STOCKHOLDERS AGREEMENT
BY AND BETWEEN RBCJJ ASSOCIATES, LLC
AND SEL-LEB MARKETING, INC.
AGREEMENT made this 31st day of October 1997, by and between RBCJJ
ASSOCIATES, LLC ("LLC"), a New York limited liability company, with offices at
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and SEL-LEB MARKETING, INC.
("SEL-LEB"), with offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
(hereinafter called the "Shareholders"), and ALES SIGNATURE LTD. ("ALES"), with
offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter called the
"Corporation").
WHEREAS, the Shareholders are the owners of all the outstanding
shares of the Corporation, and in particular LLC owning ten (10) shares
representing ten (10%) percent of the outstanding shares and SEL-LEB owning
ninety (90) shares representing ninety (90%) percent of the outstanding shares;
and
WHEREAS, the Corporation has been formed for the purposes of
acquiring by contract specific assets of Signature Beauty Care
Corp. ("SBC") and to market products bearing the Signature
trademarks. The Asset Purchase Agreement is subject to approval by
the United States Bankruptcy Court; and
WHEREAS, the success of the Corporation will require the
active interest, management and financial support of the
Shareholders; and
WHEREAS, the Shareholders desire to provide a plan for the future
as to their respective rights of ownership and to guard against introduction
into the ownership of the Corporation of other
persons or entities by restricting the privilege of owning shares
in the Corporation; and
WHEREAS, the Shareholders desire to establish such provisions with
respect to management and compensation that are consistent with the objectives
of the Shareholders.
NOW, THEREFORE, in consideration of mutual promises and other
valuable considerations, the Shareholders and the Corporation agree with each
other as follows:
1. Definitions. For all purposes of this Agreement:
(a) The term "transfer", "dispose", or any similar term
means any sale, exchange, gift, bequest, pledge, security interest, or other
alienation or disposition whatsoever of any shares of the Corporation or any
interest therein, except transfers to immediate family members, in trust or
otherwise or for estate and/or tax planning, including any distribution by an
executor, administrator, or trustee.
(b) The term "involuntary transfer" means any transfer or
disposition of shares under judicial order, legal process, execution,
attachment, or enforcement of a pledge, trust or other security interest.
(c) The term "involuntary transferee" means anyone who acquires an
interest in or title to the shares by virtue of an involuntary transfer.
(d) The term "shares" means common shares of the Corporation and
includes the shares presently outstanding and all common shares which may
hereafter be issued by the Corporation.
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(e) The term "Shareholders then holding shares" means those
Stockholders who are at the time owners of record upon the books of the
Corporation of any of the shares.
2. Contributions to Capital of the Corporation. The Shareholders
will simultaneously herewith initially commit to fund the Corporation with such
amounts as may be necessary to purchase the Signature Beauty Care assets in
accordance with the terms of the Asset Purchase Agreement on a 90%/10% basis,
with SEL-LEB contributing 90% and LLC 10% and such further and other amounts as
may be necessary for working capital in the same ratio. The working capital
contribution shall not exceed Three Hundred Thousand ($300,000.00) Dollars in
the aggregate.
3. Management and Operation in Profits of the
Corporation.
(a) The Board of Directors of the Corporation shall consist of
four of the named individuals below or their designees for the term of this
Agreement. At the next meeting of Shareholders, at which elections are held and
at all future elections for the duration of the term of this Agreement, the
Shareholders shall vote to elect or vote to continue in office, whichever is
applicable, the following persons to serve as the Directors of the Corporation:
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(b) At the next meeting of Shareholders, at which elections
are held and at all future elections for the duration of the term
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of this Agreement, the Shareholders shall vote to elect or vote to continue in
office, whichever is applicable, the following persons to serve as the officers
of the Corporation:
President: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Executive VP: ▇▇▇▇▇ ▇▇▇▇▇▇
Secretary/Treasurer: ▇▇▇ ▇▇▇▇▇▇
Chairman of the Board/
Chief Executive Officer: ▇▇▇▇ ▇▇▇▇▇▇
(c) At the next meeting of Shareholders, the Shareholders shall
vote to so amend the By-Laws of the Corporation to provide that officers of the
Corporation shall be elected directly by the shareholders and that regardless of
"titles", each officer shall have equal authority with regard to conducting the
business of the Corporation.
(d) All decisions of the Board of Directors shall be determined by
a majority vote of the entire Board of Directors. "Deadlocks" shall constitute a
no-vote by the Board of Directors and Shareholders and cannot be broken by any
vote of the Shareholders. A unanimous vote of the Board of Directors will be
required for the filing of a petition for dissolution of the Corporation.
(e) All decisions of the Shareholders shall be determined by a
majority vote of the same individuals that constitute the Board of Directors in
accordance with the procedure set forth in subparagraph (d) above, without
regard to percentage ownership in stock.
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(f) All cash, checks and instruments for the payments of
money are to be deposited in the Corporation's bank account or
accounts.
(g) All applications for loans or other advances of money must be
signed jointly by both the President and Chief Executive Officer or Secretary of
the Corporation, unless otherwise directed by the Board of Directors.
4. Restriction on Shares and Transfer.
No Shareholder shall dispose of or encumber or transfer any
shares of the Corporation during the three-year period following the date of
execution of this Agreement. Following the expiration of the three-year period,
no transfer may be made of any of the shares of the Corporation without the
prior written consent of the other Shareholder. The other Shareholder shall have
the first right of refusal. Any purported transfer or disposition of shares in
violation of the terms of this Agreement shall be void, and the Corporation
shall not recognize or give an effect to such transaction.
5. Insolvency, etc.
In the event that hereafter:
(a) There shall be filed by either Shareholder in any Court,
pursuant to any statute, either of the United States or of any State or any
United States Possession, a Petition in Bankruptcy or insolvency, or upon any
Petition being filed against any Shareholder, or the Shareholder shall be
adjudicated a bankrupt or an insolvent; or
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(b) There shall be appointed a Receiver or Trustee of all or
substantially all of the property of either Shareholder and such Receivership
shall not be terminated within thirty (30) days after the appointment; or
(c) Either Shareholder shall make a General Assignment for
the benefit of creditors; or
(d) Either Shareholder shall take advantage of any
Insolvency Act for the relief of debtors; or
(e) Any attachment potentially involving a sale of either
Shareholder's stock in the Corporation shall be levied against the assets of
either Shareholder, which attachment shall not be removed within thirty (30)
days; or
(f) An execution shall be issued against the stock of either
Shareholder and shall remain unpaid, unsatisfied and unstayed, pending appeal,
for a period of thirty (30) days.
Then, in such event ("a" through "f"), the Corporation firstly, and
then the other Shareholder, shall have the option to purchase the shares owned
by such Debtor/Shareholder; the purchase shall be effectuated in the same manner
and in the same proportions of stock as hereinafter set forth in Paragraph "12"
of this Agreement; except that the option to so purchase shall be exercised by
serving a Notice to such effect upon the Debtor/Shareholder within thirty (30)
days after the notice of completion of any of the aforementioned events and that
wherein in the heretofore the words "Selling Shareholder" are used, it shall be
deemed to mean "notice of completion of any of the aforementioned events". In
the
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event that the Corporation and the other Shareholders fail to exercise their
option to purchase and the Debtor/Shareholder's stock shall be transferred to
any subsequent owner, assignee or transferee, then such stock shall be subject
to all of the restrictions and provisions of this Agreement.
6. Legends. Each certificate for the shares of stock of
the Corporation now or hereinafter issued shall be inscribed with
the following legends:
"The shares represented by this certificate are subject to the
terms and conditions of an Agreement among the Shareholders of the
Corporation, dated the day of , 19 , a copy of which is on file at
the offices of the Corporation."
7. Valuation of No Par Value Common Shares.
The parties acknowledge and agree that the value of the no
par common shares upon full contribution of capital as provided for in Paragraph
"2" is $10,000.00 per share and that LLC is the holder of ten (10) shares and
that SEL-LEB is the owner of ninety (90) shares.
8. Duties of Shareholders.
It is agreed that LLC (▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇) will be
responsible for all sales of the Corporation and shall devote so much of their
time as necessary to fully discharge this responsibility. LLC shall not perform
any other work or services which would be in competition with or inconsistent
with the best interests of the Corporation.
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9. Salaries.
It is understood and agreed that neither the Shareholders nor the
Board of Directors shall receive a salary for services rendered to the
Corporation unless expressly agreed in writing at any time during the term of
this Agreement.
10. Sales Commissions (Overrides) and Business
Related Expenses.
(a) It is understood and agreed that LLC shall be entitled to and
receive from the Corporation a two (2%) percent override calculated upon the net
sales of the Corporation, payable the 15th day of the month following the month
in which payment has been made to the Corporation. "Net Sales" is defined as
actual monies paid and retained by Ales for the sale of Signature products less
returns, credits, charge-backs and commissions to brokers.
(i) With respect to sales made by brokers engaged by
the Corporation, the override may be excluded by agreement of the
parties.
(b) LLC's sales representatives shall be entitled to receive
reimbursement for all reasonable and necessary business expenses (travel
included) expended in connection with the furtherance of the Corporation's
business within fifteen (15) days following the close of the prior month for
which the expenses had been incurred and vouchers submitted. In the event that
the sales representatives may be conducting other business than that of the
Corporation, the expenses shall be allocated proportionately.
11. Services of SEL-LEB. It is understood and agreed that
SEL-LEB will be responsible for the marketing of the Corporation's
products and any related activities, such as warehousing,
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packaging, shipping, financial, etc. In consideration of such services, SEL-LEB
will charge back to the Corporation its actual costs for labor and actual
expenses. There will be no charge-backs to the Corporation by SEL-LEB for
indirect overhead marketing or financial services provided to the Corporation.
Financial statements as to the operation of the Corporation shall be prepared
and distributed to the Shareholders and Directors quarterly.
12. LLC's Rights to Purchase Additional Stock of ALES.
In accordance with the terms and conditions hereinafter set
forth, LLC shall have the unqualified right to acquire from SEL-LEB an
additional thirty-nine (39) shares of no par value common stock, which equates
to a forty-nine (49%) percent ownership of the Corporation:
(a) In the event that at any time following the execution of this
Agreement, the Corporation elects to sell or merge the Corporation with another
entity, LLC may, at its option, notify SEL-LEB in writing of its intent to
purchase thirty-nine (39) shares of SEL-LEB's no par value common stock at a
price of $15,000.00 per share, payable upon such terms as may be mutually
agreed; or
(b) In the event that at any time following the execution of this
Agreement, the Corporation receives a letter of intent from an underwriter for
an initial public offering, LLC may, at its option, notify SEL-LEB in writing
prior to registration with the Securities and Exchange Commission of its intent
to purchase thirty-nine (39) shares of SEL-LEB's no par value common stock at
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a price of $20,000.00 per share, payable upon such terms as may be
mutually agreed; or
(c) In the event that neither of the events described in
subparagraphs (a) and (b) above occur, at the end of a two-year period following
the date ALES first ships Signature product, LLC may, at its option, within six
months thereafter, purchase thirty-nine (39) shares at the original price of
$10,000.00 per share, payable under such terms as may be mutually agreed. As a
condition to the purchase and simultaneously therewith, SEL-LEB will cause its
banking institution to release the assets of ALES which are presently the
subject of cross-collateralization pursuant to SEL-LEB's credit agreement with
the banking institution.
(i) Upon LLC exercising its option, the net worth of
the Corporation shall be determined as of the close of the
preceding quarter; and
(ii) The net worth shall be distributed to the
respective Shareholders, ninety (90%) percent to SEL-LEB and ten (10%) percent
to LLC. In the event that there is insufficient cash to distribute the net
worth, then the available cash shall be distributed in accordance with the
percentages stated above and the balance in the same percentages shall be
entered upon the books of the Corporation as loans by the Shareholders to the
Corporation payable with interest upon such terms as may be mutually agreed.
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13. Notice of Offer and Acceptance of Shareholders' Stock.
(a) Subject to the provisions of Paragraph "4" herein, if
either Shareholder shall desire to sell, encumber or dispose of all of his
shares of stock in the Corporation, then said Shareholder shall promptly give
notice (hereinafter referred to as a "Notice to Sell"), to the Corporation and
the other Shareholder, offering to sell to the Corporation and/or the other
Shareholder, as the case may be, all of his stock and such Shareholder shall
hereinafter be referred to as the "Selling Shareholder".
(b) A Notice to Sell once given or where deemed to have been given
as provided for in this Agreement shall constitute an offer to sell and shall
subject the shares of the selling Shareholder as the case may be, as herein
contained.
(c) Within thirty (30) days of the giving of such Notice to Sell
or within thirty (30) days after such Notice to Sell shall be deemed to have
been given, the remaining Shareholder and Directors shall cause a joint meeting
of Shareholders and Directors to be called and held. At such meeting, the stock
of the Selling Shareholder shall be offered for sale and shall be subject to an
option to purchase on the part of the Corporation upon such terms as may be
mutually agreed; and in the event the Corporation desires to exercise said
option, it shall exercise said option at such joint meeting of Shareholders and
Directors by resolution; and shall within ten (10) days thereafter cause a
written notice to be given in the manner hereinafter provided for (hereinafter
referred to as the "Notice of Acceptance"). The Selling Shareholder must be
deemed in attendance at such meeting, but must abstain from all votes taken
thereat.
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(d) If the Corporation shall be prohibited by law from acquiring
the entire stock, or any part thereof so offered, or for any reason shall fail
or refuse to exercise its option to purchase said stock, or any part thereof,
then the shares offered to purchase said stock, or any part thereof, then the
shares offered and not purchased by the Corporation shall be subject to an
option on the part of each of the remaining Shareholder (hereinafter "Remaining
Shareholder") to purchase a proportionate number of shares not purchased by the
Corporation; which option shall be exercised, if at all, by said Shareholder,
acting as a group causing a "Notice of Acceptance" to be served within ten (10)
days after the aforesaid joint meeting in the manner herein provided for. The
exercise of such option by any Shareholder shall be conditioned upon its
agreeing to hold any stocks so acquired subject to the terms and conditions of
this Agreement. The term "proportionate number of shares" shall mean that
proportion of the stock of the Corporation offered for sale to the remaining
Shareholder equal to the proportion of the stock that each purchasing remaining
Shareholder bears to the stock of the Corporation owned by the remaining
Shareholder. The Corporation shall have the right to allot shares so as to avoid
fractional share interests.
14. Right to Sell to Third Parties.
If the Corporation and the remaining Shareholder shall fail
to exercise their options to purchase the shares of stock offered
for sale, the Selling Shareholder may, in accordance with an
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exemption from securities registration, sell or dispose of any of the shares
offered and refused, to any other person, firm, or Corporation; provided only
that the stock so transferred shall thereafter be subject to all of the
restrictions and provisions of this Agreement.
15. Purchase Price.
The purchase price of the stock shall be based upon the percentage
valuation of the stockholder equity set forth in the most recent audited
financial statement of the Corporation.
16. Right to Conduct Similar Business.
It is understood and agreed that both LLC and SEL-LEB are,
at the present time, engaged, directly and indirectly through affiliated
entities, in the cosmetics business. SEL-LEB's principal business activity is
the cosmetics business and it shall continue to have the right to pursue such
business. This Agreement shall not prevent the LLC or any of its affiliated
entities, such as Stealth or Creative Packaging, from continuing to buy and sell
cosmetic products, providing that it shall not in any manner, directly or
indirectly, purchase or sell cosmetic products that would be competitive with
the Signature product lines which are to be marketed by ALES as particularly set
forth in the second "WHEREAS" clause appearing on the first page of this
Agreement.
17. Trademarks.
The Corporation shall not sell or otherwise convey the trademark
rights owned or hereinafter acquired by the Corporation except with the
unanimous consent of all of the Stockholders.
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18. Actions in Violation of This Agreement.
(a) In the event the shares of stock of any Shareholder are
pledged, hypothecated, transferred or disposed of in any manner, without
complying with the provision of this Agreement, or if such shares are taken in
execution or sold in any voluntary or involuntary legal proceeding, sale,
bankruptcy, insolvency or in any other manner, the Corporation and the other
Shareholder shall, upon actual notice thereof, in addition to their rights and
remedies under this Agreement, be entitled to purchase such shares from the
Transferee thereof, under the same terms and conditions and at the same price as
set forth in the provisions of this Agreement dealing with the sale of the stock
held by such Transferee, as if the Transferee had offered to sell such shares,
but in no event shall the purchase price exceed the amount paid for said shares
by the Transferee. The Corporation may, at its option, refuse to transfer on its
books and its records any shares transferred in violation of this Agreement.
(b) A Shareholder who shall petition any Court for the dissolution
of the Corporation shall be deemed to have offered his shares for sale under the
same terms and conditions set forth in Paragraph 12(c) of this Agreement.
19. Termination of Agreement.
This Agreement shall terminate on the occurrence of any of the
following:
(a) The dissolution or bankruptcy of the Corporation.
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(b) The acquisition of all stock in the Corporation by any
individual, firm, corporation or other entity.
(c) At such time when there is only one Shareholder of the
Corporation.
20. Arbitration.
Any dispute or controversy of any kind or nature, relating to this
Agreement or the breach of performance thereof, that shall arise among the
parties hereto or their legal representative, shall be settled and determined by
binding arbitration in the County of Nassau, State of New York, in accordance
with the rules then obtaining of the American Arbitration Association, before an
arbitrator or arbitrators selected by said Association pursuant to its rules.
All costs of arbitration shall be borne as directed by the arbitrators. Judgment
upon the award rendered by the arbitrator or arbitrators may be entered in any
court having jurisdiction. The arbitrator or arbitrators shall be entitled to
compel specific performance and/or injunctive relief by the parties of their
duties and obligations under this Agreement in order to more effectively
accomplish the intentions and desires set forth in the preamble to this
Agreement.
21. Amendment.
This Agreement may not be validly modified, amended, rescinded,
changed or discharged unless the same is in writing, and signed by the parties
affected thereby, or by their duly authorized agents.
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22. Entire Agreement.
This Agreement constitutes the entire agreement and understanding
among the parties hereto with respect to the subject matter herein contained,
and there are no agreements, understandings or representations made or existing
among the parties hereto, whether written or oral, except as is herein expressly
set forth.
23. Effect of a Waiver.
No waiver of a provision of this Agreement shall be deemed a waiver
of any other provision or shall a waiver of the performance of a provision in
one or more instances be deemed a waiver of future performance thereof.
24. Separability.
If any provision of this Agreement shall be determined by the
arbitrators, or by any Court having jurisdiction, to be invalid, illegal or
unenforceable, the remainder of this Agreement shall not be affected thereby but
shall continue in full force and though such invalid, illegal or unenforceable
provision or provisions were not originally a part hereof.
25. Binding Effect of this Agreement.
This Agreement shall be binding not only on the parties
hereto, but also on their heirs, executors, administrators, successors, and
assigns, and the parties hereto agree for themselves their heirs, executors,
administrators, successors and assigns, to execute any instruments which may be
necessary and proper to carry out the purposes and intent of this Agreement.
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26. Endorsement.
All stock certificates of the Corporation shall contain an
endorsement that they are subject to the terms and provisions of this Agreement.
27. General and Number.
As used in this Agreement, wherever necessary or
appropriate, singular shall be deemed to include the plural and vice-versa and
the masculine gender shall be deemed to include the feminine and vice-versa, as
the context may require.
28. Controlling Law.
This Agreement, having been made and executed in the State of New
York, shall be construed and enforced in accordance with the laws of the State
of New York.
29. Previous Agreements.
This Agreement supersedes any previous agreements between the
parties, or some of the parties, hereto.
30. Notices.
Except as otherwise provided herein, any and all notices, requests,
demands and other communications hereunder shall be in writing and shall have
been deemed to have been given when sent by registered or certified mail, return
receipt requested, addressed to the appropriate parties at their respective
addresses as contained in the records of the Corporation, or to such addresses
as may be given in writing by any such party to the Corporation and the
attorneys indicated below:
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TO:
TO:
TO:
TO:
or to any party hereto at such other address as shall be specified in a notice
similarly given to all parties hereto.
31. Benefit.
This Agreement shall be binding upon the parties and their
legatees, distributees, legal representatives, successors, and assigns.
32. Counterparts.
This Agreement may be executed in numerous parts, each of which
shall be considered as an original. One Agreement is delivered to each of the
Shareholders and one to the Corporation.
IN WITNESS WHEREOF, the Shareholders have signed this Agreement on
the day and year first above written.
RBCJJ ASSOCIATES, LLC SEL-LEB MARKETING, INC.
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ By:/s/ ▇▇▇ ▇. ▇▇▇▇▇▇
------------------------ ----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, Member ▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
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ALES SIGNATURE LTD.
By:/s/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇
Chief Executive Officer/
Chairman of the Board
Attest:
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇
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Secretary
STATE OF NEW YORK )
) ss.:
COUNTY OF NASSAU )
On the 31st day of October, 1997, before me personally came ▇▇▇▇▇
▇▇▇▇▇▇, to me known, who, being by me duly sworn, did depose and say that he is
a member of RBCJJ ASSOCIATES, LLC, a New York limited liability company
described in and which executed the foregoing instrument; that he knows the seal
of said LLC; that the seal affixed to said instrument is such LLC seal; that it
was so affixed by order of the board of directors of said LLC, and that he
signed his name thereto by like order.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Notary Public
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STATE OF )
) ss.:
COUNTY OF )
On the ______ day of October, 1997, before me personally came ▇▇▇
▇▇▇▇▇▇▇▇▇, to me known, who, being by me duly sworn, did depose and say that he
is the Chairman of the Board of SEL-LEB MARKETING, INC., the Corporation
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the board of directors of said
corporation, and that he signed his name thereto by like order.
-------------------------------
Notary Public
STATE OF )
) ss.:
COUNTY OF )
On the ______ day of October, 1997, before me personally came ▇▇▇▇
▇▇▇▇▇▇, to me known, who, being by me duly sworn, did depose and say that he is
the Chief Executive Officer and Chairman of the Board of ALES SIGNATURE LTD.,
the Corporation described in and which executed the foregoing instrument; that
he knows the seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by order of the board of
directors of said corporation, and that he signed his name thereto by like
order.
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Notary Public
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