ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") dated as of February
25, 1998, is by and between French Fragrances, Inc., a Florida corporation
(the "Buyer"), and J.P. Fragrances, Inc., a New York corporation (the
"Seller"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, the sole
shareholders of the Seller (the "Shareholders").
RECITALS
A. The Seller owns and operates a perfume and other fragrance
product marketing and distribution business, from offices located in Port
Chester, New York (the "Business").
B. The Seller desires to sell, transfer and assign to the Buyer
certain of the assets of the Business, including, without limitation, the
goodwill associated therewith, in accordance with the terms and subject to
the conditions set forth in this Agreement.
C. The Buyer desires to purchase and assume the assets on the terms
and assume certain related liabilities in accordance with the terms and
subject to the conditions set forth in this Agreement.
D. The Shareholders constitute the sole shareholders of the Seller
and, accordingly, the transactions contemplated hereby will inure to his
direct benefit.
E. But for the agreements and representations and warranties of the
Shareholders contained herein, the Buyer would not enter into this
Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual
representations, warranties and covenants and subject to the conditions
contained in this Agreement, the parties agree as follows:
ARTICLE I
SALE OF ASSETS
Section 1.1 Subject Assets. The Seller hereby agrees to sell, assign
and deliver to the Buyer at the Closing (as defined below), free and clear
of all liens, mortgages, pledges, options, claims, security interests,
conditional sales contracts, title defects, encumbrances, charges and other
restrictions of every kind (collectively, the "Liens") except as
specifically permitted by this Agreement, on the terms and subject to the
conditions set forth in this Agreement, all right, title and interest in
and to certain of the assets of the Business owned and used in connection
therewith, whether real, personal or mixed, tangible or intangible,
together with any replacements thereof and additions thereto made between
the date hereof and the Closing, as hereafter described in this Section 1.1
and as listed on composite Schedule 1.1 (other than Schedule 1.1(f))
(collectively, the "Subject Assets"), including the following:
(a) the tangible assets and personal property relating to the
Business set forth on Schedule 1.1(a), including furniture, equipment,
computer hardware and software, tools, dies and molds (collectively, the
"Fixed Assets") and all cash and cash equivalents that are set forth on the
Closing Date Balance Sheet (as hereinafter defined);
(b) all of the interest in, and the rights and benefits accruing to
the Seller as the result of, the contracts, agreements, purchase orders and
commitments used or useful in connection with the Business of the Seller
that are listed on Schedule 1.1(b), and any other contracts or commitments
entered between the date hereof and the Closing Date whose performance
extends beyond the Closing Date and are specifically approved in writing by
the Buyer pursuant to Section 6.2(c) which shall be listed on the Closing
Date as an update to Schedule 1.1(b) (collectively, the "Contracts");
(c) the books and records, if any, pertaining to the Business (other
than the Excluded Assets) and the Subject Assets, including, without
limitation, books, records and files relating to customers (including sales
histories), manufacturers and suppliers of the Seller, copies of employee
records for the employees of the Seller who are hired post-closing by the
Buyer (including, without limitation, Form I-9's), operating data, business
plans, marketing and business strategies, budgets, regulatory filings,
warranties, guaranties, service and maintenance documents, bills of sale or
title to fixed assets, customer and supplier lists, copies of financial and
accounting records, promotions, manufacturing and sales information,
executed Contracts, payables (including purchase orders), credit and
Accounts Receivable (as hereinafter defined) records (including invoices),
correspondence reasonably required for continued operation of the Business
and other similar documents and records used and/or useful in connection
with the Business (collectively, the "Records");
(d) all Seller's rights in and to the licenses, permits, approvals
and other authorizations issued to it by any governmental authority and
used and/or useful in the conduct of the Business and operations of the
Seller as listed on Schedule 1.1(d) (collectively, the "Licenses") to the
extent such Licenses are assignable by the Seller;
(e) Intentionally omitted.
(f) all accounts receivable of the Seller relating to the Business,
with the exception of accounts receivable listed on Schedule 1.1(f), as
such schedule will be updated for the Closing Acquisition Balance Sheet (as
defined below), (the "Accounts Receivable");
(g) all inventories of finished goods relating to the Business which
constitute all regular stock keeping units which are in saleable condition
and all components and finished goods obtained from the Seller's material
suppliers which are in saleable or reasonably useful condition, including,
without limitation, finished goods and products, packaging, labels, raw
materials, components, materials, parts, accessories, tote, corrugate,
shippers, displays, testers, samples, collateral gifts, gifts with
purchase and work-in-progress (the "Inventory") as listed on the Closing
Inventory Listing Report (as defined in Section 4.20);
(h) all finished goods and products relating to the Business which
are returned in the ordinary course of business prior to or following the
Closing Date and are from sales to customers of the Seller prior to the
Closing Date (the "Returns"), provided that if such goods and products are
returned prior to the Closing Date, Returns shall not include goods and
products which are part of the Inventory or are resold or destroyed by the
Seller;
(i) all proceeds, rights, claims, credits, causes of action or rights
of set-off against third parties relating to the Subject Assets, including,
without limitation, unliquidated rights under manufacturers' and vendors'
warranties listed on Schedule 1.1(i) hereto and as updated on the Closing
Date (the "Claims");
(j) all rights and claims pursuant to any policy of property and
casualty insurance underwritten by any person arising from any loss or
damage to the Subject Assets (other than the Accounts Receivable) occurring
from the date hereof through the Closing Date, as updated on the Closing
Date (the "Insurance Claims");
(k) all trademarks, service marks, trade names, copyrights,
franchises, licenses, logos and rights with respect to the Business listed
on Schedule 1.1(f) hereto and as updated on the Closing Date (the "Marks");
and
(l) all goodwill associated with the foregoing and the Business.
Section 1.2 Assumed Liabilities. The Buyer shall, at the
Closing, assume and undertake to perform, pay, satisfy or discharge in
accordance with their terms, only (a) such liabilities, obligations and
commitments of the Seller relating to the period commencing after the
Closing Date under the Contracts to be assigned to it as listed on Schedule
1.1(b), (b) the trade payables listed on Schedule 4.22 (and those hereafter
incurred by the Seller in the ordinary course of business and associated
with the Subject Assets (and not otherwise obligations or indebtedness
of any affiliate of the Seller) as to be reflected on an updated Schedule
4.22 through the Closing and as the same may be listed on the Closing Date
Balance Sheet), and (iii) such liabilities, obligations and commitments as
may otherwise be expressly set forth on Schedule 1.2 (the "Assumed
Liabilities"). No consulting, bank or other transaction fees, costs or
expenses of any nature whatsoever or obligations of the Seller which are
not reasonably necessary for the conduct of the Business shall be included
in the Closing Acquisition Balance Sheet, the Closing Date Balance Sheet
or otherwise constitute any portion of the Assumed Liabilities.
Section 1.3 Excluded Assets and Liabilities. The Subject Assets
shall not include any assets which are not described in Section 1.1 or on
composite Schedule 1.1 (other than Schedule 1.1(f)) and as otherwise may be
described on Schedule 1.3 (the "Excluded Assets"). Except as otherwise
provided in Section 1.2, the Subject Assets shall also not include any
liabilities, obligations or commitments of the Seller not specifically
listed on Schedules 1.1 and 1.2 or specifically included in the Contracts
listed in Section 1.1 (b) (the "Excluded Liabilities") , whether arising
prior to or after the Closing Date. Without limiting the generality of the
foregoing, the Buyer shall be under no obligation, and shall not be deemed,
to assume any obligation or liability of the Seller for the following:
(a) any liability or obligations to any employees, agents or
independent contractors of the Seller (other than those arising under the
Contracts following the Closing) or under any plan or arrangement with
respect thereto, including, without limitation, liabilities and obligations
(i) under any life, health (including COBRA), accident, disability or any
other "employee welfare benefit plan," as such term is defined in Section
3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), (ii) under any pension, profit sharing, stock bonus, deferred
compensation, retirement, bonus or other "employee pension benefit plan,"
as defined in Section 3(2) of ERISA, maintained, or to which contributions
have been made, by the Seller or any predecessor or any corporation which
is a controlled group or corporations of which the Seller are a member, as
defined in Section 414(b) of the Internal Revenue Code of 1986, as amended
(the "Code"), or any trade or business (whether or not incorporated) under
common control with the Seller, as defined in Section 414(c) of the Code,
or any affiliated service group aggregated with the Seller under Section
414(m) of the Code (collectively, the "ERISA Employer"), (iii) under the
Worker Adjustment and Retraining Notification Act as amended ("WARN"), and
(iv) for wages, salaries, bonuses, commissions, sick pay, vacation or
holiday pay, overtime or other benefits not set forth above;
(b) the Seller's legal, accounting or other fees or expenses arising
out of the transactions contemplated by this Agreement;
(c) with respect to federal income or excess profits taxes or state
or local income, sales, use, excise, ad valorem or franchise taxes,
together with any interest, assessments and penalties thereon arising out
of or attributable to the conduct of the Seller's operations and business
prior to the Closing Date or the Seller's or the Shareholders' federal
income or capital gain taxes or state or local income or franchise taxes
arising by virtue of the transactions contemplated by this Agreement or
otherwise;
(d) with respect to the Subject Assets (including those arising under
the Contracts) to the extent relating to periods prior to the Closing Date
unless such liabilities are included in the Assumed Liabilities; and
(e) with respect to litigation or other legal proceedings, claims or
investigations related to the Seller or the Seller's business and
operations, regardless of when made or asserted, including, without
limitation, tort, crime, workers' compensation, product liability or
similar claim for injury to persons or property which arises out of or is
based upon any express or implied warranty, representation or agreement of
the Seller or its employees or agents, or which is imposed by law or
otherwise.
ARTICLE II
PURCHASE PRICE
Section 2.1 The Purchase Price; Adjustment of Purchase Price.
(a) As consideration for delivery of the Subject Assets by the Seller
to the Buyer and in addition to assuming the Assumed Liabilities, the Buyer
agrees, subject to the terms, conditions and limitations set forth in this
Agreement, including, without limitation, the adjustments set forth in
Sections 2.1(b) and (c), and 12.5 below, and in reliance on the
representations, warranties and covenants of the parties hereto: (i) to pay
to the Lenders (as defined below) the principal balance and accrued
interest, as reflected in a payoff letter to be delivered by the Lenders,
which certifies that no prepayment or early termination fee is included
in the payoff amount, as of the Closing Date (but not to the extent such
principal balance or interest relates in any way to a prepayment or early
termination fee), owed by the Seller under that certain Loan and Security
Agreement dated February 1, 1996, as amended (the "Loan Agreement"),
between the Seller, Marine Midland Bank ("Marine") and The First National
Bank of Boston ("FNBB") (Marine and FNBB are collectively referred to as
the "Lenders"), but in no event more than Twenty Five Million Dollars
($25,000,000.00) (the "Loan Purchase Price"); (ii) to pay to ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇▇") an amount (the "Shareholder Notes Purchase
Price"), as reflected in the Closing Acquisition Balance Sheet (as defined
below), corresponding to (A) the principal balances plus accrued and unpaid
interest relating to the Subordinated Note dated February 1, 1996 (the
"February Note") issued by the Seller to ▇▇▇▇▇▇▇▇▇▇ in the principal amount
of Nine Hundred Thousand Dollars ($900,000) and the Subordinated Note dated
December 17, 1996 (the "December Note") issued by the Seller to ▇▇▇▇▇▇▇▇▇▇
in the principal amount of One Hundred Thirty Five Thousand Dollars
($135,000), less (B) the amount reflected on the Closing Acquisition
Balance Sheet as Due from Stockholder; (iii) to pay to the Seller the sum
of (C) Four Million Five Hundred Thousand Dollars ($4,500,000) plus (D) the
amount of the Stockholder's Equity set forth on the Closing Acquisition
Balance Sheet ((C) and (D) collectively, the "Cash Purchase Price"); and
(iv) to pay to the Seller the sum of up to Three Million Dollars (the
"Holdback Purchase Price"), payable in the form of a subordinated debenture
in the form of Exhibit A which is attached hereto and made a part hereof
(the "Debenture"). The Loan Purchase Price, the Shareholder Notes Purchase
Price, the Cash Purchase Price and the Holdback Purchase Price shall
collectively be referred to as the "Purchase Price").
(b) Schedule 2.1(b) sets forth the balance sheet of the Seller as of
December 31, 1997 and the projected balance sheet of the Seller for
February 28, 1998 (the "Acquisition Balance Sheet"), in each case
reflecting the Subject Assets, the Assumed Liabilities and the amounts
relating to the Loan Purchase Price and the Shareholder Notes Purchase
Price, including any valuation methods which are to be applied for changes
thereto at Closing. Notwithstanding the foregoing, the Cash Purchase Price
shall be subject to reduction at the Closing on a $1.5625 of Cash Purchase
Price for $1 of Book Deficiency (as defined below) basis, to the extent a
Book Deficiency exists. For purposes of this Agreement, "Book Deficiency"
shall refer to the amount, if any, by which, Seven Million Two Hundred
Thousand Dollars (US$7,200,000) (the "Threshold") exceeds the Stockholder's
Equity set forth on the Closing Acquisition Balance Sheet. For purposes of
this Agreement, the "Closing Acquisition Balance Sheet" shall refer to the
balance sheet of the Seller which is delivered by the Seller to the Buyer
prior to the Closing Date (with supporting documentation including the
Closing Inventory Listing Report (as defined in Section 4.20), an updated
Acquisition Accounts Receivable Report (as defined in Section 4.23),
including an updated Schedule 1.1(f), and an updated Trade Payables Report
(as defined in Section 4.22)) and reflects the Subject Assets, the Assumed
Liabilities and the amounts relating to the Loan Purchase Price and the
Shareholder Notes Purchase Price, in each case as of February 28, 1998.
The Closing Acquisition Balance Sheet shall be prepared in accordance with
generally accepted accounting principles, including being based on the
fiscal year ended December 31, 1997 audited financial statements (the "1997
Audited Financial Statements") and the methodology established in the
Acquisition Balance Sheet.
(c) Notwithstanding anything to the contrary set forth herein, the
Purchase Price shall be adjusted (the "Adjusted Purchase Price") after the
Closing Date based on the actual balance sheet of the Seller reflecting the
Subject Assets, the Assumed Liabilities and the amounts relating to the
Loan Purchase Price and the Shareholder Notes Purchase Price, in each case
as of the Closing Date (the "Closing Date Balance Sheet"). The Closing
Date Balance Sheet shall be prepared within 20 days of the Closing Date in
accordance with generally accepted accounting principles, consistent with
the fiscal year ended December 31, 1997 audited financial statements (the
"1997 Audited Financial Statements") and the methodology established in the
Acquisition Balance Sheet and reflects (i) the physical count of the
Inventory which is to be completed following the Closing Date by the
Seller, (ii) confirmation of the Accounts Receivable and accounts payables,
to be done at the sole discretion of the Buyer, and (iii) adjustments that
the parties reasonably agree should have been included in the Acquisition
Balance Sheet or the Closing Acquisition Balance Sheet from the Audited
Financial Statements. If the Adjusted Purchase Price is less than the
Purchase Price, then the Seller shall promptly pay to the Buyer by check
the difference. If the Adjusted Purchase Price is greater than the
Purchase Price, then the Buyer shall promptly pay to the Seller by check
the difference.
Section 2.2 Payment of the Purchase Price. The Loan Purchase
Price, the Shareholder Notes Purchase Price and the Cash Purchase Price
shall be payable at the Closing by wire transfer in immediately available
funds to one or more accounts designated by the Seller (which shall include
an authorization and direction to wire transfer the Loan Purchase Price to
the Lenders and to pay the Shareholder Notes Purchase Price to ▇▇▇▇▇▇▇▇▇▇).
Section 2.3 Allocation of Purchase Price. Schedule 2.3 hereof sets
forth allocations with respect to the Subject Assets which shall be used by
the parties for purposes of reporting to the Internal Revenue Service (the
"IRS") on Form 8594.
Section 2.4 Expenses. Any transfer tax or sales tax or recording
or filing fees imposed upon the sale, assignment and delivery of the
Subject Assets (other than the fees payable in connection with the Initial
HSR Filing which are set forth in Section 8.1 hereof) shall be paid by the
Seller, provided that freight and insurance charges on delivery of the
Subject Assets shall be paid by Buyer.
ARTICLE III
CLOSING
Section 3.1 Time and Place of the Closing. The closing (the
"Closing" or "Closing Date") of the transactions contemplated by this
Agreement shall take place on a business day as soon as practicable after,
but in no event later than seven business days following HSR Expiration (as
hereinafter defined) or HSR Early Termination (as hereinafter defined) and
the satisfaction of all other conditions precedent described in Articles IX
and X hereof, which Closing shall take place at the offices of the Seller's
counsel, ▇▇▇▇▇ & ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, at 10:00
a.m. The Closing shall take place on the Closing Date at such time as the
transactions are complete, but shall be deemed to have occurred effective
as of 11:59 p.m. on the Closing Date (the "Closing Time") for all purposes.
Section 3.2 Procedure at the Closing. At the Closing, the parties
agree to take the following steps in the order listed below (provided,
however, that upon their completion all of these steps shall be deemed to
have occurred simultaneously):
(a) The Seller shall deliver to the Buyer evidence reasonably
satisfactory to the Buyer that each of the conditions to the obligations of
the Buyer set forth in Article IX of this Agreement has been satisfied and
a certificate of an officer of the Seller to such effect;
(b) The Buyer shall deliver to the Seller evidence reasonably
satisfactory to the Seller that each of the conditions to the obligations
of the Seller set forth in Article X of this Agreement has been satisfied
and a certificate of an officer of the Buyer to such effect;
(c) Each of the Seller and the Buyer shall deliver to the other a
copy of the resolutions of its Board of Directors and, as to the Seller,
the Shareholders, authorizing the transactions contemplated by this
Agreement, certified by its Secretary or Assistant Secretary;
(d) Each of the Seller and the Buyer shall deliver to the other a
good standing certificate of such party (which is dated not more than 15
days prior to the Closing) and the Seller shall deliver to the Buyer such
bills of sale, endorsements and assignments in the form attached hereto as
Exhibit B and made a part hereof, and other customary instruments and
documents and certificates reasonably satisfactory to the Buyer as shall be
sufficient to vest in the Buyer good, valid and marketable title to the
Subject Assets, free and clear of all Liens, except as otherwise
specifically permitted by this Agreement;
(e) The Buyer shall deliver to the Seller instruments reasonably
satisfactory to the Seller and the Seller's counsel for the Buyer to assume
the Assumed Liabilities;
(f) The Seller shall deliver to the Buyer the Records (originals of
which shall be provided for Records which affect the Buyer's rights with
respect to the Subject Assets, e.g. warranties, invoices for Accounts
Receivable), Licenses, Contracts and all tangible personal property
constituting a portion of the Subject Assets;
(g) The Buyer and ▇▇▇▇▇▇▇▇▇▇ shall execute and deliver the Consulting
Agreement in the form attached hereto as Exhibit C and made a part hereof;
(h) The Buyer shall deliver the Loan Purchase Price, the Shareholder
Notes Purchase Price, the Cash Purchase Price and the Debenture to the
Lenders, ▇▇▇▇▇▇▇▇▇▇ and the Seller, as the case may be, in accordance with
Section 2.1, and the Seller shall re-deliver the Debenture to be held in
accordance with Section 12.5; and
(i) Each of the Buyer and the Seller (and the Lenders and ▇▇▇▇▇▇▇▇▇▇
to the extent of the Loan Purchase Price and the Shareholder Notes Purchase
Price upon receipt) shall execute and deliver documents acknowledging
receipt from the other, respectively, of the Subject Assets and the
Purchase Price.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
In order to induce the Buyer to enter into this Agreement and to
consummate the transactions contemplated under this Agreement, the Seller
and the Shareholders, jointly and severally, make the following
representations, warranties and covenants, each of which is relied upon by
Buyer in consummating the transactions contemplated hereby regardless of
any other investigation made or information obtained by the Buyer:
Section 4.1 Organization, Power and Authority. The Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of New York, and is duly qualified in each other
jurisdiction in which the conduct of its business or the ownership of its
assets requires such qualification. The Seller has full corporate power
and authority (a) to own or lease its properties and to carry on the
business of the Subject Assets as it is now being conducted, (b) to enter
into this Agreement and, subject to the Consents (as hereinafter defined)
to assign, transfer and deliver the Subject Assets to the Buyer as provided
in this Agreement and to assign and transfer the Assumed Liabilities, and
(c) to perform the other transactions and agreements contemplated by this
Agreement. The Shareholders own all of the outstanding voting capital
stock of the Seller.
Section 4.2 Financial Statements. Attached as part of Schedule 4.2
to this Agreement are the audited financial statements for the Business for
the fiscal years ended December 31, 1994, 1995 and 1996, and the unaudited
financial statements for the Business for the fiscal year ended December
31, 1997 and the fiscal quarters ended March 31, 1997, June 30, 1997 and
September 30, 1997, certified in each such case by the Chief Financial
Officer of the Seller, together with the related notes and schedules
attached to those financial statements (collectively the "Financial
Statements;" provided that at the Closing Date, the Financial Statements
shall include the audited financial statements for the Business for the
fiscal year ended December 31, 1997). The Financial Statements are, and
the Closing Date Balance Sheet will be, in accordance with the books and
records of the Seller, prepared in accordance with generally accepted
accounting principles (except that any monthly financial statements of the
Seller provided do not contain the notes required by generally accepted
financial principles) applied on a consistent basis and fairly present the
financial condition and results of operation at the date or for the periods
so indicated. The reserve or allowance information reflected in the
Financial Statements, the Acquisition Balance Sheet, the Closing
Acquisition Balance Sheet and the Closing Date Balance Sheet is or will be
prepared in accordance with a methodology consistent with prior periods, is
reasonable under the circumstances based on the Company's commitments and
experience and represents the Company's best estimates of such reserves.
Except as provided in the Financial Statements, or as fully disclosed in
Schedule 4.2, the Seller has no liabilities or obligations (whether
accrued, absolute, contingent, whether due or to become due or otherwise)
which might be or become a charge against the Subject Assets, including any
"loss contingencies" considered "probable" or "reasonably possible" within
the meaning of the Financial Accounting Standard Board's Statement of
Financial Accounting Standards No. 5, except trade payables and similar
liabilities and obligations incurred in the ordinary and regular course of
business since the date of the Financial Statements.
Section 4.3 Leased Property. Attached as Schedule 4.3 are true and
complete copies of the leases of personal property which constitute a
portion of the Subject Assets (the "Leases"). Schedule 4.3 also separately
designates which Leases require the consent, waiver or approval of the
other parties thereto for the valid and effective transfer to the Buyer.
The Leases are the valid and legally binding obligations of the Seller and
the lessors thereunder, enforceable in accordance with their respective
terms, and are in full force and effect. Except as set forth on Schedule
4.3, the Seller has received no notice of default or breach under any of
the Leases, none of the Leases are in default, and no event has occurred
which, with the passage of time or the giving of notice or both, would
constitute a default thereunder. All consents necessary to assign the
Leases to the Buyer will be obtained by the Seller and delivered to the
Buyer at the Closing.
Section 4.4 Good Title to and Condition of the Subject Assets; Fixed
Assets. The Seller has valid leasehold interests in all of the leased
property which are part of the Subject Assets and good and marketable
title to all other Subject Assets, free and clear of all Liens, except
those set forth in Schedule 4.4 (which, other than the Assumed Liabilities,
shall be satisfied and discharged in full on or prior to the Closing). All
of the Fixed Assets are in good operating condition, normal wear and tear
excepted, and are available for immediate use in the business and operation
of the Subject Assets. Schedule 4.4 sets forth a list of all of the
physical locations of the Fixed Assets, including a street address for each
such location. With the exception of the Excluded Assets, the Subject
Assets constitute all of the assets necessary to operate the Business in
the ordinary course consistent with past practices.
Section 4.5 Intentionally omitted.
Section 4.6 Taxes. All federal, state and local tax returns and
reports required to be filed by the Seller with respect to the Business
have been or will be timely filed with the appropriate governmental
authorities in all jurisdictions in which such returns and reports are
required to be filed, which returns and reports were and will be true and
correct for the period for which they were filed or are to be filed. All
federal, state and local income, ad valorem, profits, franchise, sales,
use, occupation, property, excise, gross receipts, employment,
unemployment, regulatory assessment fees and other taxes, fees and
assessments (including interest and penalties, if any) payable by the
Seller with respect to the Business on or prior to the date hereof were
paid when due, and will be paid to the extent they become due and payable
after the date hereof with respect to periods on or prior to the Closing
Date, including the $32,764 payment for additional taxes and interest
outstanding for the 1994 Internal Revenue Service audit of the Seller,
which audit is now closed. There are no unpaid taxes which are or could
become a Lien on the Subject Assets. No tax liens have been filed against
the Subject Assets of the Seller. There are no audits pending with respect
to the Seller with any governmental authority. The charges, accruals and
reserves with respect to taxes on the books of the Seller are adequate (as
determined in accordance with generally accepted accounting principles).
All taxes that the Seller is or was legally required to withhold or collect
have been duly withheld or collected and, to the extent required, have been
paid to the proper governmental authority. All individuals that the Seller
treats as independent contractors are not "employees" (within the meaning
of Section 3121 (d)(2)(1) of the Code or Section 3(6) of ERISA) for
purposes of any federal, state or local taxes.
Section 4.7 Insurance. The Seller has maintained and is maintaining
with financially responsible insurance companies insurance with respect to
the Seller's employees and assets insuring the Seller against such
casualties and contingencies and of such types and amounts as are
reasonably adequate for the size and scope of the Business. Set forth in
Schedule 4.7 to this Agreement is a list of all policies of liability,
products liability, errors and omission, property damage, fire, workers'
compensation/employer's liability, accounts receivable or other forms of
insurance owned or carried by the Seller and the names of insurance agents
and/or brokers providing this insurance coverage, and of all performance
bonds and letters of credit securing any obligations of the Seller
maintained by the Seller in the conduct of the Business or relating to the
Subject Assets, true, complete and correct copies of which have been
provided to the Buyer. The Seller has no self-insurance arrangement by or
affecting the Seller. The Seller has received no notification from any
insurance carrier denying or disputing any claim made by the Seller,
denying or disputing any coverage for any claim, denying or disputing the
amount of any claim, or regarding the possible cancellation of any
policies. The Seller has not received (i) any notice of cancellation of
any policy, (ii) any notice that any issuer of such policy has filed for
protection under applicable bankruptcy laws or is otherwise in the process
of liquidating or has been liquidated, (iii) any other indication that such
policies are no longer in full force and effect or that the issuer of any
such policy is no longer willing or able to perform its obligations
thereunder, or (iv) any refusal of coverage or any notice that a defense
will be afforded with reservation of rights. All premiums due on such
policies have been paid, and the aggregate amount of all claims under such
policies do not exceed policy limits. The Seller has given notice to the
insurers of all claims that may be insured thereunder.
Section 4.8 Compliance; Regulatory Matters. The Seller has all
necessary regulatory and environmental permits and approvals to conduct the
Business. The Seller is operating in compliance with all applicable
foreign, federal, state and local statutes, regulations and codes
(collectively, the "legal requirements"), including, without limitation,
those relating to the packaging, manufacturing, distribution,
distribution, labeling, advertising and marketing of its products, and has
received no written notice to the contrary. There is no existing legal
requirement (including, without limitation, environmental requirements)
with a future compliance date that will require operational changes or
capital expenditures at the Seller's facilities in which the Business is
operated. No event has occurred, and no condition or circumstance exists,
that might (with or without notice or lapse of time, or both) constitute or
result, directly or indirectly, in a violation by the Seller of, or a
failure on the part of the Seller to comply with, any legal requirements.
Section 4.9 Litigation. Except as set forth in Schedule 4.9, there
are no actions, suits, proceedings, complaints, claims, governmental
investigations, administrative proceedings or arbitration or mediation
proceedings (collectively, the "Proceedings") pending or, to the best
knowledge of the Seller, threatened against the Seller which may affect the
Business or any of the Subject Assets. All Proceedings described on
Schedule 4.9 are being diligently prosecuted and are adequately covered by
insurance or adequate reserves have been set aside therefor on the
Financial Statements. There are no outstanding orders, decrees or
stipulations issued by any arbitrator or local, state, federal or foreign
court, governmental agency or regulatory body in any proceeding relating to
the Business or the Subject Assets.
Section 4.10 No Adverse Changes. Other than as described on Schedule
4.10, since December 31, 1996, there has not been (except as otherwise
contemplated or permitted by this Agreement and provided, that at the
Closing Date, all representations made in this Section 4.10 shall be made
since December 31, 1997 if the 1997 Audited Financial Statements are
available, and provided further, that the representations set forth in (d)
and (e) shall be made as of December 31, 1997 even if the 1997 Audited
Financial Statements are not available at the Closing Date):
(a) any sale, lease or other disposition of any of the Subject
Assets, other than in the ordinary course of business;
(b) any damage, destruction, loss or other change (whether or not
insured) materially and adversely affecting the Subject Assets or operation
of the Subject Assets;
(c) any loans or advances by or to the Seller or any of its
shareholders which in any way create Liens on the Subject Assets;
(d) payment or increase by the Seller of any bonuses, salaries or
other compensation to any employee of the Business or entry into any
employment, severance or similar contract with any officer of the Business
or, as to any employee of the Business, which is not in the ordinary course
of business and at compensation levels consistent with prior practices;
(e) adoption of, or increase in, any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement or other employee
benefit plan for or with any employees of the Business;
(f) change in the accounting methods followed by the Seller with
respect to the Business;
(g) suffered any material adverse change in its financial condition,
assets, liabilities (absolute, accrued, contingent or otherwise), reserves,
business or operations;
(h) incurred any liabilities or obligations (whether absolute,
accrued, contingent or otherwise), except items incurred in the ordinary
course of business and consistent with past practice;
(i) increased, or experienced any material change in any assumptions
underlying, or methods of calculating, any bad debt, contingency or other
reserve;
(j) conduct of the Business other than in the ordinary course of
business; or
(k) agreement or commitment, whether or not in writing, to do any of
the foregoing by or on behalf of the Seller.
Section 4.11 Real Property. The Seller owns no real property
relating to the Subject Assets or the Business.
Section 4.12 Labor Relations. The Seller is not a party to or bound
by any collective bargaining agreement or any other agreement with a labor
union relating to the employees of the Business, and, to the best knowledge
of the Seller, there has been no effort by any labor union during the
twenty-four (24) months prior to the date of this Agreement to organize any
employees of the Business into one or more collective bargaining units.
Except as set forth in Schedule 4.12: (a) the Seller is in compliance
with all federal, state and local laws regarding employment and employment
practices, conditions of employment, wages and hours with respect to the
Business; (b) the Seller is not engaged in unfair labor practices, and
there are no unfair labor practice complaints or grievances pending or, to
the best knowledge of the Seller, threatened against the Seller before the
National Labor Relations Board relating to employees of the Seller who are
employed in connection with the Business, (c) there are no EEOC violations
or age, sex, racial or other employment discrimination claims charged,
pending or, to the best knowledge of the Seller, threatened against the
Seller relating to employees of the Business, and (d) there is no labor
strike, dispute or work stoppage pending or, to the best knowledge of the
Seller, threatened against or involving the Business or at the current
customer locations which may affect the Business or which may interfere
with its continued operation, and there has been no strike, walkout or work
stoppage involving any of the employees of the Seller employed with respect
to the Business or at the current customer locations during the twenty-four
(24) months prior to the date of this Agreement.
Section 4.13 Employee Benefits. The ERISA Employer does not maintain
or contribute to, nor at any time since it was organized, has maintained or
contributed to: (a) any non-qualified deferred compensation or retirement
plans or arrangements; (b) any qualified defined contribution retirement
plans or arrangements; (c) any qualified defined benefit pension plan; (d)
any other plan, program, agreement or arrangement under which former
employees of the ERISA Employer or its beneficiaries are entitled, or
current employees of the ERISA Employer will be entitled following
termination of employment, to medical, health or life insurance or other
benefits other than pursuant to benefit continuation rights granted by
state or federal law; or (e) any other employee benefit, health, welfare,
medical, disability, life insurance, stock, stock purchase or stock option
plan, program, agreement, arrangement or policy, except as described in
Schedule 4.13 attached to this Agreement, and as to which the Buyer is
assuming no obligation or liability as provided in Section 1.3.
Section 4.14 Contracts. Schedule 4.14 sets forth all contracts
involving: (a) all distribution agreements, commitments and arrangements,
whether written or oral, with any material manufacturers or suppliers and
license agreements (the "Distribution Agreements"); (b) all marketing and
advertising agreements; (c) all employment agreements and agreements with
customers and third party independent contractors (including sales
representatives); (d) any written guaranty or similar undertaking by the
Seller relating to the Business; (e) all loan agreements to which the
Seller is a party or which bind the Subject Assets; (f) a description of
agreements with retail accounts, fulfillment houses, third party beauty
advisers and other third parties relating to advertising, merchandising and
promotions not reduced to a written agreement; (g) all purchase orders; and
(h) any other contract, commitment or obligation (whether lump sum or
installment and whether or not reduced to writing) to or from the Seller
relating to the Business in excess of $5,000 and which is not terminable at
will, without cost or penalty to the Seller, upon 30 days notice by the
Seller. The Seller has delivered to the Buyer true and complete copies of
the Contracts described in Schedule 1.1(b) and all amendments thereto, and
will deliver, immediately prior to the Closing, all amendments, addendums
and supplements thereto. Except for the consents listed on Schedule 4.14,
the Seller has full legal power and authority to assign its rights under
the Contracts to Buyer in accordance with this Agreement, and such
assignment will not affect the validity, enforceability or continuity of
any of such Contracts. The Contracts are valid and binding obligations,
enforceable in accordance with their respective terms, in full force and
effect and, except as set forth on Schedule 4.14, there are no defaults (or
events which with notice or the passage of time, or both, could constitute
defaults) under any of the Contracts by the Seller or, to the best
knowledge of the Seller, by any other party thereto. All consents, waivers,
approvals and authorizations which may be required with respect to the
transactions contemplated hereby are listed on Schedule 4.14 and will be
obtained by the Seller and delivered to the Buyer at the Closing (the
consents described on Schedules 4.3, 4.14 and 4.16 hereinafter collectively
referred to as the "Consents"). Schedule 4.14 also sets forth for each of
the Distribution Agreements the minimum purchase requirements for such
agreements and the current price lists. With respect to the Distribution
Agreements, the Seller has complied with all terms and conditions thereof.
To the best knowledge of the Seller, there is no reason to believe that the
benefits of any relationship with a material supplier or manufacturer will
not continue to be available to the Buyer or that any such relationship
will be changed in an adverse manner.
Section 4.15 Due Authorization; Binding Obligation. The execution,
delivery and performance of this Agreement and each of the other agreements
contemplated by this Agreement and the consummation of the transactions
contemplated by this Agreement and such other agreements have been duly
authorized by all necessary corporate and shareholder action on the part of
the Seller and the Shareholders. This Agreement and the other agreements
contemplated by this Agreement have been duly executed and delivered by the
Seller and the Shareholders and are the valid and binding obligations of
the Seller and the Shareholders enforceable in accordance with their
respective terms, subject as to enforceability only to bankruptcy,
insolvency, moratorium or similar laws affecting the rights of creditors
generally. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement will: (a)
conflict with or violate any provision of the Articles of Incorporation or
Bylaws of the Seller, or, except for the filing and waiting period
requirements (the "HSR Requirements") of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976 as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), of any law, ordinance or regulation
or any decree, judgment, injunction or order of any court, arbitrator or
administrative or other governmental body which is either applicable to,
binding upon or enforceable against, the Seller or the Subject Assets; (b)
except for the Consents, violate, conflict with or result in any breach of,
result in any modification of the effect of, otherwise give any contracting
party the right to terminate, or constitute (or with notice or lapse of
time or both constitute) a default under, any mortgage, contract,
agreement, indenture, trust or other instrument which is either binding
upon or enforceable against the Seller, the Shareholders or the Subject
Assets; (c) except for the Consents, result in the imposition or creation
of any Lien on any of the Subject Assets or accelerate any indebtedness of
the Seller or to which the Subject Assets may be bound; or (d) breach,
impair or in any way limit any governmental or official license, approval,
permit or authorization of the Seller relating to the Business.
Section 4.16 Consents. Except as set forth on Schedule 4.14 or 4.16:
(a) no consent or approval of any public body or other governmental
authority, and (b) no consents, approvals or waivers from other parties, in
each such case whether with respect to the Contracts, Licenses or other
instruments to be assumed by the Buyer, are required to be obtained by the
Seller as a result of the transfer of the Subject Assets and Assumed
Liabilities contemplated by this Agreement, the execution, delivery and
performance of this Agreement and each of the other agreements contemplated
by this Agreement and the consummation of the transactions contemplated by
this Agreement and such other agreements.
Section 4.17 Employees; Independent Contractors. The Seller is in
compliance with all federal, state and local laws, rules and regulations
relating to the employment authorization of its employees (including,
without limitation, the Immigration Reform and Control Act of 1986, as
amended and supplemented, and Sections 212(n) and 274A of the Immigration
and Nationality Act, as amended and supplemented, and all implementing
regulations relating thereto), and the Seller is not employing any
unauthorized aliens (as such term is defined under 8 CFR 274a.1(a)(1994)).
To the best knowledge of the Seller, no former or current employee or
consultant of the Business is a party to, or is otherwise bound by, any
agreement or arrangement, including, without limitation, any
confidentiality, non-competition or proprietary rights agreement, between
such individual and any other person that in any way adversely affects the
performance of his duties or the ability of the Seller to conduct its
Business. Except as set forth on Schedule 4.17, the Seller has no
arrangements with independent contractors; all such arrangements with
independent contractors are terminable at will by the Seller without
penalty.
Section 4.18 Books and Records. The books and records of the Seller
relating to the Business, all of which have been made available to the
Buyer, are complete and correct and have been maintained in accordance with
sound business practices and generally accepted accounting principles,
including, without limitation, the maintenance of an adequate system of
internal controls.
Section 4.19 Governmental Filings. Any and all filings required to
be made pursuant to any local, state or federal law, regulation or
ordinance due as of or before the Closing Date and which may be due as a
result of the Closing or for periods ending prior to the Closing Time has
or will be timely filed by the Seller.
Section 4.20 Inventory. Attached as Schedule 4.20 is a report
containing a listing of Inventory as of January 31, 1998 (the "Acquisition
Inventory Listing Report"), which report shall be updated as of the date of
the Closing Acquisition Balance Sheet and as of the Closing Date Balance
Sheet (as updated, the "Closing Inventory Listing Report"). The
Acquisition Inventory Listing Report and the Closing Inventory Listing
Report as of their respective dates are true, complete and correct and have
been prepared in a manner disclosed to the Buyer. All Inventory, whether
or not reflected on the balance sheet of the Seller, consists of a quality
and quantity which are salable and merchantable in the ordinary course of
business, except for obsolete items and items of below-standard quality all
of which have been written off or written down to net realizable value on
the balance sheet of the Financial Statements. The quantities of each type
of Inventory are not excessive, but are reasonable and warranted in the
present circumstances of the Seller. Schedule 4.20 also sets forth a list
of all of the physical locations of the Inventory, including a street
address for each such location. Schedule 4.20 also sets forth a list of all
of the Seller's customers who have returned finished goods and products
relating to the Business for fiscal 1996 and 1997, the current returns
policies of the Seller with respect to its customers and their approximate
rate of returns for fiscal 1996 and 1997, which schedule shall be updated
as of the Closing Date. All of the Returns received by the Seller on or
before the date hereof, and on or before the Closing Date, have been
returned in the ordinary course of business and are from sales made to
customers for which the Seller accepts returns in the ordinary course of
business, and, as of the date hereof, the Seller has taken no action, and
through the Closing Date will take no action, to cause or solicit Returns.
Section 4.21 Report by Customer and by Item. Schedule 4.21 sets forth
a report by customer and by item for the twelve months ended December 31,
1997 and the month ended January 31, 1998 (the "Gross Sales Report"), which
shall be updated for subsequent monthly periods or fractions thereof as of
the Closing Date. The Gross Sales Report is, and as updated at the Closing
Date will be true, complete and correct. Other than as described in
Schedule 4.21, since the most recent date reflected in the Gross Sales
Report set forth in Schedule 4.21, there has not been (except as otherwise
contemplated or permitted by this Agreement) any material adverse change
affecting the conduct of the Business other than in the ordinary course of
business or the relationship with any material customer.
Section 4.22 Trade Payables. Attached as Schedule 4.22 is a true,
complete and correct list of all of the outstanding trade payables (by
account) of the Seller as of January 31, 1998 (the "Trade Payables
Report"), which schedule shall be updated as of the date of the Closing
Acquisition Balance Sheet and the Closing Date Balance Sheet with respect
to outstanding trade payables (by account) which are incurred after the
date hereof in the ordinary course of business and associated with the
Subject Assets and are not otherwise obligations or indebtedness of any
affiliate of the Seller, and which shall be a true, complete and correct
listing thereof on such date.
Section 4.23 Accounts Receivable. Attached as Schedule 4.23 is an
report containing a listing of Accounts Receivable as of January 31, 1998
(the "Acquisition Accounts Receivable Report"), which report shall be
updated as of the date of the Closing Acquisition Balance Sheet and as of
the Closing Date Balance Sheet. The Acquisition Accounts Receivable
Reports as of their respective dates are true, complete and correct (other
than with respect to any reserve information, which is based on the
Seller's best estimate as set forth in Section 4.2) and have been prepared
in a manner disclosed to the Buyer. All Accounts Receivable as
reflected on the latest balance sheet included in the Financial Statements,
and all Accounts Receivable arising subsequent to the date of such balance
sheet (including those in the Acquisition Balance Sheet, the Closing
Acquisition Balance Sheet and the Closing Date Balance Sheet), (i)
represent valid; to the best of the Seller's knowledge, undisputed; and
bona fide obligations due to the Seller, enforceable in accordance with
their respective terms, (ii) to the best of the Seller's knowledge, are not
subject to any defense, offset or counterclaim, and (iii) are subject only
to a reserve or allowance for bad debts, returns, advertising or
adjustments all of which are separately identified and computed in a manner
consistent with past practice, and have been collected or are collectible
in the ordinary course of business of the Seller. This representation
shall not be construed as a guarantee from the Seller that all of the
Receivables delivered at the Closing will in fact be collected by the
Buyer.
Section 4.24 Related Parties. Except as set forth on Schedule 4.24,
neither the Seller nor any of its officers, directors or stockholders
(collectively, the "Related Parties") owns, directly or indirectly, (a) any
interest in a competitor, supplier or customer of the Seller, (b) any
property, assets or right, real, personal or mixed, tangible or intangible,
which is utilized in the operation of the Seller's business, or (c) has an
interest in, or is, directly or indirectly, a party to any contract,
agreement, lease or arrangement pertaining or relating to the Seller's
business.
Section 4.25 Promotional Obligations. Schedule 4.25 contains a true,
complete and correct listing of the agreements or commitments with respect
to all production, media, advisory, promotional, catalog or other fees and
expenses paid by the Seller prior to the Closing Date for television, radio
and print advertising or other promotional activities relating exclusively
to the products distributed by it which will air, appear, run or occur
after the Closing Date (the "Promotional Obligations"), and identifies the
amount of such expenses and to whom paid as of the date of this Agreement.
Schedule 4.25 shall be updated as of the Closing Date.
Section 4.26 Intentionally omitted.
Section 4.27 Accuracy of Information. No representation, statement
or information made or furnished by the Seller, the Shareholders or their
representatives to the Buyer, including those contained in this Agreement
and the various schedules attached to this Agreement and the other
information and statements referred to in this Agreement and furnished by
the Seller or its representatives to the Buyer pursuant to this Agreement,
contains or shall contain any untrue statement of a material fact or omits
or shall omit any material fact necessary to make the information contained
in this Agreement and the schedules not misleading. There is no fact known
to the Seller or the Shareholders that has specific application to the
Business (other than the Excluded Assets) and that materially adversely
affects the assets, business, prospects, financial condition or results of
operations with respect to the Business (other than the Excluded Assets)
that has not been set forth in this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
In order to induce the Seller to enter into this Agreement and to
consummate the transactions contemplated under this Agreement, the Buyer
represents and warrants:
Section 5.1 Organization, Power and Authority. The Buyer is a
corporation duly organized and validly existing under the laws of the State
of Florida, with full corporate power and authority to enter into this
Agreement and perform its obligations under this Agreement.
Section 5.2 Due Authorization; Binding Obligation. The execution,
delivery and performance of this Agreement and all other agreements
contemplated by this Agreement and the consummation of the transactions
contemplated by this Agreement and such other agreements have been duly
authorized by all necessary corporate action of the Buyer. This Agreement
has been duly executed and delivered by the Buyer and is the valid and
binding obligation of Buyer enforceable in accordance with its terms,
subject as to enforceability only to bankruptcy, insolvency or similar laws
affecting the rights of creditors generally. Neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated by this Agreement will conflict with or violate any provision
of the Articles of Incorporation or Bylaws of the Buyer, or, subject to HSR
Requirements, of any law, ordinance or regulation or any decree or order of
any court or administrative or other governmental body which is either
applicable to, binding upon or enforceable against the Buyer.
Section 5.3 Consents. Except for filings and consents required
pursuant to the HSR Act, and the consents set forth in Schedule 5.3, no
consent, action, permit, license, approval or authorization of, or material
registration, declaration or filing with, any person or a governmental
entity is required or necessary to be obtained by the Buyer in connection
with the execution, delivery and performance by the Buyer of this
Agreement, including the consummation of the transactions contemplated
hereby.
ARTICLE VI
ADDITIONAL COVENANTS OF THE SELLER
Section 6.1 COBRA Obligations. From and after the Closing Date, the
Seller agrees to pay and be liable for, and shall assume, indemnify, defend
and hold harmless the Buyer from and against and in respect of, any
Liabilities (as hereinafter defined) incurred by or assessed against the
Buyer that arise under Sections 4980B and 5000 of the Code and with respect
to any failure to comply by the Seller with the continuation health care
coverage requirements of Section 4980B of the Code and Sections 601
through 608 of ERISA, which failure occurs with respect to any person who
is or was a current or former employee of the Seller or any qualified
beneficiary of such employee (as defined in Section 4980B(g)(1) of the
Code). For purposes of this Section, references to the Code and ERISA
shall include references to any provision of such statutes as they may be
amended from time-to-time.
Section 6.2 Conduct of Business Pending the Closing. After the
execution and delivery of this Agreement and until the Closing (the
"Pre-Closing Period"), except as otherwise permitted by this Agreement or
as provided by the prior written consent of the Buyer:
(a) The Business will be conducted only in the ordinary course of
business consistent with past practices, which shall include, without
limitation, operating in compliance with all applicable laws, regulations
and administrative orders of any federal, state or local governmental
authority, the maintenance in force of all insurance policies, fidelity
bonds and performance bonds currently in force and effect and the
maintenance of the Subject Assets in good operating condition and repair.
(b) The Seller shall use its best efforts to maintain the goodwill of
the Business and of the Business' customers, contractors, agents,
suppliers, licensors, distributors, and others having business
relationships with the Seller. In connection herewith, the Seller shall
cooperate with the Buyer in (i) the execution and delivery of
correspondence to customers advising them of the execution of the Agreement
and, in the case of electronic data interchange ("EDI") accounts,
requesting that the customers take steps as soon after the date of the
letter to transfer their EDI accounts to the Buyer, which transfer is to
be effective as soon after the Closing as possible, and (ii) making
available to the Buyer the services of the President of the Seller to visit
key customer accounts (the costs of which shall be to the Buyer's
account) and to participate in conference calls with certain other customer
accounts.
(c) The Seller will not enter into any contract or commitment,
including, without limitation, commitments with customers for promotions,
returns and advertising, in excess of $50,000, or amend or voluntarily
terminate or violate the terms of any material Contract or arrangement with
an existing supplier or customer (or waive any substantial right
thereunder) without the prior written consent of the Buyer.
(d) The Seller will not incur any obligation, including obligations
relating to the borrowing of money or the guarantee of any indebtedness, or
create or assume any Liens, except in the ordinary course of business or
with the prior written consent of the Buyer.
(e) The Seller will conduct the affairs of the Business in such a
manner so that the representations and warranties contained in Article IV
shall continue to be true and correct on and as of the Closing Date as if
made on and as of the Closing Date.
(f) The Seller shall not make any fee, wage or salary increase or
enter into any employment or consulting agreement (not terminable at will),
in either such case with respect to the employees of the Business nor award
or agree to award any bonuses, commissions or dividends except for the
severance arrangement developed for its employees to be paid following the
Closing.
(g) The Seller shall not lease, sell, transfer or otherwise dispose
of any of the Subject Assets other than in the ordinary course of business
or with the consent of the Buyer; provided that the prior written consent
of the Buyer, which consent shall not be unreasonably withheld, shall be
required with respect to any (i) sale of fragrance products obtained from
the principal suppliers of the Seller to wholesalers, or (ii) sale which,
in the aggregate with other sales to the same retailer during the
Pre-Closing Period, exceed $50,000; provided that (ii) shall not apply with
respect to sales to any of the Seller's major retail customers so long as
they are in the ordinary course of business and so long as subsection
6.2(c) is complied with.
(h) The Seller shall not make any capital expenditure or commitment
for replacements or additions or structural improvements to property,
plant, equipment or other capital assets in the aggregate in excess of
$5,000.
(i) The Seller shall cause ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & Co., LLP or another
independent public accounting firm reasonably acceptable to the Buyer to
audit the financial statements of the Seller for the fiscal year ended
December 31, 1997, at the sole expense of the Seller.
(j) The Seller shall, within one business day of the date hereof,
deliver notice to its sales representatives substantially in the form set
forth in Schedule 6.2(j) and adhere to the terms thereof.
(k) The Seller shall not commit, orally or in writing, to do any of
the items (c), (d), (f), (g) and (h) of this Section 6.2.
Section 6.3 Inspection. Between the date hereof and the Closing
Date, the Buyer and its representative shall have full and complete access
during normal business hours to the books, records and properties of the
Seller relating to the Business and may make such reasonable inspections of
such books, records and properties as they may deem reasonably necessary or
advisable to evaluate the business and operations of the Business, and the
Seller hereby agrees to cooperate fully with Buyer to facilitate such
inspections and investigations, provided that the Buyer shall not
unreasonably interfere with the business and operations of the Seller or
the Business. The Buyer shall also have reasonable access to the Seller's
employees, accountants, attorneys and customers with respect to the
Business. The availability or actual delivery to the Buyer of information
concerning the Business and its investigation of the Business shall not
affect the covenants, representations, warranties, and indemnities of the
Seller contained in this Agreement nor the Buyer's right to rely thereon.
Section 6.4 Consents. The Seller shall use its best efforts to
obtain so as not to delay the Closing all consents, approvals and
authorizations necessary to effectuate the transactions contemplated by
this Agreement.
Section 6.5 Risk of Loss. The risk of any loss or damage to the
Subject Assets resulting from fire, theft or any other casualty (except
reasonable wear and tear) shall be borne by the Seller at all times prior
to Closing Time. If any such loss or damage shall be sufficiently
substantial so as to preclude and prevent resumption of normal operations
of any portion of the Business or the replacement or restoration of the
lost or damaged property within twenty (20) days from the occurrence of the
event resulting in such loss or damage (a "Material Loss"), the Seller
shall immediately notify the Buyer in writing of its inability to resume
normal operations or to replace or restore such lost or damaged property.
The Buyer, at any time within ten (10) days after receipt of such notice,
may elect by written notice to the Seller to either (a) waive such defect
and proceed toward consummation of the transaction in accordance with terms
of this Agreement, or (b) terminate this Agreement by delivering a written
notice to such effect to Seller. If the Buyer elects to consummate the
transactions contemplated hereby notwithstanding a Material Loss and does
so, or if there occurs any loss or damage to the Subject Assets that is not
a Material Loss but Seller cannot with reasonable diligence repair or
replace the affected Subject Assets prior to Closing, all insurance
proceeds payable as a result of the occurrence of the event resulting in
such loss or damage shall be delivered by the Seller to the Buyer, or the
rights thereto shall be assigned by the Seller to the Buyer, and the Seller
shall hold all such proceeds in trust for the Buyer until so delivered.
Section 6.6 Inconsistent Actions. Prior to the Closing, the
Seller and the Shareholders will not (a) take any action inconsistent with
its obligations under this Agreement or which would hinder or delay
consummation of the transactions contemplated hereby, or (b) enter into or
conduct any discussions or encourage, solicit, initiate or participate in
discussions or negotiations with, or provide information to, any other
party concerning the transactions contemplated by this Agreement or
otherwise with respect to the Subject Assets or the Business and shall
promptly advise the Buyer of any solicitations with respect to such
matters.
Section 6.7 Notification. Between the date of this Agreement and the
Closing Date, the Seller and the Shareholders shall promptly notify the
Buyer in writing if it becomes aware of any fact or condition which renders
or will render any representation untrue or incorrect or breaches, or will
cause a breach of, any warranty or covenant made by the Seller in this
Agreement. Should any such fact or condition require any change in the
Schedules hereto, the Seller shall deliver to the Buyer a supplement(s) to
the Schedules specifying such change(s). Delivery of such supplements
shall be for information purposes only and shall not modify in any such
respect any representation, warranty, covenant or condition contained
herein.
Section 6.8 WARN. The Seller has not, and will not, take any action
which would be deemed to cause a "plant closing" or "mass layoff" (as those
terms are defined in WARN) which would require notification to employees of
the Seller or the Buyer pursuant to the provisions of WARN and the rules
and regulations issued thereunder.
Section 6.9 Confidentiality. The Seller agrees, whether before or
after Closing, that it will, and will cause its directors, officers,
employees, agents and authorized representatives to, hold in strict
confidence all information obtained from the Buyer or which relates to this
Agreement (other than information which is a matter of public knowledge or
which has heretofore been or is hereafter published in any publication for
public distribution or filed as public information with any governmental
authority other than a result of a breach of this covenant) and will not,
and will ensure that such other persons do not, disclose such information
to others without the prior written consent of the Buyer, provided that the
Seller may provide such data and information: (a) in connection with
obtaining any of the consents necessary to consummate the transactions
contemplated by this Agreement; (b) in any filing required of the Seller by
the Federal Trade Commission, the Department of Justice or other regulatory
authority; and (c) in response to legal process or applicable government
regulations, but only that portion of the data and information which, in
the written opinion of the Seller's counsel, is legally required to be
furnished and further provided that the Seller notifies the Buyer of its
obligation to provide such confidential information and fully cooperates
with the Buyer to protect the confidentiality of such data and information
pursuant to the applicable provisions of the Freedom of Information Act.
If this Agreement is terminated for any reason, the Seller and such other
persons shall not use such information and shall promptly return to the
Buyer or destroy all tangible evidence thereof, including copies, which
have been furnished to the Seller or such other persons.
ARTICLE VII
ADDITIONAL COVENANTS OF THE BUYER
Section 7.1 Consents. The Buyer shall use its best efforts to obtain
so as not to delay the Closing all consents, approvals and authorizations
necessary to effectuate the transactions contemplated by this Agreement.
Section 7.2 Confidentiality. The Buyer agrees, whether before or
after Closing, that it will, and will cause its directors, officers,
employees, agents and authorized representatives to, hold in strict
confidence all data and information obtained from the Seller (other than
information which is a matter of public knowledge or which has heretofore
been or is hereafter published in any publication for public distribution
or filed as public information with any governmental authority other than a
result of a breach of this covenant) and will not, and will ensure that
such other persons do not, disclose such information to others without the
prior written consent of the Seller, provided that the Buyer may provide
such data and information: (a) to any financial institution, investment
banking firm, banking institution or investors providing financing or
contemplating providing financing to the Buyer for the purposes hereof; (b)
in connection with obtaining any of the consents necessary to consummate
the transactions contemplated by this Agreement; (c) in any filing
required of the Buyer by the Securities and Exchange Commission, the
Federal Trade Commission, the Department of Justice or other regulatory
authority; (d) to the extent necessary for the conduct of the Buyer's
business after the Closing; and (e) in response to legal process or
applicable government regulations, but only that portion of the data and
information which, in the written opinion of the Buyer, is legally required
to be furnished and further provided that the Buyer notifies the Seller of
its obligation to provide such confidential information and fully
cooperates with the Seller to protect the confidentiality of such data and
information pursuant to the applicable provisions of the Freedom of
Information Act. If this Agreement is terminated for any reason, the Buyer
and such other persons shall not use such information and shall promptly
return to the Seller or destroy all tangible evidence thereof, including
copies, which have been furnished to the Buyer or such other persons.
Section 7.3 Cooperation with Books and Records. The Buyer shall use
its best efforts to provide the Seller and the Shareholders with copies (or
originals to the extent not reasonably necessary for Buyer's use in
connection with the conduct of its business) of any Records which the
Seller or the Shareholders reasonably require for the purpose of any tax
filing or tax audit or for any other reasonable purpose not inconsistent
herewith.
ARTICLE VIII
▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇ COMPLIANCE
Section 8.1 HSR Filings. As soon as reasonably practicable after the
date of this Agreement, but in no event later than two business days
following the date hereof (the "Filing Dropdead Date"), the Seller and the
Buyer shall each complete and file with the United States Federal Trade
Commission ("FTC") and Department of Justice ("DOJ") the Premerger
Notification and Report Form and related affidavits (collectively, the
"Initial HSR Filing") required under the HSR Act with respect to the
transactions contemplated by this Agreement. The Buyer shall be
responsible for the fees payable to FTC or DOJ in connection with the
Initial HSR Filing. The Buyer and the Seller shall each exercise their
respective commercially reasonable efforts and cooperate with each other to
secure the early termination or expiration of all applicable waiting
periods under the HSR Act (the "HSR Early Termination") and shall use their
respective commercially reasonable efforts to comply promptly with all
requests for additional information, if any, received from the FTC or the
DOJ.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE BUYER
The obligation of the Buyer to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment at or
prior to the Closing of each of the following conditions:
Section 9.1 Accuracy of Representations and Warranties and Compliance
with Obligations. The representations and warranties of the Seller and the
Shareholders in this Agreement shall be true and correct in all respects at
the Closing Date as if made again on and as of the Closing Date. The
Seller shall have performed and complied with all of its obligations
required by this Agreement to be performed or complied with at or prior to
the Closing.
Section 9.2 Certified Resolutions. The Seller shall have
delivered to the Buyer copies of resolutions adopted by the Board
of Directors of the Seller and the Shareholders authorizing the
transactions contemplated by this Agreement, certified as of the
Closing by a secretary or assistant secretary of the Seller.
Section 9.3 Receipt of Necessary Consents; HSR Act. All
consents, waivers, estoppel letters, authorizations or approvals of
third parties and governmental entities with respect to any of the
transactions contemplated by this Agreement, including, without
limitation, consent to assignment of the Contracts where required
(and including the consent on terms and conditions acceptable to
the Buyer of the Distribution Agreements), shall have been obtained
and confirmed by written evidence reasonably satisfactory to the
Buyer. The Seller shall have complied with the pre-merger
notification requirements of the HSR Act and the statutory waiting
period during which consummation of the transactions contemplated
hereby is prohibited by the HSR Act shall have expired or the DOJ
or the FTC shall have otherwise consented to the consummation of
the transactions contemplated by this Agreement.
Section 9.4 No Adverse Litigation. There shall not be
pending or threatened any action or proceeding by or before any
court or other governmental body which shall seek to restrain,
prohibit or invalidate the assignment, transfer or delivery of the
Subject Assets to the Buyer or any other transaction contemplated
by this Agreement, or which might materially adversely affect the
right of the Buyer to own or operate in their entirety the Subject
Assets.
Section 9.5 Lien Searches. The Seller shall have delivered
to the Buyer at least 10 days prior to the Closing Date the results
of lien and judgment searches dated no earlier than January 28,
1998 with respect to the Subject Assets performed by the Seller at
the office of the Secretary of State of the State of New York, and
the appropriate offices in each county therein in which any of the
Subject Assets are located.
Section 9.6 UCC Statements. The Seller shall have delivered
to the Buyer UCC-3 termination statements from Marine and FNBB and
any other person or entity having a security interest in the
Subject Assets, releasing the Subject Assets from all financing
statements.
Section 9.7 Consulting Agreement. ▇▇▇▇▇▇▇▇▇▇ shall have
executed and delivered to the Buyer the Consulting Agreement.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF THE SELLER
The obligations of the Seller to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment
at or prior to the Closing Time of each of the following
conditions:
Section 10.1 Accuracy of Representations and Warranties and
Compliance with Obligations. The representations and warranties of
the Buyer contained in this Agreement shall be true and correct in
all respects at the Closing Date as if made again on and as of the
Closing Date. The Buyer shall have performed and complied with all
of its obligations required by this Agreement to be performed or
complied with at or prior to the Closing.
Section 10.2 No Adverse Litigation. There shall not be
pending or threatened any action or proceeding by or before any
court or other governmental body which shall seek to restrain,
prohibit or invalidate the transactions contemplated hereby.
Section 10.3 HSR Act. The Buyer shall have complied with the
pre-merger notification requirements of the HSR Act and the
statutory waiting period during which consummation of the
transactions contemplated hereby is prohibited by the HSR Act shall
have expired or the DOJ or the FTC shall have otherwise consented
to the consummation of the transactions contemplated by this
Agreement.
ARTICLE XI
CERTAIN ACTIONS AFTER THE CLOSING
Section 11.1 Further Assurances. After the Closing, upon the
reasonable request of the other, each party shall execute and
deliver all further documents and instruments and shall take such
other steps as may be reasonably necessary to effectuate the
transactions contemplated hereby.
Section 11.2 Litigation. It is recognized by the parties to
this Agreement that litigation may arise at some time in the future
relating to the Seller, the Buyer, the Subject Assets or the
Assumed Liabilities which may be related directly or indirectly to
the period prior to the Closing or the period subsequent to the
Closing, or both. Each of the parties to this Agreement agrees,
therefore, that to the extent reasonable under the circumstances,
it will fully cooperate with and provide information, records,
documents and assistance of employees to the other parties with
respect to any litigation or potential litigation in which the
other party is or may be involved.
Section 11.3 Accounts Receivable. If after the Closing the
Seller shall receive any payment on account of the Accounts
Receivable, it shall hold such funds in trust for the Buyer and
shall promptly endorse over and remit such payments promptly to the
Buyer.
Section 11.4 Transition Services. Subject to the terms
hereof, the Seller agrees to maintain its facility at ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ (the "34 Midland Facility"), and
sufficient employee staffing for the maintenance, security and
shipping of the Subject Assets at the request of the Buyer through
June 30, 1998; provided, however, that for a period of one month
following the Closing Date (the "First Month"), the Seller shall
also maintain the warehouse facility at 10 and ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ and its employee staffing necessary to
fulfill EDI orders for fragrance products from EDI customers while
such customers have their EDI accounts transferred to the Buyer and
any orders the Buyer is unable to fulfill on a timely basis
following the Closing Date (as specified by the Buyer). Sales
arising out of the fulfillment of all such orders shall be to the
account of the Buyer, and the Seller shall forward to the Buyer all
monies received from customers relating to such orders. The Buyer
agrees to advance to the Seller at the Closing the amount of
$275,000 to cover the Seller's operating expenses (including rent,
utilities, insurance (general liability, real property and workers'
compensation), labor and maintenance costs) for the first month
following the Closing Date. At least seven days before the
completion of the First Month and at least seven days before the
completion of every two week period following the First Month (such
two week period, the "Affected Period"), the Buyer shall provide
the Seller with its operating expenses requirement for the Affected
Period along with an advance to cover such expenses less any excess
advances from prior periods. The Seller agrees to provide the
Buyer with supporting documentation for the operating expenses for
each Affected Period and to apply amounts received in excess of the
actual operating expenses against the subsequent Affected Period
operating expenses or alternatively, reimburse the Buyer for such
excess. Notwithstanding any reductions in operating expenses in
the Affected Periods, the Buyer shall be responsible for
reimbursing the Seller for the rent, insurance (liability, workers'
compensation and real property), utilities and security at the 34
Midland Facility through June 30, 1998.
Section 11.5 Returns. The Closing Acquisition Balance Sheet
and the Closing Date Balance Sheet shall set forth a reserve for
returns of finished goods relating to the Business which, based on
the Company's commitments and experience, represents the Seller's
best estimate as of the date thereof (the "Reserve"). The parties
agree that for one year following the Closing Date, any credits or
monetary refunds for Returns which do not exceed the Reserve shall
be to the account of and the sole responsibility of the Buyer and
any credits or monetary refunds for Returns which exceed the
Reserve shall be to the account of the Seller. To the extent that
the aggregate of all credits and monetary refunds for Returns do
not exceed the Reserve, the Buyer shall pay to the Seller, within
30 days after the anniversary of the Closing Date, the amount
represented by (a) the Reserve less (b) the aggregate of all
credits and monetary refunds for Returns issued by the Buyer during
the year following the Closing Date. To the extent that the Buyer
is charged with any credits or pays any refunds for Returns which
exceed the Reserve, the Buyer shall have the right to set-off such
amounts against payments due for Returns hereunder or payments due
under the Debenture, and the indemnification basket set forth in
Section 12.1 shall not apply to offset such obligations. The
Seller shall have the right, at its sole cost, to audit the
Returns, including any associated credits and refunds, during
business hours upon receipt of reasonable notice thereof. The
Returns are part of the Subject Assets and shall be delivered to
the Buyer in accordance with this Agreement and paid for in
accordance with the following:
(a) The Buyer shall only pay the Seller for those Returns
which are of saleable quality which are delivered to the Buyer on
or before May 31, 1998 (the "Returns Deadline");
(b) The purchase price that the Buyer shall pay for all
Returns delivered to the Buyer before the Returns Deadline shall
be the Seller's standard cost as of such date for Inventory
applicable to the finished good or product;
(c) Payments for the Returns shall be made on a monthly basis
within thirty (30) days after each month following the Closing
Date, with the last payment due 30 days after the Returns Deadline;
and
(d) Returns received by the Buyer after the Returns Deadline
(including Returns which the Seller delivers to Buyer as required
herein) will not require consideration to be paid to Seller.
ARTICLE XII
INDEMNIFICATION
Section 12.1 Indemnity by the Seller. The Seller and the
Shareholders, jointly and severally, agree to indemnify and hold
the Buyer and its affiliates and their respective officers,
directors, employees and agents and (collectively, the "Buyer
Indemnitee") harmless from all Liabilities incurred or suffered by
any of the Buyer Indemnitee. For this purpose, "Liabilities" shall
mean all suits, proceedings, claims, expenses, losses, costs,
liabilities, judgments, deficiencies, assessments, actions,
investigations, penalties, interest and damages (including
reasonable attorneys' fees and expenses), whether suit is
instituted or not and, if instituted, whether at any trial or
appellate level, and whether raised by the parties hereto or a
third party, incurred or suffered by the Buyer Indemnitee or any of
them arising from, in connection with or as a result of (a) any
false or inaccurate representation or warranty made by or on behalf
of the Seller in or pursuant to this Agreement; (b) any default or
breach in the performance of any of the covenants or agreements
made by the Seller in or pursuant to this Agreement; (c) the
operation of the Business or the Subject Assets by the Seller,
including, without limitation, the provision of any services or
goods provided by the Seller or its employees or consultants, on or
prior to the Closing Time; (d) any obligation or liability of the
Seller which is not assumed by the Buyer; (e) the Excluded Assets;
and (f) any breach of the Distribution Agreements prior to the
Closing Time; provided, however, that the Seller and the
Shareholders shall not be required to pay for Liabilities except to
the extent that the aggregate amount of such Liabilities exceed
$75,000 (and then only to the extent of such excess), and provided
further that the foregoing shall not be applicable with respect to
fraud or pursuant to Section 11.5. The obligation of the Seller
and the Shareholders to indemnify the Buyer for, and hold the Buyer
harmless against, the Liabilities under this Section shall not
exceed $4,000,000 (except in the case of fraud, in which case it
shall not exceed the Purchase Price) and, except as provided in
Section 12.4, shall survive the Closing for a period of two years.
Section 12.2 Indemnity by the Buyer. The Buyer agrees that
it will indemnify and hold the Seller harmless from all Liabilities
incurred or suffered by the Seller. For this purpose,
"Liabilities" incurred by the Seller means all suits, proceedings,
claims, expenses, losses, costs, liabilities, judgments,
deficiencies, assessments, actions, investigations, penalties,
interest and damages (including reasonable attorneys' fees and
expenses), whether suit is instituted or not and, if instituted,
whether at any trial or appellate level, and whether raised by the
parties hereto or a third party, incurred or suffered by the
Seller, arising from, in connection with or as a result of (a) any
false or inaccurate representation or warranty made by or on behalf
of the Buyer in or pursuant to this Agreement; (b) any default or
breach in the performance of any of the covenants or agreements
made by the Buyer in this Agreement; or (c) the operation of the
Business or the Subject Assets after the Closing Time by the Buyer;
provided, however, that the Buyer shall not be required to pay for
Liabilities except to the extent that the aggregate amount of such
Liabilities exceed $75,000 (and then only to the extent of such
excess). The obligation of the Buyer to indemnify the Seller for,
and hold the Seller harmless against, the Liabilities under this
Section shall not exceed $4,000,000 and shall survive the Closing
for a period of two years, except as provided in Section 12.4.
Section 12.3 Procedure for Indemnification
(a) In the event any person or entity not a party to this
Agreement shall make any demand or claim or file or threaten to
file or continue any lawsuit, which demand, claim or lawsuit may
result in Liabilities, the indemnified party shall give written
notice to such effect to the indemnifying party promptly upon
becoming aware thereof. In such event, within 20 days after
written notice by the indemnified party (the "Notice") of such
demand, claim or lawsuit, the indemnifying party shall have the
right, at its sole cost and expense, to take and assume full
control of the defense thereof and to hire counsel (which counsel
shall be reasonably satisfactory to the indemnified party) to
defend any such demand, claim or lawsuit (provided, however, that
the failure to give such Notice shall not relieve the indemnifying
party of its obligations hereunder unless, and only to the extent
that, such failure caused the damages for which the indemnifying
party is obligated to be greater than they would otherwise have
been had the indemnified party given prompt notice hereunder).
Thereafter, the indemnified party shall be permitted to participate
in such defense at its sole cost and expense, provided that, if the
named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified
party or if the indemnifying party proposes that the same counsel
represent both the indemnified party and the indemnifying party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them, then the indemnified party shall have the right to
retain its own counsel at the cost and expense of the indemnifying
party. In the event that the indemnifying party shall fell to
respond within 20 days after receipt of the Notice from the
indemnified party of any such demand, claim or lawsuit, then the
indemnified party may retain counsel and conduct the defense of
such demand, claim or lawsuit, as it may in its sole discretion
deem proper, at the sole cost and expense of the indemnifying
party.
(b) With regard to claims of third parties for which
indemnification is payable hereunder, such indemnification shall be
paid in advance of settlement or final adjudication thereof on a
current basis within 30 days of receipt from the indemnified party
of such supporting documentation as the indemnifying party may
reasonably request.
Section 12.4 Limitations; Survival. The representations and
warranties of the parties shall survive the Closing for a period of
two years from the Closing Date, in each such case notwithstanding
any investigation made by or on behalf of the Buyer, provided that
the representations and warranties as to Tax Claims (as hereinafter
defined) shall survive for a period of six years from the Closing
Date. For purposes hereof, Tax Claims means any claim based upon,
arising out of, or otherwise in respect of, any inaccuracy in or
breach of any representation, warranty, covenant or agreement of
the Seller or the Shareholders contained in this Agreement relating
to taxes, including, without limitation, those contained in
Sections 4.6 and 4.13 hereof. Notwithstanding anything to the
contrary contained in this Agreement, these limited survival
periods shall not apply to a fraudulent acts or omissions. No
action or proceeding may be brought with respect to any of the
representations and warranties unless written notice thereof shall
have been delivered to the Buyer or the Seller, as the case may be,
prior to the expiration of such applicable survival period.
Section 12.5 Offset; Security Interest. As security for the
obligations of the Seller and the Shareholders under this Article
XII, whether presently existing or hereafter created or incurred,
the Seller hereby assigns and grants to the Buyer a continuing
security interest in the Debenture together with all sums due and
to become due thereunder, and agrees that, in order to perfect its
security interest therein, the Buyer shall hold the Debenture in
accordance with the terms and conditions of this Section 12.5. In
the event of any Liabilities arising under Section 12.1, the Buyer
shall be entitled to offset such Liabilities, in whole or in part,
against any remaining principal balance under the Debenture upon
written notice (the "Offset Notice") to the Seller specifying in
reasonable detail the basis for such offset, and the amount of such
offset. Nothing herein shall be construed to limit the Seller's
and the Shareholders' obligation to indemnify the Buyer for such
Liabilities. The exercise of such right of offset by the Buyer in
good faith, whether or not ultimately determined to be justified,
shall not constitute an event of default under this Agreement.
Neither the exercise of, nor the failure to exercise, such right of
offset shall constitute an election of remedies or limit the Buyer
in any manner in the enforcement of any other remedies available to
it. Without limiting the foregoing, and in addition to any other
rights and remedies it may have, the Buyer shall have all of the
rights of a "secured party" under the Uniform Commercial Code as in
effect in the State of Florida. The Buyer agrees to repay any
portion of the Debenture which is due the Seller in accordance with
the terms thereof and which is not necessary to cover any pending
offset or claims for Liabilities under this Article XII by the
Buyer. In the event that, upon resolution of any claim for which
the Buyer has offset or held back against amounts under the
Debenture, the amount due and owing to the Buyer or any third party
(plus reasonable attorneys' fees and disbursements or other amounts
incurred by the Buyer relating thereto) is less than the amount
offset or held back, then the Buyer shall promptly deliver to the
Seller a check for the excess amount.
ARTICLE XIII
NON COMPETITION
Section 13.1 Noncompetition Agreement.
(a) During the period commencing on the Closing Date and
ending five years from the Closing Date, the Seller will not,
directly or indirectly or through an affiliate:
(i) as an individual proprietor, owner, partner,
stockholder, officer, employee, director, consultant, agent, joint
venturer, investor, lender, or in any other capacity whatsoever
(other than as the holder of not more than five percent of the
total outstanding stock of any company the securities of which are
traded on a regular basis on recognized securities exchanges or any
national over-the-counter market), alone or in association with
others, or in any capacity, own, manage, operate, control, consult
with, provide financing to, be employed by, or invest in, any
business competitive with that of the Buyer, including, without
limitation, the manufacture, distribution and marketing of perfume
and other fragrance products or related services or business in the
United States;
(iii) recruit or otherwise solicit or induce any
person (natural or otherwise) who is or becomes an employee or
consultant of the Buyer to terminate his or her employment with, or
otherwise cease his or her relationship with, the Buyer or any of
its affiliates, or hire any such employee or consultant who has
left the employ of the Buyer or its affiliates within one year
after termination of such employee's or consultant's employment
with the Buyer or its affiliates;
(iv) solicit or attempt to solicit any licensors,
licensees, suppliers, manufacturers, customers or clients of the
Buyer.
(b) The restrictions set forth in clause (a) above are
considered by the parties to be reasonable for the purposes of
protecting the business investment of the Buyer and its legitimate
business interests, it being acknowledged that the business of the
Seller and that of the Buyer are conducted throughout the United
States. In view of the substantial harm which would result from a
breach or threatened breach by any of the Seller or its affiliates
of the covenants contained in clause (a) hereof, the parties agree
that such covenants shall be enforced to the maximum extent
permitted by law. If any such covenant or portion thereof is found
by any court of competent jurisdiction to be illegal, void or
unenforceable because it extends for too long a period of time or
over too broad a range of activities or in too large a geographic
area or for any other reason, however, such restriction shall be
interpreted to extend only over the maximum period of time, range
of activities or geographic area as to which it may be enforceable
or otherwise so as to render the covenant enforceable.
(c) The foregoing five-year period shall be tolled for any
period(s) of violation or period(s) of time required for litigation
to enforce the covenants herein in the event that no preliminary
injunction is issued against the Seller and the Buyer is the
prevailing party.
(d) The Seller acknowledges and agrees that the provisions
hereof are necessary and desirable to ensure that the Buyer obtains
the benefit of its bargain under this Agreement and that the
covenants contained herein are a material and integral part of this
Agreement and necessary to protect the legitimate business
interests of the Buyer. The Seller further acknowledges and agrees
that, due to its knowledge of the Business, any subsequent
competition would irreparably harm the Buyer and deny the Buyer the
benefit of the bargain of the parties as contained in this
Agreement and that the only effective way of protecting the Buyer
is to enter into a non-competition agreement on the terms and
conditions contained herein.
Section 13.2 Remedies. In the event of a breach or
threatened breach of the provisions of Section 13.1, the parties
acknowledge and agree that the Buyer would suffer irreparable harm
and that monetary damages would be inadequate. Accordingly, in
addition to all other remedies to which the Buyer may be entitled,
at law or in equity, the Buyer shall be entitled to seek specific
performance and/or injunctive relief without the necessity of
posting a bond in the event of any such breach or threatened
breach.
ARTICLE XIV
TERMINATION
Section 14.1 Termination. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned, but not
later than the Closing Date:
(a) by mutual written consent of the Buyer and the Seller;
(b) by the Buyer, in its sole discretion, if any of the
representations or warranties of the Seller or the Shareholders
contained herein are not in all material respects true, accurate
and complete or if the Seller breaches or falls to comply with any
covenant or agreement contained herein;
(c) by the Seller, in its sole discretion, if any of the
representations or warranties of the Buyer contained herein are not
in all material respects true, accurate and complete or if the
Buyer breaches or fails comply with any covenant or agreement
contained herein;
(d) by the Buyer, as provided in Section 6.5 hereof; or
(e) by the Buyer or the Seller upon written notice to the
other in the event that the Closing has not occurred by April 30,
1998, for any reason other than the failure of the party seeking to
terminate this agreement to perform its obligations hereunder or a
breach of a representation or warranty by such party (or in the
case of the Seller, the Shareholders) herein.
Section 14.2 Effect of Termination. In the event of a
termination of this Agreement by the Buyer or the Seller pursuant
to Section 14.1, written notice thereof shall promptly be given to
the other party hereto and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned without further
action by the other party hereto. Notwithstanding such
termination, each of the Buyer and the Seller shall have the right
to seek damages in the event of a breach by the other party of its
obligations under this Agreement. Following termination of this
Agreement, the Buyer and the Seller shall withdraw their respective
filings, applications and other submissions made pursuant to the
HSR Act relating to this Agreement and the transactions
contemplated hereby.
Section 14.3 Survival of Certain Provisions.
Notwithstanding anything to the contrary contained herein, the
respective obligations of the parties pursuant to Sections 6.9 and
7.2 and Article XV hereof shall survive the termination of this
Agreement.
ARTICLE XV
MISCELLANEOUS
Section 15.1 Brokers Commission. Each of the parties
represents and warrants to the other that such party has dealt with
no broker or finder in connection with any of the transactions
contemplated by this Agreement, and, insofar as such party knows,
no broker or other person is entitled to any commission or finder's
fee in connection with any of these transactions, and each party
shall indemnify and hold the other harmless from the payment of any
such commission or fee which is claimed based upon the action of
the indemnifying party in accordance with Article Xll hereof.
Section 15.2 Amendment and Modification. This Agreement may
only be amended by written instrument signed by the parties hereto.
Section 15.3 Binding Effect. This Agreement shall be
binding upon and inure to the benefit of the parties and their
respective successors, assigns, heirs, beneficiaries, estate,
executor and personal representatives.
Section 15.4 Entire Agreement. This Agreement and the
schedules and exhibits attached hereto constitute the entire
agreement of the parties with respect to the sale of the Subject
Assets and the other transactions contemplated in this Agreement,
and supersede all prior understandings, agreements and oral
representations and warranties of the parties with respect to the
subject matter of this Agreement. Any reference in this Agreement
shall be deemed to include the schedules and exhibits hereto.
Section 15.5 Headings. The descriptive headings in this
Agreement are inserted for convenience only and do not constitute
a part of this Agreement.
Section 15.6 Execution in Counterparts. This Agreement may
be executed in any number of counterparts, each of which shall be
deemed an original. Delivery of executed signature pages hereof by
facsimile transmission shall constitute effective and binding
execution and delivery hereof.
Section 15.7 Notices. Any notice, request, information or
other document to be given hereunder to any of the parties by any
other party shall be in writing (including telex and telegraphic
communication) and shall be (as elected by the person giving such
notice) hand delivered by messenger or courier service,
telecommunicated, or mailed by registered or certified mail
(postage prepaid), return receipt requested, addressed to:
If to Buyer
addressed to: French Fragrances, Inc.
▇▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: E. ▇▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇. Marina
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Seller or
the Shareholders
addressed to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to: ▇▇▇▇▇ & ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any such notice shall be deemed delivered (a) on the date
delivered if by personal delivery, (b) on the date telecommunicated
if by telegraph or telecopy and confirmation of transmission is
received, (c) on the date of transmission with confirmed answer
back if by telex, and (d) on the date upon which the return receipt
is signed or delivery is refused or the notice is designated by the
postal authorities as not deliverable, as the case may be, if
mailed. Any party may change the address to which notices under
this Agreement are to be sent to it by giving written notice of a
change of address in the manner provided in this Agreement for
giving notice.
Section 15.8 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State
of Florida applicable to contracts made and to be performed in
Florida, without regard to conflicts of law principles thereunder.
Section 15.9 Expenses. Except as otherwise provided in this
Agreement, all legal, accounting and other costs and expenses
incurred in connection with this Agreement and transactions
contemplated by this Agreement shall be paid by the party incurring
the expenses.
Section 15.10 Waiver. Any party to this Agreement may extend
the time for or waive the performance of any of the obligations of
the other, waive any inaccuracies in the representations or
warranties by the other, or waive compliance by the other with any
of the covenants or conditions contained in this Agreement. Any
such extension or waiver shall be in writing and signed by an
officer of the Buyer or the Seller, as appropriate. No such waiver
shall operate or be construed as a waiver of any subsequent act or
omission of the parties.
Section 15.11 Severability. If at any time subsequent to the
date of this Agreement, any provision of this Agreement shall be
held by any court of competent jurisdiction to be illegal, void or
unenforceable, such provision shall be of no force and effect, but
the illegality or unenforceability of such provision shall have no
effect upon and shall not impair the enforceability of any other
provision of this Agreement.
Section 15.12 Publicity. Except as otherwise required by law
or regulation, no press release or other public announcement
related to this Agreement or the transactions contemplated by this
Agreement will be issued by the Buyer or the Seller without the
prior written approval of the other party.
Section 15.13 Assignment. No party shall assign its rights
or delegate its duties hereunder without the prior written consent
of the other party, provided that the Buyer may assign its rights
and delegate its duties to an affiliate.
Section 15.14 No Third Party Rights. The provisions of this
Agreement are for the exclusive benefit of the parties hereto and
no other party (including, without limitation, any creditor of any
of the parties) shall have any right or claim against the parties
by reason of those provisions or be entitled to enforce any of
those provisions against the parties.
Section 15.15 Post-Closing Survival. Subject to the
limitations on survival set forth in Section 12.4, as applicable,
all covenants and agreements which by their respective terms are
intended to survive the consummation of the transactions
contemplated by this Agreement, including, without limitation,
Articles IV, V, VI, VII, XI, XII, XIII and XV, shall survive such
consummation.
Section 15.16 Definitions. For purposes of this Agreement,
the following terms shall have the meanings ascribed below:
(a) "affiliate" of any person or entity shall mean any
person, entity or group (currently existing or hereafter created)
controlling, controlled by or under common control with, the
specified person or entity, and "control" of a person or entity
(including, with correlative meaning, the terms "control by" and
"under common control with") means the power to direct or cause the
direction of the management, policies or affairs of the controlled
person, whether through ownership of securities or partnership or
other ownership interests, by contract or otherwise.
(b) "ordinary course of business" shall mean an action taken
by a person if:
(i) such action is recurring in nature, is consistent with
the past practices of such person and is taken in the
ordinary course of the normal day-to-day operations of
such person;
(ii) such action is not required to be authorized by the Board
of Directors or such person and does not require any
special or separate authorization of any nature; and
(iii) such action is similar in nature and magnitude to
actions customarily taken, without any special or
separate authorization, in the ordinary course of
the day-to-day operations of other persons that are
in the same line of business as the person in
question.
(c) "person" shall mean any individual, corporation
(including, without limitation, any non-profit corporation),
general partnership, limited partnership, joint venture, estate,
trust, cooperative, foundation, union, syndicate, league,
consortium, coalition, committee, society, firm, company or other
enterprise, association, organization or governmental, body.
(d) "threatened" - a claim, proceeding, investigation,
dispute, action or other matter shall be deemed to have been
"threatened" if any demand, statement or notice shall have been
made or given, verbally or in writing, that might lead a prudent
person to conclude that there is a reasonable probability that such
a claim, proceedings, investigation, dispute, action or other
matter might be asserted, commenced, taken or otherwise pursued in
the future.
Section15.17 Transition with Representatives. The Buyer and
the Seller shall agree to work together to transition with the
Seller's representatives as provided in Schedule 15.17.
Section 15.18 Subrogation of the Buyer. In the event that
the Buyer shall subsequent to the Closing Date become liable for or
suffer any damage with respect to any matter which was covered by
insurance maintained by the Seller on the Subject Assets (other
than the insurance on the Accounts Receivable) at or prior to the
Closing, the Seller agrees that the Buyer shall be subrogated to
any rights of the Seller under the insurance coverage and
indemnified by the Seller, and, in addition, the Seller agrees to
promptly remit to the Buyer any insurance proceeds which either of
them may receive on account of any such liability or damage.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
FRENCH FRAGRANCES, INC.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
▇▇▇▇▇ ▇. Marina
Vice President
J. P. FRAGRANCES, INC.
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
/S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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EXHIBITS
Exhibit A - Debenture
Exhibit B - General ▇▇▇▇ of Sale, Conveyance and Assignment
Exhibit C - Consulting Agreement
SCHEDULES
Schedule 1.1 Subject Assets
1.1(a) Fixed Assets
1.1(b) Contracts
1.1(d) Licenses
1.1(f) Excluded Accounts Receivable
1.1(i) Claims
1.1(j) Insurance Claims
1.1(k) Marks
Schedule 1.2 Assumed Liabilities
Schedule 1.3 Excluded Assets
Schedule 2.1(b) Acquisition Balance Sheet
Schedule 2.3 Allocation of Purchase Price
Schedule 4.2 Seller's Financial Statements
Schedule 4.3 Leases; consents; description of lease defaults,
if any
Schedule 4.4 Liens on Subject Assets
Schedule 4.7 List of policies and as to each policy (a) the
issuer of each such policy, and (b) limits of
liability
Schedule 4.9 Litigation
Schedule 4.10 Description of Adverse Change
Schedule 4.12 Labor Law Noncompliance Description
Schedule 4.13 ERISA Plans
Schedule 4.14 List of Contracts; Consents Required; Description
of Defaults under Contracts, if any; Distribution
Agreement information
Schedule 4.16 Governmental Consents Required
Schedule 4.17 Independent Contractor Arrangements
Schedule 4.20 Inventory Listing Report and Locations; Returns
Schedule 4.21 Gross Sales Report
Schedule 4.22 Trade Payables
Schedule 4.23 Accounts Receivable Report
Schedule 4.24 Related Party Transactions
Schedule 4.25 Promotional Obligations
Schedule 5.3 Buyer Consents
Schedule 6.2(j) Notice to Representatives
Schedule 15.17 Transition with Representatives