ACQUISITION AGREEMENT (this "Agreement"), dated as of May
23, 1997, between NEW IMAGE LABORATORIES, INC., a California
corporation having its principal place of business at 0000
Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000 (the "Seller"), THE
XXXXXXX CO., a Florida corporation having its principal place of
business at 0000 Xxxx XxXxx Xxxx, Xx. Xxxxxxxxxx, Xxxxxxx 00000
("Xxxxxxx") and XXXXXXX DISTRIBUTING, INC., a Florida corporation
and wholly-owned subsidiary of Xxxxxxx (the "Buyer").
W I T N E S S E T H :
WHEREAS, the Seller's hair care businesses include the
products known as "Image", and "Modern" and related products
listed on Schedule 1 hereto (collectively, the "Products");
WHEREAS, with respect to the Products, the Seller has
registered "Image" and "Modern" related trademarks (i) in
the United States with the United States Patent and
Trademark Office (all of such registered marks are listed
on Schedule l(a) and are collectively referred to as the
"Domestic Trademarks") and (ii) in the countries listed on
Schedule l(b) (all of such registered marks, collectively,
the "Foreign Trademarks"; the Domestic Trademarks, the
Foreign Trademarks and all other pending trademark
applications, unregistered trademarks and other
intellectual property related to the Products listed on
Schedule l(c) are sometimes referred to herein collectively
as the "Trademarks"); and
WHEREAS, the Seller desires to sell, and the Buyer desires
to acquire, all of the Seller's right, title and interest in and
to certain of the Seller's assets, as more specifically described
herein, all for the purchase price and on the terms set forth
below.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth below, the parties
agree as follows:
I. TRANSFER OF ASSETS
1.1 Transfer of Assets. Upon satisfaction of the
conditions set forth in Sections 3.1 and 3.2 hereof
(the "Closing"), the Seller hereby sells, assigns and
delivers to the Buyer, and the Buyer hereby acquires
from the Seller, all of the Seller's right, title and
interest in and to the following assets free and clear
of all liens and encumbrances:
(a) the Domestic Trademarks listed on Schedule l(a),
together with the goodwill associated therewith;
(b) the Foreign Trademarks listed on Schedule l(b),
together with the goodwill associated therewith;
(c) all other Trademarks listed on Schedule l(c),
together with the goodwill associated therewith;
(d) all trade dress relating to the Products;
(e) the formulae, trade secrets, processes
and know-how relating to the Products (collectively, the
"Specifications");
(f) the customer and supplier lists relating to the
Products;
(g) the 10 oz. Bottle Contract, dated June 18, 1996,
between the Seller and Simi Corp. (the "Bottle Agreement"
including all rights thereunder with respect to the mold, all
artwork and screens related to the Products to the extent owned
by the Seller and all trade show, training and sales conference
room equipment listed on Schedule 1.1(g);
(h) the contracts listed on Schedule 1.1(h) (the
"Contracts");
(i) all inventory relating to the Products, including
all finished goods, work in progress, promotional items, raw
materials relating to the Products and packaging relating to the
Products, wherever located (the "Inventory");
(j) all accounts receivable of the Seller listed on
Schedule 4.1(p), including any interest, claims and penalties
thereon existing on the Closing (the "Accounts Receivable");
(k) the equipment described on Schedule 1.1(k) (the
"Equipment") to the extent such Equipment is owned by the Seller,
and to the extent any Equipment is leased by the Seller an
assignment of such leased Equipment, which upon the receipt of a
consent to such assignment, shall be deemed to be leased by the
Buyer as of the Closing; and
(1) all other intangible or intellectual property
related to the Products.
As used herein, the term "Acquired Assets" shall mean those
assets identified in Section 1.1(a) through 1.1(1) above.
II. PURCHASE PRICE AND PAYMENT
2.1 Purchase Price. The purchase price (the "Purchase
Price") for the Acquired Assets shall be 250,000 unregistered and
restricted shares (the "Shares") of common stock, par value $.Ol
per share, of Xxxxxxx ("Xxxxxxx Common Stock").
2.2 Allocation of Purchase Price and Additional Payment.
The parties agree that the Purchase Price, the
Contingent Shares (as hereafter defined), if any, and
any other consideration paid for the Acquired Assets
shall be allocated among the Acquired Assets pursuant
to a schedule to be prepared by the Buyer with such
changes, if any as agreed by the Buyer and the Seller
no later than 45 days after Closing. The Buyer and the
Seller agree to prepare and file all tax returns in a
manner consistent with the allocations provided herein.
The Buyer and the Seller shall each provide to the
other for review a copy of their reports with respect
to this transaction pursuant to Section 1060 of the
Internal Revenue Code of 1986, as amended, at least ten
(10) business days prior to its submission to the
Internal Revenue Service. In the event that the
Internal Revenue Service shall require a change in such
allocations, neither party shall be liable for the tax
consequences to the other party of such change.
2.3 Payment of the Purchase Price. The Purchase Price is
being paid concurrent with the execution and delivery of this
Agreement at the Closing, against delivery of the Acquired
Assets, as follows: certificates representing 125,000 Shares are
being delivered by the Buyer directly to the Seller.
Certificates representing the remaining 125,000 Shares (the
"Escrowed Stock") are being delivered to Xxxxxxx, Calamari &
Xxxxxxx, as escrow agent (the "Escrow Agent"), to be held and
disbursed in accordance with the terms of this Agreement and a
separate escrow agreement, in the form of Exhibit A.
2.4 Contingent Payment. In addition to the Purchase Price,
the Seller shall be entitled to receive up to 100,000
unregistered and restricted shares (the "Contingent Shares") of
Xxxxxxx Common Stock, in accordance with the terms set forth in
this Section 2.4. With respect to the period commencing on the
Closing and ending on the one year anniversary date of the
Closing (the "Initial Period") , the Seller shall be entitled to
receive up to 50,000 Contingent Shares payable as follows: (i)
10,000 Contingent Shares shall be payable to the Seller if, and
only if, the Buyer's profit after taxes, as determined in
accordance with generally accepted accounting principles
("GAAP"), resulting from the operation of the business relating
to the Acquired Assets ("Profit") for the Initial Period shall
equal at least 13%, (ii) 20,000 Contingent Shares shall be
payable to the Seller if, and only if, the Buyer's Profit for the
Initial Period shall equal at least 14%, (iii) 30,000 Contingent
Shares shall be payable to the Seller if, and only if, the
Buyer's Profit for the Initial Period shall equal at least 15%,
(iv) 40,000 Contingent Shares shall be payable to the Seller if,
and only if, the Buyer's Profit for the Initial Period shall
equal at least 16%, (v) 50,000 Contingent Shares shall be payable
to the Seller if, and only if, the Buyer's Profit for the initial
Period shall equal at least 17%. With respect to the 12-month
period ending on the two year anniversary date of the Closing,
50,000 Contingent Shares shall be payable to the Seller if, and
only if, the Profit for such 12-month period shall equal 17%.
2.5. Delivery of Contingent Shares; Books and Records.
Certificates representing Contingent Shares shall be delivered to
the Seller, if earned by the Seller pursuant to Section 2.4
hereof, within 10 days of final determination of Profit for the
relevant period and, subject to Section 2.6 hereof, not later
than 60 days after the end of such period. Subject to Section
2.6 hereof, the Buyer's determination of Profit shall be final
and binding upon the parties. The Buyer agrees to maintain
complete, true and correct books of account concerning the
business relating to the Acquired Assets in sufficient detail to
enable the Profit to be readily computed and verified. The Buyer
further agrees to permit the Seller, its agents and/or
independent public accountants, to have full access to such books
of account (including the right to make copies thereof) during
normal business hours and upon reasonable notice to the Buyer.
The Buyer further agrees to deliver to the Seller a report
detailing the Buyer's calculation of the Profit as well as a copy
of the Buyer's consolidated audited financial statements for any
relevant period and shall further make reasonably available to
the Seller its work papers utilized in connection with its
calculation of the Profit. The Seller hereby agrees to keep
confidential all such information and to use it only in
accordance with and for the purposes of determining whether
Contingent Shares are payable to the Seller.
2.6 Arbitration. If the Seller concludes, after review of
the Buyer's books of account, that, notwithstanding the Buyer's
determination to the contrary, Contingent Shares are owing to the
Seller with respect to the period(s) reviewed, then the Seller
shall notify the Buyer in writing of its determination, which
notice (the "Notice") shall set forth in detail the basis for the
Seller's determination of Profit and that Contingent Shares are
due and owing. If the Seller and the Buyer are unable to resolve
the disputed items within 10 business days after the Buyer
receives the Notice, the parties shall refer the dispute to a
firm of certified public accountants mutually agreeable to the
parties (the "Arbiter"), as an arbitrator to finally determine,
as soon as practicable, and in any event within 90 days after
such referral, the Profit for the period(s) under consideration;
provided that if the parties are unable to mutually agree upon an
Arbiter, the Arbiter shall be designated by mutual agreement
between the parties' respective certified public accountants.
The Arbiter shall otherwise conduct the arbitration under such
procedures as the parties may agree or, failing such agreement,
under the applicable commercial Arbitration Rules of the American
Arbitration Association. The fees and expenses of the arbitration
and the Arbiter incurred in connection with the arbitration shall
be paid by the non-prevailing party.
2.7 Assumption of Liabilities. As additional consideration
for the Acquired Assets, the Buyer hereby assumes the Assumed
Liabilities (as defined below). All other liabilities of any
nature whatsoever of the Seller shall remain and be the sole
obligation of the Seller including, without limitation, product
liability, product warranties, all other pending litigation,
liabilities related to outstanding debentures of the Seller
(the "Debentures") and liabilities for any unpaid legal fees and
disbursements payable to Xxxxxxxx, Xxxxxx & Xxxxxxx (the "RWG
Liabilities") not included in the Assumed Liabilities. For
purposes of this Agreement, the term "Assumed Liabilities" shall
be defined as and shall be expressly limited to the following
listed liabilities:
(i) unsecured liabilities (other than the
Reorganization Liabilities, as defined below) of the Seller as of
the Closing, as reflected on the books and records of the Seller,
up to a maximum aggregate amount not to exceed $3,600,000 (the
"Trade Liabilities") . The Trade Liabilities shall consist solely
of the amounts set forth next to the names of the respective
suppliers and other creditors of the Seller to whom such Trade
Liabilities are due, as listed on Schedule 2.7(i); and
(ii) unsecured liabilities (other than the Trade
Liabilities) owed to holders of allowed claims pursuant to the
plan of reorganization of Image Laboratories, Inc., up to a
maximum amount not to exceed $3,065,000 (the "Reorganization
Liabilities"). The Reorganization Liabilities shall consist
solely of the amounts set forth next to the names of the
respective holders of such claims to whom such Reorganization
Liabilities are due, as listed on Schedule 2.7(ii).
2.8 Bulk Sales Law Compliance. The Seller agrees to pay
and discharge all claims of creditors, other than claims relating
to the Assumed Liabilities, which may be asserted against the
Buyer by reason of the Seller's noncompliance with the provisions
of the bulk sales law of any State which may require bulk sales
law compliance on account of the provisions herein and the
transactions contemplated hereby and to indemnify and hold the
Buyer harmless from and against claims suffered or incurred by
the Buyer by reason of or arising out of the failure of the
Seller to pay or discharge such claims, or such noncompliance
with any applicable bulk sales law.
2.9. Purchase Price Adjustments. The following
adjustments shall be made to the Purchase Price:
(a) Excess Liabilities. Notwithstanding the
assumption by the Buyer of the Trade Liabilities up to $3,600,000
and the Reorganization Liabilities up to $3,065,000, in the event
that the Buyer is required to pay in the aggregate more than
$5,332,000 in order to satisfy the Trade Liabilities and the
Reorganization Liabilities, including, without limitation,
incidental costs incurred by Buyer or Xxxxxxx in satisfying such
Trade Liabilities and Reorganization Liabilities (such as
litigation costs), as certified in a certificate delivered to the
Seller by the Chief Financial Officer of the Buyer which
certificate shall contain an itemized list of the Trade
Liabilities and the Reorganization Liabilities, the original
amount owed to each such creditor, the dates of payment to each
creditor and the final payment and determination of such Trade
Liabilities and Reorganization Liabilities, the Purchase Price
shall be reduced by the amount of such excess on a dollar-for-
dollar basis; provided, however, that if any of the holders of
any Trade or Reorganization Liabilities shall agree to accept any
portion of the payments over a period of time in excess of one
year ("Installment Payments"), the amount of such excess shall be
calculated by reducing the amount of any Installment Payments to
their present value, as of the Closing, using a discount factor
equal to 8% per annum.
(b) Minimum Accounts Receivable. Not earlier than 180
days after Closing, the Chief Financial Officer of the Buyer
shall certify in a certificate delivered to the Seller the total
amount of Accounts Receivable collected as of the date of such
certificate and, in reasonable detail, a listing of the Accounts
Receivable which remain uncollected.
If total collected Accounts Receivable as of the date of such
certificate shall be less than $1,835,000, the Purchase Price
shall be further reduced by the amount of such deficiency on a
dollar-for-dollar basis. Payments received from or credited to
any customer shall be applied first to the invoice identified by
such customer, or if not identified, then in payment of such
customer's oldest account receivable, unless such customer shall
specifically allege that such receivable is in dispute, in which
event the payment shall be applied in payment of the undisputed
portion of such receivable and then in payment of the customer's
next oldest undisputed account receivable. The Buyer
specifically agrees not to influence in any way a customer to pay
an invoice other than in the order which they have been sent to
such customer and not to settle, compromise or reduce the amount,
or delay the payment, of any invoice existing as of the Closing
except in the ordinary course of business and consistent with the
Seller's prior practice. The Buyer agrees to use collection
procedures for the collection of the Accounts Receivable that are
substantially the same as used by the Seller prior to Closing.
(c) Minimum Inventory. Not later than 30 days after
Closing, the Chief Financial officer of the Buyer shall certify
in writing to the Seller the net book value of the Inventory
based upon a physical inventory to be conducted after Closing
by the Buyer and utilizing the same inventory valuation methods
as used by the Seller prior to Closing. If the net book value of
the Inventory, as so determined, shall be less than $2,302,000,
the Purchase Price shall be further reduced by the amount of such
deficiency on a dollar-for-dollar basis; provided, however that
(i) the Buyer shall be deemed to have received $37,250 of such
Inventory in lieu of payment for certain equipment set forth on
Schedule 1.1(k), (ii) the Buyer shall be deemed to have received
an amount of Inventory equal to that amount of the expense
reimbursement not paid to Seller pursuant to Section 7.3 hereof
and (iii) any Accounts Receivable collected by the Buyer in
excess of $1,835,000 shall be credited as Inventory in
determining any Inventory deficiency; provided, further, however,
that any returns from customers of Inventory shall not be counted
in determining the value of Inventory and any and all credits
required to be given to any customers or vendors, including
without limitation, any advertising credit, consistent with
Seller's prior practice shall, to the extent such credit is not
also deducted from the Accounts Receivable, be deducted from the
value of the Inventory.
(d) Notwithstanding any payments which may be due to
the Buyer by the Seller pursuant to this Section 2.9, the
indemnification provisions provided in Section 6 hereof shall
remain in full force and effect, without any modification or
diminution thereof; provided, however, that the Buyer shall not
be entitled to any indemnification payment pursuant to Section 6
hereof, if, and only to the extent that, the condition or event
giving rise to such indemnification payment is reflected in the
calculation of a Purchase Price Adjustment pursuant to this
Section 2.9.
2.10. Disbursements from Escrow. Xxxxxxx, the Buyer and
the Seller agree to provide in writing to the Escrow Agent
instructions as to the amount and method of disbursing the shares
of Escrowed Stock. Such instructions to the Escrow Agent, and
the amount of Escrowed Stock to be distributed by the Escrow
Agent, shall be in accordance with the following terms and
conditions:
(i) all amounts in escrow shall be disbursed to the
Seller on the one year anniversary date of the Closing (the
"Disbursement Date"); provided, however, if prior to the
Disbursement Date the Buyer makes a claim against the amounts
remaining in escrow pursuant to subsection (ii) of this Section
2.10, or if prior to the Disbursement Date the Buyer makes a
claim against the amounts in escrow pursuant to subsection (iii)
of this Section 2.10, then Escrowed Stock having a value equal to
the amount of each such claim shall be held in escrow (beyond the
Disbursement Date, if necessary) until joint written instructions
from Xxxxxxx, the Buyer and the Seller or an order of any court
of law having jurisdiction over such claim or the order of an
arbitrator selected by Xxxxxxx, the Buyer and the Seller to
arbitrate the dispute shall be received by the Escrow Agent
regarding the resolution of such claims and amounts;
(ii) If, prior to the Disbursement Date, the Buyer
makes a claim against the Seller pursuant to Section 6 hereof,
then the Buyer shall notify the Escrow Agent in writing prior to
the Disbursement Date of the amount of such claim and the Escrow
Agent will reserve in escrow (beyond the Disbursement Date, if
necessary) Escrowed Stock having a value equal to the amount of
such claim until such time as the Escrow Agent shall receive
joint written instructions from the Buyer, Xxxxxxx and the Seller
or an order of any court of law having jurisdiction over such
claim or the order of an arbitrator selected by Xxxxxxx, Buyer
and the Seller to arbitrate the dispute regarding the resolution
of such claim and such amounts;
(iii) If, prior to the Disbursement Date, the Escrow
Agent receives written notice from the Buyer, a copy of which
notice shall be sent simultaneously by the Buyer to the Seller,
as to a Purchase Price adjustment determined in accordance with
Section 2.9 hereof, then, Escrowed Stock having a value equal to
such Purchase Price adjustment shall be distributed to the Buyer
within 10 business days of such written notice unless a written
notice is received by the Escrow Agent from the Seller disputing
such Purchase Price adjustment in which case the Escrow Agent
will reserve in escrow (beyond the Disbursement Date, if
necessary) Escrowed Stock having a value equal to the amount of
such disputed Purchase Price adjustment until such time as the
Escrow Agent shall receive joint written instructions from the
Buyer, Xxxxxxx and the Seller or an order of any court of law
having jurisdiction over such claim regarding the resolution of
such claim and such amounts;
(iv) Any time a claim is made under subsections
(ii) or (iii) of this Section 2.10, the Escrow Agent will reserve
Escrowed Stock having a value equal to the dollar amount of such
claim. The value of Escrowed Stock required to be reserved shall
be determined by reference to the average closing trading price
of Xxxxxxx Common Stock as reported in The Wall Street Journal
(or other recognized daily financial newspaper) for the 20
trading days prior to the one year anniversary of the date of
Closing.
2.11 Registration Rights. If, following the receipt by
the Seller of (i) the Shares delivered to the Seller at Closing,
(ii) any Escrowed Stock which has been disbursed to the Seller
pursuant to Section 2.10 of this Agreement or (iii) any
Contingent Shares received by the Seller, Xxxxxxx shall propose
to file a registration statement under the Securities Act of
1933, as amended (the "Securities Act") in connection with the
proposed offer and sale of any of its equity securities (other
than a registration statement on Form S-4 and Form S-8 or a
successor form to such Forms), Xxxxxxx will give notice in
writing to such effect to the Seller at least 30 days prior to
such filing, and, at the written request of the Seller made
within 10 days after the receipt of such notice, will include
therein at Stephan's cost and expense (except for the fees and
expenses of counsel to the Seller and underwriting discounts,
commissions and filing fees attributable to the Seller's
securities included in such registration statement, all of which
expenses shall be borne by the Seller), such number of shares of
Xxxxxxx Common Stock included in clauses (i), (ii) or (iii) of
this Section 2.11 (the "Registrable Securities") as the Seller
shall request unless at the time of such request the Registrable
Securities shall be able to be sold pursuant to Rule 144
promulgated under the Securities Act, in which case Xxxxxxx shall
not be required to register any such Registrable Securities.
Notwithstanding the foregoing, if the offering being registered
by Xxxxxxx is underwritten, and if in the good faith judgment of
the representative of the underwriters of such offering, the
inclusion therein of all or any of such Registrable Securities
would reduce the number of shares to be offered by Xxxxxxx, the
number of Registrable Securities otherwise to be included in the
underwritten public offering may be reduced accordingly. Nothing
contained herein shall prohibit Xxxxxxx from withdrawing any such
registration statement at any time in its sole discretion.
III. CLOSING
3.1 Deliveries at the Closing by the Seller. At Closing,
the Seller hereby transfers to the Buyer, or is causing to be
transferred to the Buyer, all of its (or its affiliates') right,
title and interest in and to the Acquired Assets by delivering to
the, Buyer possession of the Acquired Assets and the following
instruments, which shall be in form and substance reasonably
satisfactory to the Buyer and its counsel:
(a) a Xxxx of Sale and Assignment;
(b) Trademark Assignments in the form of Exhibit B for
recording the assignment of the Domestic Trademarks
listed on Schedule 1(a) in the United States Patent
and Trademark Office, and an Omnibus Trademark
Assignment relating to the assignment of the
Foreign Trademarks;
(c) the Escrow Agreement;
(d) any written Specifications, including all formulae
for each of the Products;
(e) such other instruments of conveyance and transfer
as may be appropriate to vest all of the Seller's right, title
and interest in and to the Acquired Assets (other than the
Inventory) in the Buyer;
(f) the customer and supplier lists;
(g) any Consents (as defined in Section 4.1(d) hereof)
including, without limitation, Consents of third
parties to the transfer of computer hardware and
software comprising part of the Equipment and UCC
termination statements and such other documents as
requested by the Buyer evidencing release of all
liens on the Acquired Assets;
(h) the General Release of Xxxxxxx, the Buyer and
their respective affiliates, in the form of Exhibit 0.xX.
(i) a unanimous written consent of the stockholders of
the Seller consenting to the transactions set forth in this
Agreement or in the absence of a unanimous written consent the
consent of a majority of all outstanding classes of Stock of the
Seller and an opinion from Xxxxxxxx, Xxxxxx & Xxxxxxx, or such
other counsel to Seller reasonably satisfactory to Xxxxxxx and
Buyer, that the requisite consent under California law has been
obtained to consummate the transactions contemplated hereby;
(j) a consent and release from the four largest
holders of the Seller's Debentures constituting at least $900,000
of the outstanding principal amount of the Debentures, and from
Xxxxxxxx, Xxxxxx & Xxxxxxx with respect to the RWG Liabilities in
the forms attached hereto as Exhibit 0.xX; and
(k) a letter from Xxxxxx Xxxx as the representative of
the Reorganization Liabilities that he has recommended to the
holders of the Reorganization Liabilities to reduce their claims
to an amount equal to 80% of such Liabilities (the "Adjusted
Claim") in return for the Buyer paying 55% of the Adjusted Claim
within 30 days of the Closing, 22.5% of the Adjusted Claim within
four months of the Closing and 22.5% of the Adjusted Claim within
eight months of the Closing.
3.2 Deliveries at the Closing by the Buyer. At the
Closing, the Buyer hereby delivers to the Seller:
(a) 125,000 Shares with the remaining 125,000 Shares
to be delivered to the Escrow Agent;
(b) the Escrow Agreement;
(c) Notice of Voluntary Dismissal with Prejudice of the
litigation (Case No. 97-6331-CIV-Xxxxxxxx) pending
in the U.S. District Court for the Southern
District of Florida; and
(d) the General Release of the Seller and its
affiliates, in the form of Exhibit 0.xX.
3.3 Place of Delivery. Any physical assets, such as
Inventory or Equipment, delivered to the Buyer hereunder shall be
delivered at the Seller's place of business. Any costs involved
in shipping such physical assets to a location chosen by the
Buyer shall be borne by the Buyer; provided, that the Seller
shall allow the Buyer to store such physical assets at the site
such assets are located on the Closing date for 90 days following
the Closing at no additional cost to the Buyer.
3.4 Conditions to Closing. The parties' respective
obligations to close hereunder shall be conditioned upon the
receipt by each party of all items required to be delivered by
the other party as set forth above in Sections 3.1 and 3.2, which
receipt may be waived in writing by either party.
3.5 No Shop. Upon execution of this Agreement until
Closing or termination of this Agreement by mutual agreement of
the parties, the Seller agrees that it will not initiate,
entertain, discuss, solicit or accept any offer for the sale of
any capital stock and/or the assets of the Seller (except for the
sale of the Seller's real property and any other assets other
than the Acquired Assets) and the Seller shall promptly
communicate to Buyer the terms of any such offer it receives and
the identity of the person making any such offer and shall not
continue to discuss or negotiate any such offers it received
prior to the date hereof.
IV. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Seller.
The Seller represents and warrants to the Buyer and to Xxxxxxx as
follows:
(a) Organization. The Seller is a corporation duly
organized, validly existing and in good standing under the laws
of the State of California and has all requisite power to enter
into this Agreement and perform its obligations hereunder.
(b) Authorization of Agreement; Investment Intent.
The Seller has taken all necessary corporate action (including
obtaining any necessary approval of its stockholders) to
authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby. This Agreement has been duly and validly authorized,
executed and delivered by the Seller and constitutes the legal,
valid and binding obligation of the Seller, enforceable in
accordance with its terms except as such enforcement may be
limited by bankruptcy, insolvency, moratorium or other similar
laws presently or hereafter in effect affecting the enforcement
of creditors' rights generally. The Seller understands and
agrees that (i) an investment in Xxxxxxx involves certain risks,
the Seller has taken full cognizance of and understands such
risks, the Seller has been furnished with copies of Stephan's
most recent annual report and all subsequent quarterly and
current reports required to be filed under applicable federal
securities laws and the Seller is an accredited investor (as
defined in the Securities Act), (ii) the Shares and the
Contingent Shares, if any, have not been registered under the
Securities Act, and agrees that none of such securities may be
sold, offered for sale, transferred, pledged, hypothecated or
otherwise disposed of except in compliance with the Securities
Act, (iii) no federal of state agency has made any finding or
determination as to the fairness for investment in, or any
recommendation or endorsement of, such securities, and (iv) the
Shares and the Contingent Shares, if any, being acquired
hereunder are being acquired by the Seller solely for its own
account, for investment purposes and not with a view to
subdivision, distribution or resale.
(c) Effect of Agreement. The execution, delivery and
performance of this Agreement by the Seller and consummation of
the transactions contemplated hereby will not, with or without
the giving of notice, or the lapse of time, or both (i) violate
or conflict with any provision of law, statute, rule or
regulation to which the Seller is subject including, without
limitation, any Federal or state bankruptcy, reorganization,
insolvency, receivership, liquidation, fraudulent conveyance,
bulk sales, corporate or other similar law protecting or
benefiting the stockholders or creditors of a corporation, (ii)
violate any judgment, order, writ or decree of any court
applicable to the Seller, or (iii) result in the breach of or
conflict with any term, covenant, condition or provision of,
result in the modification or termination of, constitute a
default under, or result in the creation or imposition of any
lien, security interest, charge or encumbrance upon any of the
Acquired Assets pursuant to any corporate charter, by-law,
commitment, contract or other agreement or instrument to which
the Seller is a party or by which any of the Acquired Assets is
or may be bound or affected.
(d) Consents. Except for consents of third parties
which have been obtained and are being delivered to the Buyer
with this Agreement, no consent, authorization or approval of, or
exemption by, any governmental or public body or authority or any
other entity or person is required in connection with the
execution, delivery and performance by the Seller of this
Agreement or any of the instruments or agreements herein referred
to or the taking of any action herein contemplated ("Consents").
(e) No Liens or Encumbrances. The Seller has and is
delivering to the Buyer good and marketable title to the Acquired
Assets, free and clear of all mortgages, claims, liens, charges
and encumbrances. The Seller does not know of any liens,
encumbrances or imperfections of title relating to the Acquired
Assets.
(f) Intellectual Property. There are no other
trademarks or trade names, trade name rights or service marks or
other intellectual property used by the Seller in connection
with the Products that are not included in the Acquired Assets.
The validity of such items and the title thereto of the Seller
have not been questioned in any litigation or governmental
inquiry or proceeding to which the Seller or any predecessor, is
or was a party, and, to the knowledge of the Seller, no such
litigation, governmental inquiry or proceeding is threatened.
To the knowledge of the Seller, the conduct of the business of
the Seller with respect to the Products as presently conducted
does not conflict with any licenses, trademarks, trademark
rights, trade names, trade name rights, service marks or patents
of any other person in any respect.
(g) Trademarks. Schedules l(a), l(b) and l(c) contain
a true and complete list of all of the Trademarks, including for
each registered trademark, the application or registration
number, filing or registration and expiration date, xxxx, and
class. To the knowledge of the Seller, the Trademarks do not
infringe the trademarks of any person and the Seller (i) has not
granted rights to any other person with respect to the
Trademarks, (ii) has no knowledge of any claim of use by any
other person of the Trademarks, (iii) has no knowledge of any
rights of any person which would adversely affect the right of
the Buyer to use the Trademarks, (iv) does not use any variants
of the Trademarks that are confusingly similar to or likely to
cause confusion with the Trademarks, (v) does not use the
Trademarks by consent or agreement with any person and (vi) does
not know of any claims or demands which have been asserted by
any person pertaining to the Trademarks and to the Seller's
knowledge, the Trademarks are not being infringed by any person.
(h) Permits, Licenses,-etc. (i) No permits, licenses,
orders or approvals of Federal, state, local or foreign
governmental or regulatory bodies are required in order to
permit the manufacture or distribution of the Products as
currently manufactured and distributed by the Seller and (ii)
the manufacture and distribution of the Products as currently
manufactured and distributed by the Seller does not violate or
infringe any Federal, state, local or foreign laws, statutes,
ordinances or regulations.
(i) Litigation. Except as set forth on schedule
4.1(i), there is no claim, action, suit, proceeding, arbitration,
or to the knowledge of the Seller, investigation or inquiry,
pending before any Federal, state, municipal, foreign or other
court or governmental or administrative body or agency, or any
private arbitration tribunal or, to the Seller's knowledge,
threatened, against, relating to or affecting the Products or the
transactions contemplated by this Agreement. During the past
three (3) years, there have been no recalls with respect to the
Products as a result of safety concerns or noncompliance with
applicable law or otherwise. Except as set forth on Schedule
4.1(i), there is not currently pending any unresolved customer
dispute which, if adversely determined, could have a material
adverse effect on future sales of any of the Products. The
Seller is not aware of any problem or potential problem with
respect to any Product whether relating to its safety, efficacy,
shelf life or otherwise. The Seller has not provided any
warranty of any kind with respect to any Product to any party,
other than warranties implied by law.
(j) Trade Secrets; Confidential Information. To the
best knowledge of the Seller, the Products do not make use of any
trade secrets or confidential information of any third person.
(k) Bulk Sale. The transfer of the Acquired Assets
will not constitute a "bulk sale", as such term is defined in the
Uniform Commercial Code of the State of California.
(1) Financial Statements.. Attached as Schedule 4.1(1)
are sales reports (as defined in Schedule 4.1(1)) for each of the
Products for the years ended December 31, 1995 and 1996.
Schedule 4.1(1) was accurately prepared in all material respects
in accordance with GAAP from the books and records of the Seller
in accordance with the internal accounting practices of the
Seller.
(m) Sales Data. The Seller has delivered to the Buyer
the sales data with respect to the Products for the period ending
March 31, 1997. All of such sales data was, as of their
respective dates, true and correct in all material respects.
Additionally, except as set forth on Schedule 4.1(m), the Seller
is not aware, with respect to any of the Products that any of the
top twenty U.S. customers and the top fifteen foreign customers
with respect to the Products intends not to continue carrying
such Product or materially decrease its orders therefore
(n) Contracts and Commitments. The Bottle Agreement
and the Contracts constitute all contracts or commitments
(whether written or oral) with distributors, brokers,
manufacturer's representatives, sales representatives, customers
and other persons, firms, corporations and other entities engaged
in the sale, distribution, supply or manufacture of the Products
except for contracts and commitments which are terminable on 30
days' (or less) prior written notice without further obligation.
No Contract to which the Seller is a party or to which it is
subject or by which it is bound requires the consent of any other
person by reason of the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby.
Other than purchase and sale orders, each of the Contracts is a
valid and subsisting Contract of all of the parties thereto in
full force and effect without modification. The Seller has
performed all obligations required to be performed by it and is
not in default under any Contract and no event has occurred
thereunder which, with or without the lapse of time or the giving
of notice, or both, would constitute a default by it thereunder.
To the knowledge of the Seller, no other party is in default
under any such Contract, instrument or other document. Except as
set forth in Schedule 4.1(n), no amounts are due and owing by the
Seller under such Contracts. Other than purchase and sale
orders, no Contract has been orally modified or amended. All
purchase orders and sale orders have been made in the ordinary
course of the Seller's business consistent with past practices.
None of the stockholders, officers or directors of the Seller or
any affiliate or associate thereof is a party to or subject to or
bound by any Contract.
(o) Inventory. Except as disclosed in Schedule 4.1
(o), the Inventory has been valued on the books and records of
the Seller in accordance with the Seller's standard cost. The
Inventory consists (i) of finished product which will be non-
obsolete, comply with any warranty customarily given to customers
with respect to such Inventory and be good and salable and of the
same type and product dress as then being generally marketed and
distributed and (ii) of generally acceptable quality of work-in-
process, raw and packaging material which will be non-obsolete
and capable generally of being processed at ordinary costs and by
ordinary procedures into finished goods that will be in good
merchantable condition.
(p) Accounts Receivable. All of the Accounts
Receivable represent accounts and notes receivable for
merchandise actually delivered or services actually provided
relating to the Products, are actual and bona fide receivables
and have arisen in the ordinary course of business, represent
obligations for the total dollar amounts thereof shown on the
books of the Seller and have been billed consistent with past
practice. All such Accounts Receivable are fully collectible in
the normal and ordinary course of business, except to the extent
of a reserve in an amount not in excess of a reserve for doubtful
accounts consistent with past practices of the Seller. There are
no recoupments, set-offs or counterclaims in respect of such
receivables except for third party adjustments consistent with
past practice which occur in the ordinary course of business and
which are not, in the aggregate, material in amount. Schedule
4.1(p) sets forth (i) the total amount of Accounts Receivable
outstanding as of May 14, 1997, by account debtor and (ii) the
agings of such receivables based on the following schedule: 0-30
days, 31-60 days, 61-90 days, and over 90 days, from the due date
thereof.
(q) No Misrepresentations. Neither this Agreement nor
any agreement entered into in connection with the transactions
contemplated by this Agreement nor any document delivered
hereunder or thereunder contains any untrue statement of a
material fact or omits to state a material fact necessary to make
the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
(r) No Brokers or Finders. Except for any fees due and
payable to Xxxxxxxx, Xxxxx & Company, Inc. which the Seller
hereby acknowledges and agrees is the sole responsibility of the
Seller, no agent, broker, person or firm acting on behalf of the
Seller is or shall be entitled to a brokerage commission,
finder's fee, or other like payment in connection with any of the
transactions contemplated hereby.
4.2 Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller as follows:
(a) Organization. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Florida and has all requisite power to enter into
this Agreement and perform its obligations hereunder.
(b) Authorization of Agreement. The Buyer has taken
all necessary corporate action to authorize the execution,
delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby. This Agreement has been
duly and validly authorized, executed and delivered by the Buyer
and constitutes the legal, valid and binding obligation of the
Buyer, enforceable in accordance with its terms except as such
enforcement may be limited by bankruptcy, insolvency, moratorium
or other similar laws presently or hereafter in effect affecting
the enforcement of creditors' rights generally.
(c) Effect of Agreement,. The execution, delivery and
performance of this Agreement by the Buyer and consummation of
the transactions contemplated hereby will not, with or without
the giving of notice, or the lapse of time, or both (i) violate
any provision of law, statute, rule or regulation to which the
Buyer is subject, (ii) violate any judgment, order, writ or
decree of any court applicable to the Buyer, or (iii) result in
the breach of or conflict with any term, covenant, condition or
provision of, result in the modification or termination of,
constitute a default under, or result in the creation or
imposition of any lien, security interest, charge or encumbrance
upon any of the Buyer's property pursuant to any corporate
charter, by-law, commitment, contract or other agreement or
instrument to which the Buyer is a party or by which any of its
property is or may be bound or affected.
(d) Consents. No consent, authorization or approval
of, or exemption by, any governmental or public body or authority
or any other entity or person is required in connection with the
execution, delivery and performance by the Buyer of this
Agreement or any of the instruments or agreements herein referred
to or the taking of any action herein contemplated.
(e) No Misrepresentations. Neither this Agreement nor
any other agreement entered into in connection with the
transactions contemplated by this Agreement nor any document
delivered hereunder or thereunder contains any untrue statement
of a material fact or omits to state a material fact necessary to
make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
V. ADDITIONAL COVENANTS OF THE PARTIES
5.1 Further Documents. The Seller shall execute, deliver
and acknowledge all such further documents and instruments of
transfer and conveyance in such jurisdictions, and do and perform
all such acts and other things as the Buyer may reasonably
request, to vest in the Buyer title to the Acquired Assets. Upon
the request of the Buyer, the Seller agrees promptly to prepare
at its expense all country assignment documents and powers of
attorney for delivery to Buyer for recordation of the various
Foreign Trademarks. The Buyer will record the trademark
assignment documents in the United States Patent and Trademark
Office and, if and when it so determines, in all such other
applicable foreign government offices. The Seller and the Buyer
shall each bear 50% of all of the fees and expenses related to
such recordation of assignments in the United States Patent and
Trademark Office and all of the fees and expenses related to such
recordation of assignments in such other applicable foreign
government offices.
5.2 Manufacture and Supply Agreement. The parties agree to
negotiate in good faith, at the request of the Buyer, a
Manufacture and Supply Agreement pursuant to which Seller shall,
for a mutually agreed upon period of time, if the Seller is able,
manufacture Products for the Buyer.
5.3 Exploitation of Other Territories; Non-Compete. The
Seller agrees that it will not (i) register any marks which
are identical or substantially similar to the Trademarks in
any foreign countries or (ii) market any professional hair
care products substantially similar to the Products in
connection with the exploitation or marketing of hair care
products by or on behalf of the Seller or any of its
affiliates.
5.4 Sales Taxes. The Seller and the Buyer shall each bear
50% of all sales, transfer, use and other similar taxes payable
in connection with the sale of the Acquired Assets.
5.5 Distributors and Manufacturers. The Seller will use
its best efforts to assist the Buyer in arranging for those
distributors currently selling one or more Products on behalf of
the Seller and for those manufacturers currently manufacturing
one or more Products, to continue to do so after the Closing for
the benefit of the Buyer. In that regard, to the extent any such
arrangement might otherwise cause a conflict for such distributor
or manufacturer with an existing agreement, policy or practice of
the Seller, the Seller shall waive same.
5.6 Customers. The customer list referred to in Section
1.1(f) shall contain those parties having purchased Products from
the Seller during the twelve (12) months prior to the Closing,
regardless of quantity or frequency, and shall be true, correct
and complete in all material respects.
5.7 Cooperation. The Seller will cooperate with the Buyer,
and the Seller will use its best efforts to have the officers,
directors and other employees of the Seller cooperate with the
Buyer, at the Buyer's request and expense, on and after the
Closing, in endeavoring to effect the collection of the Accounts
Receivable included in the Acquired Assets and the settlement, to
the satisfaction of the Buyer, of the Assumed Liabilities, and
shall furnish information, evidence, testimony, records, tax
returns and other assistance in connection with any actions,
proceedings, arrangements or disputes involving the Seller and/or
the Buyer and based upon contracts, arrangements, commitments or
acts of the Seller which were in effect or occurred on or prior
to the Closing.
5.8 Authorization; Mail. The Seller agrees that the Buyer
shall have the right and authority to collect for the account of
the Buyer all Accounts Receivable and other items which shall be
transferred to the Buyer as provided herein, and to endorse with
the name of the Seller any checks received on account of any such
receivables or other items. The Seller agrees that it will
promptly transfer and deliver to the Buyer any cash or other
property that the Seller may receive in respect of any such
receivables or other items. The Seller authorizes and empowers
the Buyer from and after the date hereof (i) notify account
debtors of the change in ownership (ii) to receive and open mail
addressed to the Seller and (iii) to deal with the contents
thereof in any manner the Buyer sees fit, provided such mail and
the contents thereof relate to the Acquired Assets or otherwise
to the business of the Seller, as conducted by the Buyer or to
any of the Assumed Liabilities. The Seller agrees to deliver to
the Buyer promptly upon receipt any mail, checks or other
documents received by it pertaining to the Acquired Assets or
otherwise to the business of the Seller, as conducted by the
Buyer, or any of the Assumed Liabilities. The Buyer agrees to
deliver to the Seller any mail which it receives to which it is
not entitled by reason of this Agreement or otherwise and to
which the Seller is entitled.
5.9 Transfer of Securities. The Seller covenants and
agrees that the Shares and the Contingent Shares, if any, may
only be transferred in compliance with this Agreement and
applicable Federal and state securities laws and upon receipt of
an opinion of counsel, which opinion and counsel shall be
reasonably acceptable to Xxxxxxx, that an exemption from
registration of such Shares under the Securities Act and under
any applicable state securities laws is available. All Shares
and Contingent Shares, if any, received by the Seller hereunder
shall bear the legend set forth below:
"The securities represented by this certificate (i) have
not been registered under the Securities Act of 1933 or
under any state securities or "blue sky" laws, and may not
be offered or sold except pursuant to (x) an effective
registration statement under such Act and such laws, or
(y) an opinion of counsel reasonably satisfactory to the
issuer, that an exemption from registration under such Act
and such laws is available and (ii) are subject to the
terms and conditions set forth in a certain Acquisition
Agreement between New Image Laboratories, Inc., The
Xxxxxxx Company and Xxxxxxx Distributing, Inc."
5.10 Sales. The Seller hereby agrees that any sales of
Products made by the Seller after the execution of this Agreement
but prior to Closing shall be deemed, for all purposes, to have
been made by the Buyer.
VI. INDEMNIFICATION
6.1 Indemnification. Each party agrees to indemnify,
defend and hold harmless the other party, its
affiliates and their respective officers, directors,
employees and agents from and against, or pay and
reimburse, any and all loss, liability, damage,
deficiency, costs and expenses (including, without
limitation, interest, penalties and reasonable
attorneys' fees and disbursements incurred in enforcing
its rights hereunder) (collectively, "Loss") arising
out of or otherwise in respect of any inaccuracy in or
any breach of any representation, warranty, covenant or
agreement (including the Buyer's agreement to assume
the Assumed Liabilities and the Seller's agreement to
be responsible for all other liabilities) of such party
contained in this Agreement, whether in respect of a
third party action or otherwise. Additionally, the
Seller agrees to indemnify, defend and hold Xxxxxxx and
the Buyer, their respective affiliates and their
respective officers, directors, employees and agents,
harmless from and against, or pay and reimburse, any
and all Loss arising in connection with the ownership
or use of the Acquired Assets (including, without
limitation, any Loss attributable to product liability
or warranty claims), or resulting from or arising out
of any liability or obligation of the Seller or any of
its affiliates, prior to the date of the Closing,
whether in respect of a third-party action or
otherwise, and each of Xxxxxxx and the Buyer agrees to
indemnify, defend and hold the Seller, its affiliates
and their respective officers, directors, employees and
agents, harmless from and against, or pay and
reimburse, any and all Loss arising in connection with
the ownership or use of the Acquired Assets (including,
without limitation, any Loss attributable to product
liability or warranty claims), or resulting from or
arising out of any liability or obligation of the
Buyer, on or after the date of the Closing, whether in
respect of a third-party action or otherwise. Promptly
after receipt by a party of notice of any claim or the
commencement of any action or proceeding, such party
will, if a claim with respect thereto is to be made
against the other party obligated to provide
indemnification (the "Indemnifying Party") pursuant to
this Article VI, give the Indemnifying Party written
notice of such claim or the commencement of such action
or proceeding. The Indemnifying Party shall have the
right, at its option, to compromise or defend, at its
own expense and by its own counsel, any such matter
involving the asserted liability. If the Indemnifying
Party shall undertake to compromise or defend any such
asserted liability, it shall promptly notify the other
party in writing of its intention to do so and
unconditionally acknowledge in such notice its
obligation to fully indemnify such party, and the party
seeking indemnification shall cooperate fully with the
Indemnifying Party and its counsel in the prompt
compromise of, or defense against, any such asserted
liability. In any event, the party being indemnified
shall have the right at its own expense to participate
in the defense of such asserted liability. If the
Indemnifying Party does not promptly acknowledge its
obligation to indemnify and assume the defense of any
such asserted liability, the other party may defend
against such asserted liability in such manner as it
may deem appropriate, including, but not limited to,
settling such claim, after giving written notice of the
same to the Indemnifying Party, on such terms as the
other party may deem appropriate, and the Indemnifying
Party shall have the right, at its own expense, to
participate in the defense of such asserted liability.
If the Indemnifying party thereafter seeks to question
the manner in which the other party defended such
asserted liability or the amount or nature of any such
settlement, the Indemnifying Party shall have the
burden to prove that the conduct of the other party in
the defense and/or settlement of such asserted
liability constituted gross negligence or willful
misconduct.
6.2 Recovery. While the Escrowed Stock is still in escrow,
the Buyer shall first satisfy any amounts owed to it by the
Seller pursuant to Section 2.9 and Section 6.1 hereof out of such
Escrowed Stock according to the procedures set forth in Section
2.10 hereof. If there is no Escrowed Stock remaining, the Buyer
may set-off, appropriate and apply any amounts owed to it by the
Seller pursuant to Sections 2.9 and 6.1 out of Contingent Shares,
if any. The Buyer hereby agrees to promptly notify Seller of any
such set-off and the grounds therefor. The value of the
Contingent Shares set off pursuant to this Section 6.2 shall be
determined by reference to the average closing trading price of
Xxxxxxx Common Stock as reported in the Wall Street Journal (or
other recognized daily financial newspaper) for the 20 trading
days prior to the date such Contingent Shares, if any, were
earned by the Seller. Buyer shall not be entitled to any
indemnification payment pursuant to Section 6.1, if, and only to
the extent that, the conditions or event giving rise to such
indemnification payment is reflected in a Purchase Price
adjustment pursuant to Section 2.9.
6.3 Maximum Recovery. Notwithstanding anything to the
contrary set forth in this Agreement, the Buyer acknowledges and
agrees that the sole remedy available to it to recover any
amounts owed to it pursuant to Section 2.9 and Section 6.1 of
this Agreement shall be out of the Escrowed Stock and the
Contingent Shares.
VII. MISCELLANEOUS
7.1 Further Assurances. The parties shall do and perform or
cause to be done and performed all such further acts and things
and shall execute and deliver all such other agreements,
certificates, instruments and documents as any party may
reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the Consummation of
the transactions contemplated hereby including, without
limitation, prosecuting all pending trademark applications,
subject to the Buyer's obligation to bear 50% of such costs
pursuant to Section 5.1 hereof.
7.2 Finders Fees. Each party (a) represents and warrants
that it has not taken and will not take any action which would
cause the other party to have any obligation or liability to any
person for finders' fees, brokerage fees, agents, commissions or
like payments in connection with the execution and delivery of
this Agreement or the consummation of the transactions
contemplated hereby, and (b) agrees to indemnify and hold the
other party harmless for any loss, liability, cost or expense,
including, without limitation, legal expenses arising out of the
breach or inaccuracy of the foregoing representation and
warranty.
7.3 Expenses. Each party shall pay the fees and expenses
of its respective counsel, accountants and agents and all other
expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this
Agreement; provided, however, that the Buyer shall pay the Seller
$40,000 in cash not later than 45 days after Closing to defray
the Seller's expenses; Provided, that if a deficiency of
Inventory exists on such date Buyer shall deduct from such
$40,000 an amount equal to such deficiency and the remainder, if
any, shall be paid to the Seller. The parties agree that the non-
prevailing party shall bear all costs and expenses incurred in
connection with any dispute regarding this Agreement between the
parties.
7.4 Survival of Representations and Warranties. The
representations and warranties contained herein or in any
instrument or document delivered or to be delivered pursuant
hereto shall survive until two years from the Closing; provided,
however, that the representation and warranty of the Seller set
forth in Section 4.1(e) relating to title shall survive until
three years from the Closing and; provided, further, however,
that nothing contained in this Agreement shall limit or
constitute a waiver by Xxxxxxx or the Buyer of any of their
rights or remedies based on fraud.
7.5 Notices. All notices and other communications required
or permitted to be given under this Agreement ("Communications")
shall be in writing and shall be deemed to have been duly given
if delivered personally with receipt acknowledged or sent by
registered or certified mail, return receipt requested, or by
overnight courier for next day delivery, to the parties and such
parties' counsel at their respective addresses set forth below or
to such other or additional address as either party shall
hereafter specify by Communication to the other, or by telecopier
to the parties at their respective telecopier numbers set forth
below or to such other or additional numbers as either party
shall hereafter specify by Communication to the other party:
If to the Seller to:
New Image Laboratories
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attn: Xxxxx Xxxxx, President
with a copy to:
Xxxxxxxx, Xxxxxx & Xxxxxxx
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Telecopier No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
If to the Buyer to:
The Xxxxxxx Co.
0000 Xxxx XxXxx Xxxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Telecopier No.:(000) 000-0000
Attn: Xx. Xxxxx X. Xxxxxx
President
with a copy to:
Xxxxxxx, Calamari and Xxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxxx, Esq.
Xxxxxxx X. Xxxxxx, Esq.
Notice of change of address or telecopier number shall be
deemed given when actually received or upon refusal to accept
delivery thereof; all other communications shall be deemed to
have been given and received on the earliest of: (a) when
actually received or upon refusal to accept delivery thereof, (b)
on the date when delivered personally or sent by telecopier, (c)
one (1) business day after sending by recognized overnight
courier, or (d) four (4) business days after mailing, as
aforesaid.
7.6 Assignment. Neither the Seller nor the Buyer shall
have the right, on or prior to the Closing, to assign this
Agreement nor any of their respective rights hereunder without
the prior written consent of the other.
7.7 Binding Effect; Benefits. This Agreement shall inure
to the benefit of and shall be binding upon the parties and their
respective successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to or shall (a)
confer on any person other than the parties, or their respective
successors or permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement,
or (b) constitute the parties partners or participants in a joint
venture.
7.8 Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument in writing signed by
the party against whom enforcement of any such modification or
amendment is sought. Either party may, by an instrument in
writing, waive compliance by any other party with any term or
provision of this Agreement on the part of such other party to be
performed or complied with. The waiver by a party of a breach of
any term or provision of this Agreement shall not be construed as
a waiver of any subsequent breach.
7.9 Governing Law. This Agreement shall be construed and
governed in accordance with the laws of the State of Florida,
without giving effect to the choice of law principles thereof.
7.10 Consent to Jurisdiction. (a) With respect to any
action commenced by the Seller against the Buyer hereunder or
under any other document delivered pursuant to this Agreement,
the Buyer (i) consents and submits to the jurisdiction of the
Courts of the State of California or of the Courts of the United
States of America for the Central District of California for all
purposes of this Agreement, including, without limitation, any
action or proceeding instituted for the enforcement of any right,
remedy, obligation and liability arising under or by reason of
this Agreement and (ii) consents and submits to the venue of such
action or proceeding in the City and County of Ventura (or such
judicial district of a Court of the United States as shall
include the same).
(b) With respect to any action commenced by the Buyer or
Xxxxxxx against the Seller hereunder or under any other document
delivered pursuant to this Agreement, the Seller (i) consents and
submits to the jurisdiction of the Courts of the State of Florida
or of the Courts of the United States of America for the Southern
District of Florida for all purposes of this Agreement,
including, without limitation, any action or proceeding
instituted for the enforcement of any right, remedy, obligation
and liability arising under or by reason of this Agreement and
(ii) consents and submits to the venue of such action or
proceeding in the City and County of Broward (or such judicial
district of a Court of the United States as shall include the
same).
7.11 Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other
jurisdiction.
7.12 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
7.13 Entire Agreement. This Agreement (together with
the other agreements, instruments and documents delivered
pursuant hereto) constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof, and
supersedes all prior agreements and understandings, oral and
written, among the parties hereto with respect to the subject
matter hereof including without limitation that certain Letter of
Intent, dated February 14, 1997, and that certain Letter of
Intent dated April 7, 1997, each between Xxxxxxx and the Seller.
7.14 Confidentiality. The Seller shall not discuss with,
or disclose to, any other person or entity the terms of this
Agreement without the prior written consent of the Buyer unless
required to by a court order issued by a court of competent
jurisdiction, provided that Xxxxxxx and the Buyer shall be
provided notice and an opportunity to contest such order.
7.15 (a) Termination. This Agreement may be terminated
at any time prior to the Closing by any of the following:
(i) By mutual written agreement of the
Seller, the Buyer and Xxxxxxx;
(ii) By either the Seller or the Buyer if the
Closing has not occurred by May 31, 1997, upon written notice by
such terminating party, provided that at the time such notice is
given a material breach of this Agreement by such terminating
party shall not be the principal reason for the Closing's failure
to occur;
(iii) By the Buyer, by written notice to the
Seller, if there has been a material violation or breach of any
of the Seller's covenants or agreements made herein or in
connection herewith or if any representation or warranty of the
Seller made herein or in connection herewith proves to be
materially inaccurate or misleading; or
(iv) By the Seller, by written notice to the
Buyer, if there has been a material violation or breach of any of
the Buyer's or Stephan's covenants or agreements made herein or
in connection herewith or if the representation or warranty of
the Buyer or Xxxxxxx made herein or in connection herewith proves
to be materially inaccurate or misleading.
(b) Effect of Termination. If this Agreement is
terminated pursuant to Paragraph (a) above then this Agreement
shall herewith become void and there shall be no liability or
obligation on the part of any party hereto; provided, that if the
Buyer terminates this Agreement pursuant to paragraph (a) (iii)
above or if the Seller terminates this Agreement pursuant to
paragraph (a) (iv) above, the non-terminating party shall remain
liable for any breach of this Agreement.
7.16 Seller's Acknowledgment. The Seller hereby
acknowledges that as of May 14, 1997 there is a preliminary
deficiency in Accounts Receivable and Inventory at least equal to
$335,000 and $372,000, respectively. The Seller and the Buyer
hereby further acknowledge that nothing in the prior sentence
shall be construed as an admission by either of them that the
above deficiencies are the actual deficiencies and that the
deficiencies may not be lesser or greater. The Seller, Xxxxxxx
and the Buyer specifically agree that if the deficiency uncovered
by the Buyer or Xxxxxxx following the Closing pursuant to the
procedures set forth in Section 2.9(b) and (c), respectively, is
greater or lesser than the deficiency set forth in the first
sentence of this Section 7.16, that such amount shall be the
correct adjustment to the Purchase Price as set forth in Section
2.9. Nothing in this Section 7.16 shall be deemed to be a waiver
of any rights of Xxxxxxx, the Seller, or the Buyer pursuant to
this Agreement.
IN WITNESS WHEREOF, the Seller, Xxxxxxx and the Buyer have
caused this Agreement to be signed in their respective names by
one of their officers thereunto duly authorized, as of the date
first above written.
NEW IMAGE LABORATORIES, INC.
By: Xxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: CEO & President
THE XXXXXXX CO.
By: Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: President
XXXXXXX DISTRIBUTING, INC.
By: Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: President
XXXX OF SALE AND ASSIGNMENT
XXXX OF SALE, dated as of June 26, 1997, from NEW IMAGE
LABORATORIES, INC., a California corporation (the "Seller"), to
XXXXXXX DISTRIBUTING, INC., a Florida corporation (the "Buyer").
WHEREAS, the Buyer and the Seller have entered into an
agreement dated as of the date hereof (the "Acquisition
Agreement") providing for the sale and transfer to the Buyer of
certain of the properties, assets and rights of the Seller, all
as more fully described in the Acquisition Agreement.
NOW, THEREFORE, in consideration of One ($1.00) Dollar and
other good and valuable consideration paid by the Buyer to the
Seller, the receipt of which is hereby acknowledged, the Seller
hereby sells, transfers and conveys to the Buyer and its
successors and assigns, all of the Seller's right, title and
interest in and to the properties, assets, contracts and rights
described in Section 1.1 of the Acquisition Agreement (the
"Acquired Assets").
TO HAVE AND TO HOLD the properties, assets, contracts and
rights hereby assigned, transferred and conveyed unto the Buyer
and its successors and assigns, forever.
The Seller, from time to time, if so required by the Buyer,
will execute and deliver such further instruments of conveyance,
transfer, assignment and confirmation and take such other actions
as the Buyer may reasonably request in order to more effectively
grant, bargain, sell, convey, assign, transfer, set over and
deliver all of the Seller's right, title and interest in and to
the Acquired Assets.
The Seller does hereby authorize and empower the Buyer to
collect and receive all of the Seller's right, title and interest
in the Acquired Assets, to xxx for and take any other action the
Buyer may deem appropriate in law or in equity in order to
enforce this Xxxx of Sale and to enjoy all of the Seller's right,
title and interest in and to the Acquired Assets.
This Xxxx of Sale is being delivered subject to and with
the benefit of the respective representations warranties,
covenants, terms, conditions and other provisions of the
Acquisition Agreement.
This Xxxx of Sale shall be governed by and construed and
enforced in accordance with the laws of the State of California
without regard to conflicts of law rules. This Xxxx of Sale
shall be binding upon the Seller and its successors and assigns
and shall inure to the benefit of the Buyer and its successors
and assigns.
IN WITNESS WHEREOF, the Seller has executed this Xxxx of
Sale as of the day and year set forth above.
NEW IMAGE LABORATORIES, INC.
By: Xxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: CEO & President
UNITED STATES
TRADEMARK ASSIGNMENT
THIS ASSIGNMENT is made on the 26th day of June, 1997,
between New Image Laboratories, Inc., a corporation organized
under the laws of the State of California, with its principal
place of business at 0000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx
00000 (the "Assignor"), and Xxxxxxx Distributing, Inc., a Florida
corporation organized under the laws of the State of Florida,
with its principal place of business at 0000 Xxxx XxXxx Xxxx, Xx.
Xxxxxxxxxx, Xxxxxxx 00000 (the "Assignee").
WHEREAS, the Assignor is the proprietor in the United
States of the common law trademarks, trademark applications and
registrations listed in the Schedule attached hereto (the
"Trademarks"); and
WHEREAS, pursuant to an Acquisition Agreement dated May
23, 1997, between Assignor and Assignee ("Acquisition
Agreement"), the Assignor wishes to sell and the Assignee wishes
to acquire all of the Assignor's rights in and to the Trademarks
and the goodwill associated therewith.
NOW, THEREFORE, in consideration of the mutual covenants
and promises contained in the Acquisition Agreement, the Assignor
hereby unconditionally assigns, transfers and conveys to the
Assignee all its rights, title and interests to the Trademarks,
together with the goodwill associated therewith and all
applications and registrations and any renewals thereof listed in
the Schedule and any common law rights thereto and any related
rights based on use including the right to xxx for past
infringement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
ASSIGNOR:
NEW IMAGE LABORATORIES, INC.
BY: Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: CEO & President
ASSIGNEE:
XXXXXXX DISTRIBUTING, INC.
By:______________________
Name:
Title:
FOREIGN
TRADEMARK ASSIGNMENT
THIS ASSIGNMENT is made on the 26th day of June, 1997,
between New Image Laboratories, Inc., a corporation organized
under the laws of the State of California, with its principal
place of business at 0000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx
00000 (the "Assignor"), and Xxxxxxx Distributing, Inc., a Florida
corporation organized under the laws of the State of Florida,
with its principal place of business at 0000 Xxxx XxXxx Xxxx, Xx.
Xxxxxxxxxx, Xxxxxxx 00000 (the "Assignee").
WHEREAS, the Assignor is the proprietor in the countries
listed on the Schedule attached hereto of the common law
trademarks, trademark applications and registrations listed in
the Schedule (the "Trademarks"); and
WHEREAS, pursuant to an Acquisition Agreement dated May
23, 1997, between Assignor and Assignee ("Acquisition
Agreement"), the Assignor wishes to sell and the Assignee wishes
to acquire all of the Assignor's rights in and to the Trademarks
and the goodwill associated therewith.
NOW, THEREFORE, in consideration of the mutual covenants
and promises contained in the Acquisition Agreement, the Assignor
hereby unconditionally assigns, transfers and conveys to the
Assignee all its rights, title and interests to the Trademarks,
together with the goodwill associated therewith and all
applications and registrations and any renewals thereof listed in
the Schedule and any common law rights thereto in the countries
listed on the Schedule and any related rights based on use
including the right to xxx for past infringement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
ASSIGNOR:
NEW IMAGE LABORATORIES, INC.
By: Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: CEO & President
ASSIGNEE:
XXXXXXX DISTRIBUTING, INC.
By: ________________
Name:
Title:
LIQUIDATING TRUST AGREEMENT
This Liquidating Trust Agreement (the "Agreement") is entered
into by and among New Image Laboratories, Inc., a California
corporation ("New Image"), The Xxxxxxx Co., a Florida corporation
("Xxxxxxx"), Xxxxxxx Distributing, Inc., a Florida corporation
("SDI"), and Xxxxxx X. Xxxxxx & Associates, Inc., a California
corporation, as liquidating trustee (the "Trustee"), with the
approval of the Continuing Creditors' Committee (the "Committee")
established under the "Third Amended Joint Plan of Reorganization
under Chapter II of the Bankruptcy Code" (the "Image
Reorganization Plan") confirmed in the chapter II bankruptcy case
(the "Chapter 11 Case") of Image Laboratories, Inc., a California
corporation ("Image"), with reference to the following facts and
recitations:
A. New Image is a manufacturer and distributor of hair care
products which include, among others, the product lines
known as "Image" and "Modern" (the "Product Lines").
B. SDI has agreed to purchase from New Image, and New Image
has agreed to sell to SDI, the Product Lines and certain
assets related to the Product Lines (the "Acquisition"),
on the terms and conditions set forth in the Acquisition
Agreement (the "Acquisition Agreement") among New Image,
Xxxxxxx, and SDI which has been entered into concurrently
with the execution of this Agreement.
C. Pursuant to the Image Reorganization Plan and certain
agreements executed by New Image in connection therewith, New
Image previously assumed the obligation to pay "General Unsecured
Claims" of Image, as defined in the Image Reorganization Plan, as
duly allowed in the Chapter II Case, on the terms and conditions
and to the extent set forth in the Image Reorganization Plan (the
"Old Bankruptcy Debt"). The Committee was established under the
Image Reorganization Plan for the purpose of, among other things,
pursuing the best interests of the holders of the Old Bankruptcy
Debt.
D. The unpaid principal balance of the Old Bankruptcy Debt
is approximately $3,065,000.00. There are approximately 378
holders of Old Bankruptcy Debt. Attached hereto as Exhibit A and
incorporated herein by this reference is a list of holders of the
Old Bankruptcy Debt and the corresponding amount of Old
Bankruptcy Debt owed to each such holder.
E. In addition to the Old Bankruptcy Debt, New Image is
indebted to trade creditors and other unsecured creditors (the
"New Trade Debt") in the approximate principal amount of
$3,600,000.00. There are approximately 340 holders of New Trade
Debt. Attached hereto as Exhibit B and incorporated herein by
this reference is a list of holders of the New Trade Debt and the
corresponding amount of New Trade Debt owed to each such holder
as reflected in the books and records of New Image.
F. In conjunction with and in consideration of the
Acquisition, Xxxxxxx and SDI have agreed with New Image and the
Committee, after negotiations, to provide for the Old Bankruptcy
Debt and the New Trade Debt in the manner set forth in this
Agreement.
G. The Trustee has agreed to accept the trust established
by this Agreement and to administer the trust in accordance with
the express instructions set forth in this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED BY AND AMONG THE PARTIES
HERETO, AS FOLLOWS:
1. Concurrently with and as a condition to the consummation
of the Acquisition in the manner set forth in the Acquisition
Agreement and the transfer of the ownership of the Product
Lines and related assets comprising the Acquisition to SDI (the
"Closing"), Xxxxxxx and SDI shall deposit the following with
the Trustee:
a. an irrevocable standby letter of credit in the
amount of $2,932,600.00, duly issued by NationsBank, N.A.
(South) in favor of the Trustee as beneficiary, and otherwise
in the form attached hereto as Exhibit C (the "Letter of
Credit"); and
b. the duly executed joint and several unconditional
promissory note of Xxxxxxx and SDI payable to the order of
the Trustee, in the principal amount of $2,399,400.00,
payable without interest in two equal installments of
$1,199,700.00 each on the 120th day and 240th day,
respectively, after the Closing Date, and otherwise in the
form attached hereto as Exhibit D (the "Note").
2. The Trustee shall hold the Letter of Credit, the Note,
and all payments received by the Trustee under this Agreement
(except the Trustee's compensation and reimbursement of expenses
pursuant to Paragraph 13 below), including without limitation
all payments on account of the Letter of Credit and all payments
on account of the Note, in trust on the express terms and
conditions set forth in this Agreement. All disbursements of
funds by the Trustee shall be in accordance with the express
instructions contained in this Agreement. All undisbursed funds
shall be held by the Trustee in a segregated, interest-bearing
trust account (the "Holding Account") at Union Bank of
California. All disbursements by the Trustee shall be by checks
drawn upon a segregated, trust checking account (the
"Disbursement Account") at Union Bank of California. Xxxxxxx
shall be entitled to all interest earned on the trust funds and
shall furnish the Trustee its taxpayer identification number for
the reporting of all such interest. New Image shall have no
interest whatsoever in any assets of the trust or any proceeds
thereof
3 . On the Closing Date or as soon as practicable
thereafter, New Image shall cause to be mailed to each
holder of Old Bankruptcy Debt, as fisted on Exhibit A,
and to each holder of New Trade Debt, as listed on
Exhibit D, copies of the following:
a. the "Consent and Release" in the form attached hereto
as Exhibit E (the "Consent and Release");
b. the letter from the Committee in the form attached
hereto as Exhibit F (the "Committee Letter"); and
C. the letter from New Image in the form attached hereto
as Exhibit H.
4. On the Closing Date, the Committee shall cause to
be deposited with the Trustee a duly executed Consent
and Release from each member of the Committee in respect
of both the Old Bankruptcy Debt and the New Trade Debt,
if any, held by such member. On the Closing Date, the
Committee shall deliver to New Image the Committee
Letter duly executed on behalf of the Committee. On and
after the Closing Date, the Committee shall use
reasonable efforts to urge each holder of Old Bankruptcy
Debt and each holder of new Trade Debt to execute and
deposit with the Trustee a Consent and Release.
5. On and after the Closing Date, the Trustee shall make
disbursements from the funds held in trust under this Agreement
to each holder of Old Bankruptcy Debt who duly executes and
deposits with the Trustee a Consent and Release and to each
holder of new Trade Debt who duly executes and deposits with the
Trustee a Consent and Release (collectively, "Consenting
Creditors"), at the times and in the amounts and manner set
forth in this Agreement. Each Consent and Release shall be
accompanied by invoices, purchase orders, delivery receipts, and
similar documentation evidencing the validity of the claim of
the Consenting Creditor. Each Consenting Creditor shall send a
copy of its Consent and Release and all accompanying
documentation directly to Xxxxxxx, concurrently with depositing
the original thereof with the Trustee. In the event Xxxxxxx
shall notify the Trustee in writing that a Consenting Creditor
failed to send a copy of its Consent and Release and all
accompanying documentation to Xxxxxxx, the Trustee shall mail
such copy to Xxxxxxx before making any further disbursements to
such Consenting Creditor. Each Consenting Creditor shall be
entitled to disbursements under this Agreement aggregating 80%
of the "Allowed Amount" (as defined in Paragraph 7 below) of the
claim of such Consenting Creditor, in full settlement and
satisfaction of such claim. No disbursements shall be made to
any creditor or purported creditor (a "Non-consenting Creditor")
who does not duly execute and deposit with the Trustee a Consent
and Release, and no Non-Consenting creditor shall have any
interest whatsoever in any of the assets of the trust or any
proceeds thereof
6. For each duly executed Consent and Release deposited
with the Trustee, the Trustee shall prepare an initial cash
disbursement ("Initial Disbursement") in an amount equal to 44%
of the lesser of (i) the amount indicated on the Consent and
Release as "Amount of Claim" (the "Claimed Amount"), and (E) the
amount listed (the "Listed Amount") for the holder of such claim
on Exhibit A (in the case of Old Bankruptcy Debt) or on Exhibit B
(in the case of new Trade Debt). The Trustee shall process the
Initial Disbursement for each Consenting Creditor as soon as
practicable after the date of deposit with the Trustee of such
Consenting Creditor's duly executed Consent and Release. On the
seventh day following the Closing, and at weekly intervals
thereafter as necessary, the Trustee shall provide Xxxxxxx, by
confirmed telecopy in accordance with Paragraph 18 below, a
schedule, by creditor, of the amounts necessary to fund the
Initial Disbursements then payable, and Xxxxxxx shall provide the
funds necessary to make such Initial Disbursements by effecting a
wire transfer to the Holding Account no later than the seventh
day following its receipt of each such schedule. The Trustee
shall make each Initial Disbursement promptly upon confirmation
of receipt of each corresponding wire transfer from Xxxxxxx. In
the event that Xxxxxxx shall fail timely to effect a required
wire transfer, the Trustee shall be entitled to draw upon the
Letter of Credit, in the manner specified therein, for the
required funds which Xxxxxxx shall have failed to transfer to the
Trustee.
7. Within sixty days after receipt by Xxxxxxx of the copy
of each Consent and Release and accompanying documentation
required to be sent to Xxxxxxx Pursuant to Paragraph 5 above,
Xxxxxxx shall notify the Trustee whether or not Xxxxxxx intends
to dispute the Claimed Amount therein. If Xxxxxxx does not
notify the Trustee that Xxxxxxx disputes the Claimed Amount, then
the Claimed Amount shall be deemed the Allowed Amount for
purposes of this Agreement. If Xxxxxxx notifies the Trustee that
Xxxxxxx disputes the Claimed Amount (a "Disputed Claim"), then
Xxxxxxx shall send to the Trustee and to the holder of the
Disputed Claim a written objection to the Claimed Amount, stating
in reasonable detail the grounds for its objection, and shall
send to the holder of the Disputed Claim a copy of the
"Description of Dispute Resolution Procedure" attached hereto as
Exhibit I. Resolution of the Disputed Claim shall proceed in
accordance with the Description of Dispute Resolution Procedure.
If at any time a consensual resolution of the amount of such
Disputed Claim is reached, as evidenced by a joint written
instruction to the Trustee executed by the holder of such
Disputed Claim and by Xxxxxxx, the agreed-upon amount shall be
deemed the Allowed Amount, and such claim shall receive
disbursements on account of the Allowed Amount in accordance with
this Agreement. If no consensual resolution of such Disputed
Claim is reached, then the Allowed Amount shall be determined by
binding arbitration in accordance with the Description of dispute
Resolution Procedures, and such claim shall receive disbursements
on account of the Allowed Amount in accordance with this
Agreement.
8. The Trustee shall make the following disbursements to
each holder of a claim for which the Allowed Amount has been
determined as set forth in Paragraph 7 above:
a. If the Allowed Amount of such claim is greater than
the Listed Amount, then the Trustee shall supplement
the Initial Disbursement by processing an additional
disbursement ("Supplemental Disbursement") in an
amount equal to the difference between 44% of the
Allowed Amount of such claim and the Initial
Disbursement previously made by the Trustee with
respect to such claim. The Trustee shall process each
Supplemental Disbursement as soon as practicable after
the determination of such Allowed Amount. The Trustee
shall provide Xxxxxxx, by confirmed telecopy in
accordance with Paragraph 18 below, a schedule of the
amounts necessary to fund the Supplemental
Disbursements then payable, and Xxxxxxx shall provide
the funds necessary to make such Supplemental
Disbursements by effecting a wire transfer to the
Holding Account no later than the second business day
following its receipt of each such schedule. The
Trustee shall make each Supplemental Disbursement
promptly upon confirmation of receipt of each
corresponding wire transfer from Xxxxxxx. In the
event Xxxxxxx shall fail timely to effect a required
wire transfer, the Trustee shall be entitled to draw
upon the Letter of Credit for the required funds which
Xxxxxxx shall have failed to transfer to the Trustee.
b. If the Listed Amount of such Claim is
greater than the Allowed Amount, then the Trustee
shall recover 44% of the excess of the Listed
Amount over the Allowed Amount by deducting such
excess from the next disbursements due to the holder
of such claim under Sub-paragraphs 8c and 8d below.
C. The Trustee shall disburse 18% of the Allowed Amount of
such claim in cash from the first installment payment on the
Note, on the later of the date of receipt by the Trustee of
payment of such first installment or the date of determination
of such Allowed Amount, or as soon as reasonably practicable
thereafter; and
d. The Trustee shall disburse 18% of the Allowed Amount
of such claim in cash from the second installment
payment on the Note, on the later of the date of receipt
by the Trustee of payment of such second installment
or the date of determination of such Allowed Amount, or
as soon as reasonably practicable thereafter.
9. For purposes of all disbursements under this Agreement,
the Allowed Amount shall exclude any interest, late
charges, penalties, attorneys' fees or costs, collection
costs, or any other amounts related to any failure by New
Image to make timely payment. Execution of the Consent
and Release shall be deemed a waiver and release of all
such excluded amounts.
10. Xxxxxxx and SDI shall have no obligation under this
Agreement to deposit with the Trustee any funds other than (i) up
to $2,932,600.00 to fund the Initial Disbursements and
Supplemental Disbursements, (ii) the amounts payable under the
Note, and (iii) one-third of the Trustee's compensation and
reimbursement of out-of-pocket expenses as provided in Paragraph
13 below. At Stephan's written request, the amount of the Letter
of Credit may be reduced, from time to time, to a new amount
equal to $2,932,600.00 less the aggregate amount of all Initial
Disbursements and all Supplemental Disbursements as of the date
of such reduction as reflected in the biweekly reports issued by
the Trustee pursuant to Paragraph 12 below. In the event Xxxxxxx
requests such a reduction, the Trustee shall provide reasonable
cooperation in facilitating such reduction, provided that Xxxxxxx
shall pay all fees of the issuer of the Letter of Credit and all
expenses incurred by the Trustee in effecting such reduction. In
the event the aggregate of the Allowed Amounts of the claims of
the holders of New Trade Debt, as finally determined after the
implementation of the Dispute Resolution Procedure for any
Disputed Claims, exceeds $3,600,000.00, then New Image shall pay
to the Trustee, in cash, 80% of such excess amount as and when
required by the Trustee to make the disbursements required under
this Agreement, and the Trustee shall utilize such funds from New
Image to augment the funds available for making disbursements as
required under this Agreement.
11. On the first anniversary of the Closing Date, the
Trustee shall refund to Xxxxxxx all surplus funds and earned
interest held in the trust, if any. Any funds reserved for
unresolved Disputed Claims shall not be deemed surplus funds
available for refund. To the extent additional funds held in
the trust may become surplus funds, or additional interest may
be earned, after the first anniversary of the Closing Date, the
Trustee shall refund any such funds to Xxxxxxx at monthly
intervals thereafter. In the event there remain any unresolved
Disputed Claims as of the expiration date of the Letter of
Credit, Xxxxxxx shall cause the Letter of Credit to be extended
in a reduced amount equal to at least 44% of the aggregate
Claimed Amounts of the outstanding unresolved Disputed Claims
less the aggregate amounts of any Initial Distributions
previously paid on account of such Disputed Claims (the
"Required Extension Amount"). If the Trustee shall not receive
written confirmation of such extension by the issuer of the
Letter of Credit by the fifteenth day prior to the expiration
date of the Letter of Credit, then the Trustee shall be entitled
to draw on the Letter of Credit in an amount equal to the
Required Extension Amount.
12. The Trustee shall provide bi-weekly reports of its
receipts and disbursements to New Image, Xxxxxxx, and the
Committee, so long as any assets remain in the trust. The
Trustee shall provide a final report of its receipts and
disbursements and of the disposition of all claims at the
conclusion of its administration of the trust.
13. The Trustee shall receive a fee in the amount of
$22,500.00 as full compensation for its services and shall
additionally be reimbursed for its reasonable and necessary out-
of-pocket expenses (including premiums for any fidelity bond,
postage, overnight delivery charges, messenger service charges,
printing, photocopying, long distance telephone, telecopy, and
similar expenses). Unless otherwise agreed by Xxxxxxx in
writing, the Trustee shall cause a fidelity bond in the amount
of $3,000,000.00 to be issued and remain in effect so long as
any funds remain in the trust. The Trustee has determined that
the premium for such bond for the initial one-year period will
be $3,475.00. The compensation and reimbursement under this
Paragraph 13 shall be paid one-third by New Image, one-third by
Xxxxxxx, and one-third by the Consenting Creditors (by deduction
from the earliest disbursements otherwise payable to such
Consenting Creditors on a pro-rata basis). New Image and
Xxxxxxx shall each deposit $9,000.00 with the Trustee on the
Closing Date on account of their respective obligations under
this Paragraph 13. The Trustee shall not have or incur any
liability to any person or entity for any act taken or omission
made in good faith in connection with the administration of the
trust under this Agreement, absent negligence or intentional
misconduct. In the event the Trustee is required to take legal
action to collect on the Letter of Credit or on the Note or
otherwise to enforce this Agreement, the Trustee will be
entitled to retain special counsel (including, without
limitation, counsel for the Committee) as a reimbursable expense
of the trust.
14. New Image shall cooperate with, and provide reasonable
assistance to, the Trustee in its administration of the trust
under this Agreement. Without limiting the foregoing, New Image
shall make available to the Trustee its accounts payable
records, including computerized records, relating to the New
Trade Debt, and the services of at least one accounts payable
clerk familiar with such records.
15. The parties hereto shall execute such other documents
and take such other actions as may be reasonably necessary to
effectuate the intent of this Agreement. No party to this
Agreement shall take any action which would interfere with the
performance of this Agreement by any party or which would
adversely affect any of the rights provided for herein.
16. In the event that any party hereto should bring any
action, suit, litigation, or other proceedings against any other
party hereto contesting the validity of this Agreement, or
attempting to rescind, negate, modify, or reform this Agreement
or any of the terms or provisions hereof, or to remedy, prevent,
or obtain relief from a breach of this Agreement by such other
party or parties, or arising out of a breach of this Agreement,
then the prevailing party shall recover all of such party's
reasonable attorneys' fees and costs incurred in each and every
such action, suit, litigation, or other proceeding, including
any and all appeals or petitions therefrom. Each party agrees
to bear its own attorneys' fees and costs and other expenses
incurred in entering into this Agreement.
17. The Trustee may be removed at the request of any party
to this Agreement if the Trustee fails to comply with any
material provision of this Agreement or becomes incapable of
acting. The Trustee may resign by written notification to each
other party to this Agreement. Any successor trustee shall be
selected by mutual agreement of each party to this Agreement
other than the Trustee. Any removal of or resignation by the
Trustee shall become effective only upon the acceptance of
appointment of a successor trustee. This Agreement shall inure
to the benefit of, and shall be binding upon, the successors and
assigns of each of the parties hereto.
18. All notices and other communications required or
permitted to be given under this Agreement shall be in writing
and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return
receipt requested, or by overnight courier for next day
delivery, to the parties at their respective addresses set forth
below or to such other or additional addresses as either party
shall hereafter specify in a written notice to the other
parties, or by confirmed telecopy to the parties at their
respective telecopier numbers set forth below or to such other
or additional numbers as any party shall hereafter specify by
written notice to the other parties:
New Image: New Image Laboratories, Inc.
Attn.:Xxxxxxx X. Xxxxx, President
0000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Telecopier # 000-000-0000
and
Xxxxxxxx, Xxxxxx & Xxxxxxx
Attn.: Xxxxxxx X. Xxxxxxx
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000-0000
Telecopler # 000-000-0000
Xxxxxxx and SDI: The Xxxxxxx Co.
Attn.: Xxxxx Xxxxxx, Xx., President
0000 XxXxx Xxxx
Xx. Xxxxxxxxxx, XX 00000
Telecopier # 000-000-0000
and
Xxxxxxx & Xxxxx
Attn.: Xxxxxx Xxxxxxx
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx, XX 00000
Telecopier # 000-000-0000
The Committee: Xxxxxxxxx & Bass
Attn.: Xxxxxx X. Xxxx
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxx, XX 00000-0000
Telecopier # 000-000-0000
The Trustee: Xxxxxx X. Xxxxxx & Associates, Inc.
Attn.: Xxxxxx X. Xxxxxx, President
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000-0000
Telecopier # 000-000-0000
All notices shall be deemed given and received on the earliest of
(i) the date when actually, received or upon refusal to accept
delivery, (ii) the date when sent by confirmed telecopier, (iii)
the date one business day after sending by reputable overnight
courier, or (iv) the date three business days after mailing.
19. This Agreement shall be construed in accordance with,
and be governed by, the internal laws of the State of California.
In the event that any provision of this Agreement should be held
to be void, voidable, or unenforceable, the remaining portions
hereof shall remain in full force and effect.
20. This Agreement may not be modified or amended except by
an instrument in writing signed by the party against whom
enforcement of any such modification or amendment is sought.
This Agreement may be executed and delivered in two or more
counterparts, each of which, when so executed and delivered,
shall be an original, but such counterparts together shall
Constitute but one and the same instrument.
DATED: May 23, 1997 NEW IMAGE LABORATORIES, INC.,
a California corporation
By Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx, President
DATED: May 23, 1997 THE XXXXXXX CO.,
a Florida corporation
By: Xxxxx Xxxxxx
Xxxxx Xxxxxx, Xx., President
DATED: May 23, 1997 XXXXXXX DISTRIBUTING, INC.
a Florida corporation
By: Xxxxx Xxxxxx
Xxxxx Xxxxxx, Xx.,
President
DATED: May , 1997 XXXXXX X. XXXXXX & ASSOCIATES, INC.
a California corporation, as trustee
By_________________________
Xxxxxx X. Xxxxxx, President
DATED: May , 1997 CONTINUING CREDITORS' COMMITTEE
By__________________________
Xxxxxx X. Xxxx
Xxxxxxxxx & Bass R.L.L.P,
Attorneys for the Committee
