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EXHIBIT
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ASSET PURCHASE AGREEMENT
by and among
STYLING TECHNOLOGY CORPORATION
("Purchaser")
KOTCHAMMER INVESTMENTS, INC.
("Seller")
and
▇▇▇▇ ▇. ▇▇▇▇▇▇ AND ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
TRUSTEES, THE HAMMER FAMILY LIVING TRUST,
THE ▇▇▇▇▇ FAMILY TRUST
AND
▇▇▇▇▇▇ ▇▇▇▇▇
(collectively "Stockholders")
Dated: October 29, 1996
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and
entered into this 29th day of October, 1996, by and among STYLING TECHNOLOGY
CORPORATION, a Delaware corporation ("Purchaser"); KOTCHAMMER INVESTMENTS, INC.,
a California corporation, dba Styling Research Company ("Seller"); and ▇▇▇▇ ▇.
▇▇▇▇▇▇ AND ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, TRUSTEES, THE HAMMER FAMILY LIVING TRUST dated July
3, 1993 ("Hammer Trust") ; THE ▇▇▇▇▇ FAMILY TRUST dated December 19, 1989
("▇▇▇▇▇ Trust") ; and ▇▇▇▇▇▇ ▇▇▇▇▇ ("Stockholders").
R E C I T A L S
A. Seller is engaged in the distribution of hair care
products, accessories and equipment on a wholesale basis in the United States
("Seller's Business").
B. Stockholders collectively own 100 percent (100%) of the
issued and outstanding capital stock of Seller.
C. Seller desires to sell to Purchaser and Purchaser desires
to purchase from Seller, certain of Seller's assets free and clear of any and
all liens, claims, charges, liabilities, encumbrances and security interests of
whatsoever kind and nature, subject only to certain of Seller's liabilities, all
on the terms and subject to the conditions contained in this Agreement.
D. Stockholders desire to cause Seller to perform its
obligations under this Agreement and to make certain representations to
Purchaser in connection with the transactions contemplated by this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 AGREEMENT TO PURCHASE AND SELL. On the terms and subject
to the conditions contained in this Agreement, Purchaser agrees to purchase from
Seller, and Seller agrees to sell to Purchaser (and Stockholders agree to cause
Seller to sell to Purchaser), certain of the assets, properties and rights of
Seller (tangible and intangible), which are used or associated with Seller's
Business (hereinafter collectively referred to in this Agreement as the
"Purchased Assets"), as more particularly referenced in Section hereof. All of
the Purchased Assets shall be sold to Purchaser free and clear of any and all
liens, claims, charges, liabilities, obligations, encumbrances and security
interests of every kind and nature, except only the specific liabilities of
Seller to be assumed by Purchaser pursuant to Section hereof.
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1.2 ENUMERATION OF PURCHASED ASSETS. The Purchased Assets are
the following items:
(a) ACCOUNTS RECEIVABLE. All of Seller's accounts
receivable and notes and other receivables (including accounts receivable from
employees) (the "Accounts Receivable") satisfying Section 4.4(f)(iii) hereof,
including but not limited to, those set forth on Schedule 1.2(a) hereto, which
sets forth the amount of each receivable (note or otherwise) and the name and
phone number of the payee of each note or receivable as of October 24, 1996 and
which will set forth the name and mailing address of the payee of each note or
receivable as of the Closing Date as defined in Section 7.1 hereof.
(b) FURNITURE, FIXTURES AND EQUIPMENT. The Seller's
furniture, fixtures, equipment, machinery, parts, tools and molds set forth on
Schedule 1.2(b) hereto (the "Equipment").
(c) INVENTORY. All inventory satisfying Section
4.4(f)(ii) hereof (the "Inventory"), including, but not limited to, the
Inventory set forth on Schedule 1.2(c) hereto.
(d) CLAIMS AND RIGHTS TO PURCHASED ASSETS. All claims
and rights (and benefits arising therefrom) related to the Purchased Assets
against all persons and entities, including, without limitation, all rights
against suppliers under warranties covering any of the Equipment and Inventory.
(e) INTELLECTUAL PROPERTY. All intellectual property
rights, if any, that are owned by or licensed to Seller, including, without
limitation, all patents and applications therefor, know-how, unpatented
inventions, trade secrets, secret formulas, business and marketing plans, ideas
for products or production (to the extent of Seller's right, title, and interest
therein), copyrights and applications therefor, trademarks and applications
therefor, service marks and applications therefor, trade names and applications
therefor, and all names and slogans used by Seller (the "Intellectual
Property"), including, but not limited to, the Intellectual Property set forth
on Schedule 1.2(e) hereto; provided, however, that "Intellectual Property" shall
not include the trade name "AMINOPURE." Attached to Schedule 1.2(e) are copies
of all such business and marketing plans, license agreements, trademarks and
trade names and all patents, and all applications therefor with respect to and
used by Seller in Seller's Business.
(f) COMPUTER SOFTWARE AND HARDWARE. The computer
software and hardware owned or licensed by or to Seller that is not otherwise
prohibited from transfer by contract between Seller and the owner thereof or
applicable law set forth on Schedule 1.2(f) hereto.
(g) REAL PROPERTY LEASEHOLD IMPROVEMENTS AND
INTERESTS. The leasehold interest created by the lease of real property under
which Seller is a lessee of the premises located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ (the "Lease"), together with
all leasehold improvements thereon (such real property which Seller is leasing
as lessee shall hereinafter be referred to as the "Leased Realty"). Schedule
1.2(g) hereto sets forth an itemized list of the Leased Realty and attached
thereto are copies of all the lease agreements and amendments thereto.
(h) LEASED PERSONALTY. The leasehold interests
created by lease of personal property used with respect to Seller's Business,
under which Seller is a lessee, set forth on Schedule 1.2(h) hereof, and any
maintenance contracts and deposits in connection therewith (such personal
property
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that Seller is leasing as lessee and that is set forth on Schedule 1.2(h) hereof
shall herein be referred to as "Leased Personalty"). Attached to Schedule 1.2(h)
are copies of all the lease agreements listed on Schedule 1.2(h).
(i) NAMES. All right, title and interest in and to
the names "Styling Research Company" and "SRC" and any derivations thereof (the
"Names").
(j) DEPOSITS AND PREPAID EXPENSES. The deposits and
prepaid expenses (the "Deposits"), set forth on Schedule 1.2(j) hereto
(including any deposits with respect to the Lease assumed by Purchaser pursuant
to Section 2.1(b) hereof). "Deposits" shall not include any prepaid expense for
which the independent certified public accountants selected by Purchaser cannot
determine a value under generally accepted accounting principles.
(k) REDKEN AGREEMENT. Seller's rights under that
certain Asset Purchase Agreement dated December 3, 1993 between Seller and
Redken Laboratories, Inc. ("Redken") (the "Redken Agreement"), including,
without limitation, the rights to all formulas and other intellectual property
under the Redken Agreement other than rights to the "AMINOPURE" trademark.
(l) NOBLE DISTRIBUTION SYSTEMS AGREEMENT. Seller's
rights under that certain warehousing agreement dated June 1, 1996 between Noble
Distribution Systems and Seller ("Noble Distribution Agreement").
1.3 EXCLUDED ASSETS. All other assets of Seller shall be
excluded from the purchase and sale contemplated by this Agreement and shall be
retained by Seller (the "Excluded Assets"), including, but not limited to, all
insurance policies of Seller and all rights thereunder and all cash on hand and
in banks and all right, title and interest in and to Seller's bank accounts.
ARTICLE II
ASSUMPTION OF LIABILITIES
2.1 ASSUMED LIABILITIES. At the Closing as defined in Section
7.1 hereof, Purchaser shall assume only the following liabilities and
obligations of Seller ("Assumed Liabilities"):
(a) LIABILITIES FOR LEASED PERSONALTY. Liabilities
and obligations arising under those operating leases and capitalized leases for
the Leased Personalty described in Section 1.2(h) hereof.
(b) LIABILITIES FOR THE LEASED REALTY. Liabilities
and obligations arising under the Lease.
(c) LIABILITIES RESPECTING NOBLE DISTRIBUTION
AGREEMENT. All obligations and liabilities arising under the Noble Distribution
Agreement.
(d) REDKEN AGREEMENT. Seller's obligations arising
under the Redken Agreement and all obligations and liabilities of ▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇▇▇▇▇, respectively, under those certain Guaranty Agreements in favor
of Redken dated December 8, 1993 (the "Redken Guarantees").
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(e) OPEN PURCHASE ORDERS. All of Seller's obligations
under its purchase orders for merchandise for which the merchandise ordered
thereunder remains unshipped or undelivered as of the Closing Date; provided,
however, that the obligations shall only be assumed pursuant to this Section
2.1(e) if, as of the Closing Date, such related merchandise is not included in
the calculation of Total Current Assets.
2.2 EXCLUDED LIABILITIES. Except only with respect to the
Assumed Liabilities set forth in Section 2.1 hereof, Purchaser shall not
directly or indirectly pay, perform or discharge any other claims, obligations
or liabilities of Seller or Stockholders.
ARTICLE III
PURCHASE PRICE AND MANNER OF PAYMENT
3.1 PURCHASE PRICE. The total purchase price of the Purchased
Assets (the "Purchase Price") shall be the sum of (a) Four Hundred Fifty
Thousand Dollars ($450,000) (the "Cash Component"), (b) a promissory note of
Purchaser with a principal amount of $200,000, subject to adjustment as set
forth in Section 3.2(d) hereof, as set forth in Section 3.2(b) below (the
"Purchaser Note"), (c) the common stock of Purchaser with a value on the Closing
Date of $50,000 as set forth in Section 3.2(c) below ("Purchaser Stock"), and
(d) the assumption of the Assumed Liabilities.
3.2 PAYMENT OF PURCHASE PRICE. At the Closing, Seller shall be
entitled to receive an amount equal to the Purchase Price payable as follows:
(a) CASH. At the Closing, Purchaser shall pay to
Seller, by wire transfer, the Cash Component less the ▇▇▇▇▇▇▇ Deposit provided
in Section 3.3 hereof.
(b) PURCHASER NOTE. At the Closing, Purchaser shall
deliver to Seller the Purchaser Note which shall be secured by a first lien on
the Purchased Assets (as defined in Section 1.1 hereof) pursuant to the terms of
a security agreement (the "Security Agreement"), in form and substance
reasonably acceptable to Purchaser and Seller, shall bear simple interest at ten
percent (10%) per annum, shall provide for quarterly payments of principal and
interest amortized over a period of thirty (30) months and shall be prepaid,
without penalty, within five (5) days following Purchaser's second public
financing (or in the event the financing of this acquisition is from funds other
than the proceeds of an initial public financing, then following Purchaser's
initial public financing). The Purchaser Note shall be subject to a right of
offset to the extent of any Accounts Receivable (not previously excluded under
Section 3.2(d) in determining Total Current Assets) that have not been collected
within the 90 days following the Closing Date. In addition, the Purchaser Note
may be assigned to one or more Stockholders or their affiliates.
(c) COMMON STOCK. At the Closing, Purchaser shall
deliver to Seller shares of Common Stock of Purchaser (the "Purchaser Stock")
equal in value on the Closing Date to Fifty Thousand Dollars ($50,000), based on
the initial public offering price per share of the Purchaser Stock; provided,
however, that in the event that the Purchaser Stock shall not have been the
subject of an initial public offering at the time of the Closing, Seller may
elect to (i) receive such Purchaser Stock based on the fair market value per
share of the Purchaser Stock as determined by an independent securities dealer
acceptable to Seller and Purchaser, or (ii) require Purchaser to issue to Seller
a convertible subordinate debenture in the principal amount of Fifty Thousand
Dollars ($50,000) and bearing interest at ten percent
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(10%) (the "Convertible Debenture"). Such Convertible Debenture would have a
term of five years, would require quarterly payments of interest only, would be
secured by a lien on the Purchased Assets (as defined in Section 1.1 hereof)
second only to the lien securing the Purchaser Note, and would be convertible
into Purchaser Stock during the ten (10) day period commencing on the date of
Purchaser's initial public offering. To the extent reasonably required by
Purchaser, Seller shall, prior to the delivery of the Purchaser Stock, execute a
Subscription Agreement with respect to the issuance of the Purchaser Stock in a
form reasonably acceptable to Seller. The Purchaser Stock or the Convertible
Debenture, as the case may be, shall be subject to the terms of a separate
Escrow Agreement in form and substance reasonably satisfactory to Purchaser and
Seller which provides for a right of offset to the extent of any liabilities
owing by Seller or any Stockholder pursuant to Article IX or Article X hereof.
(d) ADJUSTMENT TO PURCHASE PRICE. If the Purchased
Assets have a total tangible asset value as defined by generally accepted
accounting principles (the "Total Current Assets"), as of the Closing Date (as
determined by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP), that is less than Six Hundred Fifty Thousand
Dollars ($650,000) (the "Minimum Asset Level"), then the Purchase Price set
forth in Section 3.1 shall be reduced by reducing the Purchaser Note component
by an amount equal to the difference between the Minimum Asset Level and the
value of the Total Current Assets as of the Closing Date. In determining Total
Current Assets, (i) Accounts Receivable shall only include those Accounts
Receivable satisfying Section 4.4(f)(iii); (ii) Inventories shall only include
those Inventories satisfying Section 4.4(f)(ii) hereof together with shaded
salonwear covered by the ▇▇▇▇▇ Guarantee referred to in Section 8.7 hereof.
Notwithstanding any other provision of this Agreement, neither Seller nor any
Stockholder shall have any liability for breach of the representations and
warranties contained in Sections 4.4(f)(ii) and 4.4(f)(iii) with respect to
Accounts Receivable or Inventories excluded in determining Total Current Assets.
3.3 DEPOSIT. Upon Purchaser's approval of the results of the
audit and due diligence review as set forth in Section 6.2(h) and Section 6.2(i)
hereof, Purchaser shall deliver to Seller a cashier's check in the amount of
Fifty Thousand Dollars ($50,000) on account of the Purchase Price (the "▇▇▇▇▇▇▇
Deposit"); provided, however, that if such audit or due diligence review has not
been completed by November 30, 1996, Purchaser shall deliver the ▇▇▇▇▇▇▇ Deposit
to Seller but shall retain the right to approve the results of the audit and due
diligence review as set forth in Section 6.2(h) and Section 6.2(i) hereof. In
the event the Closing does not occur, the ▇▇▇▇▇▇▇ Deposit shall be retained or
returned as specified in Article XI hereof.
3.4 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Purchased Assets as set forth in Schedule 3.4 hereto. The
allocations will be made in accordance with the rules promulgated under Section
1060 of the Internal Revenue Code of 1986, as amended.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 GENERAL STATEMENT. The parties make the representations
and warranties to each other that are set forth in this Article IV. All such
representations and warranties and all representations and warranties that are
set forth elsewhere in this Agreement shall survive the Closing (and none shall
merge into any instrument of conveyance), regardless of any knowledge or belief,
investigation or lack of investigation by any of the parties to this Agreement.
No specific representation or warranty shall limit the generality or
applicability of a more general representation or warranty. Representations and
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warranties of the parties are initially made as of the date hereof and are to be
true and correct as of the Closing Date except as otherwise provided in Sections
6.1(d) and 6.2(d) hereof.
4.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. To induce
Seller and Stockholders to enter into this Agreement and to perform Seller's and
Stockholders' obligations hereunder, and with full knowledge that Seller and
Stockholders will rely thereon, Purchaser represents and warrants the truth,
accuracy and completeness of the following, and subject only to the information
specifically set forth in the disclosure schedules called for by this Agreement
(the "Purchaser Disclosure Schedules"):
(a) ORGANIZATION. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
(b) POWER AND AUTHORITY. Purchaser has full corporate
power and authority to execute and deliver this Agreement and the Other
Purchaser Agreements, and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Other Purchaser
Agreements by Purchaser, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized and approved by Purchaser's board
of directors, and no other corporate proceedings on the part of Purchaser are
required to authorize the execution and delivery of this Agreement, the Other
Purchaser Agreements or the consummation of the transactions contemplated hereby
or thereby. As used in this Agreement, the term "Other Purchaser Agreements"
means, collectively, the Purchaser Note, the Assumption Agreement, the Lease
Assumption Agreement, the Security Agreement, the Escrow Agreement, the ▇▇▇▇▇
Employment Agreement and, if applicable, the Convertible Debenture.
(c) ENFORCEABILITY. This Agreement and the Other
Purchaser Agreements have been or will be duly executed and delivered by
Purchaser and constitute legal, valid and binding obligations of Purchaser,
enforceable against Purchaser in accordance with their respective terms.
(d) CONFLICTS; CONSENTS. Neither the execution and
delivery of this Agreement and the Other Purchaser Agreements, nor the
consummation of the transactions contemplated hereby or thereby, will conflict
with, violate or result in a breach of or default under (with or without the
giving of notice or the passage of time, or both): (i) the Certificate of
Incorporation or the Bylaws of Purchaser; (ii) any license, instrument, contract
or agreement to which Purchaser is a party or by which Purchaser is bound; or
(iii) any law, order, rule, regulation, writ, injunction or decree that is
applicable to Purchaser. Neither the execution and delivery of this Agreement or
the Other Purchaser Agreements by Purchaser, nor the consummation by Purchaser
of the transactions contemplated hereby or thereby, will require any consent or
approval of, or any filing with, any governmental entity or other person.
(e) ACCURACY OF DOCUMENTS, REPRESENTATIONS AND
WARRANTIES. The copies of all documents identified on Schedule 4.2(e) hereof
furnished to Seller and its representatives by or on behalf of Purchaser and its
representatives are true, complete and correct in all material respects. No
representation or warranty of Purchaser contained in this Agreement, and no
statement contained in the Exhibits, the Schedules or the other documents
delivered by or on behalf of Purchaser or its representatives pursuant to or in
connection with this Agreement or any of the transactions contemplated hereby or
thereby contains any untrue statement of a material fact, or omits to state any
material fact
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required to be stated herein or therein in order to make the statements
contained herein or therein not misleading.
(f) STATUS OF COMMON STOCK TO BE ISSUED. The shares
of Common Stock to be issued pursuant to Section 3.2(c) hereof will be, when
issued, validly authorized and issued, fully paid, nonassessable, and free of
preemptive or other similar rights.
4.3 REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS. To induce
Purchaser to enter into this Agreement and to perform Purchaser's obligations
hereunder, and with full knowledge that Purchaser will rely thereon, each
Stockholder represents and warrants, severally and not jointly, as to himself,
the truth, accuracy and completeness of the following as of the Closing Date,
unless otherwise noted, and subject to the information expressly set forth in
the disclosure schedules of the Stockholders called for by this Agreement (the
"Stockholder Disclosure Schedules"):
(a) OWNERSHIP. Except as set forth in Schedule
4.3(a), such Stockholder owns the percent of the issued and outstanding capital
stock of Seller set forth below free and clear of any and all liens, claims,
charges, liabilities, encumbrances and security interests of whatsoever kind and
nature:
▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Trustees, the Hammer Family
Living Trust dated July 3, 1993 45%
The ▇▇▇▇▇ Family Trust
dated December 19, 1989 20%
▇▇▇▇▇▇ ▇▇▇▇▇ 35%
(b) POWER AND AUTHORITY. Such Stockholder has full
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby.
(c) ENFORCEABILITY. This Agreement has been duly
executed and delivered by such Stockholder and constitutes the legal, valid and
binding obligation of Stockholder, enforceable against such Stockholder in
accordance with its terms.
(d) CONFLICTS; CONSENTS. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby, will conflict with, violate or result in a breach of or default under
(with or without the giving of notice or the passage of time, or both): (i) any
license, instrument, contract or agreement to which such Stockholder is a party
or by which such Stockholder is bound; or (ii) any law, order, rule, regulation,
writ, injunction or decree that is applicable to such Stockholder. Neither the
execution and delivery of this Agreement by such Stockholder, nor the
consummation by such Stockholder of the transactions contemplated hereby, will
result in the creation of any lien, claim, charge, encumbrance or security
interest of any nature or type whatsoever with respect to the Purchased Assets.
Except as set forth in Schedule 4.4(e), neither the execution and delivery of
this Agreement by such Stockholder, nor the consummation by Stockholder of the
transactions contemplated hereby, will require any consent or approval of, or
any filing with, any governmental entity or other person.
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(e) ACCURACY OF DOCUMENTS, REPRESENTATIONS AND
WARRANTIES. No representation or warranty of such Stockholder contained in this
Agreement contains any untrue statement of a material fact, or omits to state
any material fact required to be stated herein or therein in order to make the
statements contained herein not misleading.
4.4 REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDERS.
To induce Purchaser to enter into this Agreement and to perform Purchaser's
obligations hereunder, and with full knowledge that Purchaser will rely thereon,
Seller and each Stockholder, jointly and severally, represent and warrant the
truth, accuracy and completeness of the following, subject only to the
information specifically set forth in the schedules called for by this Agreement
(the "Seller Disclosure Schedules").
(a) ORGANIZATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California.
(b) QUALIFICATION. Seller has qualified as a foreign
corporation, and is in good standing, under the laws of all jurisdictions where
the failure to qualify would have a material adverse effect on its business (all
of such jurisdictions are referred to herein collectively as the "Foreign
Jurisdictions"). Schedule 4.4(b) hereto contains a list of the Foreign
Jurisdictions and a list of all addresses at which Seller conducts business or
owns or holds assets.
(c) POWER AND AUTHORITY. Seller has full corporate
power and authority to execute and deliver this Agreement and the Other Seller
Agreements, and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Other Seller Agreements by
Seller, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized and approved by Seller's board of directors
and stockholders, and no other corporate proceedings on the part of Seller are
required to authorize the execution and delivery of this Agreement, the Other
Seller Agreements or the consummation of the transactions contemplated hereby
and thereby. As used in this Agreement, the term "Other Seller Agreements"
means, collectively, the consents, the assignments of the Contracts, and the
▇▇▇▇ of Sale.
(d) ENFORCEABILITY. This Agreement and the Other
Seller Agreements have been or will be duly executed and delivered on behalf of
Seller and constitute legal, valid and binding obligations of Seller,
enforceable against Seller in accordance with their respective terms.
(e) CONFLICTS; CONSENTS. Except as set forth in
Schedule 4.4(e) hereof, neither the execution and delivery of this Agreement and
the Other Seller Agreements, nor the consummation of the transactions
contemplated hereby or thereby, will conflict with, violate or result in a
breach of or default under (with or without the giving of notice or the passage
of time, or both): (i) the Articles of Incorporation or Bylaws of Seller; (ii)
any material license, instrument, contract or agreement to which Seller is a
party or by which Seller is bound; or (iii) any law, order, rule regulation,
writ, injunction or decree that is applicable to Seller. Except as set forth in
Schedule 4.4(e) hereof, neither the execution and delivery of this Agreement or
the Other Seller Agreements by Seller, nor the consummation by Seller of the
transactions contemplated hereby or thereby, will require any consent or
approval of, or any filing with, any governmental entity or other person.
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(f) ASSETS.
(i) Except as set forth in Schedule 4.4(f),
Seller has good and marketable title to and rightful possession of all of the
Purchased Assets, free and clear of any and all mortgages, liens, pledges,
privileges, claims, rights, charges, encumbrances and security interests of
whatsoever kind or nature.
(ii) The Inventories of Seller are stated at
not more than the lower of cost or market, with adequate adjustments for
obsolete, obsolescent or otherwise not readily marketable items. The Inventories
of Seller are in good and merchantable condition and none of such Inventories is
obsolete (except that this representation shall not apply to shaded salon wear
listed on Schedule 4.4(f)(ii)).
(iii) The Accounts Receivable reflected in
the Balance Sheet and those existing since the date of the Balance Sheet or
existing on the books of Seller at the Closing are good and collectible within
ninety (90) days after the Closing Date, and none of such Accounts Receivable
are subject to the return of the merchandise or other property the selling price
of which is represented thereby, or to offsets or counterclaims, the extent of
which is in excess of any reserves for collectibility thereof reflected therein.
(iv) The Equipment of the Seller as defined
in Section 1.2(b) is being sold "as is" without representation or warranty.
(g) CONTRACTS. Attached hereto are true, complete and
correct copies of the Redken Agreement, the Redken Guarantees, the Noble
Distribution Agreement, the Lease and all agreements relating to Leased
Personalty and open purchase orders, together with all amendments thereto or
interpretations thereof, such as arbitration decisions and the like, to which
Seller is a party or is bound. All of the foregoing contracts and agreements are
referred to herein collectively as the "Contracts." Each of the Contracts is in
full force and effect and enforceable in accordance with its respective terms
and conditions, and (i) there is not existing any default, or event or condition
which, with the giving of notice or the passage of time, or both, would
constitute an event of default, by Seller or Stockholders or any of them, or, to
the best knowledge and belief of Seller and each Stockholder, any other party
thereto under any of the Contracts; (ii) no party to any of the Contracts has
given any notice of default or termination, nor does any Stockholder or Seller
have any reason to believe that such notice shall be given; and (iii) Seller has
not waived any material right under or with respect to any of the Contracts.
(h) INTELLECTUAL PROPERTY. Seller owns or holds all
of the rights to use all trademarks, trade names, fictitious names, service
marks, patents and copyrights that are used in the conduct of its business. To
the best knowledge and belief of Seller and each Stockholder, none of the
matters covered by the Intellectual Property, nor any of the products or
services sold or provided by Seller, nor any of the processes used or the
business practices followed by Seller, infringes or has infringed upon any
trademark, trade name, fictitious name, service ▇▇▇▇, patent or copyright owned
by any person or entity, or constitutes unfair competition. To the best
knowledge and belief of Seller and each Stockholder, Seller is not obligated to
pay any royalty or other payment with respect to any of the Intellectual
Property. To the best knowledge and belief of each Stockholder and Seller, no
person or entity is producing, providing, selling or using products or services
that would constitute an infringement of any of the Intellectual Property.
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(i) LITIGATION. There is no litigation or proceeding,
in law or in equity, and there are no proceedings or investigations or inquiries
before any commission or other governmental or private administrative authority
pending, or to the best knowledge and belief of Seller and each Stockholder,
threatened, against Seller with respect or affecting the business or financial
condition of Seller, or the consummation of the transaction herein contemplated,
or with respect to or affecting the use of the Purchased Assets of Seller
(either by Purchaser or Seller after the Closing Date or by Seller prior
thereto).
(j) UNASSERTED CLAIMS. There are no facts that, if
known by a potential claimant or governmental authority, would give rise to a
claim or proceeding that, if asserted or conducted with results unfavorable to
Seller, would have a material adverse effect on the business or financial
condition of Seller or the consummation of the transactions herein contemplated,
or the use of the Purchased Assets after the Closing.
(k) ABSENCE OF PRODUCT OR SERVICE WARRANTIES. Except
as set forth in Schedule 4.4(k), there are no material claims pending or, to the
best knowledge and belief of Seller and each Stockholder, anticipated or
threatened against Seller with respect to the quality of or absence of defects
in Seller's products or services. Seller has not been required to pay direct,
incidental or consequential damages to any person in connection with any of such
products or services at any time since Seller acquired Seller's business on
December 8, 1993.
(l) ABSENCE OF JUDICIAL ORDERS. Seller is not a party
to any decree, order or arbitration award (or agreement entered into in any
administrative, judicial or arbitration proceeding with any governmental
authority) with respect to or affecting the Purchased Assets.
(m) COMPLIANCE WITH LAW. Seller, the conduct of
Seller's Business, the use by Seller of Seller's properties, assets and
personnel, the provision of Seller's services, and the business activities of
Seller are in compliance with all applicable laws, and Seller is not in
violation of, or delinquent in respect to, any decree, order or arbitration
award or law or regulation of or agreement with, or any license, permit,
approval or authority from, any governmental or private authority or body to
which any of its properties, assets, personnel or business activities are
subject, the non-compliance with, or violation of, which would have a material
and adverse effect on the Purchased Assets. Except as set forth in Schedule
4.4(m) hereto, Seller has not received notice of any violation of a type
referred to in any portion of this Section 4.4(m).
(n) ACCURACY OF DOCUMENTS, REPRESENTATIONS AND
WARRANTIES. The copies of all documents identified in Schedule 4.4(n) hereto
furnished to Purchaser, or any of its representatives by or on behalf of Seller
or any of its representatives are true, complete and correct in all material
respects. No representation or warranty of Seller or of any Stockholder
contained in this Agreement contains any untrue statement of a material fact, or
omits to state any material fact required to be stated herein or therein in
order to make the statements contained herein or therein not misleading. The
Stockholder has no knowledge or belief that any statement contained in the
Exhibits or the Seller Disclosure Schedules delivered by or on behalf of Seller
or its representatives pursuant to or in connection with this Agreement or any
of the transactions contemplated hereby or thereby contains any untrue statement
of a material fact, or omits to state any material fact required to be stated
herein or therein in order to make the statements contained herein or therein
not misleading.
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4.5 FURTHER REPRESENTATIONS AND WARRANTIES OF SELLER. To
induce Purchaser to enter into this Agreement and for the benefit of Purchaser,
Seller further represents and warrants as follows:
(a) ABILITY TO BEAR RISKS; BUSINESS AND FINANCIAL
KNOWLEDGE AND EXPERIENCE. Seller (i) can bear the economic risk of the
acquisition of the Purchaser Stock, including the complete loss of its
investment, and (ii) has sufficient knowledge and experience in business and
financial matters as to be capable of evaluating the merits and risks of its
acquisition of the Purchaser Stock.
(b) KNOWLEDGE RESPECTING PURCHASER. Seller (i) knows
or has had the opportunity to acquire all information concerning the business,
affairs, financial condition, plans and prospects of Purchaser which Seller
deems relevant to make a fully informed decision respecting the acquisition of
the Purchaser Stock, (ii) has been encouraged and has had the opportunity to
rely upon the advice of Seller's legal counsel and accountants and other
advisers with respect to the acquisition of the Purchaser Stock, and (iii) has
had the opportunity to ask such questions and receive such answers and
information respecting, among other things, the business, affairs, financial
condition, plans and prospects of Purchaser and the terms and conditions of the
purchase of the Purchaser Stock as Purchaser has requested so as to more fully
understand its investment.
(c) ABSENCE OF REPRESENTATIONS AND WARRANTIES. Seller
confirms that neither Purchaser nor anyone purportedly acting on behalf of
Purchaser has made any representations, warranties, agreements or statements
other than those contained herein respecting the business, affairs, financial
condition, plans or prospects of Purchaser nor has Seller relied on any
representations, warranties, agreements or statements in the belief that they
were made on behalf of any of the foregoing nor has Seller relied on the absence
of any such representations, warranties, agreements or statements in reaching
its decision to acquire the Purchaser Stock.
(d) NO DISTRIBUTION. Seller is acquiring the
Purchaser Stock for Seller's own account without a view to public distribution
or resale, and Seller does not have any contract, undertaking, agreement or
arrangement to transfer, sell or otherwise dispose of any portion of the
Purchaser Stock or any interest therein to any other person except to
Stockholders.
(e) STOCK TO BE RESTRICTED. Seller understands that
the Purchaser Stock may be restricted securities within the meaning of Rule 144
under the Securities Act of 1933, as amended (the "1933 Act").
(f) NO REGISTRATION. Except as provided in Section
9.2 hereof, Seller understands that the Purchaser Stock may not be registered
under the 1933 Act or the securities laws of any state and must be held
indefinitely without any transfer, sale or other disposition unless the
Purchaser Stock is registered under the 1933 Act and the securities laws of any
applicable states or, in the opinion of counsel for Seller, registration is not
required under the 1933 Act or such state securities laws as the result of an
available exemption.
(g) NO OBLIGATION TO REGISTER. Seller understands
that (i) Purchaser will be under no obligation to register the Purchaser Stock
under the 1933 Act or the securities laws of any state or to take any action
which would make available any exemption from such registration and (ii) Seller
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therefor may be precluded from transferring, selling or otherwise disposing of
the Purchaser Stock or any interest therein for an indefinite period of time or
at any particular time.
(h) LEGEND ON CERTIFICATE. Seller understands and
agrees that there shall be endorsed on the certificates evidencing the Purchaser
Stock a legend substantial to the following effect:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO
REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON
THE BOOKS OF THE ISSUER UNLESS SUCH TRANSFER IS MADE IN
CONNECTION WITH AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH ACT DOES NOT APPLY.
(i) STOP ORDERS. Seller understands that Purchaser
and its transfer agent, if any, may refuse to effect a transfer, sale or other
disposition of any of the Purchaser Stock by Seller or its successors or assigns
otherwise than as contemplated hereby. Notwithstanding the provisions of this
Section 4.5, Seller shall have the right to transfer, sell or dispose of its
Purchaser Stock at any time, subject to applicable federal and state securities
law.
(j) RELIANCE UPON INFORMATION. Seller understands
that the Purchaser Stock may be issued in reliance on specific exemptions from
the registration requirements of federal and state securities laws and that
Purchaser may be relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgements and understandings set forth herein in
order to determine the suitability of Seller to acquire the Purchaser Stock.
ARTICLE V
CONDUCT PRIOR TO THE CLOSING
5.1 GENERAL. Seller, Stockholders and Purchaser shall have the
rights and obligations with respect to the period between the date hereof and
the Closing Date which are set forth in the remainder of this Article V.
5.2 SELLER AND STOCKHOLDERS. The following are the obligations
of Seller and/or Stockholders:
(a) ACCESS TO RECORDS. Seller, Stockholders and
Seller's officers, agents, representatives and accountants shall fully cooperate
with Purchaser, and shall give to Purchaser's officers, agents, representatives,
employees, attorneys, consultants and accountants reasonable access during
normal business hours to all of the properties, books, contracts, documents and
records of Seller, excluding the minutes of Seller's meetings and negotiations
with other prior prospective purchasers of the stock or assets of Seller, and
shall furnish to Purchaser such information as Purchaser may at any time and
from time to time reasonably request. Seller and Stockholders understand and
agree that prior to the Closing, Purchaser's certified public accountants shall
perform an audit with respect to Seller, and Seller and Stockholders agree to
cooperate fully with Purchaser's accountants.
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(b) CERTAIN TRANSACTIONS. Seller shall not, without
the prior written consent of Purchaser (which consent shall not be unreasonably
withheld); (i) create or suffer to exist any material liens or encumbrances with
respect to any of the Purchased Assets which shall not be discharged at or prior
to the Closing Date, other than liens for nondelinquent taxes; (ii) sell or
transfer any Purchased Assets or property (including sales and transfers to a
person or entity controlling, controlled by or under common control with Seller)
other than in the ordinary course of business; (iii) make any material change in
the conduct or nature of any aspect of its business, whether or not in the
ordinary course of business or whether or not the change has or will have a
material adverse affect on the Purchased Assets; and (iv) waive any material
rights with respect to the Purchased Assets.
(c) CONFIDENTIALITY. Seller and each Stockholder
shall maintain as confidential the discussions between them and Purchaser, and
the terms and conditions of this Agreement, and except as required by law shall
not make any trade press or other announcement or disclosure in relation to such
discussions whether before or after Closing, and if the Closing shall not occur
then at all times thereafter, without the prior written consent of Purchaser.
(d) EXCLUSIVITY. Seller and each Stockholder shall
negotiate the sale of the Purchased Assets with Purchaser and its affiliates
only, and shall not directly or indirectly enter into any discussion with or
disclose any information in relation to Seller to any other person unless this
Agreement has been terminated in accordance herewith, with a view to the sale of
the assets or stock of Seller. Seller and Stockholders shall promptly advise
Purchaser of any initiatives after the date hereof by any other person, firm or
other entity to so acquire the assets or stock of Seller and the terms and
conditions thereof.
(e) CONSENTS. Seller and each Stockholder shall use
their reasonable efforts and make every good faith attempt to obtain any consent
and estoppel letters necessary in connection with the assignment of the
Purchased Assets to Purchaser hereunder, including, without limitation, any
required consent from Redken, but excluding any consents or estoppel letters
relating to the Accounts Receivable and which may be required for such
assignment to be effective, the failure to obtain any of which would have a
material adverse effect on Purchaser's use or enjoyment of the Purchased Assets.
Purchaser shall cooperate with Seller in its attempts to obtain such consents
and estoppel letters.
5.3 PURCHASER CONFIDENTIALITY. From and after the date of this
Agreement until the Closing, or in the event that the Closing shall not occur
then thereafter, except as required by the Securities and Exchange Commission,
other state or federal regulatory agencies, or others as required relating to
the anticipated securities offering, Purchaser shall not disclose to any third
party (other than to its directors, officers and employees having a need to know
such information in connection with the transaction contemplated hereby, or to
its attorneys, accountants, consultants, lenders, investment bankers, and their
attorneys), or use for any purpose other than as contemplated by this Agreement,
any proprietary information regarding Seller, the discussions between it and
Seller and the terms and conditions of this Agreement. Purchaser acknowledges
that during the negotiations leading to this Agreement and as required by the
terms and conditions hereof, Seller shall have disclosed certain information
relating to all aspects of its business, including but not limited to Seller's
finances, its methods of doing business, and its pricing (internal and that of
its customers). Purchaser acknowledges that certain of this information may be
proprietary information of Seller which information, if proprietary, Purchaser
agrees not to disseminate to others except as hereinabove described, nor to use
or permit to be used through its agents, employees or others on behalf of
Purchaser to damage Seller. The preceding
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two sentences shall not apply to information that (i) is, was or becomes
generally known or available to the public or the industry other than as a
result of a disclosure by Purchaser in violation of this Agreement; (ii) was
previously known by Purchaser; (iii) is subsequently obtained by Purchaser from
an independent third-party source having no obligation of confidentiality to
Seller; or (iv) is required to be disclosed by law. Purchaser shall timely
advise Seller of any request, including a subpoena or similar legal inquiry, to
disclose any such confidential information so that Seller can seek appropriate
legal relief.
5.4 JOINT OBLIGATIONS. The following shall apply with equal
force to Seller, Stockholders and Purchaser:
(a) NOTICE. Each party shall promptly give the other
party written notice of the existence or occurrence of any condition which would
make any representation or warranty of the notifying party untrue or that might
reasonably be expected to prevent the consummation of the transactions herein
contemplated.
(b) PERFORMANCE. No party shall intentionally perform
any act that, if performed, or intentionally omit to perform any act that, if
omitted to be performed, would prevent or excuse the performance of this
Agreement by any party hereto or that would result in any representation or
warranty herein contained of that party being untrue in any material respect as
of the date hereof and as if originally made on and as of the Closing Date.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. The
obligation of Seller to consummate the transactions contemplated hereby is
subject to fulfillment by Purchaser or written waiver by Seller, of each of the
following conditions precedent on or prior to the Closing Date.
(a) TRUTH OF REPRESENTATIONS AND WARRANTIES. Each and
every representation and warranty made by Purchaser shall have been true and
complete in all material respects when made and shall be true and complete in
all material respects as if originally made on and as of the Closing Date.
(b) ASSUMED LIABILITIES. Purchaser shall have entered
into the Assumption Agreement (the "Assumption Agreement"), in form and
substance reasonably satisfactory to Purchaser and Seller pursuant to which
Purchaser shall have assumed the Assumed Liabilities and a lease assumption
agreement (the "Lease Assumption Agreement") pursuant to which Purchaser shall
have assumed the Lease.
(c) OBLIGATIONS PERFORMED BY PURCHASER. All
obligations of Purchaser to be performed hereunder through, and including on,
the Closing Date (including, without limitation, all obligations that Purchaser
would be required to perform at the Closing if the transaction contemplated
hereby was consummated) shall have been performed in all material respects.
(d) PURCHASER'S CLOSING CERTIFICATE. Purchaser shall
have executed a closing certificate, dated as of the Closing Date, in form and
substance reasonably satisfactory to Purchaser hereto ("Purchaser's Closing
Certificate"), pursuant to which (i) Purchaser shall represent and warrant
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to Seller that Purchaser's representations and warranties to Seller are true and
complete as of the Closing Date as if then originally made (or, if any such
representation or warranty is untrue or incomplete in any respect, specifying
the respect in which the same is untrue or incomplete), (ii) that all covenants
required by the terms hereof to be performed by Purchaser on or before the
Closing have been so performed, and (iii) that all documents to be executed and
delivered by Purchaser at or prior to the Closing have been executed by a duly
authorized officer of Purchaser.
(e) NO SUIT, PROCEEDING OR INVESTIGATION. No suit,
proceeding or investigation shall have been commenced or threatened by any
governmental authority or private person on any grounds to restrain, enjoin or
hinder, or to seek material damages on account of, the consummation of the
transactions herein contemplated.
(f) EMPLOYMENT AGREEMENT. Purchaser shall have
executed an Employment Agreement between Purchaser and ▇▇▇▇▇▇ ▇▇▇▇▇ (the "▇▇▇▇▇
Employment Agreement") in form and content satisfactory to ▇▇▇▇▇▇ ▇▇▇▇▇ and
Purchaser.
(g) RECEIPT OF OPINION OF COUNSEL FOR PURCHASER.
Seller shall have received a favorable opinion of ▇'▇▇▇▇▇▇, Cavanagh, Anderson,
▇▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A., counsel for Purchaser, in form and substance
satisfactory to Seller's counsel, confirming the following:
(i) Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power to own its assets and properties and to
carry on its business as it is now being conducted and qualified to do business
and in good standing under the laws of each jurisdiction which requires such
qualification because of ownership or leasing of any assets or properties or any
operations relating to its business except where the failure to so qualify would
not have a material adverse effect on Purchaser.
(ii) The execution and delivery of this
Agreement and the Other Purchaser Agreements, the consummation of the
transactions contemplated hereby and thereby, and the fulfillment of the terms
hereof and thereof, will not violate any provision of Purchaser's certificate of
incorporation or bylaws nor will they result in the breach of any term or
provision of, or constitute a default under, or conflict with, or cause the
acceleration of any obligation under, any loan agreement, note, debenture,
indenture, mortgage, deed of trust, lease, contract, agreement or other
obligation of any description of which such counsel has knowledge to which
Purchaser is a party or by which it is bound, or any judgment, decree, order or
award of any court, governmental body or arbitrator of which such counsel has
knowledge, or any applicable law, rule or regulation.
(iii) Purchaser has full power and authority
to execute, deliver and perform this Agreement, and this Agreement is the legal
and binding obligation of it and is enforceable against it in accordance with
its terms.
(iv) Such counsel has no knowledge of any
suits, actions, claims, arbitrations, administrative or other proceedings or
governmental investigations pending or threatened against or affecting
Purchaser, its business or its assets and properties, or of any litigation
affecting the right of Purchaser to enter into or perform this Agreement in any
court or before or by any federal, state or governmental department or agency or
of the existence of any order, judgment, decree or ruling of
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any court or governmental department or agency affecting Purchaser's business or
its assets and properties.
(v) The Purchaser Stock, when authorized,
issued and delivered in connection with the transactions contemplated by this
Agreement, will be legally issued, fully paid and non-assessable.
6.2 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. The
obligations of Purchaser to consummate the transactions contemplated hereby are
subject to the fulfillment by Seller and/or Stockholders or written waiver by
Purchaser, of each of the following conditions precedent on or prior to the
Closing Date.
(a) REPRESENTATIONS AND WARRANTIES. Each and every
representation and warranty made by Seller and/or Stockholders shall be true and
correct in all material respects when made and shall be true and correct in all
material respects as if originally made on and as of the Closing Date.
(b) OBLIGATIONS PERFORMED BY SELLER AND STOCKHOLDERS.
All obligations of Seller and/or Stockholders to be performed hereunder through
and including on the Closing Date (including, without limitation, all
obligations which Seller and/or Stockholder would be required to perform at the
Closing if the transaction contemplated hereby was consummated) shall have been
performed in all material respects.
(c) CONSENTS. All of the consents and estoppel
letters referred to in Section 5.2(e) hereof shall have been obtained.
(d) CLOSING CERTIFICATE OF SELLER AND STOCKHOLDERS.
Seller and each Stockholder shall have executed a closing certificate, dated the
Closing Date, in form and substance reasonably satisfactory to Purchaser and
Seller ("Seller's Closing Certificate"), pursuant to which Seller and each
Stockholder severally and not jointly represent and warrant to Purchaser that
except as otherwise expressly provided for in this Agreement (i) between the
date of this Agreement and the Closing Date there shall have been no material
adverse change in the assets of Seller, and (ii) that (A) Seller's and
Stockholder's representations and warranties to Purchaser are true and complete
as of the Closing Date as if then originally made (or if any such representation
or warranty is untrue or incomplete in any respect, specifying the respect in
which the same is untrue or incomplete); (B) all covenants and obligations
required by the terms hereof to be performed by Seller and each Stockholder on
or before the Closing Date have been fully performed; and (C) all documents to
be executed and delivered by Seller and/or Stockholders at or prior to the
Closing have been executed by duly authorized officers of Seller and/or
Stockholder.
(e) EMPLOYMENT AGREEMENT. ▇▇▇▇▇▇ ▇▇▇▇▇ shall have
entered into the ▇▇▇▇▇ Employment Agreement in form and content satisfactory to
▇▇▇▇▇▇ ▇▇▇▇▇ and Purchaser.
(f) ABSENCE OF SUITS. No suit, proceeding or
investigation shall have been commenced or threatened by any governmental
authority or private person on any grounds to restrain, enjoin or hinder, or to
seek material damages on account of, the consummation of the transactions herein
contemplated.
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(g) ▇▇▇▇ OF SALE AND DOCUMENTS OF TITLE. Seller shall
have delivered to Purchaser the ▇▇▇▇ of Sale and the Assumption Agreement
together with such other documents of title and transfer as Purchaser may
reasonably request transferring to Purchaser all right, title and interest in
and to the Purchased Assets free and clear of all liens, claims, charges,
liabilities, encumbrances and security interests of whatsoever kind and nature,
subject only to the Assumed Liabilities.
(h) RECEIPT OF SATISFACTORY AUDIT REPORT. Purchaser
shall have received and approved, in Purchaser's sole discretion, the audit
report by a certified public accounting firm engaged by Purchaser. If for any
reason whatsoever, the transactions contemplated by this Agreement are not
consummated, Purchaser shall deliver to Seller the audit results.
(i) PURCHASER'S DUE DILIGENCE. Purchaser shall have
completed its due diligence investigation of Seller and the results of such due
diligence shall have been satisfactory to Purchaser, in its sole discretion.
Such due diligence shall include, but shall not be limited to, Purchaser's
review of the Redken Agreement and the Redken Guarantees, and the inventory
related thereto, all of which shall be satisfactory to Purchaser in its sole
discretion.
(j) CONSENTS AND APPROVALS. Purchaser shall have
received all necessary consents and approvals with respect to the issuance of
the Purchaser Stock pursuant to this Agreement.
(k) RECEIPT OF OPINION OF COUNSEL FOR SELLER.
Purchaser shall have received a favorable opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇, counsel for
Seller, in form and substance satisfactory to Purchaser's counsel, dated the
Closing Date, and confirming the following:
(i) Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and has the corporate power to own its assets and properties and to carry on its
business as it is now being conducted and qualified to do business and in good
standing under the laws of each jurisdiction which requires such qualification,
except where the failure to so qualify would not have a material adverse effect
on Seller.
(ii) The execution and delivery of this
Agreement and the Other Seller Agreements (except any of such Other Seller
Agreements that are consents), the consummation of the transactions contemplated
hereby and thereby, and the fulfillment of the terms hereof and thereof, will
not violate any provision of Seller's articles of incorporation or bylaws nor
will they result in the breach of any term or provision of, or constitute a
default under, or conflict with, or cause the acceleration of any obligation
under, any loan agreement, note, debenture, indenture, mortgage, deed of trust,
lease, contract, agreement or other obligation of any description of which such
counsel has knowledge to which Seller is a party or by which Seller is bound, or
any judgment, decree, order or award of any court, governmental body or
arbitrator of which such counsel has knowledge, or any applicable law, rule or
regulation.
(iii) Seller has full power and authority to
execute, deliver and perform this Agreement, and this Agreement is the legal and
binding obligation of Seller and is enforceable against Seller in accordance
with its terms.
(iv) Such counsel has no knowledge of any
suits, actions, claims, arbitrations, administrative or other proceedings or
governmental investigations pending or threatened
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against or affecting Seller, its business or its assets and properties, or of
any litigation affecting the right of Seller to enter into or perform this
Agreement in any court or before or by any federal, state or governmental
department or agency or of the existence of any order, judgment, decree or
ruling of any court or governmental department or agency affecting Seller's
business or its assets and properties.
(l) FINANCING. Purchaser shall have received proceeds
of its financing in an amount and on terms acceptable to Purchaser (in its
reasonable discretion).
ARTICLE VII
CLOSING
7.1 TIME AND PLACE OF CLOSING. The transactions contemplated
by this Agreement shall be consummated within 30 days after the fulfillment of
all conditions precedent to closing set forth in Article VI hereof (the
"Closing"), or at such later date as the parties may mutually agree in writing
(the "Closing Date"), at 10:00 a.m., prevailing business time, at the offices of
▇'▇▇▇▇▇▇, Cavanagh, Anderson, ▇▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or such other date, or at such
other place, as shall mutually be agreed upon by Seller, Stockholders and
Purchaser.
7.2 FORM OF DOCUMENTS. At the Closing, the parties shall
deliver to the other the documents, and shall perform the other acts, that are
set forth in this Article VII. All documents that Seller and/or Stockholders
shall deliver shall be in form and content reasonably satisfactory to Purchaser.
All documents that Purchaser shall deliver shall be in form and content
reasonably satisfactory to Seller and Stockholders.
7.3 PURCHASER'S DELIVERIES. Subject to the fulfillment or
written waiver of the conditions precedent set forth in Section 6.2, hereof,
Purchaser, shall execute and/or deliver to Seller at the Closing all of the
following:
(a) PURCHASE PRICE. That portion of the Purchase
Price to be paid in cash at the Closing by wire transfer.
(b) PURCHASER NOTE. The Purchaser Note and the
Security Agreement in each case in form and substance reasonably satisfactory to
Seller and Purchaser, each executed by Purchaser.
(c) PURCHASER STOCK/DEBENTURE. The Purchaser Stock or
if an election is made by Seller in the event an initial public offering has not
occurred, the Convertible Debenture.
(d) GOOD STANDING CERTIFICATE. A certificate of good
standing of Purchaser, issued not earlier than three (3) days prior to the
Closing Date by the Secretary of the State of Delaware.
(e) ▇▇▇▇ OF SALE; ASSUMPTION AGREEMENT. The ▇▇▇▇ of
Sale and the Assumption Agreement, each executed by Purchaser.
(f) INCUMBENCY CERTIFICATE. An incumbency and
specimen signature certificate with respect to the officers of Purchaser
executing this Agreement, and any other document delivered hereunder, on behalf
of Purchaser.
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(g) CORPORATE RESOLUTIONS. A certified copy of
resolutions of Purchaser's board of directors authorizing the execution,
delivery and performance of this Agreement, the Other Purchaser Agreements, and
the transactions contemplated hereby and thereby.
(h) OPINION OF COUNSEL. The legal opinion of
▇'▇▇▇▇▇▇, Cavanagh, Anderson, ▇▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A.
(i) CLOSING CERTIFICATE. Purchaser's Closing
Certificate executed by the Purchaser.
(j) OTHER DOCUMENTS. The Lease Assumption Agreement,
the ▇▇▇▇▇ Employment Agreement, and the Escrow Agreement, all signed by
Purchaser, and without limitation by specific enumeration of the foregoing, all
other documents reasonably required by Seller to consummate the transaction
herein contemplated.
7.4 SELLER'S AND STOCKHOLDERS' DELIVERIES. Subject to the
fulfillment or waiver of the conditions set forth in Section 6.1 hereof, Seller
and Stockholders shall deliver to Purchaser at the Closing physical possession
of all Purchased Assets (other than the molds), and shall execute (where
applicable in recordable form) and/or deliver to Purchaser all of the following:
(a) GOOD STANDING CERTIFICATES. Certificates of good
standing of Seller, issued not earlier than three (3) days prior to the Closing
Date by the Secretary of State of California and by the Secretary of State of
each state in which Seller is qualified to transact business.
(b) INCUMBENCY CERTIFICATE. An incumbency and
specimen signature certificate with respect to the officers of Seller executing
this Agreement, and any other document delivered hereunder, on behalf of Seller.
(c) CORPORATE RESOLUTIONS. A certified copy of
resolutions of Seller's board of directors and stockholders authorizing the
execution, delivery and performance of this Agreement, the Other Seller
Agreements, and the transactions contemplated hereby and thereby.
(d) ▇▇▇▇ OF SALE; ASSUMPTION AGREEMENT. The ▇▇▇▇ of
Sale and the Assumption Agreement executed by Seller, transferring, conveying
and assigning all of the Purchased Assets to Purchaser, free and clear of any
and all liens, claims, charges, liabilities, encumbrances and security interests
of every kind and nature, subject only to the Assumed Liabilities.
(e) CLOSING CERTIFICATE. Seller's Closing Certificate
executed by Seller and Stockholders.
(f) OPINION OF COUNSEL. The legal opinion ▇▇▇▇▇ &
▇▇▇▇▇▇.
(g) CONSENTS AND ESTOPPEL LETTERS. All consents and
estoppel letters referred to in Section 5.2(e) for the assignment of the
Purchased Assets, or permitted alternate arrangements with respect thereto.
(h) THE LEASE. The Lease Assumption Agreement
executed by Seller.
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(i) EMPLOYMENT AGREEMENT. The Employment Agreement
executed by ▇▇▇▇▇▇ ▇▇▇▇▇.
(j) SUBSCRIPTION AGREEMENT. A Subscription Agreement
executed by Seller with respect to the Purchaser Stock or Convertible Debenture,
as the case may be.
(k) STOCK ESCROW AGREEMENT. The Stock Escrow
Agreement (the "Escrow Agreement"), in form and substance reasonably
satisfactory to Seller and Purchaser, executed by Seller, Stockholders and the
Representative (as defined therein).
(l) OTHER DOCUMENTS. Without limitation by specific
enumeration of the foregoing, all other documents reasonably required to
consummate the transaction herein contemplated including, without limitation,
all documents and instruments reasonably requested by Purchaser to assure itself
that it receives good and marketable title to the Purchased Assets free and
clear of all liens, claims, charges, liabilities, encumbrances and security
interests of every kind and nature, subject only to the Assumed Liabilities.
ARTICLE VIII
POST-CLOSING AGREEMENTS
8.1 MAINTENANCE OF EXISTENCE. Seller shall retain its
corporate existence and Stockholders shall cause Seller to remain in good
standing under the laws of the State of California at least until December 31,
1997.
8.2 USE OF TRADEMARKS. Neither Seller nor any Stockholder
shall use or license or authorize any third party to use, any name or trademark
that is deceptively similar to any of the names or trademarks that are included
among the Purchased Assets.
8.3 BACK-UP. Seller and Stockholders shall, at Purchaser's
cost and request, furnish complete detailed back-up material with respect to the
Purchased Assets, the past financial statements of Seller and the Assumed
Liabilities as are then in Seller's or Stockholders' possession or are otherwise
reasonably available to Seller or Stockholders, provided that Purchaser executes
and delivers to Seller and Stockholders a confidentiality agreement in a form
reasonably acceptable to Seller and Stockholders with respect to the past
financial statements and with respect to any contract or other agreement that
contains confidentiality provisions.
8.4 THIRD-PARTY CLAIMS. The parties shall cooperate with each
other with respect to the prosecution or defense of any claims or litigation
made or commenced by or against third parties subsequent to the Closing Date
regardless of whether such claims or litigation are subject to the
indemnification provisions contained in Article X, and access to the books and
records of Seller pertaining to a state of facts in existence on or prior to the
Closing Date shall be provided.
8.5 FURTHER ASSURANCES. The parties shall execute such further
documents, and perform such further acts, as may be necessary to transfer and
convey the Purchased Assets to Purchaser on the terms herein contained, and to
otherwise comply with the terms of this Agreement and consummate the transaction
herein provided.
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8.6 PAYMENTS OF ACCOUNTS RECEIVABLE.
(a) DELIVERY OF ACCOUNTS RECEIVABLE. In the event
Seller shall, after the Closing, receive any instruments of payment of any of
the Accounts Receivable, Seller shall immediately thereafter deliver it to
Purchaser, endorsed where necessary, without recourse, in favor of Purchaser.
(b) NONPAYMENT OF CURRENT ACCOUNTS RECEIVABLE. In the
event any Account Receivable which was not excluded in calculating Total Current
Assets is not fully paid to Purchaser within ninety (90) days of the Closing,
Purchaser may tender it to Seller for the immediate payment by Seller at the
face amount or the unpaid portion thereof. If payment is not made as provided
herein then, without limitation of any other remedy available to it, Purchaser
may offset any amount owed by it (i) first, under the Purchaser Note and (ii)
second, if the remaining amounts owed by Purchaser under the Purchaser Note are
insufficient to satisfy the unpaid portion of an Account Receivable, then as
provided in the Escrow Agreement.
8.7 GUARANTEE RESPECTING SHADED SALONWEAR. In the event that
any of the shaded salonwear listed on Schedule 4.4(f)(ii) hereto remains unsold
after 120 days following the Closing Date, Purchaser may reduce any amount owed
by it to ▇▇▇▇▇▇ ▇▇▇▇▇ under the Employment Agreement by the amount of the
Purchase Price paid by Purchaser for such Inventories as set forth in Schedule
4.4(f)(ii).
ARTICLE IX
POST CLOSING OBLIGATIONS
9.1 OBLIGATIONS OF SELLER AND STOCKHOLDERS.
(a) TRADE SECRETS AND OTHER INFORMATION. After the
Closing, neither Seller nor any Stockholder will communicate or divulge to, or
use for the benefit of, any person, firm or corporation other than Purchaser, or
its or their agents and representatives, any of the trade secrets, methods,
formulas, business and/or marketing plans, processes or any other proprietary or
confidential information with respect to Purchaser or Seller, and its or their
business, financial condition, business operations or methods, or business
prospects. The preceding sentence shall not apply to information that (i) is,
was or becomes generally known or available to the public or the industry other
than as a result of a disclosure by Seller or any Stockholder in violation of
this Agreement, or (ii) is required to be disclosed by law, including in
connection with any legal proceeding or a tax return or audit. Seller and
Stockholders shall advise Purchaser, in writing, of any request, including a
subpoena or similar legal inquiry, to disclose any such confidential
information, such that Purchaser can seek appropriate legal relief.
(b) EQUITABLE RELIEF. Each of Seller and Stockholders
acknowledges that the covenant contained in paragraph (a) of this Section 9.1 is
a material inducement for Purchaser to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. Accordingly, each Stockholder
acknowledges that the restriction contained in paragraph (a) of this Section 9.1
is reasonable and necessary for the protection of Purchaser's investment in the
Purchased Assets, and that a breach of any such restriction could not adequately
be compensated by damages in an action at law. In the event of a breach or
threatened breach by any Stockholder of any of the provision of paragraph (a) of
this Section 9.1, Purchaser shall be entitled to obtain, without the necessity
of posting bond therefor, an injunction (preliminary or permanent, or a
temporary restraining order) restraining the breaching entity
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from the activity or threatened activity constituting, or that would constitute,
a breach of this Agreement, as well as damages and an equitable accounting of
all earnings, profits and other benefits arising from such a violation, which
right shall be cumulative and in addition to any other rights or remedies to
which Purchaser may be entitled.
9.2 OBLIGATIONS OF PURCHASER.
(a) REGISTRATION RIGHTS. For purposes of this Section
9.2:
(i) The terms "register", "registered", and
"registration" refer to a registration effected by preparing and filing a
registration statement on Form S-1 or Form SB-2 or similar document in
compliance with the 1933 Act, and the declaration or ordering of effectiveness
of such registration statement or document;
(ii) The term "Registrable Securities" means
the shares of Common Stock issuable in accordance with Section 3.2(c) hereof;
and
(iii) The term "Holders" means the
Stockholders.
(b) PIGGYBACK REGISTRATION. Commencing 180 days after
the Purchaser has completed an initial registered offering of its Common Stock,
if Purchaser proposes to register (including for this purpose a registration
effected by Purchaser for stockholders other than the Holders) any of its shares
of Common Stock under the 1933 Act in connection with the public offering of
such securities solely for cash (other than a registration of securities to be
offered to employees pursuant to an employee benefit plan on Form S-8, a
registration in connection with an exchange offer or any acquisition, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), Purchaser shall give each
Holder written notice of such proposed registration at least thirty (30) days
prior to filing the registration statement respecting such proposed
registration. Upon the written request of any Holder given within twenty (20)
days after the giving of such notice by Purchaser in accordance with Section
12.3, Purchaser shall cause to be registered under the Securities Act all of the
Registrable Securities that each such Holder has requested to be registered,
subject to Sections 9.2(c) and (e) hereof.
(c) INFORMATION CONCERNING HOLDER. It shall be a
condition precedent of the obligations of Purchaser to take any action pursuant
to this Section 9.2 that the selling Holders shall furnish to Purchaser such
information regarding themselves, the Registrable Securities held by them, and
the intended method of disposition of such securities as shall be required to
effect the registration of their Registrable Securities.
(d) EXPENSES. All expenses incurred in connection
with the registration pursuant to Section 9.2 (other than underwriter's
commissions and fees or any fees of others employed by selling Holder, including
attorneys' fees), including without limitation all registration, filing and
qualification fees, printer's and accounting fees, and fees and disbursements of
counsel for Purchaser, shall be borne by Purchaser.
(e) ACCEPTANCE OF UNDERWRITING AGREEMENT. Purchaser
shall not be required under Section 9.2 to include any of the Registrable
Securities in an underwriting of securities being issued by
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Purchaser unless all the Holders thereof accept the terms of the underwriting
agreement as agreed upon between Purchaser and the underwriter selected by
Purchaser, and then only in such quantity, if any, as will not, in the opinion
of the managing underwriter, jeopardize or in any way reduce the success of the
offering by Purchaser.
(f) EXPIRATION OF REGISTRATION RIGHTS. Any obligation
of Purchaser to register the Registrable Securities pursuant to this Section
9.2(f) shall expire on the third anniversary of the receipt by Holders of the
Common Stock.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY SELLER AND STOCKHOLDERS.
(a) GENERAL. Seller and Stockholders, severally and
not jointly, covenant and agree to defend, indemnify and hold Purchaser harmless
for, from and against any and all damages, losses, liabilities (absolute and
contingent), fines, penalties, costs and expenses (including, without
limitation, reasonable counsel fees and costs and expenses incurred in the
investigation, defense or settlement of any claim covered by this indemnity),
whether or not involving a third-party claim arising, directly or indirectly,
from or in connection with: (i) any of the liabilities of Seller, not expressly
assumed hereunder; or (ii) the failure to comply with, or the breach, or the
default by Seller or Stockholder of any of the covenants, warranties or
agreements made by Seller or any Stockholder contained in this Agreement, or any
of the agreements, certificates, documents, exhibits or schedules delivered in
connection with this Agreement. Purchaser shall be entitled to offset any amount
owed to Purchaser under this Article X or under Section 9.1 by Seller or any
Stockholder against the Purchaser Stock or the Convertible Debenture (in each
such case as provided in accordance with the Stock Escrow Agreement), to Seller
or any Stockholder or affiliate. To the extent that any claim covered by this
indemnity can be offset by a claim or right included in the Purchased Assets
pursuant to Section 1.2(d) hereof, Purchaser shall first assert such claims or
rights prior to seeking indemnification pursuant to this Section 10(a).
(b) BULK SALES MATTERS. Purchaser hereby waives
compliance by Seller with the provisions of the Bulk Sales Law of any state, and
Seller warrants and agrees to pay and discharge when due all claims of Seller's
creditors which could be asserted against Purchaser by reason of such
non-compliance. Seller and each of the Stockholders, jointly and severally,
hereby indemnify and agree to hold Purchaser harmless from, against and in
respect of (and shall on demand reimburse Purchaser for) any loss, liability,
cost or expense, including, without limitation, attorneys' fees, suffered or
incurred by Purchaser by reason of the failure of Seller to pay or discharge
such claims.
(c) EXCLUSION FROM INDEMNIFICATION. Seller and
Stockholders shall have no obligation to defend, indemnify or hold Purchaser
harmless pursuant to Section 10.1 hereof with respect to any liability that is
included within the Assumed Liabilities expressly set forth in Section 2.1
hereof or any liability covered by Purchaser's indemnification obligations under
Section 10.2 hereof.
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(d) LIMITATION ON INDEMNITY. Seller and Stockholders
shall have no obligation to defend, indemnify, or hold Purchaser harmless
pursuant to this Section 10.1 for any claim or other matter otherwise covered by
this Section 10.1 unless such claim or other matter exceeds $1,000. In no event
shall the aggregate liabilities of Seller or any Stockholder under or in
connection with this Agreement or the transactions contemplated hereby,
including, without limitation, liabilities under Section 10.1 exceed his or its
pro rata share of the Purchase Price. The limitation set forth in this
subsection shall not apply to (i) with respect to each Stockholder, any claim or
other loss caused by fraud or willful or wanton misconduct by such Stockholder
or, (ii) with respect to Seller, Hammer Trust and ▇▇▇▇▇ only, any breach of the
representations contained in Section 4.4(g) to the extent the breach applies to
the Redken Agreement.
10.2 INDEMNIFICATION BY PURCHASER.
(a) GENERAL. Purchaser covenants and agrees to
defend, indemnify and hold Seller and Stockholders harmless for, from and
against any and all damages, losses, liabilities (absolute and contingent),
fines, penalties, costs and expenses (including, without limitation, reasonable
counsel fees and costs and expenses incurred in the investigation, defense or
settlement of any claim covered by this indemnity), whether or not involving a
third-party claim arising, directly or indirectly from or in connection with:
(i) the inaccuracy of any of the representations or warranties of Purchaser
contained in this Agreement, or any of the agreements, certificates, documents,
exhibits or schedules delivered in connection with this Agreement; (ii) any
Assumed Liabilities; (iii) the failure to comply with, the breach or the default
by Purchaser of any of the covenants, warranties or agreements made by Purchaser
in this Agreement, or any of the agreements, certificates, documents, exhibits
or schedules delivered in connection with this Agreement; or (iv) the operation
of Seller's Business following the Closing.
(b) EXCLUSION FROM INDEMNIFICATION. Purchaser shall
have no obligation to defend, indemnify and hold Seller or any Stockholder
harmless pursuant to Section 10.2(a) hereof with respect to any liability that
is an Excluded Liability set forth in Section 2.2 hereof or any liability
covered by Seller's and Stockholders' indemnification obligations under Section
10.1 hereof.
(c) LIMITATION ON INDEMNITY. Purchaser shall have no
obligation to defend, indemnify, or hold Seller or any Stockholder harmless
pursuant to this Section 10.2 for any claim or other matter otherwise covered by
this Section 10.2 unless such claim or other matter exceeds $1,000. In no event
shall the aggregate liabilities of Purchaser under this Section 10.2 exceed the
Purchase Price; provided, however, that this limitation shall not apply to any
claim against Seller, Hammer Trust or ▇▇▇▇▇ arising as a result of Purchaser's
failure to assume Seller's obligations under the Redken Agreement. The
limitation set forth in this subsection shall not apply to any claim or other
loss caused by fraud or willful or wanton misconduct.
(d) ▇▇▇▇ ▇▇▇▇▇▇ INDEMNIFICATION. In connection with
Purchaser's assumption of the Redken Guarantee by ▇▇▇▇ ▇▇▇▇▇▇, Purchaser shall
indemnify, defend and hold ▇▇▇▇ ▇▇▇▇▇▇ harmless with respect to any liability
arising under such Redken Guarantee from and after the Closing Date. The
limitation set forth in Section 10.2(c) shall not apply to the indemnification
set forth in this Section 10.2(d).
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10.3 NOTICE AND RIGHT TO DEFEND THIRD-PARTY CLAIMS. Promptly
upon receipt of notice of any claim, demand or assessment or the commencement of
any suit, action or proceeding with respect to which indemnity may be sought
pursuant to this Agreement, the party seeking to be indemnified or held harmless
(the "Indemnitee") shall notify in writing, within sufficient time to respond to
such claim or answer or otherwise plead in such action (but in any event within
ten (10) days), the party from whom indemnification is sought (the
"Indemnitor"). In case any claim, demand or assessment shall be asserted, or
suit, action or proceeding commenced against the Indemnitee, the Indemnitor
shall be entitled, at the Indemnitor's expense, to participate therein and, to
the extent that it may wish, to assume the defense, conduct or settlement
thereof, at its own expense, with counsel satisfactory to the Indemnitee, whose
consent to the selection of counsel shall not be unreasonably withheld or
delayed. The Indemnitor shall have the right to settle or compromise monetary
claims without the consent of Indemnitee; however, as to any other claim, the
Indemnitor shall first obtain the prior written consent from the Indemnitee,
which consent shall be exercised in the sole discretion of the Indemnitee. After
notice from the Indemnitor to the Indemnitee of Indemnitor's intent so to assume
the defense, conduct, settlement or compromise of such action, the Indemnitor
shall not be liable to the Indemnitee for any legal or other expenses
(including, without limitation, settlement costs) subsequently incurred by the
Indemnitee in connection with the defense, conduct or settlement of such action
while the Indemnitor is diligently defending, conducting, settling or
compromising such action. The Indemnitor shall keep the Indemnitee apprised of
the status of the suit, action or proceeding and shall make Indemnitor's counsel
available to the Indemnitee to advise the Indemnitee of the status, at the
Indemnitor's expense, upon the request of the Indemnitee. The Indemnitee shall
cooperate with the Indemnitor in connection with any such claim and shall make
personnel, books and records and other information relevant to the claim
available to the Indemnitor to the extent that such personnel, books and records
and other information are in the possession and/or control of the Indemnitee. If
the Indemnitor decides not to participate, the Indemnitee shall be entitled, at
the Indemnitor's expense, to defend, conduct, settle or compromise such matter
with counsel satisfactory to the Indemnitor, whose consent to the selection of
counsel shall not be unreasonably withheld or delayed.
10.4 EXCLUSIVE REMEDIES. The indemnification and defense
provided in this Article X is the sole and exclusive remedy of the parties
hereto for any matter arising under this Agreement after the Closing Date except
to the extent that the claim, demand or assertion arises from fraud or willful
or wanton misconduct of one or more parties to this Agreement.
ARTICLE XI
TERMINATION
11.1 RIGHT TO TERMINATE. Notwithstanding anything to the
contrary contained herein, this Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing: (a) by Seller if the
conditions precedent set forth in Section 6.1 are not satisfied or waived in
writing by Seller; (b) by Purchaser if the conditions precedent set forth in
Section 6.2 are not satisfied or waived in writing by Purchaser; or (c) by
either Seller or Purchaser if the Closing has not occurred by December 31, 1996.
In addition, in the event Purchaser has not acknowledged in writing to Seller
and the Stockholders by November 30, 1996 that the conditions set forth in
Sections 6.2(h) and 6.2(i) have been satisfied, Seller and the Stockholders may
terminate this Agreement.
11.2 REMEDIES. No party shall be limited to the termination
right granted in Section 11.1 hereof by reason of the nonfulfillment of any
condition precedent to such party's closing obligations
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or a breach of another party's representations and warranties, but may, in the
alternative, elect to do one of the following:
(a) PROCEED TO CLOSE. Proceed to Closing despite the
nonfulfillment of any condition precedent to its obligation to proceed to
Closing, it being understood that consummation of the transactions contemplated
herein shall not be deemed a waiver of a breach of any representation, warranty
or covenant or of any party's rights and remedies with respect thereto.
(b) DECLINE TO CLOSE. Decline to proceed to Closing,
terminate this Agreement as provided in Section 11.1 hereof, and thereafter seek
damages to the extent permitted in Sections 11.4 and 11.5 hereof.
11.3 EVENTS ON TERMINATION. In the event the transactions
contemplated hereby shall fail to be consummated for any reason whatsoever, the
officers, directors, agents and representatives of Seller and Stockholders shall
return to Purchaser, and Purchaser, its officers, directors, agents and
representatives shall return to Seller, all written material obtained in
connection with the proposed transactions, and shall keep confidential all
confidential information acquired and shall not use such confidential
information to unfairly compete with the other. Further, Purchaser shall destroy
any internal analysis and spread sheet data compiled utilizing confidential or
financial information pertaining to Seller. In the event this Agreement is
terminated by Purchaser pursuant to Section 11.1(b) hereof (except by reason of
failure of the conditions set forth in Sections 6.2(h) or 6.2(i) hereof), Seller
and Stockholders shall immediately repay to Purchaser the ▇▇▇▇▇▇▇ Deposit.
Except as provided in the preceding sentence and except in the event of any
violation or breach by Seller or a Stockholder of any of its or his obligations
hereunder that gives rise to the termination of this Agreement, Seller and
Stockholders shall be entitled to retain the ▇▇▇▇▇▇▇ Deposit.
11.4 RIGHT TO DAMAGES. If this Agreement is terminated, no
party hereto shall have any liability or obligation to the other; provided,
however, that each party shall remain liable for (i) any wanton or willful
breach of any of the party's representations and warranties or the terms of this
Agreement; (ii) any wanton or willful failure by the party to perform any of his
or its obligations or agreements contained in this Agreement; or (iii) any
violation or breach of the party's obligations pursuant to Sections 5.2(b),
5.2(c) or 11.3 hereof or any other section hereof that specifically survives
termination of this Agreement, in which case the party shall be liable for all
of the other parties' out-of-pocket costs and expenses that were incurred in
connection with the negotiations, due diligence reviews, preparation of this
Agreement, and all of the other documents related to this transaction, and those
costs and expenses that are incurred by the other party in pursuing such rights
and remedies (including reasonable attorneys' fees).
11.5 RIGHT TO DAMAGES. If Seller and or any Stockholder fails
to proceed with the Closing for any reason other than in accordance with Section
11.1 hereof, Seller and Stockholders shall be jointly and severally liable to
pay Purchaser (a) out of pocket expenses (including all legal and accounting
fees and expenses) up to $25,000 (the "Termination Fee"), and (b) the ▇▇▇▇▇▇▇
Deposit, which amount shall be payable by wire transfer of same day funds within
two (2) days after the date such amount becomes due. Seller and Stockholders
acknowledge that the agreements contained in this Section 11.5 are an integral
part of the transactions contemplated by this Agreement and that without these
agreements, Purchaser would not enter into this Agreement; accordingly, if
Seller and Stockholders fail to promptly pay the Termination Fee, Seller and
Stockholders shall also pay Purchaser all its costs and
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expenses incurred by it in pursuing payment of such Termination Fee (including
reasonable attorneys' fees).
11.6 LIMITATION ON DAMAGES. None of the damages permitted to
either party under this Article XI shall exceed the Purchase Price except to the
extent the damages result from fraud or willful or wanton misconduct of one or
more parties to this Agreement.
ARTICLE XII
MISCELLANEOUS
12.1 ASSIGNABILITY. Purchaser may assign all or part of its
rights under this Agreement to any entity which it controls, is controlled by or
is under common control with, and which entity shall assume all of Purchaser's
obligations hereunder with respect to the rights so assigned; provided, however,
that any such assignment shall be subject to Seller's consent, which consent
shall not be unreasonably withheld.
12.2 FEES. Seller, Stockholders and Purchaser each represent
and warrant to the other that the respective warrantor has not dealt with and is
not aware of any dealings with any person, firm or corporation who is or may be
entitled to a broker's commission, finder's fee, investment banker's fee or
similar payment from the other party for arranging these transactions or
introducing the parties to each other. Except as otherwise provided in this
Agreement, Seller and Stockholders shall be solely responsible for their own
fees and expenses incurred in connection with the negotiation, execution and
consummation of this transaction, including without limitation legal and
accounting fees and expenses, none of which shall be borne directly or
indirectly by Purchaser. Purchaser shall be solely responsible for its own fees
and expenses incurred in connection with the negotiation, execution and
consummation of this transaction, including without limitation legal and
accounting fees and expenses, none of which shall be borne by Stockholders or
Seller.
12.3 NOTICES. All notices required or permitted to be given
hereunder shall be in writing and shall be deemed given when delivered in
person, or three (3) business days after being placed in the hands of a courier
service (e.g., DHL or Federal Express) prepaid or faxed provided that a
confirming copy is delivered forthwith as herein provided, addressed as follows:
If to Seller:
Kotchammer Investments, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
With a copies to:
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
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and
▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
If to Stockholders:
▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Trustees of the Hammer Family Living Trust
dated July 3, 1993
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
FAX:
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▇▇▇▇▇▇ ▇▇▇▇▇
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FAX:
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The ▇▇▇▇▇ Family Trust
dated December 19, 1989
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FAX:
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If to Purchaser:
Styling Technology Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇'▇▇▇▇▇▇, Cavanagh, Anderson,
▇▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section.
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12.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by each of the parties hereto shall survive
the Closing for a period of two (2) years.
12.5 LEGAL AND OTHER COSTS.
(a) Subject to Article X hereof, in the event any
party defaults (the "Defaulting Party") in his or its obligations under this
Agreement and, as a result thereof, the other party (the "Non-Defaulting Party")
seeks to legally enforce his or its rights hereunder against the Defaulting
Party, then, in addition to all damages and other remedies to which the
Non-Defaulting Party is entitled by reason of such default, the Defaulting Party
shall promptly pay to the Non-Defaulting Party an amount equal to all costs and
expenses (including reasonable attorneys' fees) paid or incurred by the
Non-Defaulting Party in connection with such enforcement.
(b) Subject to Article X hereof, in the event that
the Non-Defaulting Party is entitled to receive an amount of money by reason of
the Defaulting Party's default hereunder, then, in addition to such amount of
money, the Defaulting Party shall promptly pay to the Non-Defaulting Party a sum
equal to interest on such amount of money accruing at the rate of ten percent
(10%) per annum (but if such rate is not permitted under the laws of the State
of California, then at the highest rate which is permitted to be paid under the
laws of the State of California) during the period between the date such payment
should have been made hereunder and the date of the actual payment thereof.
12.6 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties and shall be binding upon and inure to the benefit
of the parties hereto and their respective legal representatives, successors and
permitted assigns. Each exhibit and schedule shall be considered incorporated
into this Agreement. Any amendments or alternative or supplementary provisions
to this Agreement must be made in writing and duly executed by an authorized
representative or agent of each of the parties hereto.
12.7 NON-WAIVER. The failure in any one or more instances of a
party to insist upon performance of any of the terms, covenants or conditions of
this Agreement, to exercise any right or privilege in this Agreement conferred,
or the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party. A breach of any
representation, warranty or covenant shall not be affected by the fact that a
more general or more specific representation, warranty or covenant was not also
breached.
12.8 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, and all such
counterparts shall constitute but one instrument.
12.9 SEVERABILITY. The invalidity of any provision of this
Agreement or portion of a provision shall not affect the validity of any other
provision of this Agreement or the remaining portion of the applicable
provision.
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12.10 APPLICABLE LAW. This Agreement shall be governed and
controlled as to validity, enforcement, interpretation, construction, effect and
in all other respects by the internal laws of the State of California applicable
to contracts made in that state.
12.11 CONSTRUCTION. The parties hereto acknowledge and agree
that each party has participated in the drafting of this Agreement and that this
document has been reviewed by the respective legal counsel for the parties
hereto and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be applied
to the interpretation of this Agreement. No inference in favor of, or against,
any party shall be drawn from the fact that one party has drafted any portion
hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
SELLER: STOCKHOLDERS:
KOTCHAMMER INVESTMENTS, INC. ▇▇▇▇ ▇. ▇▇▇▇▇▇ AND ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Trustees, The Hammer Family
Living Trust dated July 3, 1993
By:
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Name:
-----------------------------
Its: By:
----------------------------- -----------------------------
▇▇▇▇ ▇▇▇▇▇▇, Trustee
PURCHASER: By:
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STYLING TECHNOLOGY CORPORATION ▇▇▇▇▇ ▇▇▇▇▇▇, Trustee
THE ▇▇▇▇▇ FAMILY TRUST dated December
By: 19, 1989
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Name:
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Its:
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By:
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▇▇▇▇▇ ▇▇▇▇▇, Trustee
By:
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▇▇▇▇▇ ▇▇▇▇▇, Trustee
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▇▇▇▇▇▇ ▇▇▇▇▇
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