EXHIBIT 10.17
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into this 31st day of January, 1996, by and between Xxxxxxx Xxxxxx Fragrances,
Inc., a Nevada corporation (the "Seller") and Xxxxxx Xxxxxxxxxx, Inc., a
Delaware corporation (the "Buyer").
WHEREAS, the Seller is engaged in the business of selling, marketing,
manufacturing and distributing licensed fragrances, cosmetics and personal care
products, and providing warehousing and other services to customers (the
"Business");
WHEREAS, the Seller desires to sell or otherwise transfer to the Buyer
substantially all of the assets owned and used by Seller in the conduct of the
Business (except for those specifically excluded), together with certain of the
liabilities of the Seller incurred in the operation of the Business (except for
those specifically excluded); and
WHEREAS, the Buyer desires to purchase and acquire said assets and
agrees to assume certain of said liabilities of the Seller.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties intending
to be legally bound hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
The following terms are used with the meanings given them herein:
1.1. "Affiliate" shall mean with respect to a specified person, any
officer or director of such specified person, and any person who directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such specified person.
1.2. "Xxxxx Properties Lease" shall mean Lease of Improved Properties,
dated December 10, 1993, between Xxxxx Properties Limited Partnership and
Seller, relating to that certain property at 00 Xxxxxxxxx Xxxxxxxxx, Xxxxxx,
Xxxxxxxxxxx.
1.3. "Excluded Assets" shall mean the assets and properties
referred to in Section 2.2.
1.4. "Financial Statements" shall mean the financial
statements of Seller referred to in Section 5.5.
1.5. "GAAP" shall mean generally accepted accounting
principles
1.6. "Income Taxes" shall mean all federal, state, local or foreign
income taxes (inclusive of all interest and penalties thereon) imposed upon
Seller with respect to the Business or the assets of Seller, and which are based
in whole or in part upon income, but excluding any Taxes.
1.7. "Inventory" shall mean all finished goods, raw
materials, packaging components, work-in-process, and all
advertising materials relating to the Baryshnikov and Xxxxxxx
Xxxxx brands.
1.8. "Notes" shall mean the $5,157,750 principal amount of
10% Convertible Subordinated Promissory Notes of Seller.
1.9. "Purchased Assets" shall have the meaning given to
such term in Section 2.1.
1.10. "Taxes" shall mean all federal, state, local or foreign taxes,
assessments, additions to tax, deficiencies, duties, fees and other governmental
charges or impositions of any kind whatsoever, whether measured by properties,
assets, wages, payroll, withholding, purchases, value added, payments, sales,
use, business, capital stock or surplus income arising from or in connection
with the Business or the assets of Seller prior to the Closing Date, or the
transactions contemplated by this Agreement (inclusive of all interest and
penalties thereon), but excluding any Income Taxes.
1.11. "Transaction Documents" shall mean this Agreement, the Xxxx of
Sale, the Assignment and Assumption Agreement, the Employment Agreements, the
Registration Rights Agreement, and any other instruments or documents executed
and delivered in connection with the transactions contemplated hereby.
ARTICLE II
PURCHASE AND SALE OF ASSETS AND ASSUMPTION OF CERTAIN LIABILITIES
2.1. Assets to be Sold. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing (as
defined below) the Seller shall sell, transfer, assign and
deliver to the Buyer, free and clear of all claims, charges,
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liens, contracts, rights, options, pledges, security interests, mortgages,
encumbrances and restrictions whatsoever (collectively, the "Claims"), all with
the intention that the Business shall be transferred to the Buyer as a going
concern, substantially all of the assets, properties and rights owned by the
Seller or in which the Seller has any right or interest, of every type and
description, real, personal and mixed, tangible and intangible (the assets being
purchased by the Buyer being referred to as the "Purchased Assets"), including
without limitation the following:
(a) Cash, cash equivalents, marketable securities, prepaid
expenses, accounts receivable and other rights to receive payment with
respect to the Business, as reflected on a closing balance sheet to be
delivered by Seller not more than ten (10) business days after the
Closing Date (the "Closing Balance Sheet");
(b) All of the Seller's licenses, sublicenses, patents,
trademarks, trade names, service marks, copyrights, trade secrets or
other intangible assets or rights used or useful in connection with the
Business, including but not limited to those listed on Schedule 2.1(b)
(collectively, the "Intellectual Property"), but excluding those
trademarks and trade names listed on Schedule 2.1(b) hereto;
(c) All Inventory, both on premises and at contract
manufacturers, as defined in Section 1.6 hereof;
(d) All owned equipment relating to the Business
(collectively, the "Equipment"), including but not limited to the
assets listed on Schedule 2.1(d) hereto;
(e) All office furnishings, office equipment and fixtures
owned by the Seller which are capable of being sold by Seller and which
have not been attached to the premises, the result of which the
landlord possesses certain ownership rights;
(f) Those security and other deposits and advances, including
"Key-Man" insurance funding, maintained for use in the conduct of the
Business which appear on the Financial Statements, but as they may
exist at the Closing;
(g) All customer files and lists of customers,
suppliers and distributors of the Business;
(h) All rights and claims under (x) those purchase orders
listed on Schedule 5.22, (y) supply orders accepted by Seller in the
ordinary course of business, and (z) those commitments related to the
Business as shall be specified by Buyer prior to or at Closing;
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(i) All rights to and under those specific computer, equipment
and other leases (including any leasehold improvements) related to the
Business as are set forth on Schedule 2.1(i);
(j) Subject to Section 10.3, all documents and records
relating to the Purchased Assets, and the operations of the Business
(including historical costing and pricing data, employment and
personnel records for all Employees of the Business (as defined in
Section 5.6 hereof) hired by Buyer);
(k) All of Seller's right, title and interest in and to all
contracts or agreements to which Seller is a party or shall become a
party prior to the Closing Date (other than this Agreement and the
agreements executed pursuant hereto or contemplated hereby)
(collectively, the "Contracts");
(l) All accounting books, records, ledgers and
electronic data processing materials relating to the
Business;
(m) All software and documentation thereof owned by
Seller which are used or intended to be used in the conduct
of the Business;
(n) All transferable rights to telephone numbers of
the Business;
(o) All goodwill associated with the Business;
(p) All other assets, properties, rights and claims owned by
Seller related to the operations of the Business which arise in or from
the conduct thereof; and
(q) All rights to barter transactions;
provided, however, that the definition of Purchased Assets shall not include any
items defined below as Excluded Assets.
2.2. Excluded Assets. The following assets (the "Excluded
Assets") shall not be sold or transferred to Buyer:
(a) Corporate accounting journals and corporate books
of account which comprise Seller's permanent accounting or
tax records;
(b) Any Contract which, by its terms, is not assignable by
Seller without the waiver or consent of another party thereto and as to
which such waiver or consent shall not have been given by Closing;
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(c) All corporate documents relating to the legal or financial
structure of the Seller, including but not limited to, minute books,
stock records, corporate seal and documents filed with the Securities
and Exchange Commission; and
(d) All rights of the Seller under this Agreement and the
agreements executed in connection herewith, including the consideration
to be received by Seller hereunder.
2.3. Assumed Liabilities. Upon the terms and subject to
the conditions of this Agreement, at Closing, Buyer shall assume
the following liabilities only (the "Assumed Liabilities"):
(a) Liabilities under leases specified in Schedule
2.1(i) commencing with the period from and after the Closing
Date;
(b) Liabilities of Seller which are set forth on the Balance
Sheet of Seller dated September 30, 1995 (other than the Notes), to the
extent that they exist on the Closing Date;
(c) Such additional amounts of liabilities of Seller of the
types reflected on said Balance Sheet as may arise between September
30, 1995 and the Closing Date in the ordinary course of business and as
reflected on the Closing Balance Sheet; and
(d) All obligations under Contracts, customer orders, purchase
orders, and other agreements and commitments relating to the Business
that are included in the Purchased Assets (except liabilities of Seller
on any of the foregoing arising from Seller's defaults, if any,
thereon, or liabilities for benefits received by Seller through the
Closing Date, except as pro-rated at Closing);
2.4. Excluded Liabilities and Obligations. Except as expressly set
forth in Section 2.3, Buyer does not assume and shall not be liable for any
debt, obligation, responsibility or liability of the Business through the
Closing Date or of Seller, whether known or unknown, contingent or absolute, or
otherwise (collectively, the "Excluded Liabilities"), and Seller agrees to
indemnify and hold harmless Buyer from and against any Excluded Liabilities in
accordance with Section 12.2 hereof. In particular, but without limiting the
generality of the foregoing, Buyer shall have no responsibility with respect to
the following Excluded Liabilities:
(a) Liabilities and obligations of Seller to the
holders of the Notes (collectively, the "Noteholders"),
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including without limitation for any principal of or
interest on the Notes, whether or not accrued;
(b) Liabilities and obligations relating to accrued vacation,
sick leave, or holiday pay, or the relocation or termination of
employees of the Business whether or not they are retained by Buyer;
(c) Liabilities and obligations with respect to any Employee
Plan (as defined in Section 5.18 hereof) maintained or contributed to
at any time by Seller for the benefit of any Employees of Seller used
in connection with the Business;
(d) All legal, accounting and other fees (if any), Taxes or
other expenses incurred by Seller in connection with this Agreement and
the transactions contemplated hereby, including without limitation any
applicable sales taxes or transfer taxes in connection with the sale of
the Purchased Assets;
(e) All other Taxes for periods prior to the Closing;
(f) All Income Taxes;
(g) Liabilities and obligations in respect of the
Excluded Assets; and
(h) Liabilities and obligations relating to any pending or
threatened suits, actions or claims against Seller, whether or not
known to Seller or Buyer.
ARTICLE III
CONSIDERATION FOR TRANSFER
3.1. Purchase Price. The purchase price for all of the Purchased Assets
(the "Purchase Price") shall be (a) 370,000 shares of newly-issued Common Stock
of the Buyer (the "Acquisition Shares") and (b) $750,000, to be paid at Closing
by wire transfer of immediately available funds in U.S. dollars to an account as
instructed by Seller not less than five (5) business days prior to the Closing.
ARTICLE IV
THE CLOSING AND TRANSFER OF PURCHASED ASSETS
4.1. Closing. The transfer of the Purchased Assets
contemplated by this Agreement (the "Closing") shall occur at the
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offices of Xxxxx, Xxxxx & Xxxxx, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at
10:00 A.M. on April 30, 1996 or at such other place or time as soon thereafter
as practicable as may be agreed upon by the parties in writing (the "Closing
Date"). Upon consummation, the Closing shall be deemed to take place as of the
Closing Date.
4.2. Closing Physical Inventory Extension. Not more than thirty (30)
days nor less than ten (10) days prior to Closing, Seller at its own cost shall
conduct a physical count of the Inventory, upon which the Inventory will be
established, and shall permit Buyer and its representatives to observe the
procedures and the results thereof shall be delivered to Buyer along with copies
of all work papers in reasonable detail within ten (10) days after the Closing.
4.3. Deliveries by Buyer. At the Closing, Buyer shall
deliver the following:
(a) The cash portion of the Purchase Price as provided
for in Section 3.1 hereof;
(b) Stock certificates evidencing the Acquisition Shares, in
the name or names and, as applicable, in such amounts, as requested by
Seller in writing not less than five (5) business days prior to the
Closing;
(c) Opinion of counsel contemplated by Section 9.2;
(d) Certified resolutions and officer's certificate
contemplated by Sections 9.4 and 9.1;
(e) Employment Agreements contemplated by Section 7.3;
(f) Registration Rights Agreement in favor of the
Noteholders contemplated by Section 7.4;
(g) The Assignment and Assumption Agreement in form acceptable
to Buyer's counsel providing for the assignment to Buyer of certain
Purchased Assets and the assumption by Buyer of all Assumed
Liabilities;
(h) Each of the other Transaction Documents to which
Buyer is a party; and
(i) Such other instruments or documents as may be reasonably
requested by Seller to carry out the transactions contemplated by this
Agreement and to comply with the terms hereof.
4.4. Deliveries by Seller. At the Closing, Seller shall
deliver the following documents:
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(a) The Assignment and Assumption Agreement;
(b) Xxxx of Sale in form acceptable to Buyer's counsel
for all of the Purchased Assets;
(c) Opinion of counsel contemplated by Section 8.2;
(d) Certified resolutions and officer's certificate
contemplated by Sections 8.5 and 8.1;
(e) All Schedules required by this Agreement;
(f) Employment Agreements contemplated by Section 7.3;
(g) Registration Rights Agreement in favor of the
Noteholders contemplated by Section 7.4;
(h) Each of the other Transaction Documents to which
Seller is a party; and
(i) Such other instruments or documents as may be reasonably
requested by Buyer to carry out the transactions contemplated by this
Agreement and to comply with the terms hereof.
At the Closing and thereafter, Seller shall take all steps necessary to put
Buyer in actual possession and operating control of the Business and the
Purchased Assets.
ARTICLE V
REPRESENTATIONS AND
WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date hereof and as of
the Closing Date, as follows:
5.1. Authority. The execution and delivery by Seller of this Agreement
and the other Transaction Documents, the performance by Seller of its
obligations hereunder, and the consummation of the transactions contemplated
hereby, have been duly and validly authorized by all necessary corporate action
on the part of the Seller (subject, prior to the Closing Date, to the approval
thereof by the stockholders of Seller and the Noteholders) and Seller has all
necessary corporate power with respect thereto.
5.2. Other Consents and Approvals; Validity. Except as
disclosed on Schedule 5.2 hereto, no filing with, and no
authorization, consent or approval of, any governmental agency or
other person is necessary for the consummation of the
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transactions contemplated hereby. Subject to Schedule 5.2, all such filings,
authorizations, consents and approvals have been, or will be, obtained or made
prior to Closing by Seller. This Agreement and each of the other Transaction
Documents to be executed and delivered by Seller at Closing will at such time be
duly executed and delivered and are the lawful, valid and legally binding
obligations of Seller, enforceable in accordance with their respective terms,
except as enforcement may be limited by applicable bankruptcy, insolvency,
rearrangement, reorganization or similar debtor relief legislation affecting the
rights of creditors, generally. Subject to obtaining the consents and approvals
set forth on Schedule 5.2, the execution and delivery of this Agreement and the
other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby will not result in the creation of any lien,
charge or encumbrance on the Purchased Assets and are not prohibited by, do not
violate or conflict with any provision of, and do not result in a default under
or a breach of (i) the charter or By-laws of Seller, (ii) any contract or other
instrument to which Seller is a party or by which Seller or any of Seller's
assets may be bound, (iii) any regulation, order, decree or judgment of any
court or governmental agency, or (iv) any law applicable to Seller, except for
such violations, conflicts or defaults which do not (x) prevent the consummation
of the transactions contemplated hereby, or (y) have a material adverse effect
on Seller or the Business.
5.3. Due Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of Nevada, and has full corporate
power and authority to own or lease its properties and to carry on the Business.
Seller is duly licensed and qualified to do business as a foreign corporation
and is in good standing in all jurisdictions where, by the nature of its
business or the character and location of its property or personnel, failure to
be so licensed or qualified would have a material adverse effect on the
Business.
5.4. Transactions with Affiliates. Except as disclosed in
Schedule 5.4 hereto, no Affiliate of Seller, or any corporation
or other business in which any of the foregoing has any
controlling interest:
(i) has a controlling interest in any corporation,
firm or other entity which is a competitor, material
supplier or customer of the Business; or
(ii) owns any property or right used in the conduct of
the Business.
5.5. SEC Documents; Financial Statements. Seller has
delivered to Buyer a true and complete copy of each form, report,
schedule, registration statement and definitive proxy statement
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filed by Buyer with the Securities and Exchange Commission (the "SEC") since
June 30, 1995 which are all the documents (other than preliminary material) that
Seller was required to file with the SEC since such date (the "SEC Documents")
and, without duplication, the audited Financial Statements of Seller for the
prior five (5) fiscal years. As of their respective dates, the SEC Documents
(other than preliminary material) complied in all material respects with the
Securities Act of 1933, as amended (the "Securities Act") or the Securities
Exchange Act of 1934, as amended, (the "Exchange Act"), as applicable, and none
of the SEC Documents (including all Financial Statements included therein and
exhibits and schedules thereto and documents incorporated by reference therein)
contained any untrue statement of material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
Financial Statements comply as to form in all material respects with applicable
accounting requirements and with the rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto, or in the case of the unaudited Financial Statements, as
permitted by Exchange Act Form 10-QSB) and fairly present (subject, in the case
of unaudited financial statements, to normal recurring audit adjustments that,
individually and in the aggregate, were not material) the consolidated financial
position of Seller as at the date thereof and the consolidated results of their
operations and cash flows for the periods then ended.
5.6. Absence of Adverse Change; Conduct of Business. Except as set
forth on Schedule 5.6 hereof, since June 30, 1995, there has been no material
adverse change in the Business, financial condition, operations, property or
affairs of the Seller, other than those disclosed in the SEC Documents, and
there is no condition or development or contingency of any kind existing or in
prospect which, so far as reasonably can be foreseen by the Seller, may result
in any such material adverse change. Without limiting the generality of the
foregoing, except as set forth on Schedule 5.6, since June 30, 1995 there has
not been, occurred or arisen:
(a) Any damage, destruction or loss to any Purchased Asset
(whether or not covered by insurance) that, individually or in the
aggregate, would have a material adverse effect on the Business or its
prospects;
(b) Any material change in the business or operations of
Seller or in the manner of conducting the Business or sale or other
disposition or any right, title or interest in or to any assets or
properties used in the Business or any
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revenues derived therefrom other than in the ordinary course
of business;
(c) Any increase in any compensation or benefits payable to
any employee or consultant of the Seller (collectively, "Employees"),
other than those outlined in the Permanent Manpower Budget for the
period commencing January 1, 1996, or any bonus, service, pension,
award, percentage compensation or other benefit paid, granted or
accrued to or for the benefit of any Employee;
(d) Any sale, assignment or transfer of any of the tangible
Purchased Assets used by the Seller except in the ordinary course of
business consistent with past practice, or cancellation of any debt or
claim owing to or owed by the Seller;
(e) Any sale, assignment, transfer or grant of any
Intellectual Property used or useful in the Business;
(f) Any material transaction other than in the
ordinary course of business;
(g) Any amendment or modification of any material
Contract, franchise, permit or license; or
(h) Any commitment (contingent or otherwise) to do any
of the foregoing.
5.7. Intellectual Property. Schedule 2.1(b) contains a complete and
correct list and summary description of all of the Intellectual Property used or
useful in the Business, other than rights that are set forth on Schedule 2.1(b),
and contains a complete and correct list and summary description of all licenses
and other agreements relating to any of the foregoing Intellectual Property.
Except as disclosed in Schedule 2.1(b), with respect to the foregoing items of
Intellectual Property, (i) Seller is the sole and exclusive owner and, to the
best of its knowledge, Seller has the sole and exclusive right to use the same
in the conduct of the Business, free and clear of any and all Claims; (ii) no
proceedings have been instituted, are pending or to the best of Seller's
knowledge are threatened which challenge any rights in respect thereto or the
validity thereof; (iii) to the best of Seller's knowledge none of the
Intellectual Property or Seller's use thereof infringes upon or otherwise
violates the rights of others or is being infringed upon by others, and none is
subject to any outstanding order, decree, judgment, stipulation or charge; (iv)
no licenses, sublicenses or agreements pertaining to any of the Intellectual
Property have been granted by Seller; and (v) Seller has no notice of any
patent, invention or application therefor which would infringe upon any of the
Intellectual Property.
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5.8. Insurance. The Seller is, and will be through the Closing, fully
insured with nationally recognized insurers in respect of its properties, assets
and business against risks normally insured against by entities in similar lines
of business under similar circumstances. Schedule 5.8 contains a complete and
correct list and summary description (including the type, name of the insurer,
policy number, coverage, limits, premium and expiration date) of all policies of
insurance relating to the Purchased Assets or the Business, which insurance will
remain in full force and effect with respect to all events occurring prior to
the Closing.
5.9. Title to Purchased Assets. Seller is the sole and exclusive legal
and equitable owner of all right and interest in and has good and marketable
title to all of the tangible Purchased Assets. Except as set forth in Schedule
5.9, none of such property and assets is subject to (i) any contract of sale,
except inventory to be disposed of in the ordinary course of business, or (ii)
any Claims of any kind or character, direct or indirect, whether accrued,
absolute, contingent or otherwise. On the Closing Date, Seller shall convey to
Buyer good, marketable and indefeasible title to all of the tangible Purchased
Assets free and clear of any Claims. Except for the Purchased Assets and the
Excepted Assets, there are no other assets or agreements which are presently
used by Seller or which Seller deems necessary to carry on the Business which
are not being transferred to Buyer pursuant to this Agreement.
All of the tangible Purchased Assets are in good condition, operable
and useable for the purposes and in the manner for which they are presently
being used (ordinary wear and tear excepted), and the tangible Purchased Assets
have not been damaged by any fire, accident, act of God or any other casualty to
an extent that materially and adversely impairs the Business or any such
tangible Purchased Asset.
5.10. Employees. Schedule 5.10 contains a complete and correct list and
a summary description of all written and oral employment contracts with
officers, directors and other Employees of Seller, incentive arrangements,
"Keyman" insurance plans, pension plans, profit sharing plans and other employee
compensation or benefit plans, arrangements or understandings of Seller or to
which Seller is a party or otherwise bound, other than Employee Plans disclosed
in Section 5.18. None of Seller's employees are covered by collective bargaining
agreements. Schedule 5.10 also sets forth the name, position and present rate of
compensation, direct and indirect, of each employee of the Business together
with the title or job classification of each such person and the base annual and
the total compensation paid to each such person by the Seller in calendar year
1995 and anticipated to be paid in calendar year 1996. Except as set forth on
Schedule 5.10, none of such persons has an employment
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agreement or understanding, whether oral or written, with the Seller which is
not terminable on notice by the Seller without cost or other liability to the
Seller. No person listed on Schedule 5.10 has notified the Seller that he or she
intends to terminate his or her employment with the Seller or seek a material
change in his or her duties or status.
5.11. Material Contracts. All contracts, agreements, instruments, plans
and leases (other than those entered into after the date hereof with the written
consent of Buyer or as otherwise permitted hereby) related to the Business or by
which any of Seller's properties are subject or bound, meeting any of the
descriptions set forth below (the "Material Contracts"), are listed on Schedule
5.11, identified by each applicable paragraph number:
(a) any lease of real estate;
(b) any lease of equipment, computer hardware or other
personal property;
(c) any continuing, or requirements contract or
agreement for the purchase of any materials or supplies by
Seller;
(d) any contract involving any expenditure in excess
of $10,000; and
(e) any continuing, or requirements agreements or commitments
obligating Seller to sell or deliver any product or service.
Except as set forth in Schedule 5.11, (i) all Material Contracts are
valid and binding in accordance with their terms and are in full force and
effect, (ii) no party to any Material Contract has prepaid any amounts due
thereunder for performance by the other party, and (iii) Seller is not, and to
its best knowledge, no other party is, in breach of any material provision of,
in material violation of, or in default under any material term of, any Material
Contract, and (iv) neither party has asserted or to Seller's best knowledge,
threatened to assert any default under any Material Contract. Seller will
deliver not later than fifteen days prior to Closing true and complete copies of
all Material Contracts and all other Contracts, leases and commitments included
in the Purchased Assets.
5.12. Product Liability. Schedule 5.12 attached hereto, to be updated
at Closing, contains a complete and accurate list and summary description of all
claims asserted against Seller arising from or alleged to arise from actual or
alleged injury to persons or property as a result of the conduct of the Business
or the ownership, possession, or use of any Purchased Asset manufactured
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prior to the date of this Agreement (and, as updated, through the Closing Date).
There are no recalls pending, or to the best knowledge of Seller threatened with
respect to any of the Purchased Assets. No report has been filed by Seller under
any applicable act or statute with respect to any product defects or hazards in
connection with the Purchased Assets and there have been to the best knowledge
of Seller, no material recurring defects therein which create a hazard.
5.13. Litigation. There is no (i) action, suit, claim, proceeding or
investigation pending or, to the best of the Seller's knowledge, threatened
against or affecting the Seller or the Business (whether or not the Seller is a
party or prospective party thereto), at law or in equity, or before or by any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, (ii) arbitration
proceeding relating to the Seller or the Business or (iii) governmental inquiry
pending or to the best of Seller's knowledge threatened against or involving the
Seller or the Business, and, to the Seller's best knowledge, there is no basis
for any of the foregoing. There are no outstanding orders, writs, judgments,
injunctions or decrees of any court, governmental agency or arbitration tribunal
against, involving or affecting the Seller and the Seller is not in default with
respect to any order, writ, injunction or decree known to or served upon it from
any court or of any Federal, state, municipal other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign. There
is no action or suit by the Seller pending or threatened against others.
5.14. Certain Practices. Neither the Seller nor any of its officers,
employees or consultants has, directly or indirectly, given or agreed to give
any significant rebate, gift or similar benefit to any supplier, customer,
governmental employee or other person who was, is or may be in a position to
help or hinder the Seller (or assist in connection with any actual or proposed
transaction) which (i) could subject the Seller or the Buyer to any damage or
penalty in any civil, criminal or governmental litigation or proceeding, or (ii)
if not continued in the future, could have an adverse effect on the Business.
5.15. Compliance with Law. The Seller has complied with and is not in
default under, all laws, ordinances, legal requirements, rules, regulations and
orders applicable to it, its operations, properties, assets, products and
services, except for violations or defaults which, individually or in the
aggregate, do not have a material adverse effect on the Seller, the Purchased
Assets or the Business. There is no existing law, rule, regulation or order, and
the Seller is not aware of any proposed law, rule, regulation or order, whether
Federal or state, which would prohibit or materially restrict Buyer from, or
otherwise materially adversely affect the Buyer in, conducting
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the Business in any jurisdiction in which such business is now
conducted.
5.16. Licenses and Permits. The Seller has all licenses, permits,
consents, approvals and authorizations of or from any public or governmental
agency, used in or otherwise necessary in the conduct of the Business
(collectively, the "Permits"), and, other than as set forth on Schedule 5.16,
all Permits will be duly and validly transferred to the Buyer. The Seller has
complied with all conditions and requirements of the Permits and the Seller has
not received any notice of, and has no reason to believe, that any appropriate
authority intends to cancel or terminate any of the Permits or that valid
grounds for such cancellation or termination exist. The Seller owns or has the
right to use the Permits in accordance with the terms thereof without any
conflict or alleged conflict or infringement with the rights of others and
subject to no Claim, and each Permit is valid and in full force and effect, and
will not be terminated or adversely affected by the transactions contemplated
hereby.
5.17. Labor and Employee Relations. The Seller is not a party to or
bound by any collective bargaining agreement with any labor organization, group
or association covering any of its Employees, and the Seller does not have any
knowledge of any attempt to organize any of its Employees by any person, unit or
group seeking to act as their bargaining agent. There are no pending or to the
best of Seller's knowledge threatened charges (by employees, their
representatives or governmental authorities) of unfair labor practices or of
employment discrimination or of any other wrongful action with respect to any
aspect of employment of any person employed or formerly employed by the Seller.
The Seller has not experienced any work stoppages during the last three (3)
years, and to the best of the Seller's knowledge, no work stoppage is planned or
threatened.
5.18. Employee Benefits. Set forth on Schedule 5.18 is a list of any
pension, profit sharing, retirement, deferred compensation, stock purchase,
stock option, incentive, bonus, vacation, severance, disability,
hospitalization, medical insurance, life insurance, fringe benefit, welfare and
other employee benefit plans, programs or arrangements to which Employees of the
Seller are entitled (the "Employee Plans").
The Seller will maintain the benefits, if any, of the Employee Plans
listed on Schedule 5.18 in full force and effect through the Closing Date, and
thereafter with respect to events occurring on or prior to the Closing. The
Buyer shall not have any obligation of any kind or nature for any compensation
or benefits of any kind or nature of the Seller's Employees for services
rendered prior to the Closing.
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Each "Employee Welfare Benefit Plan" (as defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) covering
any present or former employee of the Seller subject to the requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") has complied
with all requirements for continuation coverage under group health benefit plans
under COBRA and there are no claims against the Seller for a failure or alleged
failure to comply with the COBRA continuation requirements.
Each Employee Plan, if any, which is subject to ERISA conforms to, and
its operation and administration are in compliance with, all applicable
requirements of ERISA. There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the best knowledge of the Seller and the
Stockholders, to the best of Seller's knowledge threatened against any Employee
Plan or against the assets of any Employee Plan.
5.19. Environmental Matters. The Seller and all premises occupied and
used by it are in material compliance with all applicable laws, rules,
regulations, orders, ordinances, judgments and decrees of all governmental
authorities with respect to all environmental statutes, rules and regulations.
The Seller is not aware of, nor has the Seller received notice of, any past,
present or future events, conditions, circumstances, activities, practices,
incidents, actions or plans of the Seller, which may interfere with or prevent
continued compliance, or which may give rise to any common law or legal
liability, or otherwise form the basis of any claim, action, suit, proceeding,
hearing, or investigation, based on or related to the disposal, storage,
handling, manufacture, processing, distribution, use, treatment, or transport,
or the emission, discharge, release or threatened release into the environment,
of any Substances (as defined below). The Seller has obtained and holds all
registrations, permits, licenses and authorizations issued by or on behalf of
any Federal, state or local government body or agency that are required in
connection with the conduct of the Seller's business, the discharge or emission
of Substances from its facilities or the generation, treatment, storage,
transportation or disposal of any Substances. As used in this Section 5.19, the
term "Substances" shall mean any pollutant, hazardous substance, hazardous
material, hazardous waste or toxic waste, as defined in any presently enacted
Federal, state or local statute or any regulation that has been promulgated
pursuant thereto.
5.20. Subsidiaries. Seller has no subsidiaries.
5.21. Customers. Schedule 5.21 is a complete list of all
customers of the Business who purchased products from Seller in
excess of $5,000 in fiscal 1995. Except as disclosed in Schedule
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5.21, none of such customers who accounted for more than 5% of sales in fiscal
1995 has, to the best knowledge of Seller, as of the date of this Agreement and
the Closing Date, discontinued or decreased its purchases of products from
Seller, and Seller has received no notice of any intention of such customers to
discontinue purchasing any products of the Business previously purchased by
them.
5.22. Purchase Orders. Schedule 5.22 correctly sets forth the
quantities and the total aggregate amount (within 5%) applicable to the purchase
orders of Seller described thereon, and Seller is not materially in default in
respect of any shipping release requirements thereof. The original quantities
ordered and the outstanding amounts thereon are not in excess of normal
requirements.
5.23. Taxes. Seller has filed all tax returns and reports
required by law to have been filed by it and has paid all Taxes
thereby shown to be owing.
5.24. All Material Information. No representation or warranty in any
document, schedule, certificate, or other instrument furnished or to be
furnished to Buyer by Seller in connection with the transactions contemplated by
this Agreement contains or will contain any untrue statement of a material fact
or omits to state any material facts necessary in order to make any statements
of fact contained herein or therein, in light of the circumstances under which
they are made, not misleading.
ARTICLE VI
REPRESENTATIONS AND
WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Seller as of the date
hereof, and as of the Closing Date, as follows:
6.1. Authority. Buyer has full legal right, power and authority to
execute and deliver this Agreement and the other Transaction Documents to which
it is a party and to carry out the transactions contemplated hereby and thereby,
and all corporate and other actions required to be taken by Buyer to authorize
the execution, delivery and performance of this Agreement and the other
Transaction Documents to which it is a party and all transactions contemplated
hereby and thereby will have been duly and properly taken. No consents of third
parties are necessary in connection with the execution, delivery and performance
of this Agreement and such other Transaction Documents.
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6.2. Validity. This Agreement and the other Transaction Documents to be
executed and delivered by Buyer at Closing have been, or will at Closing be,
duly executed and delivered by the Buyer and are the lawful, valid and legally
binding obligations of the Buyer, enforceable in accordance with their
respective terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, rearrangement, reorganization or similar debtor relief legislation
affecting the rights of creditors. The execution and delivery of this Agreement
does not and the consummation of the transactions contemplated hereby will not
result in the creation of any lien, charge or encumbrance or the acceleration of
any indebtedness or other obligation of the Buyer and are not prohibited by, do
not violate or conflict with any provision of, and do not result in a default
under or a breach of (i) the Buyer's charter or By-laws, (ii) any contract,
agreement or other instrument to which the Buyer is a party, (iii) any
regulation, order, decree or judgment of any court or governmental agency, or
(iv) any law applicable to the Buyer, except for such violations, conflicts or
defaults which do not (x) prevent the consummation of the transactions
contemplated hereby, or (y) have a material adverse effect on Buyer.
6.3. Due Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware, with full power and authority to own or
lease its properties and to carry on the business in which it is
engaged.
6.4. Capitalization. The authorized capital stock of Seller consists of
20,000,000 shares of Common Stock, $0.01 par value ("Common Stock"), of which
9,860,822 shares are outstanding and 5,000,000 shares of preferred stock, $0.01
par value per share, none of which are outstanding (without giving effect to the
transactions contemplated hereby which will occur at or concurrently with the
Closing). Each outstanding share of Common Stock is, and the Acquisition Shares
to be issued at the Closing will be, duly and validly issued, fully paid and
non-assessable. Except for the Acquisition Shares, and the options, warrants and
other rights described in Schedule 6.4 hereto, there are no outstanding options,
warrants or other rights to which Buyer is a party or otherwise bound which
provide for the acquisition, disposition or issuance of any securities of the
Buyer. There are no preemptive or similar rights attached to the Common Stock.
Upon the issuance by Buyer to Seller or its designees of the Acquisition Shares,
the Seller (or such designees) will have good and valid title to the Acquisition
Shares, free and clear of any liens, claims or encumbrances of any nature
whatsoever.
6.5. All Material Information. No representation or
warranty in any document, schedule, certificate, other instrument
furnished or to be furnished to Seller by Buyer in connection
with the transactions contemplated by this Agreement, contains or
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will contain any untrue statement of a material fact or omits or will omit to
state any material facts necessary in order to make any statement of fact
contained herein, or therein, in light of the circumstances under which they
were made, not misleading.
ARTICLE VII
COVENANTS
7.1. Access and Information. Seller shall afford to Buyer, its counsel,
its accountants and other representatives full access, during regular business
hours, to the properties, assets, plants, offices, warehouses, books and records
of Seller in order that Buyer may have full opportunity to make such
investigations as it shall desire to make of the Business and the Purchased
Assets, and Seller will cause its respective officers and accountants to furnish
such additional financial and operating data and other information as Buyer
shall from time to time reasonably request; provided, however, that any such
investigation shall be conducted in such a manner as not to interfere
unreasonably with the operation of the Business. Buyer shall furnish to Seller
and its representatives all such information and documents relating to Buyer as
Seller may reasonably request.
7.2. Books and Records. Buyer and Seller shall, for a period of at
least seven years following the Closing, maintain and make available to the
other party and its representatives for inspection and reproduction, during
regular business hours, all books and records relating to Seller, the Purchased
Assets, the Business or the Assumed Liabilities.
7.3. Employment Agreements. On or before the Closing Date, Buyer shall
execute and deliver an Employment Agreement with each of Messrs. Buvel, Stein,
Xxxxxxx and Barrie effective on the Closing Date substantially in the form of
Exhibits A, B, C and D, respectively, attached hereto and made a part hereof
(collectively, the "Employment Agreements").
7.4. Registration Rights Agreement. On or before the Closing Date,
Buyer shall execute and deliver a Registration Rights Agreement covering the
Acquisition Shares in favor of the Noteholders substantially in the form of
Exhibit E attached hereto and made a part hereof ("Registration Rights
Agreement").
7.5. Cooperation; Public Statements. Buyer and Seller
shall fully cooperate in preparing and filing all tax returns,
reports and other instruments and documents which are required by
any statute, rule or regulation in connection with the
transactions contemplated herein. Buyer and Seller shall consult
with each other prior to issuing any press release, public
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announcement or other statement with respect to this Agreement or the
transactions contemplated hereby.
7.6. Conduct of Business.
From the date hereof through the Closing Date, Seller agrees
that it will, consistent with its past practices and policies with
respect to the Business:
(a) Conduct the Business in the usual, regular and
ordinary course.
(b) Keep the Purchased Assets in good operating condition and
repair and make all normal and necessary repairs, renewals,
replacements and improvements thereto.
(c) Maintain its existing policies of insurance and apply any
insurance recovery to the prompt repair or replacement of any insured
loss. Any insurance recoveries which cannot be used for the repair or
replacement of any insured loss prior to the Closing Date shall, if the
transaction contemplated hereby is closed, be paid to Buyer at the
Closing.
(d) Comply with all laws, regulations and orders
applicable to the Purchased Assets, to the Business and to
Seller.
(e) Perform in all material respects its obligations
under all material Contracts.
(f) Use its best efforts to preserve good business
relationships with its customers, suppliers, dealers, employees,
lessors and others having relationships with Seller relating to the
Business, provided that Seller shall provide Buyer with prompt written
notice of the loss of any customer representing 5% or more of Seller's
revenues.
(g) Use its best efforts to maintain all Intellectual
Property relating to the Business.
(h) Maintain its past level of sales activities and
continue to order materials and supplies consistently with
such prior levels of activities.
(i) Maintain the Purchased Assets by replacing or
repairing the same.
(j) Not permit any of the following events to occur:
(i) Any material adverse change in the Business;
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(ii) Any decreases in the prices charged for
Seller's products used in the Business otherwise than
in the ordinary course of business;
(iii) Any material change in security or other deposits or
advances, including "Key-Man" insurance funding, maintained
for use in the conduct of the Business from that appearing on
the most recent Financial Statements provided to Buyer;
(iv) Any mortgage, pledge or other disposition of any
of the Purchased Assets, provided that Seller may sell
Inventory in the ordinary course of business consistent with
past practices;
(v) Any material change in the indebtedness of
Seller from that reflected in the Financial Statements;
(vi) Any material alteration in Seller's marketing
or promotions policies relating to the Business, or in
any expenditures attendant thereto; or
(vii) Any material change in Seller's contractual
relationships with any vendor, customer, dealer, distributor,
supplier or other party which might reasonably be expected to
adversely affect the Business or its prospects or give Seller
any reason to believe any such vendor, customer, dealer,
distributor, supplier or other party will not continue to do
business with Buyer after the date hereof.
7.7. Warehousing Agreement. Seller shall use its best efforts to obtain
any waivers or consents to the assignment to Buyer, prior to the Closing Date,
of the Administration, Selling and Warehousing Agreement, dated as of June 6,
1995, between Seller and Muelhens Inc. (the "Muelhens Contract"). Without
limiting the generality of the foregoing, Seller shall use its best efforts to
take such actions as shall in Buyer's reasonable opinion be necessary or
appropriate (i) in order that the rights and obligations of Seller under the
Muelhens Contract are preserved for the benefit of Buyer, (ii) to obtain any
necessary waivers or consents to the assignment to Buyer of any amended or
modified Muelhens Contract or any Contract executed by Seller in substitution
for the Muelhens Contract, and (iii) to facilitate the collection of monies due
and payable and to become due and payable to Seller in respect of the Muelhens
Contract, as it may be amended or modified, or any such replacement Contract,
and Seller shall hold all such monies in trust for the benefit of Buyer and
shall promptly pay such amounts to Buyer.
7.8. Change of Corporate Name. On the Closing Date, or as
soon thereafter as practicable, Seller shall change its corporate
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name to a new name which does not include the term "Xxxxxxx Xxxxxx Fragrances"
or any variation thereof or similar name and otherwise is not likely to be
confused with Seller's present name, so as to make Seller's present name
available to Buyer. From and after the Closing Date, and until such name change
shall be effective, Seller may continue to use its corporate name to the extent
necessary to effect an orderly transition.
7.9. Cooperation Concerning Approval of Stockholders and Noteholders of
Seller. In connection with Seller's efforts to obtain approval of the
transactions contemplated hereunder, which is a condition precedent pursuant to
Sections 8.6, 8.7, 9.6 and 9.7, Seller will require certain assistance and
cooperation by Buyer and its public accountants in order to permit Seller to
provide to its stockholders and Noteholders information concerning Buyer. Buyer
shall cooperate in furnishing Seller with such information and documents as may
be reasonably requested by Seller of the nature described on Schedule 14A (SEC
Rule 101) and SEC Rule 502. To the extent that such information shall be derived
from or presented by incorporation by reference to any form, report, schedule,
registration statement or definitive proxy statement filed by Buyer with the SEC
("Buyer's SEC Documents"), Buyer represents that, as of their respective dates,
Buyer's SEC Documents (other than preliminary material) complied in all material
respects with the Securities Act or the Exchange Act, as applicable, and none of
Buyer's SEC Documents (including all financial statements included therein and
exhibits and schedules thereto incorporated by reference therein) contained any
untrue statement of material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any such financial
statements comply as to form in all material respects with applicable accounting
requirements and with the rules and regulations of the SEC with respect thereto,
have been prepared in accordance with GAAP applied on a consistent basis in the
periods involved (except as may be indicated in the notes thereto) or in the
case of unaudited financial statements, as permitted by Exchange Act Form 10-Q,
and fairly present (subject, in the case of unaudited financial statements, to
normal recurring audit adjustments that, individually and in the aggregate, were
not material) the consolidated financial position of Buyer as of the date
thereof and the consolidated results of Buyer's operations and cashflows for the
periods then ended.
ARTICLE VIII
CONDITIONS PRECEDENT TO
OBLIGATIONS OF BUYER
Each and all of the obligations of Buyer to consummate the
transactions contemplated by this Agreement are subject to
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fulfillment prior to or at the Closing of the following
conditions:
8.1. Accuracy of Warranties; Performance of Covenants. The
representations and warranties of Seller contained herein shall be accurate in
all respects as if made on and as of the Closing Date, as well as on the date
when made except for such nonmaterially adverse changes therein as may have
occurred in the ordinary course of business and which are disclosed to Buyer in
revised Schedules delivered at or prior to the Closing. Seller shall have
performed each and all of the obligations and complied with each and all of the
covenants specified in this Agreement to be performed or complied with on or
prior to the Closing, and Seller shall have delivered to Buyer a certificate
dated the Closing Date to such effect.
8.2. Opinion of Counsel. Seller shall have delivered to
Buyer (in form and substance satisfactory to Buyer) an opinion of
counsel dated the Closing Date, to the effect that:
(a) Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Nevada;
(b) The execution, delivery and performance of this Agreement
and each of the Transaction Documents to be delivered by Seller are
within the corporate authority and power of Seller and have been duly
authorized and approved by all requisite corporate action of Seller;
(c) This Agreement and all Transaction Documents to be
delivered by Seller have been duly executed and delivered and
constitute valid and binding obligations of Seller, enforceable in
accordance with their terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and subject to any equity
principles limiting the right to obtain specific performance of
Seller's obligations hereunder;
(d) The instruments executed and delivered pursuant to this
Agreement to Buyer at the Closing are valid in accordance with their
terms and effectively vest in Buyer all of the right, title and
interest of Seller in and to the assets, properties, rights and claims
to be conveyed, assigned and transferred hereunder;
(e) Except as disclosed in this Agreement, to the knowledge of
such counsel, there is no litigation, arbitration or other judicial or
regulatory proceeding pending against Seller with respect to the
Business or any
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of the Purchased Assets or the transactions contemplated by
this Agreement;
(f) Neither the execution and delivery of this Agreement or
any other Transaction Document to which Seller is a party nor
compliance with the provisions hereof or thereof will conflict with,
violate or result in a default under the terms, conditions or
provisions of the corporate charter or bylaws of Seller, or, to such
counsel's knowledge, of any agreement or instrument to which Seller is
a party, which conflict, violation or default would result in the
creation of a lien or other encumbrance upon the Purchased Assets or
affect Seller's ability to perform its obligations hereunder or
thereunder; and
(g) To the knowledge of such counsel there are no consents,
approvals or authorizations of any governmental authority or third
parties required in connection with the execution, delivery and
performance by Seller of this Agreement and the other Transaction
Documents to be executed and delivered by Seller in connection with the
transactions contemplated hereby, other than those that have been
obtained by the Closing Date.
8.3. No Pending Action. No judicial or administrative
proceeding shall be pending seeking to enjoin or prevent, nor
shall any order or injunction have been issued prohibiting,
consummation of the transactions contemplated hereby.
8.4. Condition of Business and Purchased Assets. From the date of this
Agreement, there shall have been no material adverse change in the Business or
the financial condition of Seller, and the Purchased Assets shall not have been
materially damaged, lost or otherwise materially adversely affected in any way
by any act of God, fire, flood, war, or other event constituting force majeure.
8.5. Certified Resolutions. Seller shall have delivered to Buyer
resolutions adopted by Seller's Board of Directors and stockholders, certified
by Seller's secretary, authorizing the execution of this Agreement and the other
Transaction Documents to which Seller is a party and the consummation of the
transactions contemplated hereby and thereby.
8.6. Approval of Seller's Stockholders. Seller shall have provided
evidence to Buyer of the required approval of Seller's stockholders to
consummate the transactions contemplated by this Agreement by the requisite vote
of Seller's stockholders in accordance with applicable law and Seller's
certificate of incorporation and by-laws, and such approval shall be in full
force and effect.
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8.7. Noteholders' Consents. Seller shall have provided evidence to
Buyer that the Noteholders representing not less than $5,001,750 in aggregate
principal amount of the Notes shall have consented to the transactions
contemplated by this Agreement, and such consents shall be in full force and
effect.
8.8. Assignment of Certain Contracts. Seller shall have provided
evidence to Buyer of the required consent to the assignment to Buyer of the
Xxxxx Properties Lease and such consent shall be in full force and effect.
ARTICLE IX
CONDITIONS PRECEDENT TO
SELLER'S OBLIGATIONS
Each and all of the obligations of Seller to consummate the
transactions contemplated by this Agreement are subject to fulfillment prior to
or at the Closing of the following conditions:
9.1. Accuracy of Warranties; Performance of Covenants. The
representations and warranties of Buyer contained herein shall be accurate in
all respects as if made on and as of the Closing Date, as well as on the date
when made, except for nonmaterially adverse changes therein as may have occurred
in the ordinary course of business and which are disclosed to Seller in revised
Schedules delivered at or prior to Closing. Buyer shall have performed each and
all of the obligations and complied with each and all of the covenants specified
in this Agreement to be performed or complied with on or prior to the Closing
and Buyer shall have delivered to Seller a certificate dated the Closing Date to
such effect.
9.2. Opinion of Counsel. Buyer shall have delivered to
Seller (in form and substance satisfactory to Seller) an opinion
of Xxxxx, Xxxxx & Xxxxx, Buyer's counsel, dated the Closing Date,
to the effect that:
(a) Buyer is a corporation validly existing and in
good standing under the laws of the State of Delaware;
(b) The execution, delivery and performance of this Agreement
and the other Transaction Documents to be delivered by Buyer are within
the corporate authority and power of Buyer and have been duly
authorized and approved by all requisite corporate action of Buyer;
(c) This Agreement and each of the other Transaction Documents
to which Buyer is a party have been duly executed and delivered and
constitutes the valid and binding
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obligation of Buyer, enforceable in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to affecting creditors' rights
and subject to any equity principles limiting the right to obtain
specific performance of Buyer's obligations hereunder and thereunder;
(d) Neither the execution and delivery of this Agreement or
the other Transaction Documents to which Buyer is a party nor
compliance with the provision hereof or thereof will conflict with,
violate or result in a default under the terms, conditions or
provisions of the corporate charter or By-laws of Buyer, or, to such
counsel's knowledge, of any agreement or instrument to which Buyer is
now a party which would affect its ability to perform its obligations
hereunder or thereunder;
(e) To the knowledge of such counsel, there are no consents,
approvals or authorizations of any governmental authority or other
person in connection with the execution, delivery and performance by
Buyer of this Agreement and the other Transaction Documents to which
Buyer is a party which have not been obtained; and
(f) The Acquisition Shares are duly authorized, validly
issued, fully paid and nonassessable.
9.3. No Pending Action. No judicial or administrative
proceeding is pending seeking to enjoin or prevent, nor shall any
governmental order or injunction have been issued prohibiting,
the consummation of the transactions contemplated hereby.
9.4. Certified Resolutions. Buyer shall have delivered to
Seller resolutions adopted by Buyer's Board of Directors,
certified by Buyer's secretary, authorizing the execution of this
Agreement and the consummation of the transactions contemplated
hereby.
9.5. Condition of Assets. The Purchased Assets shall not
have been substantially destroyed, damaged or lost by any act of
God, fire, flood, war or other event constituting force majeure
which is not covered by insurance.
9.6. Approval of Seller's Stockholders. Seller shall have
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provided evidence to Buyer of the required approval of Seller's stockholders to
consummate the transactions contemplated by this Agreement by the requisite vote
of Seller's stockholders in accordance with applicable law and Seller's
certificate of incorporation and by-laws, and such approval shall be in full
force and effect.
9.7. Noteholders' Consents. Seller shall have provided evidence to
Buyer that the Noteholders representing not less than $5,001,750 in aggregate
principal amount of the Notes shall have consented to the transactions
contemplated by this Agreement, and such consents shall be in full force and
effect.
9.8. Side Letter. Buyer and Seller shall have entered into
a letter agreement covering such post-Closing and other matters
as to which Buyer and Seller shall mutually agree.
ARTICLE X
EMPLOYEES
10.1. Continued Association with the Business. Seller shall use its
best efforts to encourage the Employees of the Business to continue until
Closing and thereupon to accept and retain employment with Buyer, provided that,
except as contemplated in Section 7.3 or as otherwise agreed to by Buyer in its
sole discretion, Buyer shall have no obligation to hire any Employees of Seller.
10.2. Severance. Concurrently with the Closing, Seller
shall terminate all employees of the Business and shall pay to
each such employee any amounts owing applicable to the period
through the Closing Date including all vacation and sick pay.
10.3. Personnel Records. Unless prohibited by law, Seller shall make
available to Buyer all personnel records for all Employees of Seller, including
but not limited to names, social security numbers, dates of hire by Seller,
dates of birth, number of hours worked in each calendar year, and salary
histories, provided that Seller and Buyer shall cooperate in securing any
necessary releases or waivers of confidentiality with respect to such personnel
records and otherwise in order to ensure an orderly and effective transition.
Not later than the Closing Date, Buyer shall advise Seller as to which Employees
of Seller Buyer will be hiring.
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ARTICLE XI
NONCOMPETITION COVENANTS OF SELLER
11.1. Seller's Covenants. In consideration for the purchase by Buyer of
the Purchased Assets, Seller agrees and covenants that neither it nor its
Affiliates (other than Messrs. Buvel, Stein, Xxxxxxx and Barrie) will from and
after Closing directly or indirectly for a period of seven years engage in the
manufacture or sale, or licensing for manufacture or sale, in the United States
or any foreign country, of the Purchased Assets. The parties agree that this
covenant is necessary to protect the value of the Business purchased hereunder,
and Seller agrees that any breach of the restrictive covenant set forth above
will result in irreparable damage to Buyer to which Buyer will have no adequate
remedy at law, and Seller consents to any injunction by any court of competent
jurisdiction in favor of Buyer enjoining any breach of such covenant, without
prejudice to any other right or remedy to which Buyer shall be entitled. In the
event that this covenant shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its being extended to too great a
period of time or too large a geographic area or over too great a range of
activities, it should be interpreted to extend only over the maximum period of
time, geographic area, or range of activities as to which it may be enforceable.
ARTICLE XII
SURVIVAL AND INDEMNIFICATION
12.1. Survival. All representations, warranties, covenants and
agreements contained in this Agreement or in any document delivered pursuant
hereto shall survive the Closing, but only with respect to claims for breach of
any such representation or warranty which are made in writing by either party
against the other and are delivered to the other within two years after the
Closing. The representations and warranties set forth in this Agreement shall
not be affected by any investigation, verification or approval by any party
hereto or by anyone on behalf of any such party.
12.2. Indemnification.
(a) Seller agrees to indemnify, defend and hold harmless Buyer
from and against any and all loss, damage, expense (including
reasonable attorneys' fees), suit, action, claim, liability or
obligation related to, caused by or arising from (i) any
misrepresentation, breach of warranty or failure of Seller to fulfill
any covenant or agreement of Seller in or pursuant to this Agreement,
unless waived by Buyer, provided, however, that Seller's liability
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therefor shall be limited to $3,700,000, and provided, further, that
Seller shall not be liable for any claim arising from a breach of a
representation, warranty or covenant contained herein, that is not made
in writing delivered to Seller within two years after the Closing, (ii)
any Excluded Liabilities, or (iii) any liability arising from the
operation of the Business prior to the Closing Date, including but not
limited to liability arising from damage or injury (real or alleged) to
person or property arising from the ownership, possession or use of any
finished goods manufactured by the Business or Seller through the
Closing Date.
(b) Buyer shall indemnify, defend and hold harmless Seller
from and against any and all loss, damage, expense (including
reasonable attorneys' fees) suit, action, claims, liability or
obligation related to, caused by or arising from (i) any
misrepresentation, breach of warranty or failure of Buyer to fulfill
any covenant or agreement in or pursuant to this Agreement, unless
waived by Seller, or any liability of the Business expressly assumed in
writing by Buyer, provided, that Buyer shall not be liable for any
claim arising from a breach of a representation, warranty or covenant
contained herein that is not made in writing delivered by Seller within
two years after the Closing, (ii) any Assumed Liabilities, or (iii) any
liability arising from the operation of the Business by the Buyer after
the Closing Date.
(c) Each party indemnified under the provisions of this
Section 12.2, upon receipt of written notice of any claim of the
service of a summons or other initial legal process upon it in any
action instituted against it, in respect of which indemnity may be
sought on account of any indemnity agreement contained in this Section
12.2, shall promptly give written notice of such claim, or the
commencement of such action, or threat thereof, to the party from whom
indemnity shall be sought hereunder. Such indemnifying party shall be
entitled at its own expense to participate in the defense of such claim
or action, or, if it shall elect, to assume such defense, in which
event such defense shall be conducted by counsel chosen by such
indemnifying party, which counsel may be any counsel reasonably
satisfactory to the indemnifying party against whom such claim is
asserted or who shall be the defendant in such action, and such
indemnified party shall bear the fees and expenses of any additional
counsel retained by it or them. If the indemnifying party shall elect
not to assume the defense of such claim or action, such indemnifying
party will reimburse such indemnified party for the reasonable fees and
expenses of any counsel retained by it, and shall be bound by the
results obtained by the indemnified party;
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provided, however, that no such claim or action shall be settled
without the written consent of the indemnifying party.
(d) Notwithstanding anything contained herein to the contrary,
the indemnities provided for in this Section 12.2 shall not be
enforceable unless and until the aggregate amount of claims by the
party entitled to indemnification (including the full asserted amounts
of claims against the party entitled to indemnification) exceeds the
sum of Ten Thousand Dollars ($10,000), whereupon the entire aggregate
amount of claims (including the first $10,000), and all additional
claims shall be enforceable in full.
ARTICLE XIII
GENERAL PROVISIONS
13.1. Waiver of Conditions. Each party may, at its option,
waive in writing any or all of the conditions herein contained to
which its obligations hereunder are subject.
13.2. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be sent by
registered or certified mail, postage prepaid, as follows:
(a) If to Seller:
Xxxxxxx Xxxxxx Fragrances, Inc.
00 Xxxxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxxxx 00000-0000
Attention: President
With a copy to:
Xxxxx X. Xxxxxx Esq.
Xxxxxxxx Mollen & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(b) If to Buyer:
Xxxxxx Xxxxxxxxxx, Inc.
0000 X.X. 00xx Xxxxxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxx, Chief Executive Officer
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With a copy to:
Xxxxx X. Xxxxxx, Esq.
Xxxxx, Xxxxx & Xxxxx
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Any party may change its address for receiving notice by written notice given to
the others named above.
13.3. Modifications and Amendments. The terms and
provisions of this Agreement may be modified or amended only by
written agreement executed by all parties hereto.
13.4. Waivers and Consents. The terms and provisions of this Agreement
may be waived, or consent for the departure therefrom granted, only by written
document executed by the party entitled to the benefits of such terms or
provisions. No such waiver or consent shall be deemed to be or shall constitute
a waiver or consent with respect to any other terms or provisions of this
Agreement, whether or not similar. Each such waiver or consent shall be
effective only in the specific instance and for the purpose for which it was
given, and shall not constitute a continuing waiver or consent.
13.5. Assignment. Neither this Agreement, nor any right hereunder, may
be assigned by any of the parties hereto without the prior written consent of
the other parties, except that the Buyer may assign all or part of its rights
and obligation under this Agreement (other than its obligations to issue the
Acquisition Shares or execute and deliver the agreements referred to in Sections
7.3 and 7.4) to one or more direct or indirect affiliates (in which event,
representations and warranties relating to the Buyer and the opinion of counsel
to be delivered by the Buyer shall be appropriately modified).
13.6. Jurisdiction and Service of Process. Any legal action or
proceeding with respect to this Agreement may be brought in the courts of the
State of New York or of the United States of America for the Southern District
of New York. By execution and delivery of this Agreement, each of the parties
hereto accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The parties hereby
irrevocably waive any objection or defense that they may now or hereafter have
to the assertion of personal jurisdiction by any such court in any such action
or to the laying of venue of any such action in any such court, and hereby
waive, to the extent not prohibited by law, and agree not to assert, by way of
motion, as a defense, or otherwise, in any such proceeding, any claim that it is
not subject to the jurisdiction of the above-named courts for such proceedings.
Each of the parties hereto irrevocably consents to the service of
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process of any of the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered mail, postage prepaid, to the party
at its address set forth in Section 13.2 hereof and irrevocably waive any
objection or defense that it may now or hereafter have to the sufficiency of any
such service of process in any such action. Nothing in this Section 13.6 shall
affect the rights of the parties to commence any such action in any other forum
or to serve process in any such action in any other manner permitted by law.
13.7. Interpretation. The parties hereto acknowledge and agree that:
(i) each party and its counsel reviewed and negotiated the terms and provisions
of this Agreement (except with respect to the disclosure schedules regarding the
Business which are the sole responsibility of the Seller) and have contributed
to its revision; (ii) the rule of construction to the effect that any
ambiguities are resolved against the drafting party shall not be employed in the
interpretation of this Agreement; and (iii) the terms and provisions of this
Agreement shall be construed fairly as to all parties hereto and not in favor of
or against any party, regardless of which party was generally responsible for
the preparation of this Agreement.
13.8. Entire Transaction. This Agreement and the documents referred to
herein embody the entire agreement and understanding among the parties with
respect to the transactions contemplated hereby and supersede all prior oral or
written agreements and understandings among the parties.
13.9. Applicable Law. This Agreement shall be governed in its
interpretation and application by the internal laws of the State of New York
without giving effect to the conflict of law principles thereof.
13.10. Litigation Arising from the Business Activities. It is recognized
that in the future litigation may arise relating to the Business and the
conduct, products, property or assets thereof, which may relate directly or
indirectly to the period prior to the Closing, the period subsequent to the
Closing or both. Therefore, each of the parties agrees that, to the extent
reasonable under the circumstances, it will assist and provide information,
records and documents and the Employees covered by the Employment Agreements to
any other parties with respect to any such litigation or potential litigation in
which such other party is or may be involved.
13.11. Headings. The section and other headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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13.12. Brokers. Each party warrants to the other that it
has not retained any brokers or finders or incurred any liability
for any brokerage fees, commissions or finder's fees with respect
to this Agreement or the transactions contemplated hereby.
13.13. Expenses. Except as otherwise expressly provided herein or in
another Transaction Document, each party to this Agreement shall pay its own
fees and expenses (including the fees of any attorneys, accountants, appraisers
or others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby.
13.14. Severability. If any term or provision of this Agreement shall
to any extent be decreed by a court of competent jurisdiction to be invalid or
unenforceable, such term or provision shall not thereby be deemed invalid or
unenforceable in any other jurisdiction, and the remainder of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.
13.15. Counterparts. This Agreement may be executed in one
or more counterparts, and by different parties hereto on separate
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by a duly authorized officer all as of the date first
written above.
XXXXXXX XXXXXX FRAGRANCES, INC.
By
Name:
Title:
XXXXXX XXXXXXXXXX, INC.
By
Name:
Title:
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