________________
Title: ____________________________
NUMICO USA, INC.
By: _______________________________
Title: ____________________________
NBTY, INC.
By: _______________________________
Title: ____________________________
63
Schedule 1.05 - Purchase Price Allocation
-----------------------------------------
1) Interests Two Hundred Twenty-Five Million
Dollars ($225,000,000)
2) Affiliate Intellectual Property Twenty-Five Million Dollars
($25,000,000)
Any increases to the Purchase Price shall be allocated to Affiliate
Intellectual Property. Any decreases to the Purchase Price shall first be
deducted from the allocation to Affiliate Intellectual Property set forth
below (but the allocation shall not be less than zero) and then any
remainder shall be deducted from the allocation to the Interests.
Schedule 3.04 - Governmental and Other Consents
-----------------------------------------------
1. Filings required under the HSR Act
2. Form 8-K filing required under applicable Federal securities
laws
3. Consent under the Third Amended and Restated Credit and
Guarantee Agreement, dated as of April 27, 2001 among NBTY, Inc., as
Borrower, Holland & Barrett Holdings Limited, as Foreign Subsidiary
Borrower, the several lenders from time to time parties thereto, and The
Chase Manhattan Bank, as Administrative Agent
EXHIBIT A
[Intentionally omitted]
EXHIBIT A-1
EXHIBIT B
Required Consents for Company and Subsidiaries
----------------------------------------------
1. Lessor under the Harrisburg, PA Lease
2. Lessor under the Sparks, NV Lease
EXHIBIT B-1
EXHIBIT C
Forms of Opinions of Seller's Counsels
--------------------------------------
EXHIBIT C-1
EXHIBIT C-1
-----------
[Letterhead of Vedder, Price]
_______________, 2003
[Purchaser]
___________________
___________________
Attn: _____________
Re: Numico USA, Inc.
----------------
Ladies and Gentlemen:
We have acted as special counsel to Royal Numico N.V., a company
organized under the laws of The Netherlands ("Royal Numico"), and Numico
USA, Inc., a Delaware corporation ("Seller"), in connection with that
certain Purchase Agreement (the "Purchase Agreement") dated ______, 2003 by
and among Royal Numico, Seller and __________, a __________ corporation
(the "Purchaser"), which sets forth the terms upon which Seller has agreed
to sell to Purchaser all of the membership interests in Rexall US Newco 1
LLC ("Newco LLC") owned by Seller and the general partnership interests in
Rexall US Newco DGP 1 ("Newco DGP") owned by Seller (Newco LLC and Newco
DGP are referred to herein together as the "Company" and the transactions
contemplated by the Purchase Agreement are referred to herein collectively
as the "Transaction"). This Opinion Letter is furnished to you at the
request of Royal Numico and Seller pursuant to Section 7.07 of the Purchase
Agreement. Unless otherwise defined herein, capitalized terms used herein
shall have the meanings assigned to them in the Purchase Agreement.
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section
of Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, including,
but not limited to, the assumptions contained in [SECTION] 4 of the Accord and
the General Qualifications (as defined in the Accord), and this Opinion Letter
should be read in conjunction therewith. The law covered by the opinions
expressed herein is limited to the Federal Law of the United States, the
Law of the State of New York, the General Corporation Law of the State of
Delaware and, with respect to paragraph 5 below, the Law of the State of
Florida.
Based on the foregoing, and subject to the qualifications,
assumptions and limitations set forth herein, we are of the opinion that:
1
1. Seller is a corporation validly existing and in good standing
under the laws of the State of Delaware.
2. The execution and delivery by Seller of the Purchase Agreement
and the performance by Seller of its agreements under such Agreement have
been duly authorized by all requisite corporate action on the part of
Seller.
3. The Purchase Agreement is enforceable against Seller and Royal
Numico in accordance with its terms.
4. Except as set forth in Section 2.06 of the Disclosure Schedule
to the Purchase Agreement, the execution and delivery by Seller and Royal
Numico of the Purchase Agreement and the performance by Seller and Royal
Numico of their respective agreements under the Purchase Agreement will not
(a) violate the Constituent Documents of Seller; (b) breach or otherwise
violate any existing obligation of Royal Numico or Seller under any Court
Order which is listed on Section 2.21 of the Disclosure Schedule; or (c)
violate applicable provisions of statutory law or regulation.
5. Each of Rexall Sundown, Inc., RXSD Receivables, Inc., Rexall,
Inc. and Sundown, Inc. (the "Florida Subsidiaries") is a corporation,
validly existing and in good standing under the laws of the State of
Florida, and has the requisite corporate power and authority to conduct its
business as now conducted and to own, use and lease its Assets. Rexall
Sundown, Inc. is duly qualified, licensed or admitted to do business and is
in good standing in those jurisdictions specified in Section 2.05 of the
Disclosure Schedule. Except as disclosed in Section 2.05 of the Disclosure
Schedule, all of the outstanding shares of capital stock of each Florida
Subsidiary have been duly authorized and validly issued and are fully paid
and nonassessable.
With respect to our opinion in paragraph 5 above, we have relied
without investigation solely upon the opinion of Richard Werber, Vice
President, General Counsel and Secretary of Rexall Sundown, Inc., a copy of
which opinion is attached as Exhibit A hereto.
For purposes of this Opinion Letter, we have assumed, without
investigation, the accuracy and truthfulness of the following:
(a) Royal Numico is a company, validly existing and in good
standing under the Laws of The Netherlands. Royal Numico has the
requisite power and authority to execute and deliver the Purchase
Agreement and to perform its agreements thereunder.
(b) The execution and delivery by Royal Numico of the
Purchase Agreement and the performance by Royal Numico of its
agreements thereunder, have been duly and validly authorized by the
Supervisory Board of Royal Numico, no other corporate action on the
part of Royal Numico or its stockholders being necessary. The
Purchase Agreement has been duly and validly
executed and delivered by Royal Numico and is enforceable against
Royal Numico under the Laws of The Netherlands.
(c) The execution and delivery by Royal Numico of the
Purchase Agreement and the performance by Royal Numico of its
agreements thereunder will not (i) violate the Constituent Documents
of Royal Numico or (ii) violate any law, statute, rule or regulation
or order of The Netherlands applicable to Royal Numico.
(d) No consent, approval or action of, filing with or notice
to any Governmental Authority of The Netherlands or any other
jurisdiction (other than the United States or New York) on the part
of Royal Numico or Seller is required in connection with the
execution and delivery by Royal Numico or Seller of the Purchase
Agreement or the performance by Royal Numico or Seller of its
respective agreements thereunder, all of which consents, approvals,
actions, filings and notices have been obtained, made or given, as
the case may be, are not subject to the satisfaction of any condition
that has not been satisfied or waived and are in full force and
effect, except for any which if not obtained, made, given, satisfied
or waived or in full force and effect would not have a material
adverse effect on the ability of Royal Numico or Seller to perform
its respective obligations under the Purchase Agreement.
In addition, we understand that you have received the respective
opinions of Marco Bijl, Advocaat and General Counsel of Royal Numico, and
Messrs. Richard, Layton & Finger, P.A. with respect to certain matters
which are not addressed by this Opinion Letter and that, with respect to
such matters, you are relying solely upon such opinions and not this
Opinion Letter.
The foregoing opinions are subject to the following qualifications:
(i) We express no opinion as to the enforceability of the
second sentence of Section 6.06 of the Purchase Agreement or any
noncompetition, nonsolicitation or other restrictive covenants
contained in the Purchase Agreement;
(ii) We express no opinion as to the validity, binding effect
or enforceability of any choice of law provision;
(iii) We assume that any obligations of Royal Numico or Seller
under the Purchase Agreement which are to be performed in any
jurisdiction outside the United States will not be illegal or
contrary to public policy under the laws of that jurisdiction; and
(iv) With respect to our opinion in paragraph 3, above, and
without limiting the generality of clause (ii), above, Section 9.05
of the Purchase Agreement provides that any claims for Losses arising
out of the provisions of Articles 9 and 10 of the Purchase Agreement
are to be settled by arbitration.
There can be no assurance that the arbitrators will apply principles
of New York law in resolving any such claims or in rendering any
award and that, if they do not apply such principles, their failure
to do so will not be a basis for a court to vacate such award. We
have, with your permission, assumed for purposes of our opinion in
paragraph 3, above, that such arbitrators will properly apply
principles of New York law in arriving at their award.
This Opinion Letter may be relied upon by you only in connection with
the Transaction and may not be used or relied upon by you or any other
person for any purpose whatsoever, except to the extent authorized in the
Accord, without in each instance our prior written consent.
Very truly yours,
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
DFV
GES
MEM
EXHIBIT A
---------
[Letterhead of Rexall Sundown, Inc.]
_______________, 2003
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Suite 2600
Chicago, Illinois 60601
Re: Numico USA, Inc.
----------------
Ladies and Gentlemen:
I have acted as Florida counsel to Numico USA, Inc., a Delaware
corporation ("Seller"), in connection with that certain Purchase Agreement
(the "Purchase Agreement") dated ______, 2003 by and among Royal Numico
N.V., a company organized under the laws of The Netherlands ("Royal
Numico"), Seller and __________, a __________ corporation (the
"Purchaser"), which sets forth the terms upon which Seller has agreed to
sell to Purchaser all of the membership interests in Rexall US Newco 1 LLC
("Newco LLC") owned by Seller and the general partnership interests in
Rexall US Newco DGP 1 ("Newco DGP") owned by Seller (the transactions
contemplated by the Purchase Agreement are referred to herein collectively
as the "Transaction"). This Opinion Letter is furnished to you at the
request of Royal Numico and Seller pursuant to the Purchase Agreement.
Unless otherwise defined herein, capitalized terms used herein shall have
the meanings assigned to them in the Purchase Agreement.
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section
of Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, including,
but not limited to, the assumptions contained in [SECTION] 4 of the Accord
and the General Qualifications (as defined in the Accord), and this Opinion
Letter should be read in conjunction therewith. The law covered by the
opinions expressed herein is limited to the Law of the State of Florida,.
Based on the foregoing, and subject to the qualifications,
assumptions and limitations set forth herein, I am of the opinion that:
Each of Rexall Sundown, Inc., RXSD Receivables, Inc., Rexall, Inc.
and Sundown, Inc. (the "Florida Subsidiaries") is a corporation, validly
existing and in good standing under the laws of the State of Florida, and
has the requisite corporate power and authority to conduct its business as
now conducted and to own, use and lease its Assets. Rexall Sundown, Inc.
is duly qualified, licensed or admitted to do business and is in good
standing in those jurisdictions specified in Section 2.05 of the Disclosure
Schedule. Except as disclosed in Section 2.05 of the
Disclosure Schedule, all of the outstanding shares of capital stock of each
Florida Subsidiary have been duly authorized and validly issued, and are
fully paid and nonassessable.
This Opinion Letter may be relied upon by you only to render the
legal opinion that you are required to give in connection with the
Transaction and may not be used or relied upon by you or any other person
(other than the addressees of your legal opinion) for any purpose
whatsoever, except to the extent authorized in the Accord, without in each
instance my prior written consent.
Very truly yours,
Richard Werber, Vice President,
General Counsel and Secretary
EXHIBIT C-2
-----------
[Letterhead of Richards, Layton & Finger, P.A.]
_____________, 2003
To Each of the Persons Listed
on Schedule A Attached Hereto
Re: Rexall US Newco 1 LLC; Rexall US Newco DGP 1; Rexall US Newco 2
LLC; Rexall US Newco DGP 2
---------------------------------------------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for Rexall US Newco 1 LLC,
a Delaware limited liability company ("Newco 1"), Rexall US Newco DGP 1, a
Delaware general partnership ("DGP 1"), Rexall US Newco 2 LLC, a Delaware
limited liability company ("Newco 2"), and Rexall US Newco DGP 2, a
Delaware general partnership ("DGP 2"), in connection with that certain
Purchase Agreement, dated ________, 2003 (the "Purchase Agreement"), among
Royal Numico N.V., a company organized under the laws of The Netherlands,
Numico USA, Inc., a Delaware corporation ("Numico USA"), and [Purchaser].
This opinion is being furnished to you pursuant to Section 7.07 of the
Purchase Agreement.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals
or copies of the following:
(a) The Certificate of Formation of Newco 1, dated January
28, 2003, as filed in the office of the Secretary of State of the
State of Delaware (the "Secretary of State") on January 28, 2003 (the
"Newco 1 Certificate");
(b) The Limited Liability Company Agreement of Newco 1, dated
as of January 28, 2003 (including Schedule A thereto) (the "Newco 1
Agreement"), executed by Numico USA, as the sole member and as the
manager;
(c) The Statement of Partnership Existence of DGP 1, dated as
of January 28, 2003, as filed in the office of the Secretary of State
on January 28, 2003, as corrected by the Corrected Statement of
Partnership Existence of DGP 1, dated as of February 10, 2003, as
filed in the office of the Secretary of State on February 10, 2003
(as so corrected, the "DGP 1 Statement");
(d) The Agreement of General Partnership of DGP 1, dated as
of January 28, 2003 (the "DGP 1 Agreement"), between Numico USA and
Newco 1, as partners;
To Each of the Persons Listed
on Schedule A Attached Hereto
________________ __, 2003
Page 2
(e) The Certificate of Formation of Newco 2, dated January
28, 2003, as filed in the office of the Secretary of State on January
28, 2003 (the "Newco 2 Certificate");
(f) The Limited Liability Company Agreement of Newco 2, dated
as of January 28, 2003 (including Schedule A thereto) (the "Newco 2
Agreement"), executed by DGP 1, as the sole member and as the
manager;
(g) The Statement of Partnership Existence of DGP 2, dated as
of January 28, 2003, as filed in the office of the Secretary of State
on January 28, 2003, as corrected by the Corrected Statement of
Partnership Existence of DGP 2, dated as of February 10, 2003, as
filed in the office of the Secretary of State on February 10, 2003
(as so corrected, the "DGP 2 Statement");
(h) The Agreement of General Partnership of DGP 2, dated as
of January 28, 2003 (the "DGP 2 Agreement"), between DGP 1 and Newco
2, as partners;
(i) A Certificate of Good Standing for Newco 1, dated
___________ __, 2003, obtained from the Secretary of State;
(j) A Certificate of Good Standing for DGP 1, dated
____________ __, 2003, obtained from the Secretary of State;
(k) A Certificate of Good Standing for Newco 2, dated
___________ __, 2003, obtained from the Secretary of State; and
(l) A Certificate of Good Standing for DGP 2, dated
__________ ___, 2003, obtained from the Secretary of State.
For purposes of this opinion, we have not reviewed any documents
other than the documents listed in paragraphs (a) through (1) above. In
particular, we have not reviewed any document (other than the documents
listed in paragraphs (a) through (1) above) that is referred to in or
incorporated by reference into any document reviewed by us. We have
assumed that there exists no provision in any document that we have not
reviewed that is inconsistent with the opinions stated herein. We have
conducted no independent factual investigation of our own but rather have
relied solely upon the foregoing documents, the statements and information
set forth therein and the additional matters recited or assumed herein, all
of which we have assumed to be true, complete and accurate in all material
respects.
With respect to all documents examined by us, we have assumed that
(i) all signatures on documents examined by us are genuine, (ii) all
documents submitted to us as originals are authentic, and (iii) all
documents submitted to us as copies conform with the originals of those
documents.
To Each of the Persons Listed
on Schedule A Attached Hereto
________________ __, 2003
Page 3
For purposes of this opinion, we have assumed (i) that the Newco 1
Agreement, the Newco 1 Certificate, the DGP 1 Agreement, the DGP 1
Statement, the Newco 2 Agreement, the Newco 2 Certificate, the DGP 2
Agreement and the DGP 2 Statement are in full force and effect, have not
been amended and no amendment of such documents is pending or has been
proposed, (ii) except to the extent provided in paragraphs 1, 2, 10 and 11
below, the due organization or due formation, as the case may be, and valid
existence in good standing of each party to the documents examined by us
under the laws of the jurisdiction governing its organization or formation
and the legal capacity of natural persons who are signatories to the
documents examined by us, (iii) that each of the parties to the documents
examined by us has the power and authority to execute and deliver, and to
perform its obligations under, such documents, (iv) the due authorization,
execution and delivery by all parties thereto of all documents examined by
us, (v) the payment by Numico USA of the full consideration due from it for
the limited liability company interests of Newco 1 (the "Newco 1
Interests") acquired by it, (vi) that the books and records of Newco 1,
including Schedule A to the Newco 1 Agreement, name Numico USA as the sole
member of Newco 1, identify Numico USA as holding 100% of the Percentage
Interest (as defined in the Newco 1 Agreement) of Newco 1, and set forth
the name and address of Numico USA, the contributions of Numico USA to
Newco 1, the agreed value of such contributions, the number of Units (as
defined in the Newco 1 Agreement) issued to Numico USA and all information
required by the Newco 1 Agreement, (vii) that the Newco 1 Interests
acquired by Numico USA were issued and sold to Numico USA in accordance
with the Newco 1 Agreement, (viii) the payment by each of Numico USA and
Newco 1 of the full consideration due from it for the partnership interests
in DGP 1 (the "DGP 1 Interests") acquired by it, (ix) that the books and
records of DGP 1 name Numico USA and Newco 1 as the only partners of DGP 1,
identify Numico USA and Newco 1 as holding 100% of the Percentage Interests
(as defined in the DGP 1 Agreement) of DGP 1, and set forth the names and
addresses of Numico USA and Newco 1, the contributions of each of Numico
USA and Newco 1 to DGP 1, the agreed value of such contributions and all
information required by the DGP 1 Agreement, (x) that the DGP 1 Interests
acquired by each of Numico USA and Newco 1 were issued and sold to Numico
USA and Newco 1 in accordance with the DGP 1 Agreement, (xi) the payment by
DGP 1 of the full consideration due from it for the limited liability
company interests of Newco 2 (the "Newco 2 Interests") acquired by it,
(xii) that the books and records of Newco 2, including Schedule A to the
Newco 2 Agreement, name DGP 1 as the sole member of Newco 2, identify DGP 1
as holding 100% of the Percentage Interest (as defined in the Newco 2
Agreement) of Newco 2, and set forth the name and address of DGP 1, the
contributions of DGP 1 to Newco 2, the agreed value of such contributions,
the number of Units (as defined in the Newco 2 Agreement) issued to DGP 1
and all information required by the Newco 2 Agreement, (xiii) that the
Newco 2 Interests acquired by DGP 1 were issued and sold to DGP 1 in
accordance with the Newco 2 Agreement, (xiv) the payment by each of DGP 1
and Newco 2 of the full consideration due from it for the partnership
interests in DGP 2 (the "DGP 2 Interests") acquired by it, (xv) that the
books and records of DGP 2 name DGP 1 and Newco 2 as the only partners of
DGP 2, identify
To Each of the Persons Listed
on Schedule A Attached Hereto
________________ __, 2003
Page 4
DGP 1 and Newco 2 as holding 100% of the Percentage Interests (as defined
in the DGP 2 Agreement) of DGP 2, and set forth the names and addresses of
DGP 1 and Newco 2, the contributions of each of DGP 1 and Newco 2 to DGP 2,
the agreed value of such contributions and all information required by the
DGP 2 Agreement, and (xvi) that the DGP 2 Interests acquired by each of DGP
1 and Newco 2 were issued and sold to DGP 1 and Newco 2 in accordance with
the DGP 2 Agreement.
This opinion is limited to the laws of the State of Delaware
(excluding the securities and blue sky laws of the State of Delaware), and
we have not considered and express no opinion on the laws of any other
jurisdiction, including United States federal laws and rules and
regulations relating thereto. Our opinions are rendered only with respect
to Delaware laws and rules, regulations and orders thereunder that are
currently in effect. In rendering the opinions set forth herein, we
express no opinion concerning (i) the creation, attachment, perfection or
priority of any security interest, lien or other encumbrance, or (ii) the
nature or validity of title to any property.
Based upon the foregoing, and upon our examination of such questions
of law and statutes of the State of Delaware as we have considered
necessary or appropriate, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that:
1. Newco 1 has been duly formed and is validly existing in
good standing as a limited liability company under the Delaware
Limited Liability Company Act (6 Del. C. [SECTION]18-101, et seq.)
(the "LLC Act"), with all requisite limited liability company power
and authority under the LLC Act and the Newco 1 Agreement to own its
properties and to carry on its business, all as described in the
Newco 1 Agreement.
2. DGP 1 has been duly formed and is validly existing in
good standing as a general partnership under the Delaware Revised
Uniform Partnership Act (6 Del. C. [SECTION]15-101, et seq.) (the "GP
Act"), with all requisite partnership power and authority under the
GP Act and the DGP 1 Agreement to own its properties and to carry on
its business, all as described in the DGP 1 Agreement.
3. Under the LLC Act and the Newco 1 Agreement, Numico USA
has been duly admitted to Newco 1 as the sole member of Newco 1.
4. Under the GP Act and the DGP 1 Agreement, Numico USA and
Newco 1 have been duly admitted to DGP 1 as the only partners of DGP 1.
To Each of the Persons Listed
on Schedule A Attached Hereto
________________ __, 2003
Page 5
5. The Newco 1 Interests issued to Numico USA have been duly
authorized and validly issued by Newco 1 and, subject to the
qualifications set forth in paragraph 6 below, are fully paid and
nonassessable limited liability company interests in Newco 1.
6. Numico USA, as a member of Newco 1, shall not be
obligated personally for any of the debts, obligations or liabilities
of Newco 1, whether arising in contract, tort or otherwise solely by
reason of being a member of Newco 1, except that Numico USA may be
obligated to make payments provided for in the Newco 1 Agreement and
to repay any funds wrongfully distributed to it. Numico USA may be
liable for its tortious or wrongful conduct.
7. The DGP 1 Interests issued to Numico USA and Newco 1 have
been duly authorized and validly issued.
8. The Newco 1 Interests issued to Numico USA constitute
100% of the limited liability company interests of Newco 1.
9. The DGP 1 Interests issued to Numico USA and Newco 1
constitute 100% of the partnership interests of DGP 1.
10. Newco 2 has been duly formed and is validly existing in
good standing as a limited liability company under the LLC Act, with
all requisite limited liability company power and authority under the
LLC Act and the Newco 2 Agreement to own its properties and to carry
on its business, all as described in the Newco 2 Agreement.
11. DGP 2 has been duly formed and is validly existing in
good standing as a general partnership under the GP Act, with all
requisite partnership power and authority under the GP Act and the
DGP 2 Agreement to own its properties and to carry on its business,
all as described in the DGP 2 Agreement.
12. Under the LLC Act and the Newco 2 Agreement, DGP 1 has
been duly admitted to Newco 2 as the sole member of Newco 2.
13. Under the GP Act and the DGP 2 Agreement, DGP 1 and Newco
2 have been duly admitted to DGP 2 as the only partners of DGP 2.
14. The Newco 2 Interests issued to DGP 1 have been duly
authorized and validly issued by Newco 2 and, subject to the
qualifications set forth in paragraph 15 below, are fully paid and
nonassessable limited liability company interests in Newco 2.
15. DGP 1, as a member of Newco 2, shall not be obligated
personally for any of the debts, obligations or liabilities of Newco
2, whether arising in contract, tort or otherwise solely
To Each of the Persons Listed
on Schedule A Attached Hereto
________________ __, 2003
Page 6
by reason of being a member of Newco 2, except that DGP 1 may be
obligated to make payments provided for in the Newco 2 Agreement and
to repay any funds wrongfully distributed to it. DGP 1 may be liable
for its tortious or wrongful conduct.
16. The DGP 2 Interests issued to DGP 1 and Newco 2 have been
duly authorized and validly issued.
17. The Newco 2 Interests issued to DGP 1 constitute 100% of
the limited liability company interests of Newco 2.
18. The DGP 2 Interests issued to DGP 1 and Newco 2
constitute 100% of the partnership interests of DGP 2.
We understand that you will rely as to matters of Delaware law upon
this opinion in connection with the formation of Newco 1, DGP 1, Newco 2,
DGP 2 and the transactions contemplated by the Purchase Agreement. In
connection with the foregoing, we hereby consent to your relying as to
matters of Delaware law upon this opinion, subject to the understanding
that the opinions rendered herein are given on the date hereof and such
opinions are rendered only with respect to facts existing on the date
hereof and laws, rules and regulations currently in effect. Except as
stated above, without our prior written consent, this opinion may not be
furnished or quoted to, or relied upon by, any other person or entity for
any purpose.
Very truly yours,
To Each of the Persons Listed
on Schedule A Attached Hereto
________________ __, 2003
Page 2
Schedule A
----------
[Purchaser]
___________________
___________________
___________________
Vedder, Price, Kaufman & Kammholz
222 N. LaSalle Street, Suite 2600
Chicago, Illinois 60601
EXHIBIT C-3
-----------
[Letterhead of Royal Numico]
[Purchaser]
______________________
______________________
Attention:_________________
Ladies and Gentlemen:
In my capacity as Advocaat and General Counsel of Koninklijke Numico
N.V., I render this legal opinion to you, solely related to certain matters
of the laws of The Netherlands in connection with the Purchase Agreement
dated as of __________________, 2003 (the "Purchase Agreement") among
Koninklijke Numico N.V. ("Royal Numico"), having its registered offices at
Rokkeveenseweg 49, 2712 PJ Zoetermeer, The Netherlands, Numico USA, Inc., a
Delaware corporation, and _______________________, a __________ corporation
("Purchaser").
I am rendering this legal opinion pursuant to paragraph 7.07 of the
Purchase Agreement. Capitalized terms used herein without definition
shall, unless the context otherwise requires, have the same meanings
ascribed to them in the Purchase Agreement. Headings in this opinion are
for ease of reference only and shall not affect the interpretation hereof.
In arriving at the opinions expressed below, I have examined and
relied upon the following documents:
(a) a copy of the articles of association (statuten) of Royal
Numico as they stand at their latest amendment on 17 April
2002;
(b) a faxed copy of an official extract (uittreksel) dated [ ] from
the Commercial Register of the Chamber of Commerce for
Haaglanden (the "Haaglanden Chamber") relating to the
registration of Royal Numico under number 27090619 and
confirmed to me by the Haaglanden Chamber by telephone on the
date hereof to have remained unaltered since such date;
(c) a faxed copy of a written resolution of the board of managing
directors (hoofddirectie) of Royal Numico dated [ ] signed by
Messrs. [ ] in their capacity as managing directors of Royal
Numico approving the entry into the Purchase Agreement by Royal
Numico and authorizing each of [....] (the "Attorneys" and each
of them an "Attorney") and the aforementioned managing
directors to execute the Purchase Agreement on behalf of Royal
Numico (the "Royal Numico Managing Directors Resolution");
(d) a faxed copy of an extract of the minutes of meeting of the
supervisory board (raad van commissarissen) of Royal Numico
held on [ ] (the "Royal Numico Supervisory Board Resolution");
(e) (the Royal Numico Managing Directors Resolution and the Royal
Numico Supervisory Board Resolution are referred to herein,
together as the "Corporate Resolutions"); and
(f) a faxed copy of the executed Purchase Agreement.
In examining and describing the documents listed above and in giving
this opinion I have assumed:
(a) the genuineness of all signatures on all documents or on the
originals thereof, the authenticity and completeness of all
documents submitted to me as originals and the conformity of
conformed, (photo)copied, faxed or specimen documents to the
originals thereof;
(b) the power, capacity (corporate and other) and authority of all
parties (other than Royal Numico) to enter into and execute the
Purchase Agreement and to perform each of their respective
obligations thereunder, the legal capacity
(handelingsbekwaamheid) of all individuals signing or having
signed documents on which I have expressed reliance (including
those individuals acting on behalf of Royal Numico) and that
the Purchase Agreement has been or will be (where appropriate)
duly authorized, executed and delivered by all parties thereto
(other than Royal Numico) and creates valid and legally binding
obligations for all such parties as a matter of applicable law
(if other than the law of The Netherlands is chosen as the
governing law);
(c) that each party to any document (other than Royal Numico) is
duly incorporated and organized, validly existing and in good
standing (where such concept is legally relevant in the context
of this opinion) under the laws of its jurisdiction of
incorporation and in good standing under the laws of the
jurisdiction of its principal place of business;
(d) the due compliance with all matters (including without
limitation the obtaining of the necessary consents, licenses,
approvals and authorizations, the making of the necessary
filings, lodgments, registrations and notifications and the
payment of stamp duties and other taxes) under any law other
than that of The Netherlands as may relate to or be required in
respect of (i) the Purchase Agreement and its lawful execution,
(ii) the parties thereto (including Royal Numico) or other
persons affected thereby, (iii) the performance or enforcement
by or against such parties (including Royal Numico) or such
other persons and (iv) the creation of valid and legally
binding obligations of all parties to the Purchase Agreement
(including Royal Numico) enforceable against such parties in
accordance with its terms;
(e) that any obligations under the Purchase Agreement which are to
be performed in any jurisdiction outside The Netherlands will
not be illegal or contrary to public policy under the laws of
that jurisdiction;
(f) that under the laws of the State of New York to which the
Purchase Agreement is expressed to be subject, and under all
other relevant laws (other than those of The Netherlands):
(i) the Purchase Agreement constitutes and will at all times
constitute a valid and legally binding obligation of all
parties thereto (including Royal Numico) enforceable
against such parties in accordance with its terms
(including Royal Numico);
(ii) the choice of law of the State of New York as the
governing law of the Purchase Agreement is a valid and
binding selection;
(iii) the submission by Royal Numico to the jurisdiction of the
courts of the State of New York with regard to any action
or proceeding arising out of or relating to the Purchase
Agreement is valid and binding upon Royal Numico;
(iv) the appointment of Royal Numico (the "Process Agent") as
the authorized process agent upon which process may be
served in any action or proceeding before the courts of
the State of New York arising out of or relating to the
Purchase Agreement constitutes a valid and binding
appointment; and
without prejudice to my opinion under paragraph (8)
(Choice of Law) below, that the courts of The Netherlands
will, in giving effect to the choice of law provisions in
the Purchase Agreement, apply the chosen law correctly;
(v) that the Corporate Resolutions, including the powers of
attorney granted therein, remain in full force and effect
and unaltered and that all matters contained and
certified therein are true and accurate;'
(vi) that all parties have entered into the Purchase Agreement
for bona fide commercial reasons and on arm's length
terms;
(vii) that Royal Numico's execution of the Purchase Agreement
and the performance of the transactions contemplated
thereby is in the best corporate interest of Royal Numico
and is not prejudicial to its (present or future)
creditors;
(viii) that none of the managing directors of Royal Numico or
Purchaser has a conflict of interest with Royal Numico in
respect of the execution of the Purchase Agreement that
would preclude such managing director from validly
representing Royal Numico;
(ix) that none of the parties to the Purchase Agreement would
require the prior consent, approval, cooperation,
permission or other action of any other party thereto or
any third party or person (other than those listed in
paragraph 4 hereafter), in connection with the execution
and performance of the Purchase Agreement;
(x) that the Purchase Agreement and the transactions
contemplated thereby or connected therewith (whether
individually or seen as a whole) do not and will not
result in a breach of the laws (including, for the
avoidance of doubt, any tax laws) to which it is subject
or of any other relevant law (other than the laws of The
Netherlands on which I opine), or are intended to avoid
the applicability or the consequences of such laws (other
than those of The Netherlands on which I opine) in a
manner that is not permitted under such laws (other than
those of The Netherlands);
(xi) that in respect of the works council of Royal Numico
(ondernemingsraad) and central works council (centrale
ondernemingsraad) with jurisdiction over the transactions
as envisioned by the Purchase Agreement, all consultation
obligations in respect of such Dutch (central) works
council have been complied with by Royal Numico and that
there are no objections in this respect against Royal
Numico entering into the transactions envisioned by the
Purchase Agreement.
The Purchase Agreement states that it is to be governed by the laws
of the State of New York. As a Dutch lawyer, I am not qualified to assess
the meaning and consequences of the terms of the Purchase Agreement under
the laws of the State of New York and I have made no investigation into the
laws of the State of New York as a basis for the opinions expressed
hereinafter and do not express or imply any opinion thereon. Accordingly,
my review of the Purchase Agreement has been limited to the terms of such
document as they appear on the face thereof without reference to the
general body of the laws of the State of New York to which it states it is
subject.
This opinion is limited to the laws of The Netherlands in force as of
the date hereof.
I express no opinion:
(a) that the future or continued performance by Royal Numico of its
obligations or the consummation of the transactions
contemplated by the Purchase Agreement will not contravene such
laws, application or interpretation if altered in the future;
or
(b) with regard to the effect of any system of law (other than the
laws of The Netherlands), even in cases where, under the laws
of The Netherlands, any foreign law is to be applied, and I
assume that no such foreign law would affect or qualify my
opinion as set out below; or
(c) on the tax laws of The Netherlands; or
(d) unless expressly stated otherwise, on international law,
including (without limitation) the rules of or promulgated
under or by any bi-lateral or multi-lateral treaty or treaty
organization or on antitrust or competition laws; or
(e) on any commercial, accounting or other non-legal matter or on
Royal Numico's ability to meet its financial or other
obligations under the Purchase Agreement.
I have not been concerned with investigating or verifying the
accuracy of any facts, representations or warranties set out in the
documents listed above (with the exception of those matters on which I have
specifically and expressly given my opinion). To the extent that the
accuracy of such facts, representations and warranties not so investigated
or verified and of any facts which have been orally confirmed to me is
relevant to this opinion, I have assumed that such facts, representations
and warranties were true and accurate when made and remain true and
accurate.
Other than to review the documents listed above, I have not examined
any contracts, instruments or other documents entered into by or affecting
Royal Numico or any corporate records of Royal Numico and I have not
undertaken any factual investigations or made any other inquiries or
searches concerning Royal Numico.
Where an assumption is stated to be made in this opinion, I have not
made any investigation or inquiry with respect to the matters that are the
subject of such assumption and I express no views as to such matters.
Based upon and subject to the foregoing and to the further
qualifications set out below and subject to any factual matters, documents
or events not disclosed to me by the parties concerned, having regard to
such legal considerations as I deem relevant, I am of the opinion that:
1. Corporate Status, Power and Capacity
1.1 Royal Numico is registered as: (a) a public company with
limited liability (naamloze vennootschap), (b) duly
incorporated on 3 January 1966 and (c) validly existing
under the laws of The Netherlands.
1.2 Royal Numico has:
(a) the corporate power and the corporate capacity to
enter into, execute and deliver the Purchase
Agreement and to undertake and perform the
obligations expressed to be assumed by it therein;
and
(b) taken all internal corporate action required by its
Articles of Association and by Dutch corporate law
to approve and to authorize the same.
1.3 The court registry of the Civil law section (Sector
Civiel Recht) of the District Court
(arrondissementsrechtbank) of The Hague has confirmed to
me by telephone (in respect of Royal Numico) that on the
date hereof Royal Numico has not been declared bankrupt
(failliet) and Royal Numico has not been granted a
suspension of payments (surseance van betaling).
The Chamber has confirmed to me by telephone at 00.00 (am) at
the date hereof:
(a) that Royal Numico has not registered a voluntary
winding-up resolution;
(b) that the Chamber is not itself taking steps to have
Royal Numico dissolved;
(c) that no order placing any assets of Royal Numico
under administration (onder bewindstelling) has
been registered with it; and
(d) that no order by the District Court
(Arrondissementsrechtbank) of The Hague for the
dissolution (ontbinding en vereffening) of Royal
Numico has been registered with it.
1.4 The searches and inquiries referred to above do not
determine conclusively whether or not the matters or
events inquired after have occurred or not. There is no
formal register of judgments, declarations or orders.
2. Execution and Validity. When executed in respect of Royal
Numico by the Attorneys or by Mr. [insert names], the Purchase
Agreement will constitute a valid and legally binding
obligation of Royal Numico enforceable against it in accordance
with its terms.
3. Authorizations, Consents and Approvals. No authorizations,
licenses, approvals, orders, consents, registrations,
recordations or filings with any court, governmental authority,
bureau, official agency or body in The Netherlands are required
under the laws of The Netherlands for (or in connection with):
(a) the execution and delivery of and the performance
by Royal Numico of its obligations under the
Purchase Agreement;
(b) ensuring the legality, validity or enforceability
thereof against Royal Numico;
4. Conflict with Laws or Articles of Association.
In themselves, neither the execution and delivery by Royal Numico of
the Purchase Agreement nor the undertaking and performance by Royal Numico
of the obligations expressed to be assumed by Royal Numico thereunder
conflicts or will conflict with or contravene, violate (constitute a breach
of or default under):
(a) its Articles of Association; or
(b) any law or generally applicable regulation of The
Netherlands to which Royal Numico is subject.
5. Filings and Registrations. It is not necessary under the laws
of The Netherlands to notarize, file, register or otherwise
record with any court or public authority of The Netherlands
the Purchase Agreement or to comply with any other formality in
relation thereto in order to ensure the legality, validity,
effectiveness, enforceability or admissibility in evidence of
the Purchase Agreement or any other documents relating thereto.
6. Choice of Law. The courts of The Netherlands will observe and
give effect to the choice of the laws of the State of New York
as the law governing the Purchase Agreement in any proceedings
in relation to the Purchase Agreement, but when applying the
laws of the State of New York as the law governing the Purchase
Agreement, the courts of competent jurisdiction of The
Netherlands, if any, by virtue of the limitations imposed by
the 1980 Rome convention on the Law Applicable to Contractual
Obligations (the "Rome Convention"):
* may give effect to the mandatory rules of law of another
country with which the situation has a close connection,
if and insofar as, under the law of the latter country,
those rules must be applied whatever the applicable law
is to the Purchase Agreement;
* will apply the laws of The Netherlands in a situation
where it is mandatory irrespective of the law otherwise
applicable to the Purchase Agreement;
* may refuse to apply the laws of the State of New York if
such application is manifestly incompatible with the
public policy of The Netherlands; and
* shall have regard to the law of the country in which
performance takes place in relation to the manner of
performance and the steps to be taken in the event of
defective performance.
7. Submission to Jurisdiction. The submission by Royal Numico to
the jurisdiction of the courts of the State of New York with
regard to any action or proceeding arising out of or relating
to the Purchase Agreement is valid and binding upon Royal
Numico. Notwithstanding a contractual provision to the
contrary, however, a competent court in The Netherlands may
assume jurisdiction (a) pursuant to Article 254 Netherlands
Code of Civil Procedure (Wetboek van Burgerlijke
Rechtsvordering) in urgent matters, when in view of the
interest of the parties, provisional measures are required, or
(b) to allow provisional measures for the duration of the
litigation at the request of each party to pending litigation
pursuant to Article 223 Netherlands Code of Civil Procedure
(Wetboek van Burgerlijke Rechtsvordering). Furthermore,
notwithstanding any contractual provision to the contrary,
jurisdiction of Dutch courts may arise in the context of an
attachment against Royal Numico or any of its assets.
The opinion expressed above is subject to the following
qualifications:
(a) the terms "enforceable", "valid"; "legal",
"binding", "effective" or any combination thereof
where used herein, mean that the obligations
assumed by the relevant party under the relevant
document are of a type which the laws of The
Netherlands generally recognize or enforce; they do
not mean that these obligations will necessarily be
enforced in all circumstances in accordance with
their terms: in particular, enforcement before the
courts of The Netherlands will in any event be
subject to:
(i) the degree to which the relevant obligations
are enforceable under their governing law (if
other than the laws of The Netherlands);
(ii) the nature of the remedies available in the
courts of The Netherlands (and nothing in
this opinion must be taken as indicating that
specific performance or injunctive relief
would be available as remedies for the
enforcement of obligations);
(iii) the acceptance by such courts of jurisdiction
and the power of such courts to start
proceedings if concurrent proceedings are
being brought elsewhere; and
(iv) the availability of defenses such as, without
limitation, set-off (unless validly waived),
fraud, misrepresentation, force majeure (niet
toerekenbare tekortkoming), unforeseen
circumstances (imprevision), duress, undue
influence, error, abatement and counter-
claim;
in addition, my opinion is subject to and limited
by the provisions of any applicable bankruptcy,
insolvency, liquidation, reorganization, moratorium
and other similar laws of general application
relating to or affecting creditors' right and
remedies from time to time in effect (including the
doctrine of voidable preference within the meaning
of Article 3:45 of The Netherlands Civil Code
and/or Article 42 et seq. of The Netherlands
Bankruptcy Code).
(b) any enforcement of the Purchase Agreement and of
any foreign judgments in The Netherlands will be
subject to the rules of civil procedure as applied
by the courts of The Netherlands; such courts have
powers to make an award in a foreign currency;
enforcement against Royal Numico's assets located
in The Netherlands of a judgment for a sum of money
expressed in foreign currency would be executed,
however, in terms of The Netherlands legal tender
and the applicable rate of exchange would be that
prevailing on the date of payment; service of
process for any proceedings before the courts of
The Netherlands must be performed in accordance
with the laws of civil procedure of The
Netherlands;
(c) the concept of "delivery" of a document is not
known or required under the laws of The Netherlands
to make a document valid, legally binding and
enforceable; furthermore, the question whether or
not any provisions in the Purchase Agreement which
may be invalid or void may be severed from the
other provisions thereof in order to save those
other provisions (partiele nietigheid) would be
determined by The Netherlands courts in their
discretion; the Purchase Agreement may be amended
to the extent that the laws of The Netherlands are
applicable, orally by the consent of the parties
thereto notwithstanding provisions therein to the
contrary;
(d) all powers of attorney (volmachten) and mandates
(lastgevingen) (including, but not limited to,
powers of attorney and mandates expressed to be
irrevocable) granted and all appointments made by
Royal Numico, explicitly or by implication,
terminate by law and without notice upon its
bankruptcy (faillissement), and become ineffective
upon Royal Numico being granted a suspension of
payments (surseance van betaling); to the extent
that the
appointment by Royal Numico of the Process Agent as
process agent to receive service of process
constitutes a power of attorney or a mandate to the
Process Agent, a service of process on the Process
Agent once Royal Numico has been declared bankrupt
will not be valid against Royal Numico;
(e) a court of The Netherlands has the discretion to
decrease the amount of those agreed damages,
indemnities or penalties provided for in the
Purchase Agreement which it regards as manifestly
excessive;
(f) the validity of the obligations of Royal Numico
under the Purchase Agreement may be contested by
its creditors (or its receiver in bankruptcy) on
the basis of Article 2:1 of The Netherlands Civil
Code, if both (i) the execution of the Purchase
Agreement cannot serve the attainment of the
objects as expressed in the Articles of Association
and (ii) the other parties to the Purchase
Agreement knew or should reasonably have known
(without any inquiry) of this fact.
As regards (f)(i))
In determining whether the entering into of transactions contemplated
by the Purchase Agreement, specifically Royal Numico's assumption of joint
and several liability for the liabilities of Numico thereunder, is
conducive to the realization of the corporate objects and purposes of each
of Royal Numico and Numico, it is important to consider (x) the text of the
objects clause in the articles of association of each of Royal Numico and
Numico, (y) whether such transactions (including the assumption of such
joint and several liability) are in Royal Numico's corporate interest
(vennootschappeljk belang) and to its benefit, and (z) whether or not the
subsistence of Royal Numico is jeopardized by such transactions.
For the purposes of this opinion, I have assumed that the execution
and performance by Royal Numico of the Purchase Agreement is in its
corporate interest and that the subsistence of Royal Numico is not
jeopardized by the transactions contemplated by the Purchase Agreement.
(a) my opinions set forth in paragraphs 4, 6 and 7 are
limited to licenses, authorizations, consents or
approvals of or filings or registrations with or
other acts of any court, governmental agency or
body of The Netherlands which, in my experience,
are normally applicable to transactions of the type
provided for in the Purchase Agreement;
(b) if a party to the Purchase Agreement is controlled
by or otherwise connected with a person,
organization or country, which is currently the
subject of sanctions by the United Nations, the
European Community or The Netherlands, implemented,
effective
or sanctioned in The Netherlands under the Sanction
Act 1977 (Sanctiewet 1977), the Economic Offences
Act (Wet Economische Delicten) or the ASCI, or is
otherwise the target of any such sanctions, the
obligations of Royal Numico to that party may be
unenforceable, void or otherwise affected;
(c) paragraph 7 (Submission to Jurisdiction) of my
opinion above is not to be read as a statement that
all of the procedures of the courts of the State of
New York (such as discovery or the compulsion of
witness by subpoena) will be available against
Royal Numico; and
(d) in issuing this opinion I do not assume any
obligation to notify or to inform you of any
developments subsequent to its date that might
render its contents untrue or inaccurate in whole
or in part at such time.
This opinion:
(a) expresses and describes certain legal concepts of
The Netherlands in English and not in their
original Dutch terms; these concepts may not be
identical to the concepts described by the English
translations; consequently this opinion is issued
and may only be relied upon on the express
condition that it shall be governed by and that all
words and expressions used herein shall be
construed and interpreted in accordance with the
laws of The Netherlands:
(i) speaks as of the date specified above;
(ii) is addressed to you, is for your benefit and
solely for the purpose of rendering a legal
opinion to Purchaser with regard to the
Purchase Agreement, whereby Purchaser will be
relying on this opinion with regard to
matters of the laws of The Netherlands;
(iii) is strictly limited to the matters set forth
herein and no opinion may be inferred or
implied beyond that expressly stated herein;
and
(iv) may not be relied upon by or disclosed to any
other person, company, enterprise or
institution, except for disclosure to your
legal advisers, your successors and assigns,
or used for any purpose other than in
connection with the Purchase Agreement and as
described above under (ii). Its delivery
may, nevertheless, be referred to as a
condition precedent under the Purchase
Agreement.
Yours faithfully,
Mr. Marco Bijl
Advocaat & General Counsel
Koninklijke Numico N.V.
EXHIBIT D
Forms of Opinion of Purchaser's Counsel
---------------------------------------
EXHIBIT D-1
-----------
[Letterhead of Milbank]
_______________, 2003
Royal Numico N.V.
Rokkeveenseweg 49
NL-2712 PJ Zoetermeer
Netherlands
Facsimile No.: 31-79-353-9000
Attention: President
Numico USA, Inc.
6111 Broken Sound Parkway NW
Boca Raton, Florida 33487
Facsimile No.: 561-999-4729
Attention: President
Re: Numico USA, Inc.
----------------
Ladies and Gentlemen:
We have acted as counsel to NBTY, Inc., a Delaware corporation
("Purchaser"), in connection with that certain Purchase Agreement (the
"Purchase Agreement") dated ______, 2003 by and among Royal Numico N.V., a
company organized under the laws of The Netherlands ("Royal Numico"),
Numico USA, Inc., a Delaware corporation ("Seller"), and Purchaser, which
sets forth the terms upon which Purchaser has agreed to acquire from Seller
all of the membership interests in Rexall US Newco 1 LLC ("Newco LLC")
owned by Seller and the general partnership interests in Rexall US Newco
DGP 1 ("Newco DGP") owned by Seller (the transactions contemplated by the
Purchase Agreement are referred to herein collectively as the
"Transaction"). This opinion is furnished to you at the request of
Purchaser pursuant to Section 8.06 of the Purchase Agreement. Unless
otherwise defined herein, capitalized terms used herein shall have the
meanings assigned to them in the Purchase Agreement.
In rendering this opinion, we have examined:
a. the Purchase Agreement;
b. the Ancillary Agreements;
c. the Certificate of Incorporation of Purchaser;
d. the By-laws of Purchaser;
e. a Certificate of Good Standing as of a recent date from the
Secretary of State of Delaware with respect to Purchaser;
f. resolutions of the Board of Directors of Purchaser approving
the Purchase Agreement and the transactions contemplated
thereby; and
Exhibit D-1
g. such other documents as we, in our professional judgment, have
deemed necessary or appropriate as a basis for the opinions set
forth below.
In rendering the opinions expressed below, we have examined an
executed counterpart of the Purchase Agreement. In our examination, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity with authentic
original documents of all documents submitted to us as copies. When
relevant facts were not independently established, we have relied upon
representations made in or pursuant to the Purchase Agreement or in
certificates delivered by or on behalf of the Purchaser pursuant thereto.
We have also assumed that the Purchase Agreement has been duly authorized,
executed and delivered by, and (except, to the extent set forth below, as
to the Purchaser) constitutes a legal, valid, binding and enforceable
obligation of, all of the parties thereto, that all signatories thereto
have been duly authorized and that all such parties are duly organized and
validly existing and have the power and authority (corporate or other) to
execute, deliver and perform the same.
Based upon and subject to the foregoing and subject also to the
comments and qualifications set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that:
1. Purchaser is a corporation validly existing and in good
standing under the laws of the State of Delaware. Purchaser has
requisite corporate power and authority to conduct its business as it
is now being conducted.
2. Purchaser has requisite corporate power and authority to
execute, deliver and perform its obligations under the Purchase
Agreement.
3. The execution and delivery by Purchaser of the Purchase
Agreement and the performance by Purchaser of its agreements
thereunder have been duly authorized by all requisite corporate
action on the part of Purchaser. Purchaser has duly executed and
delivered the Purchase Agreement.
4. The Purchase Agreement constitutes the legal, valid and
binding obligation of Purchaser and is enforceable against it in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or other similar laws relating to or affecting the rights
of creditors generally, and except as the enforceability of the
Purchase Agreement is subject to the application of general
principles of equity (regardless of whether considered in a
proceeding in equity or at law), including without limitation (i) the
possible unavailability of specific performance, injunctive relief or
any other equitable remedy and (ii) concepts of materiality,
reasonableness, good faith and fair dealing.
5. The execution and delivery by Purchaser of the Purchase
Agreement, and the performance by Purchaser of its agreements
thereunder, do not (a) violate Purchaser's Certificate of
Incorporation or By-laws, (b) result in a breach of or constitute a
default under the [Third Amended and Restated Credit and Guarantee
Agreement, dated as of April 27, 2001
among NBTY, Inc., as Borrower, Holland & Barrett Holdings Limited, as
Foreign Subsidiary Borrower, the several lenders from time to time
parties thereto, and The Chase Manhattan Bank, as Administrative
Agent], or (c) violate the Delaware General Corporation Law or any
applicable law or regulation of any United States Federal or New York
State Governmental Authority that in our experience are normally
applicable to transactions of the nature of the Transaction.
6. To our knowledge, there is no action, suit or proceeding
before any United States Federal or New York State Governmental
Authority pending or overtly threatened in writing against Purchaser,
which challenges the enforceability of the Purchase Agreement.
7. No approval, consent or authorization of, or filing with,
any United States Federal or New York State Governmental Authority or
Delaware State Governmental Authority pursuant to the Delaware
General Corporation Law is required on the part of Purchaser in
connection with the execution, delivery and performance by Purchaser
of the Purchase Agreement, except for approvals, consents,
authorizations and filings specified in the Purchase Agreement and
already obtained or made or under applicable law are permitted to be
made after the Closing.
The foregoing opinions are subject to the following comments and
qualifications:
(A) The enforceability of Article 9.2 of the Purchase
Agreement may be limited by laws limiting the enforceability of
provisions exculpating or exempting a party, or requiring
indemnification of a party for, liability for its own action or
inaction, to the extent the action or inaction involves gross
negligence, recklessness, willful misconduct or unlawful conduct.
(B) The enforceability of provisions in the Purchase
Agreement to the effect that terms may not be waived or modified
except in writing may be limited under certain circumstances.
(C) With respect to our opinion in paragraph 4, above, we
note that under Section 9.05 of the Purchase Agreement any claims for
Losses arising out of the provisions of Articles 9 and 10 of the
Purchase Agreement are to be settled by arbitration. We wish to
point out that there can be no assurance that the arbitrators will
apply principles of New York law in resolving any such claims or in
rendering any award and that, if they do not apply such principles,
their failure to do so will not be a basis for a court to vacate such
award. We have, with your permission, assumed for purposes of our
opinion in paragraph 4 above that such arbitrators will properly
apply principles of New York law in arriving at their award.
(D) We express no opinion as to the second sentence of
Section 14.08 of the Purchase Agreement, insofar as such sentence
relates to (i) the subject matter jurisdiction of the United States
District Court for the Southern District of New York to adjudicate
any controversy related to any of the Purchase Agreement or (ii) the
waiver of inconvenient forum with respect to proceedings in the
United States District Court for the Southern District of New York.
The foregoing opinions are limited to matters involving the Federal
laws of the United States, the Delaware General Corporation Law and the
laws of the State of New York, and we do not express any opinion as to the
laws of any other jurisdiction.
At the request of our client, this opinion letter is, pursuant to
Section 8.06 of the Purchase Agreement, provided to you by us in our
capacity as counsel to Purchaser and may not be relied upon by any other
Person or for any purpose other than in connection with the transactions
contemplated by the Purchase Agreement without, in each instance, our prior
written consent.
Very truly yours,
EXHIBIT D-2
[Letterhead of NBTY, Inc.]
__________, 2003
Royal Numico N.V.
Rokkeveenseweg 49
NL-2712 PJ Zoetermeer
Netherlands
Facsimile No.: 31-79-35 3-9000
Attention: President
Numico USA, Inc.
6111 Broken Sound Parkway N.W.
Boca Raton, Florida 33487
Facsimile No.: 561-999-4729
Attention: President
Re: Numico USA, Inc.
----------------
Ladies and Gentlemen:
I am General Counsel of NBTY, Inc., a Delaware corporation ("NBTY").
This opinion is being delivered pursuant to Section 8.06 of the Purchase
Agreement, dated as of _____________, ___, 2003 (the "Purchase Agreement"),
among Royal Numico N.V., a company organized under the laws of The
Netherlands, Numico USA, Inc., a Delaware corporation, and NBTY. Except as
otherwise specified herein, terms defined in the Purchase Agreement are
used herein as defined therein.
In connection with this opinion, I have examined originally executed
copies of the Purchase Agreement.
In addition, I have examined originals or copies of originals,
certified or otherwise identified to my satisfaction, of such corporate
records, other agreements, documents, instruments, such questions of law,
certificates of public and governmental officials and corporate officers
and other representatives of entities referred to herein, and have made
such inquiries of such officers and other representatives of NBTY, as I
have deemed relevant or appropriate as a basis for the opinion hereinafter
expressed.
In my examination of the aforesaid documents, I have assumed, without
independent investigation, the authenticity of all documents submitted to
me as originals, the conformity to the original documents of all documents
submitted to me as certified, photostatic, reproduced or
EXHIBIT D-2
conformed copies of valid existing agreements or other documents and the
authenticity of all such latter documents.
Based upon the foregoing and subject to the assumptions, exceptions
and qualification set forth herein, I am of the opinion that:
1. The execution and delivery by Purchaser of the Purchase
Agreement, and the performance by Purchaser of its agreements
thereunder, do not violate any decree or order of any
Governmental Authority to which Purchaser is a party.
2. To my knowledge, there is no action, suit or proceeding before
any Governmental Authority pending or overtly threatened in
writing against Purchaser which could reasonably be expected to
have a material adverse effect on the ability of the Purchaser
to perform its agreements under the Purchase Agreement.
In rendering the opinions set forth above, I have, with your
approval, relied as to certain factual matters on information obtained from
public officials, officers of NBTY and other sources believed by me to be
responsible and representations and warranties of NBTY in the Purchase
Agreement.
The foregoing opinions are limited to the Federal laws of the United
States, the laws of the State of New York and the General Corporation Law
of the State of Delaware, and I am expressing no opinion as to the effect
of the laws of any other jurisdiction. My opinions are rendered only with
respect to the laws, and the rules, regulations and orders thereunder,
which are in effect on the date hereof. Please be advised that I am not
admitted to practice in the State of Delaware.
This letter is delivered solely for your benefit and may not be
relied upon by any other Person or for any purpose other than in connection
with the transactions contemplated by the Purchase Agreement without my
prior written consent.
Very truly yours,
EXHIBIT D-3
EXHIBIT E
Company Accounting Policies
---------------------------
EXHIBIT E-1
COMPANY ACCOUNTING POLICIES
---------------------------
This Schedule sets forth the Company Accounting Policies, which are to be
used to calculate the Closing Date Working Capital Adjustment. Seller and
Purchaser agree to all of the Company Accounting Policies. Seller and
Purchaser also acknowledge that even though the Company and two of the
Subsidiaries were formed subsequent to January 1, 2003, and were not
included in the Audited Financial Statements, their assets and liabilities
will be included for purposes of determining the Closing Date Working
Capital Amount.
Closing Date Working Capital Amount
The Closing Date Working Capital Amount is defined in this Purchase
Agreement (the "Agreement") as the Working Capital Assets of the Company
and the Subsidiaries, as of the Closing Date less the Working Capital
Liabilities of the Company and the Subsidiaries, as of the Closing Date.
Set forth below are the Company Accounting Policies (including definitions
and methodologies) that are to be applied in calculating the Closing Date
Working Capital Amount for purposes of this Agreement. The Company
Accounting Policies (including definitions and methodologies) shall be the
primary guidance for determining the Closing Date Working Capital Amount,
including Pro Forma adjustments. All other capitalized terms used but not
defined herein shall have the respective meanings assigned thereto in this
Agreement. All references to the Closing Date shall mean the opening of
business on the Closing Date.
Working Capital Assets
- ----------------------
Working Capital Assets shall mean Investment Assets, net accounts
receivable (other than any tax receivables), net inventory, and all other
current assets, including, without limitation, prepaid expenses. No cash
balances or intercompany receivables shall be included for purposes of this
calculation. Additionally, no adjustments have been or will be made with
respect to the Nutraco profits included in the net inventory and
intercompany payables - Nutraco balances for purpose of calculating either
the WC Target or the Closing Date Working Capital Amount. The specifics
related to each of these categories (other than Investment Assets which
shall be valued at their face amount) are detailed below.
Net Accounts Receivable
Net accounts receivable shall include amounts due from customers as of the
Closing Date reduced by adequate allowances and reserves as determined in
accordance with the Company Accounting Policies set forth below.
Allowance for Uncollectible Accounts
- ------------------------------------
The allowance for uncollectible accounts shall be determined in accordance
with the following policy, which was the basis for determining the
allowance for uncollectible accounts included in the Audited Financial
Statements:
(i) Customer accounts included in the allowance for uncollectible
accounts will be determined in accordance with the following
criteria:
a. General Market, Dollar ($) Stores and Convenience Stores
with $10,000 over 90 days outstanding with a total
balance of greater than $25,000, unless in a credit
balance position or pending the resolution of a shipping
dispute as of the Closing Date;
b. Sports Nutrition accounts/distributor with $10,000 over
60 days outstanding, unless in a credit balance position
or pending the resolution of a shipping dispute as of the
Closing Date; and
c. Customer accounts with less than 10% available on an
outstanding credit facility, in a Debtor in Possession
situation, rated less than a B by Standard & Poors, or
that have had significant past payment issues as of the
Closing Date.
(ii) The accounts identified in clauses (a)-(c) above will then be
categorized into four (4) categories based on the Seller's
judgment which will be exercised in a manner consistent with
the manner in which such judgment was exercised to include an
allowance for uncollectible accounts in the Audited Financial
Statements. The four (4) categories are defined as follows:
a. Low Risk - Very little chance on not being paid in full.
Accounts not past due. 2% of these account balances will
be included in the allowance for uncollectible accounts.
b. Medium Risk - Small chance of invoices not being paid.
Past due accounts. 10% of these account balances will be
included in the allowance for uncollectible accounts.
c. High Risk - Even chance of invoices not being paid.
Significantly past due accounts. 25% of these account
balances will be included in the allowance for
uncollectible accounts.
d. Danger - Good chance of invoices not being paid.
Balances are past 90 days overdue. Candidate to be sent
to collections within 60 days. 75% of these account
balances will be included in the allowance for
uncollectible accounts.
Accrued Returns/Destroyed in Field/Credit Memos
- -----------------------------------------------
Accrued customer returns/destroyed in field/credit memos will be determined
in accordance with the following methodologies which were the basis for
accrued customer returns/destroyed in field/credit memos included in the
Audited Financial Statements:
(iii) Returns - 3.0% of invoiced sales divided by two (2) for the
four (4) calendar months ending immediately prior to the
Closing;
(iv) Destroyed in Field - 2.8% of invoiced sales for the four (4)
calendar months ending immediately prior to the Closing; and
(v) Credit Memos - 0.3% of invoiced sales for the four (4) calendar
months ending immediately prior to the Closing.
Accrued Customer Discounts
- --------------------------
Accrued customer discounts will be based on the amount determined by the
Company's Pricing System in accordance with the terms and conditions of the
relevant agreements between the Company and each of its customers.
Net Inventory
Net inventory shall represent the items on hand at the Closing Date valued
at the lower of cost or market based on the First-In, First-Out method,
including all applicable capitalized costs/variances, reduced by adequate
allowances and reserves determined in accordance with the methodologies set
forth below. The Closing Date net inventory amount shall not include any
amounts related to the inventories included as part of the European Sundown
and/or Met-Rx operations.
Inventory Reserves
- ------------------
Inventory reserves shall be determined in accordance with the following
methodologies, which were the basis for determining the inventory reserves
included in the Audited Financial Statements:
(i) All inventory items are classified into the following
categories:
a. Discontinued/Obsolete - Represents rationalized SKU's.
This category includes products that are not saleable,
products that have been discontinued from current
marketing and sales efforts or products that have been
replaced by another product and that have no other use.
b. Active - Represents all SKU's not included in the above
category. These items are further divided into "Excess,"
defined as SKU's with greater than 52 weeks of inventory
on hand, and "All Other," defined as SKU's with less than
52 weeks of inventory of hand.
(ii) Each of the categories described above is subject to different
policies/calculations to determine the necessary reserves.
These policies/calculations are set forth below:
a. Discontinued/Obsolete - 100% of the items in this
category are included in the inventory reserve, with the
exception of those products which include materials that
are determined to be reusable (see below).
b. Excess SKU's - Greater than 52 weeks on hand - 65% of
this category is included in the inventory reserve.
c. Reusable Inventory - The inventory reserve calculated
based on the methodology set forth above shall be reduced
by the value of the inventory included in such inventory
reserve that can be reused in another product. These
items will be identified on an SKU by SKU basis by Seller
in the manner in which such SKUs' were identified in
connection with the preparation of the Audited Financial
Statements.
(iii) In addition to the above policies, 100% of the items "Passed
Ship Date" or expired shall be included in the inventory
reserve.
Other Current Assets
The balances of the accounts included in other current assets shall be
determined in accordance with the Company's past practice and in a manner
consistent with the preparation of the Audited Financial Statements.
Working Capital Liabilities
- ---------------------------
Working Capital Liabilities shall include accounts payable (other than
federal and state income tax liabilities), Nutraco intercompany payable,
and all other current accrued liabilities, including without limitation
accrued expenses.
Accounts Payable
These accounts include amounts due to third party suppliers of both
inventory and services to the Company and the Subsidiaries that are unpaid
as of the Closing Date.
Intercompany Payables
Intercompany payables shall include only the Nutraco payable balance
(including the related Nutraco profit component) as of the Closing Date.
Other Current Liabilities
The amounts included in the current liabilities accounts shall be
determined in accordance with the Company's past practice and in a manner
consistent with the preparation of the Audited Financial Statements.
In determining the other current liabilities, the following shall be
excluded:
(i) all balances related to accrued federal and state income tax
balances;
(ii) all balances related to Excluded Litigation and any other
matters listed in Section 9.01(a)(iii) of the Disclosure
Schedule; and
(iii) all balances related to all of the payments and obligations of
Seller referred to in Section 13.04 of the Agreement and the
Royal Numico 2000
Amended and Restated Management Stock Purchase Plan referred to
in Section 13.03 in this Agreement.
Although the Company has not historically accrued for 401(k) contributions
and earned but unused vacation and sick days on its balance sheet, for the
purpose of determining the Closing Date Working Capital Amount, appropriate
GAAP adjustments shall be made for these items.
Ephedra Balances
In determining the Closing Date Working Capital Amount, all
amounts/accounts specifically related to Ephedra based products shall be
excluded from the calculation, as the related obligations shall be retained
by Seller. These balances include, but are not limited to, inventory,
returns reserves, etc.
Special Adjustments
In determining the Closing Date Working Capital Amount, (a) an amount equal
to $2.4 million shall be added to Working Capital Assets to reflect a
certain contract fee paid to Amerikids by the Company prior to the Closing,
and (b) any amounts paid or accrued by the Company or any Subsidiary after
the date of this Agreement and prior to Closing to settle any Retained
Litigation in accordance with Section 4.03(b)(xii) shall be added to the
Working Capital Assets; provided, that Purchaser has consented to such
settlement, which consent should not be unreasonably withheld or delayed.
___________________________________________________________________________
In order to illustrate the above-described calculation, Exhibit 1 has been
attached to these Policies, which sets forth the Company's Closing Date
Working Capital Amount as if it had been calculated as of March 31, 2003 in
accordance with the foregoing Company Accounting Policies.
EXHIBIT 1
---------
(in thousands)
Pro Forma Mar-03
Working Capital
----------------
<s> <c>
Accounts Receivable
3rd Party $ 47,813
Intercompany -
--------
47,813
Inventory, Net 67,739
Other Current Assets 8,951
--------
Total Current Assets 124,503
Accounts Payable
3rd Party 7,964
Intercompany - Non Nutraco -
Intercompany - Nutraco 16,277
--------
24,241
Accrued Expenses & Other Liabilities 17,025
--------
Total Current Liabilities 41,266
--------
Total Working Capital $ 83,237
========