ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into
this 18th day of March, 1998, by and among XXXXXX FLAMINGO-XXXXXXX, INC., a
Florida corporation, which is a wholly-owned subsidiary of The Xxxxxxx Co.
("Buyer"), THE XXXXXXX CO., a Florida corporation, ("Xxxxxxx"),
XXXXXX-FLAMINGO, L.P., a Georgia limited partnership ("Seller"),
XXXXXX-FLAMINGO BEAUTY PRODUCTS, INC., a Georgia corporation, which is the
sole general partner of Seller ("MFB"), SHAHEEN & CO., INC., a Georgia
corporation, which is the sole limited partner of Seller, ("SCI," and
together with MFB, the "Partners"), and XXXXXX X. XXXXXXX, a Georgia
resident ("Shaheen").
W I T N E S S E T H :
WHEREAS, Buyer desires to purchase, and Seller desires to sell,
certain assets of Seller on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises, agreements,
and covenants hereinafter set forth, made and to be performed by the
parties hereto, the parties hereto intending to be legally bound, agree as
follows:
ARTICLE 1.
SALE AND PURCHASE
1.1 The Business
The subject of this Agreement is Seller's grooming, hair care
products distribution business and other products and assets more fully
described on Schedule I .1 hereto ("Business").
1.2 Sale and Purchase of Assets
Subject to the terms and conditions of this Agreement, as of the
Closing Date as defined in Article 4, Seller shall sell, assign, transfer
and convey to Buyer, and Buyer shall purchase all of the assets utilized or
necessary for the Business, including, without limitation, all those assets
set forth on Schedule 1.1 hereto or described in Section 2.1 of this
Agreement (the "Acquired Assets"). In consideration for the sale of the
Acquired Assets, Buyer will pay Seller the Purchase Price as defined in
Article 3 of this Agreement.
ARTICLE 2.
ASSETS AND LIABILITIES
2.1 The Acquired Assets
The Acquired Assets to be sold, assigned, conveyed and
transferred by Seller to Buyer at Closing (as defined in Section 4.1 below)
are all of the assets and properties associated, directly or indirectly,
with, or which are utilized in or are necessary to, the Business, except
for the Retained Assets, as defined in Section 2.2 of this Agreement, which
Acquired Assets include, but are not limited to, the following:
(a) Fixed Assets and Tangible Personal Property. All fixed assets of
Seller, other than any Retained Assets, including, without limitation, all
machinery, tools, vehicles, furniture, equipment and other tangible
personal property of every kind and description that are owned by Seller,
as of the Closing Date, all as listed on Schedule 2.1 (a), provided that,
any other fixed assets and tangible personal property related to the
Business that should have been included on such Schedule but was omitted
from such Schedule shall be considered fixed assets and tangible personal
property purchased by the Buyer hereunder.
(b) Inventories. All of Seller's inventories including, without
limitation, racks on hand and inventories with respect to which vendors
have drawn drafts under letters of credit as of the Closing Date even
though such goods have not been received by Seller as of the Closing Date,
all finished goods, work-in-process, spare parts, promotional items, raw
materials, all packaging and all related supplies to any of the foregoing
("Inventory"), all as listed on Schedule 2.1 (b), provided that, any other
inventory related to the Business that should have been included on such
Schedule but was omitted from such Schedule shall be considered Inventory
purchased by the Buyer hereunder.
(c) Accounts Receivable. All of Seller's accounts receivables listed
on Schedule 2. l(c) including any interest, claims and penalties thereon
existing as of the Closing Date, provided that, any other accounts
receivable related to the Business that should have been included on such
Schedule but was omitted from such Schedule shall be considered accounts
receivable purchased by the Buyer hereunder.
(d) Intangible Rights and Intellectual Property. All right, title and
interest of Seller to the name "Xxxxxx-Flamingo" and all variations thereof
as well as all fictitious business names, trade names, trademarks,
trademark registrations and applications, service marks, service xxxx
registrations and applications, copyrights, copyright registrations and
applications, patents, patent rights, trade secrets, technical know-how and
goodwill of Seller including also, all customer and supplier lists, and any
customer and supplier records and histories, formulae, processes, licenses,
computer software or systems that are proprietary to Seller together with
any other intangibles owned by Seller or used in its Business, all as
listed on Schedule 2.1 (d), provided that, any other intangible rights and
intellectual property related to the Business that should have been
included on such Schedule but was omitted from such Schedule shall be
considered intangible rights and intellectual property purchased by the
Buyer hereunder.
(e) Catalogs and Flyers. All of Seller's catalogs, flyers, brochures,
artwork, materials, boards, transparencies, photos and related
preparations.
(f) Books, Papers and Records. All books, papers, and records of
Seller relating in any way or manner to the Acquired Assets and/or the
Business, including, without limitation, all purchasing and sales records,
vendor lists, and all accounting and financial records.
(g) Leases and Other Contracts. Except for the leasehold interests
held by Seller and specifically excluded hereunder by Section 2.2, all of
Seller's rights and interest in, to or under all facility leases, equipment
leases, sales and purchase orders and other instruments, all other
contracts or agreements related in any way or manner to the Acquired Assets
or the Business, including without limitation, all equipment rental
contracts under which Seller is the lessee, all as listed on Schedule 2.1
(g), provided that, any other leases and other contracts related to the
Business that should have been included on such Schedule but was omitted
from such Schedule shall be considered leases and other contracts purchased
by the Buyer hereunder.
(h) Prepaid Expenses. All prepaid expenses existing as of the Closing
Date, including, without limitation, ad valorem taxes, insurance premiums,
lease and rental payments, all as listed on Schedule 2.1 (h), provided
that, any other prepaid expenses related to the Business that should have
been included on such Schedule but was omitted from such Schedule shall be
considered prepaid expenses purchased by the Buyer hereunder.
(i) Rights of Action. Except for the claims held by Seller and
specifically excluded hereunder as reflected on Schedule 2. l(i) hereto, to
the extent there are any, all of Seller's rights, claims, credits, causes
of action or rights of act-off against third parties, relating to the
Acquired Assets or the Business, including all unliquidated rights under
manufacturers' and vendors' warranties.
(j) Cash. All of Seller's cash, certificates of deposits and all
other cash equivalents, as of the Closing Date.
(k) Other Assets. All of Seller's other assets or inventories
associated or used in connection with the Business as of the Closing Date,
not otherwise specifically excluded by Section 2.2 of this Agreement,
whether or not such assets were required to be set forth on a Schedule
hereto but were omitted from such Schedule.
2.2 Assets Being Retained By Seller.
Seller shall retain (i) the real property owned by it and the
structures, buildings, fixtures, and improvements located in Danville,
Vermilion County, Illinois, together with all leasehold interests therein
by which Seller is the lessor, all of which are more fully described on
Schedule 2.2 and (ii) the claims reflected on Schedule 2.1(i)
(collectively, the "Retained Assets"). Only those assets specifically set
forth on Schedule 2.1(i) and on Schedule 2.2 shall be considered Retained
Assets and be retained by Seller.
2.3 Payment of Fleet Capital Corporation Indebtedness at Closing.
At Closing, Buyer shall pay, in full, all of the indebtedness
(i.e., unpaid principal and accrued interest, if any) owed by Seller to
Fleet Capital Corporation f/k/a Shawmut Capital Corporation, ("Fleet
Capital"), as successor-in-interest by assignment from Barclays Business
Credit, Inc. ("Barclays"), as of, and including, the Closing Date, as
evidenced by that certain Loan and Security Agreement, dated January 19,
1990, as amended, and by that certain Secured Promissory Note, dated
January 19, 1990, as amended and extended, between Xxxxxx-Flamingo, Inc., a
Georgia Corporation ("MFI"), as borrower and Fleet Capital, as successor in
interest to Barclays, as lender, which indebtedness is secured by a first
lien security interest, mortgage, and encumbrance between Seller and Fleet
Capital, all of which indebtedness was assumed by Seller under an Asset
Purchase Agreement between Seller and MFI, made effective as of January 1,
1992 (the "1992 Agreement") (the "Fleet Capital Indebtedness"). The Seller
hereby represents that the indebtedness owed to Fleet Capital (including
unpaid principal and accrued interest, if any) as of February 28, 1998 is
$2,039,519.63.
2.4 Assumed Liabilities.
(a) As of the Closing Date, in addition to the Fleet Capital
Indebtedness, Buyer will only assume trade accounts payable and such other
notes payable, debts, and other liabilities accrued and which arose in the
ordinary course of Seller's Business, as of, and including, the Closing
Date ("Assumed Liabilities") specifically limited to, those liabilities
which are set forth on Schedule 2.4(a). All liabilities not specifically
set forth on Schedule 2.4(a) will not be considered to be an Assumed
Liability hereunder, including without limitation any tax liability, and
will not be assumed by Buyer.
(b) Major International Supply Promissory Note ("Major Note").
At Closing, Seller shall provide Buyer with (i) the original Major Note
marked canceled and (ii) a written certification from Major International
Supply, L.P., a Georgia limited partnership ("Major International Supply")
that the Major Note has been paid in full prior to the Closing. Seller, its
Partners and Shaheen also agree to jointly and severally indemnify Buyer
and Xxxxxxx for any claims which may be made by either Xxxxxx'x Hair Beauty
Supply Co., Ltd. or LePachu, Ltd., with respect to and in connection with
the indebtedness owed to them by Major international Supply. At Closing,
Seller shall provide Buyer with copies of Major International Supply's
prior written notification to Xxxxxx'x Hair Beauty Supply Co., Ltd. and
LePachu, Ltd., of the final adjustments made by Major International Supply
to the indebtedness owed to them by Major International Supply together
with evidence of the final payments made by Major International Supply to
them in full satisfaction of this indebtedness.
ARTICLE 3.
THE PURCHASE PRICE
3.1 Purchase Price
(a) Subject to the adjustments provided for in Section 3.1(b) hereof,
the purchase price ("Purchase Price") for the Acquired Assets and the
Business shall be the total amount of the following:
(i) An amount of Xxxxxxx unregistered and restricted shares of common stock
(the "Xxxxxxx Common Stock") having an aggregate Fair Market Value (as
defined below) equal to $3,715,405.00; plus
(ii) The assumption and immediate payment of the Fleet Capital
Indebtedness; plus
(iii) The assumption of Assumed Liabilities as finally determined as of the
Closing Date.
(b) The Purchase Price hereunder shall be adjusted downward on a
dollar for dollar basis to the extent that, on or as of the Closing Date,
the book value of the Acquired Assets minus (A) the amount of the Fleet
Capital Indebtedness and (B) the amount of Assumed Liabilities, all of
which shall be determined in accordance with generally accepted accounting
principles ("GAAP"), as finally determined as of the Closing Date, is less
than $1,234,405.00 ("Purchase Price Adjustment"). The determination of the
Purchase Price Adjustment shall be made in accordance with the provisions
of Sections 3.1(c) and 3.1(d) hereof.
(c) For purposes of determining the Purchase Price Adjustment, if
any, required under Section 3. l (b) hereof, Seller shall prepare a balance
sheet as of the Closing Date reflecting the book value of the Acquired
Assets and the amount of the Fleet Capital Indebtedness together with the
amount of Assumed Liabilities ("Closing Balance Sheet"). Seller shall
prepare the Closing Balance Sheet in accordance with GAAP consistently
applied. The Inventories shall be reflected on the Closing Balance Sheet
based on Sellers perpetual inventory records as of the Closing Date. On
December 31, 1997 a joint physical count of the Inventories was taken by
Buyer and Seller (or by their representatives), and within thirty (30) days
after the Closing, Seller shall provide Buyer with a reconciliation of the
Inventories as counted on December 31, 1997 to the value of Inventories as
reflected on Seller's perpetual inventory records as of the Closing Date.
For purposes of the Closing, the value of Inventories shall be determined
in accordance with Section 3.4(c) of this Agreement. On or before ninety
(90) days after the Closing Date, Buyer shall provide Seller with any
necessary adjustments required to be made to the Closing Balance Sheet to
accurately reflect the book value of the Acquired Assets and the amount of
the Fleet Capital Indebtedness together with the amount of Assumed
Liabilities as of the Closing Date (the "Post Closing Balance Sheet"). The
Post Closing Balance Sheet shall be prepared by Buyer in accordance with
GAAP consistently applied. If it is determined by the Post Closing Balance
Sheet as of the Closing Date that the excess of the book value of the
Acquired Assets minus (A) the amount of the Fleet Capital Indebtedness and
(B) the amount of the Assumed Liabilities is less than $1,234,405.00, then
the Purchase Price shall be reduced, on a dollar for dollar basis, in
accordance with the terms and provisions of the Escrow Agreement to be
entered into by and among the parties to this Agreement, attached hereto as
Exhibit A.
(d) The Closing Balance Sheet shall be provided in writing by Seller
to Buyer at the Closing and the Post Closing Balance Sheet shall be
provided in writing to Seller by Buyer within ninety (90) days after the
Closing Date. Seller shall have the right to challenge within thirty (30)
days after receipt of the Post Closing Balance Sheet, Buyer's determination
of the Post Closing Balance Sheet. If either party challenges any of these
amounts, then such other party shall provide the challenging party, in
writing, with its determination of these amounts. Seller and Buyer shall
attempt, in good faith, to resolve any differences. If Seller and Buyer are
unable to resolve said differences within thirty (30) days of receipt of
the other's determination of these amounts, any unagreed differences
between Buyer and Seller's determination of these amounts shall be resolved
by an arbitrator designated by the American Arbitration Association in
Miami, Florida, with the cost of such arbitration to be equally borne by
Buyer and Seller. If, after a final determination of the amounts, there is
a Purchase Price Adjustment hereunder, there shall be released to Buyer
from the Xxxxxxx Common Stock held in escrow pursuant to the Escrow
Agreement an amount of Xxxxxxx Common Stock, as determined under the Escrow
Agreement, to satisfy this Purchase Price Adjustment. If there is an
insufficient amount of Xxxxxxx Common Stock held in escrow pursuant to the
Escrow Agreement to satisfy this Purchase Price Adjustment, then an
additional amount of Xxxxxxx Common Stock required to satisfy this Purchase
Price Adjustment shall be paid from Seller to Buyer, in accordance with the
provisions of Section 11.2(g) of this Agreement. Buyer agrees to issue
additional shares of Xxxxxxx Common Stock to the Seller if the final
determination of the Purchase Price Adjustment based on the Post Closing
Balance Sheet is less than the Purchase Price Adjustment made at Closing
based on the Closing Balance Sheet. In such event thirty percent (30%) of
such additional shares of Xxxxxxx Common Stock shall be deposited with the
Escrow Agent named in the Escrow Agreement. The issuance of such additional
shares shall be based on the value as determined in accordance
with Section 3.2(a)(i) of this Agreement and such shares shall be issued by
Buyer within fifteen (15) days of such final determination of the Post
Closing Balance Sheet.
3.2 Payment of Purchase Price At Closing
(a) At Closing, Buyer shall pay the Purchase Price to Seller as
follows:
(i) The issuance to Seller of certificates for 307,058 shares of
Xxxxxxx Common Stock which was calculated with such shares having an
aggregate Fair Market Value (as hereinafter defined) equal to
$3,715,405.00, (as adjusted in accordance with Paragraph 3.1 (a) of this
Agreement) with thirty percent (30%) of such Xxxxxxx Common Stock to be
deposited with the Escrow Agent named in the Escrow Agreement. For purposes
hereof, "Fair Market Value" shall mean $11.00 for each share of Xxxxxxx
Common Stock, subject to adjustment upward or downward of up to ten percent
(10%) based on the average closing sales price of Stephan's common stock as
reported by the American Stock Exchange for the twenty (20) trading days
prior to the Closing Date; plus
(ii) The payment by Buyer of the Fleet Capital Indebtedness; plus
(iii) The assumption by Buyer of the Assumed Liabilities.
(b) Each certificate for Xxxxxxx Common Stock issued to Seller as part
of the Purchase Price shall bear the following legend:
"The securities represented by this certificate (i) have not been
registered under the Securities Act of 1933, as amended, or under any state
securities or other "blue sky" laws, and may not be sold, transferred or
otherwise disposed of except in accordance with the terms thereof and
unless registered with the Securities and Exchange Commission of the United
States and the securities regulatory authorities of certain states, or
based on the opinion of counsel reasonably satisfactory to the issuer, an
exception from such registration is available and (ii) are subject to that
certain Asset Purchase Agreement dated March 18, 1998, by and among Xxxxxx
Flamingo-Xxxxxxx, Inc., The Xxxxxxx Co., Xxxxxx-Flamingo, L.P.,
Xxxxxx-Flamingo Beauty Products, Inc., Shaheen & Co., Inc., and Xxxxxx X.
Xxxxxxx."
(c) Buyer and Seller agree that, at Closing, if the Closing Balance
Sheet, as prepared by Seller, requires a Purchase Price Adjustment, then
such Purchase Price Adjustment shall be made at Closing, subject, however,
to an additional Purchase Price Adjustment, based on the Post Closing
Balance Sheet as finally determined in accordance with Section 3.1(d)
hereof. The satisfaction of such additional Purchase Price Adjustment shall
be made in accordance with Section 3.1(d) hereof, based on the value as
determined in accordance with Section 3.2(a)(i) of this Agreement for the
Xxxxxxx Common Stock.
3.3 No Fractional Shares
If a fractional share shall result from the determination of the
number of Xxxxxxx Common Stock required to be issued to Seller pursuant to
Section 3.2 (a), then no certificate or scrip of any kind shall be issued
by Buyer in respect of such fractional interest, but Seller shall be
entitled to receive a cash payment equal to such fractional interest on the
Closing Date.
3.4 Allocation of Purchase Price
The Purchase Price shall be allocated for tax purposes by the
parties and the parties shall report the transactions contemplated by this
Agreement in their tax returns as follows:
(a) Cash, certificates of deposit, and all cash equivalents
shall equal the amount thereof transferred by Seller to Buyer as of the
Closing Date;
(b) Accounts receivable shall have a value equal to the total of
all such amounts owed to Seller on the Closing Date, less an allowance for
doubtful accounts receivable, calculated according to GAAP.
(c) Inventories shall be determined as of the close of business
on March 18, 1998 based on Seller's perpetual inventory records. The
Inventories shall be reflected on an item by item basis, to be valued at
first-in, first-out (FIFO) cost. After the total cost of the Inventories
has been determined in accordance with the preceding sentence hereof, such
amount shall then be reduced by the below inventory reserve adjustment.
This inventory reserve adjustment shall be based on the following
quantities of the Inventories and the following percentage reduction for
such quantities:
Inventories Percentage Reduction
Over 4 Years Quantities On Hand 80.00%
Over 3 Years Quantities On Hand 75.00%
Over 2 Years Quantities On Hand 50.00%
Over 1 Year Quantities On Hand 25.00%
Over 6 Months Quantities On Hand 2.00%
All Other Inventories 2.00%
As used herein, "Quantities" refer to units of Inventory sold by
Seller during the calendar year 1997. At the Closing, Seller shall provide
Buyer with its perpetual inventory records as of March 18, 1998.
(d) (i) Furniture, fixtures, machinery, equipment and similar
assets; (ii) catalogs, flyers, and similar assets and (iii) prepaid
expenses shall have values based on the allocation of the Purchase Price to
these items as made by Xxxxxxx, and as provided to Seller by Xxxxxxx
following the Closing.
(e) The remainder of the Purchase Price shall be allocated to intangibles.
ARTICLE 4.
THE CLOSING
4.1 Place of Closing
The Closing of this transaction ("Closing") shall take place at
a location mutually acceptable by Buyer and Seller.
4.2 Closing Date
The Closing Date shall be March 18, 1998, (the "Closing Date"),
with the closing to commence at 10:00 a.m., or such other time and date as
Buyer and Seller shall mutually agree.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF SELLER, ITS PARTNERS, AND
SHAHEEN
To induce Buyer and Xxxxxxx to enter into this Agreement,
Seller, its Partners, and Shaheen, jointly and severally, make the
following representations and warranties to Buyer and Xxxxxxx:
5.1 Organization, Standing and Power
Seller is a limited partnership duly organized, validly existing
and in good standing under the laws of the state of the jurisdiction in
which it is organized with full power and authority to own, lease and
operate its properties and to carry on its business as presently conducted
by it. Schedule 5.1 hereto sets forth all states and other jurisdictions in
which the Seller is duly qualified and in good standing to conduct
business. There are no other states or jurisdictions in which the character
and location of the properties owned or leased by Seller, or the conduct of
its business, make such qualification necessary. True and complete copies
of Seller's Certificate of Limited Partnership and all amendments thereto
have been furnished to Buyer.
5.2 Ownership
The ownership of Seller is shown on Schedule 5.2.
5.3 Interests in Other Entities
Seller does not (i) own, directly or indirectly, of record or
beneficially, any shares of voting stock or other equity securities of any
corporation, (ii) have any ownership interest, direct or indirect, of
record or beneficially, in any unincorporated entity, or (iii) have any
obligation, direct or indirect, present or contingent, to purchase or
subscribe for any interest in, advance or loan monies to, or in any way
make investments in, any person or entity, or to share any profits or
capital investments in other persons or entities, or both.
5.4 Authority
The execution and delivery by MFB, on its own behalf and as the
general partner of Seller, and by SCI of this Agreement and all of the
agreements, Schedules, Exhibits, documents and instruments specifically
provided hereunder to be executed and/or delivered by any or all of them
(all of the foregoing, including this Agreement, being hereinafter
sometimes collectively called the "Executed Agreements"), and the
performance by Seller and its Partners (to the extent that they are parties
thereto) of their respective obligations under the Executed Agreements, and
the consummation of the transactions contemplated by the Executed
Agreements, have been duly and validly authorized by all necessary
corporate action on the part of MFB (on its own behalf and as the general
partner of Seller) and SCI. Shaheen hereby individually represents and
warrants that he is an individual over 21 years of age and is legally
competent to enter into, execute and perform any of the Executed Agreements
to which he is a party. The Executed Agreements are, or when executed and
delivered by the delivering parties shall be, the valid and binding
obligations of the delivering parties, enforceable in accordance with their
respective terms, except to the extent that enforceability may be limited
by the operation of bankruptcy, insolvency or similar laws. Neither the
execution and delivery by MFB (on its own behalf and as the general partner
of Seller), SCI or Shaheen (to the extent that they are parties thereto) of
the Executed Agreements, nor the consummation of the transactions
contemplated thereby, nor the performance by Seller, its Partners or
Shaheen (to the extent that they are parties thereto) of their respective
obligations under the Executed Agreements, shall (nor with the giving of
notice or the lapse of time or both would) (i) other than as to Shaheen,
conflict with or result in a breach of any provision of their respective
Agreement of Limited Partnership, Certificates of Incorporation or By-Laws,
(ii) give rise to a default, or any right of termination, cancellation or
acceleration, or otherwise result in a loss of contractual benefits to
Seller, under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation
to which Seller is a party or by which it or any of its properties or
assets may be bound, (iii) violate any order, writ, injunction, decree,
law, statute, rule or regulation applicable to Seller or any of its
respective properties or assets, (iv) result in the creation or imposition
of any lien, claim, restriction, charge or encumbrance upon any of the
properties or assets of Seller, or (v) interfere with or otherwise
adversely affect the ability of Seller to carry on the Business as now
conducted. Seller has the right, power, legal capacity, and authority to
enter into, and perform its obligations under this Agreement, and has
obtained, or shall obtain before the Closing, the necessary approvals or
consents of any persons necessary to the consummation of the asset purchase
in connection with this Agreement, including, but not limited to, the
consents of Xxxxxxx and Xxxxxxxxx
5.5 Properties
Except as set forth on Schedule 5.5 hereto, Seller has good and
marketable title to all of the properties and assets (real, personal and
mixed, tangible and intangible) it purports to own or use, including those
set forth on the Balance Sheet (as defined below) or thereafter acquired
(except properties or assets sold or otherwise disposed of in the ordinary
course of business subsequent to the date of the Balance Sheet), free and
clear of all mortgages, liens, pledges, charges or encumbrances of any
nature whatsoever. Except as set forth on Schedule 5. 5, such properties
and assets are in good operating condition, normal wear and tear excepted,
and are adequate for the purposes for which they are used. Schedule 5.5
also contains an accurate list setting forth all (i) real property owned,
leased (whether as lessor or lessee) or subject to contract or commitment
of purchase or sale or lease (whether as lessor or lessee) by Seller and
(ii) personal property leased by or to Seller or subject to a title
retention or conditional sales agreement or other security device. All
leases listed on Schedule 5.5 are valid, binding and enforceable in
accordance with their terms, and are in full force and effect, except to
the extent that enforceability may be limited by the operation of
bankruptcy, insolvency or similar laws; there are no existing defaults by
either party thereunder; no event of default has occurred which (whether
with or without notice, lapse of time or both) would constitute a default
by Seller thereunder; are in conformity with all laws including, without
limitation for any real property leases, zoning or other building laws and
all lessors under such leases have consented (where such consent is
necessary) to the consummation of the transactions contemplated by this
Agreement without requiring modification of the rights and obligations of
Seller under such leases.
5.6 Financial Statements
Seller has delivered to Buyer true and complete copies of its
audited balance sheets as of December 31, 1995 and 1996, and the related
audited statements of income, retained earnings and cash flows for the
fiscal years ended December 31, 1995 and 1996 and its unaudited balance
sheet as of December 31, 1997 (the "Balance Sheet") and related unaudited
statements of income, retained earnings and cash flows for the period ended
December 31, 1997. Such financial statements, including the notes thereto,
were prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be otherwise expressly
stated in said financial statements and notes thereto) and fairly present
the financial position of Seller at the dates thereof and the results of
its operations for the periods as indicated. The books and records of
Seller are in all material respects complete and correct, have been
maintained in accordance with good business practices, and accurately
reflect the basis for the financial condition and results of operations of
Seller as set forth in the financial statements referred to herein.
5.7 Absence of Undisclosed Liabilities and Solvency
(a) Seller does not have any liabilities or obligations, whether
known, unknown, accrued, absolute, contingent or otherwise which have not
been (i) in the case of liabilities and obligations of a type customarily
reflected on the balance sheet of Seller, reflected on the Balance Sheet in
accordance with GAAP, (ii) in the case of all other types of liabilities
and obligations described on Schedule 5.7 hereto, or (iii) incurred,
consistent with past practice, in the ordinary course of business since the
date of the Balance Sheet and which are not material either individually or
in the aggregate.
(b) Seller is solvent, having assets which at a fair valuation exceed
its known liabilities and Seller is able to meet its debts as they mature
and will not become insolvent as a result of the transactions contemplated
by this Agreement.
5.8 Absence of Certain Chances
Except as and to the extent set forth on Schedule 5.8 hereto,
since the date of the Balance Sheet, Seller has not:
(i) suffered any material adverse change in its working capital, condition
(financial or otherwise), assets, liabilities, business, operations or
prospects;
(ii) incurred any material liabilities or obligations except items incurred
in the ordinary course of business and consistent with past practice, none
of which exceeds $20,000.00 (counting obligations or liabilities arising
from one transaction or a series of similar or related transactions, and
all periodic installments or payments under any lease or other agreement
providing for periodic installments or payments, as a single obligation or
liability), or experienced any increase in, or change in any assumption
underlying or methods of calculating, any bad debt, contingency or other
reserves;
(iii) paid, discharged or satisfied any claim, liabilities or obligations
(absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business and consistent
with past practice of liabilities and obligations reflected or reserved
against on the Balance Sheet or incurred in the ordinary course of business
and consistent with past practice since the date of the Balance Sheet;
(iv) permitted or allowed any of its property or assets (real, personal or
mixed, tangible or intangible) to be subjected to any mortgage, pledge,
lien, security interest, encumbrance, restriction or charge of any kind,
except those disclosed Pursuant to Section 5.8 hereof;
(v) written down the value of any inventory or written off as uncollectible
any notes or accounts receivable, except for write-downs and write-offs in
the ordinary course of business and in accordance with GAAP consistent with
past practice none of which are material;
(vi) canceled any debts or waived any claims or rights of substantial
value, or sold, transferred, or otherwise disposed of any of its properties
or assets (real, personal or mixed, tangible or intangible), except in the
ordinary course of business and consistent with past practice;
(vii) disposed of or permitted to lapse any rights to use any patent,
trademark, trade name or copyright, or disposed of or disclosed (except as
necessary in the conduct of its business) to any person any trade secret,
formula, process or know-how;
(viii) granted any general increase in the compensation of officers or
employees (including any such increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any officer or employee, and,
unless otherwise indicated on Schedule 5 8, no such increase is customary
on a periodic basis or is required by agreement or understanding;
(ix) made any single capital expenditure or commitment (or a series of
related capital expenditures or commitments) in excess of $20,000 00 for
additions to property, plant, equipment or intangible assets or made
aggregate capital expenditures and commitments in excess of $20,000 00 (on
a consolidated basis) for additions to property, plant, equipment or
intangible assets;
(x) declared, paid or set aside for payment any distributions to its
partners;
(xi) made any change in any method of accounting or accounting practice;
(xii) paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets (real, personal or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with, any of
its or any of its Partner's officers, directors, stockholders or employees
or any "affiliate" or "associate" of any of its or any of its Partner's
officers, directors, stockholders or employees (as such terms are defined
in the rules and regulations of the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933 (the "Securities Act")), except for
compensation to officers and employees at rates not materially exceeding
the rates of compensation paid during the year ended December 31, 1997;
(xiii) delayed or failed to repay when due any material obligation of
Seller;
(xiv) failed to operate the business of Seller in the ordinary course so as
to preserve the Seller's business intact and to preserve the goodwill of
Seller's suppliers, customers, distributors and other third parties having
business relationships with Seller; and
(xv) agreed, whether in writing or otherwise, to take any action described
in this Section unless such action is specifically excepted from this
Section or described in Schedule 5.8.
5.9 Bankruptcy and Insolvency
No petition in bankruptcy (voluntary or otherwise), assignment
for the benefit of creditors, or petition seeking reorganization or
arrangement or other action under federal or state bankruptcy laws is
pending on behalf of or against Seller. The assets of Seller, at fair
market value, exceed its liabilities, immediately prior to the Closing
Date. The sale of the Acquired Assets hereunder is not for the purpose of
delaying or defrauding any creditors of Seller.
5.10 Tax Matters
(i) Seller has filed all Tax Returns (as defined below) that it was
required to file. All such Tax Returns were correct and complete in all
respects. All Taxes (as defined below) owed by Seller (whether or not shown
on any tax Return) have been paid. Seller is not currently the beneficiary
of any extension of time within which to file any Tax Return. No claim has
ever been made by an authority in a jurisdiction where Seller does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction.
There are no liens on any of the assets of Seller that arose in connection
with any failure (or alleged failure) to pay any Tax.
(ii) Seller has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(iii) Seller does not expect any authority to assess any additional
Taxes for any period for which Tax Returns have been filed. There is no
dispute or claim concerning any Tax liability of Seller claimed or raised
by any authority in writing. To the knowledge of Seller, no issue has
arisen in any examination of Seller by any governmental authority that if
raised with respect to any other period not so examined would, if upheld,
result in a material deficiency for any other period not so examined.
Seller has delivered to Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by any of Seller or its Partners (relating to
Seller) since January 1, 1994.
(iv) Seller has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment
or deficiency.
(v) The unpaid Taxes of Seller did not, as of December 31, 1997, exceed
the reserve for any tax liability set forth on the face of the Balance
Sheet (rather than in any notes thereto). The provision for Taxes reflected
on the books of account of Seller is adequate for all Taxes of Seller which
have accrued since the date of the Balance Sheet.
(vi) For purposes of this Section 5.10 the following definitions shall
apply:
"Tax" or "Taxes" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, customs duties, capital stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule
or attachment thereto, and including any amendment thereof.
5.11 Certain Contracts
Schedule 5.11 hereto contains a complete and correct list of all
contracts, commitments, obligations and undertakings, written or oral, to
which Seller is a party or otherwise bound the dollar value of which
exceeds $10,000.00 (collectively, the "Contracts"). Complete and correct
copies of all Contracts, set forth on any of the Schedules attached hereto,
including, without limitation, Schedule 5.11 have been, or, upon request,
will be, furnished to Buyer, and except as expressly stated on Schedule 5.
11, each of such Contracts is in full force and effect, no person or entity
which is party thereto or otherwise bound thereby is, to the knowledge of
Seller, in material default thereunder, and, to the knowledge of Seller,
its Partners and/or Shaheen, no event, occurrence, condition or act exists
which, with the giving of notice or the lapse or time or both, would give
rise to a material default or right of cancellation thereunder, and to the
knowledge of Seller, its Partners, and/or Shaheen, there have been no
threatened cancellations thereof and there are no outstanding material
disputes thereunder. Seller has not received notice that any party to any
of the Contracts intends to cancel or terminate any such Contracts or to
exercise or not exercise any options under any of such Contracts. Seller is
not a party to, nor are the Acquired Assets bound by, any agreement that is
materially adverse to the Business, property, or financial condition of
Seller.
5.12 Inventory
Schedule 2.1(b) sets forth a complete and accurate list of all
Inventory as of the close of business on March 18, 1998, and Schedule 5.12
sets forth a complete and accurate list of all Inventory as of December 31,
1997. All Inventory set forth on either Schedule 2.1(b) or Schedule 5.12
consists of items of a quality and quantity suitable and usable or saleable
in the ordinary course of business for the purposes for which they are
intended, are in good and merchantable condition except for obsolete
materials, materials of below standard quality and not readily marketable
items, all of which have been adequately reserved against on the books and
records of Seller in accordance with Section 3.4(c) hereof. Inventory is
stated at cost, subject to the reserve adjustment required by Section
3.4(c) hereof. There has not been any significant adverse change in the
quantity or quality of Inventories since the date of the Balance Sheet. The
present quantity of Inventory is reasonable in the present circumstances of
Seller's business and consistent with the average level of Seller's
Inventory in the past twelve months.
5.13 Fixed Assets
Schedule 2.1(a) contains a true and complete list of all of the
fixed assets owned by, in the possession of, or used by Seller in
connection with the Business. Except as stated on Schedule 2.1(a) no fixed
assets used by Seller in connection with the Business are held under any
lease, security agreement, conditional sales contract, or other title
retention or security arrangement.
5.14 Accounts Receivable
Schedule 2.1 (c) contains a true and complete list of the
accounts receivable of Seller. The accounts receivable reflected on
Schedule 2.1(c) and on the Balance Sheet, and all accounts receivable
arising since the Balance Sheet date, which may not be included on Schedule
2. l(c) or the Balance Sheet, represent bona fide claims of Seller against
debtors for sales or services sold or performed and are good and
collectible in the ordinary course of business at the aggregate amounts
recorded on Schedule 2. l(c) or on such Balance Sheet or as reflected in
the books of account of Seller, less the amount of the reserve for bad
accounts reflected in said Balance Sheet or on the books of account of
Seller (which reserve has been established on a basis consistent with past
practice and in accordance with GAAP), and are not subject to any defenses,
recoupments, counterclaims, disputes or rights of offset.
5.15 Insurance
Schedule 5.15 hereto contains a complete and correct list and
summary description of all policies or binders of insurance in which Seller
is an insured party, beneficiary or loss payable payee. Such policies are
in full force and effect and provide the type and amount of coverage
reasonably required for the business of Seller. No insurer has advised
Seller, its Partners or Shaheen that it intends to reduce coverage,
increase premiums or not renew any existing policy or binder. In the past
five years no provider of insurance to Seller has failed to renew any
policy or refused to grant any insurance coverage requested by Seller.
5.16 No Violation of Law
Seller is not engaged in any activity and is not omitting to
take any action as a result of which Seller would be in violation of any
law, rule, regulation, statute, order, injunction or decree, or any other
requirement of any court or governmental or administrative body or agency,
foreign or domestic (collectively, "Laws"), applicable to Seller or any of
its properties, products, operations, businesses, pension or other employee
benefit plans, labor practices, or employees, including, without
limitation, the rules and regulations of the United States Food and Drug
Administration and any similar governmental authority of any state or
foreign entity, any laws, rules and regulations relating to air, water,
solid or liquid waste disposal practices, health or safety practices
advertising practices or hiring, promotion or retirement practices, the
violation of which may result in a material and adverse effect on the
business or condition (financial or otherwise) of Seller. Neither Seller
nor its Partners or Shaheen have received any notice to the effect that, or
otherwise been advised that, Seller is not in compliance with any Laws, and
there are no existing circumstances which are reasonably likely to result
in any violations of any Laws.
5.17 Litigation
Other than as set forth on Schedule 5.l7 hereto, there are no suits or
actions, or administrative, arbitration or other proceedings or
governmental investigations (collectively, "Actions"), pending or to the
best knowledge of Seller, its Partners and/or Shaheen, threatened against
or affecting, or which may affect, Seller or any of its properties, assets
or businesses or the transactions contemplated hereby, nor does Seller, its
Partners and/or Shaheen have knowledge of any reasonable basis for any such
Actions. The Actions described on Schedule 5.17 do not materially and
adversely affect, and/or will not materially and adversely affect, Seller
or any of its properties, assets or businesses. There are no outstanding
judgments, orders, stipulations, injunctions, decrees or awards against
Seller which are not satisfied.
5.18 Intangible Rights and Intellectual Property
Schedule 2. l(d) hereto is a true and complete list of all
licenses, computer software or systems that are proprietary to Seller,
patents, copyrights, trademarks, trade names and business names, whether
foreign or domestic, owned or used by Seller in the conduct of its business
and all pending applications therefor (the "Intangible Rights and
Intellectual Property"). All Intangible Rights and Intellectual Property
listed on Schedule 2.1(d) have been, to the extent applicable and indicated
on such Schedule, duly registered with or filed in or issued by the United
States Patent and Trademark Office or such other government entity or
foreign government entity as indicated in such Schedule and such
registrations and filings remain in full force and effect. Except as set
forth on Schedule 2.1 (d) no other party other than Seller, including its
Partners or Shaheen (other than as a result of their ownership of Seller),
has any ownership or other interest in any of the Intangible Rights and
Intellectual Property. To the knowledge of Seller, its Partners and
Shaheen, none of the Intangible Rights and Intellectual Property is being
infringed upon by, or infringes, any licenses, patents, copyrights,
trademarks or other intellectual property rights of any other person or
entity nor have any of them received any notice or other communication of
any alleged or actual infringement by Seller of the rights or others.
5.19 Right to Use Name
Seller has the right to use its name and any fictitious business
names as presently used and this right is not subject to any pending or, to
the best of Seller's knowledge, threatened challenge. To the best of
Seller's knowledge, its name is not used by any other person or business in
any state in which it conducts business.
5.20 Suppliers and Customers
Seller has received no oral or written complaints with respect
to its supply, purchase, sale, distribution, sales representative or
similar agreements necessary for the normal operation of the business or
any notice from any customer that it intends to return any inventory of
Seller other than in customary amounts in the ordinary course of business.
Schedule 5.20 hereto contains a true and complete list of all of Seller's
significant suppliers and customers . Seller has received no notice stating
that (i) any supplier or customer expects to materially reduce its business
with Seller by reason of the transactions contemplated by this agreement or
for any other reason whatsoever or (ii) any supplier named on Schedule 5.20
has any intention to increase supply costs, adversely change any other
terms of supply arrangements or significantly increase the delivery time of
any supplies. Seller has no agreement or understanding with any customer
that upon return of any products to Seller that such customer will be
entitled to a credit for any amount other than the invoice price of the
products so returned, and there is no standard in the industry of Seller
for customers to obtain credits in excess of such amounts.
5.21 Approvals
Seller has obtained and there remain in effect, all governmental
and administrative consents, permits, appointments, approvals, licenses,
certificates and franchises necessary for the operation of its business as
presently conducted by it, and the continued operation thereof on
substantially the same basis following the Closing Date.
5.22 Governmental Authorizations; Third Party Consents
Except as set forth on Schedule 5.22 hereto, no approval,
consent, compliance, exemption, authorization or other action by, or notice
to or filing with, any governmental authority or any other person or
entity, and no lapse of a waiting period, is necessary or required to be
obtained by Seller, its Partners or Shaheen in connection with the
execution, delivery or performance by any of them, of this Agreement or the
transactions contemplated hereby.
5.23 Employee Arrangements: ERISA
Except as reflected on Schedule 5.23 hereto, Seller has (i) no
union, collective bargaining, employment, management, severance or
consulting agreements to which Seller is a party or otherwise bound which
are not terminable, pursuant to their respective terms, by Seller without
penalty or further obligation on 30 days notice or less, (ii) no
compensation plans, bonus plans, deferred compensation agreements, pension
and retirement plans, profit-sharing plans, stock purchase and stock option
plans and/or (iii) no employee benefits plans established or maintained by
Seller which are qualified for federal income tax exemption under Sections
401 and 501 of the Internal Revenue Code of 1986, as amended, (the "Code").
All charges for vacation time have been accrued on the Balance Sheet in
accordance with GAAP.
5.24 Environmental Matters
No Hazardous Material (as defined below) has been discharged,
dumped, spilled, leaked, migrated, disposed of, or released at, on or under
any properties which the Seller (i) currently owns, leases, occupies or
operates or (ii) previously owned, leased, occupied or operated during such
period of ownership, lease, occupation or operation. Seller has neither
knowledge nor reason to believe or suspect, that any such discharge,
dumping, spillage, leakage, disposal or release occurred before or after
the Seller took title to, or possession or operation of, any of such
properties, or that any such Hazardous Materials are migrating or have
migrated off of such properties in subsurface soils, groundwater or surface
waters. For purposes of this Section, "Hazardous Materials" means any
pollutant, contaminant, hazardous, radioactive or toxic substance,
material, constituent or waste, or any other waste, substance, chemical or
material regulated under any environmental law of any jurisdiction,
including (1) petroleum, crude oil and any fractions thereof, (2) natural
gas, synthetic gas and any mixtures thereof, (3) asbestos and/or
asbestos-containing material, (4) radon and (5) polychlorinated biphenyls
("PCBs"), or materials or fluids containing PCBs.
5.25 Bank Accounts and Powers of Attorney
Schedule 5.25 hereto contains a complete and correct list
showing (i) the name of each bank in which Seller has an account or safe
deposit box and the names of all persons authorized to sign or draw thereon
or have access thereto, and (ii) the names of all persons, if any, holding
powers of attorney from Seller.
5.26 Certain Business Matters
Except as set forth on Schedule 5.26 hereto, (i) Seller is not a
party to or bound by any distributorship, dealership, sales agency,
franchise or similar agreement which relates to the sale or distribution of
its products and services, (ii) Seller does not have any sole-source
supplier of significant goods or services (other than utilities) with
respect to which practical alternatives sources are not available on
comparable terms and conditions and (iii) there are not pending, and to
Seller's, its Partner's and/or Shaheen's knowledge, there are not
threatened, any labor negotiations involving or affecting Seller, and to
Seller's, its Partners' and Shaheen's knowledge, no organizing activities
involving union representation exist in respect of any of its employees.
Schedule 5.26 also sets forth any product warranties given to third parties
by Seller and except for the product warranties described in Schedule 5.26
Seller neither gives nor is bound by any express warranties relating to its
products or services. To Seller's, its Partners' or Shaheen's knowledge,
there has been no assertion of any breach of product warranties which could
have a material adverse effect on the business or condition (financial or
otherwise) of Seller and, to Seller's, its Partners' or Shaheen's
knowledge, there are no problems or potential problems with respect to any
product sold by Seller whether relating to its safety, efficacy, life or
otherwise. Seller is not a party to or bound by any agreement which limits
its freedom to compete in any line of business or with any person. Except
as set forth on Schedule 5.26, Seller is not a party to or bound by any
agreement or involved in any transaction in which any principal of Seller
or any officer, director or stockholder of its Partners, or any affiliate
or associate (as defined under the Securities Act) of any such person has,
or had when made, a direct or indirect material interest.
5.27 Computer System
Except as disclosed on Schedule 5.27, all computer hardware and
software and related materials used by Seller in the performance of
Seller's business (collectively, the "Computer System") are in good working
order and condition, and Seller has not experienced any significant defects
in design, workmanship or material. The Computer System has the performance
capabilities, characteristics and functions necessary for the conduct of
Seller's business. The use of the Computer System by Seller (including any
software modifications) (i) does not and has not violated or infringed upon
and will not violate or infringe upon the rights of any third parties and
(ii) does not and has not resulted and will not result in the termination
of any maintenance, service or support agreement relating to any part of
the Computer System or any reduction in the services provided to Seller,
warranties available to Seller or rights of Seller thereunder. Consummation
of the transactions contemplated hereby will not impair, preclude or
increase the cost of the Buyer's use of the Computer System.
5.28 Purchase Commitments and Outstanding Bids
As of February 28, 1998, the aggregate of all accepted and unfulfilled
orders for the sale of merchandise entered into by Seller is, in the
aggregate, at least $21,946.00 and the aggregate of all orders or
commitments for the purchase of supplies by Seller does not exceed
$699,154.00, all of which orders and commitments were made in the ordinary
course of business. As of the date of this Agreement, there are no claims
against Seller to return merchandise by reason of alleged overshipments,
defective merchandise or otherwise, or of merchandise in the hands of
customers under an understanding that such merchandise would be returnable,
other than claims made in the ordinary course of business or for which
reasonable reserves have been taken on the Balance Sheet. To the knowledge
of Seller, its Partners and/or Shaheen, no outstanding purchase or lease
commitment of Seller was knowingly made at any price in excess of the then
current market price.
5.29 Absence of Certain Business Practices
Neither Seller nor its Partners and/or Shaheen, nor any of their
respective officers, directors, employees and/or agents have engaged in any
activities in the operation of the Seller's business which are prohibited
under United States federal, transnational, state, local or foreign
statutes or laws, including, without limitation, (i) knowingly soliciting
or receiving any remuneration (including any kickback, bribe, illegal gift,
gratuity, rebate or other similar benefit), directly or indirectly, overtly
or covertly, in cash or in kind or offering to pay such remuneration (a) in
return for referring an individual to a person for the furnishing, or
arranging for the furnishing, of any item or service or (b) in return for
purchasing, leasing, or ordering or arranging for or recommending
purchasing, leasing, or ordering any good, facility, service, or item, or
(ii) knowingly selling any products or providing any services to any
customers who are engaged or involved in any illegal practices or
activities.
5.30 Investment Intent
Each entity or person receiving Xxxxxxx Common Stock hereunder
is an "accredited investor" as such term is defined in Rule 501 in
Regulation D under the Securities Act and has such knowledge and experience
in financial and business matters and is capable of evaluating the merits
and risks of an investment in the Xxxxxxx Common Stock. Each entity or
person receiving Xxxxxxx Common Stock hereunder acknowledges that Buyer and
Xxxxxxx have made available to each such person or entity the opportunity
to ask questions of and receive satisfactory answers from Buyer and Xxxxxxx
concerning Buyer and Xxxxxxx. All such questions have been answered to the
satisfaction of each entity or person receiving Xxxxxxx Common Stock
hereunder. In addition each entity or person receiving Xxxxxxx Common Stock
further acknowledges receipt of all filings made by Xxxxxxx with the SEC
since (and including) the filing of Stephan's latest annual report on Form
10-K with the SEC. Shares of Stephan's Common Stock issued or to be issued
hereunder are being acquired by each entity or person receiving Xxxxxxx
Common Stock hereunder for such person or entity's own account, for
investment and not with a view to, or for resale in connection with, any
distribution of such shares within the meaning of the Securities Act.
5.31 Sale or Disposition of Xxxxxxx Common Stock
Seller, its Partners and Shaheen represent and warrant that they
will not sell or otherwise dispose of any Xxxxxxx Common Stock except
pursuant to: (i) a registration of the Shares under the Securities Act;
(ii) compliance with the provisions of Rule 144 promulgated under the
Securities Act, as it now exists or may hereafter be amended; or (iii) such
other exemption from registration that may be applicable to such
transaction.
5.32 Brokers
Except as set forth on Schedule 5.32, no agent, broker, person
or firm acting on behalf of the Seller, its Partners or Shaheen, or under
authority of any of the foregoing is or shall be entitled to a fee or
brokerage commission or other like payment in connection with the
transactions contemplated hereby from the Seller, its Partners or Shaheen.
5.33 Disclosure
No representation or warranty made by Seller, its Partners
and/or Shaheen in any of the Executed Agreements contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements therein not
misleading.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF BUYER AND XXXXXXX
To induce Seller, its Partners, and Shaheen to enter into this
Agreement, Buyer and Xxxxxxx make the following representations and
warranties to Seller its Partners, and Shaheen:
6.1 Organization, Good Standing and Qualification
Buyer and Xxxxxxx are corporations duly organized, validly
existing, and in good standing under the laws of Florida.
6.2 Due Authorization
The execution and delivery of this Agreement by Buyer and
Xxxxxxx, and the performance by Buyer and Xxxxxxx of their obligations
hereunder, have been or by the Closing Date will have been duly authorized
by all requisite corporate action on the part of Buyer and Xxxxxxx, and no
other corporate or shareholder authorization or approval is required for
Buyer and Xxxxxxx to enter into this Agreement or to perform their
obligations hereunder. This Agreement constitutes a valid and binding
obligation of Buyer and Xxxxxxx enforceable in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
moratorium, reorganization, or similar laws affecting creditors' rights and
to general equitable principles.
6.3 Approvals and Consents
No consent, authorization, or waiver by or filing with any
governmental agency or any person not a party to this Agreement is required
in connection with the execution or performance of this Agreement by Buyer
or Xxxxxxx or the consummation by Buyer and Xxxxxxx of the transactions
contemplated hereby which have not been obtained by Buyer and Xxxxxxx, or
as of the Closing will not have been obtained by Buyer and Xxxxxxx.
6.4 Disclosure
No representation or warranty made by Buyer or Xxxxxxx in any of
the Executed Agreements contains or will contain any untrue statement of a
material fact or omit or will omit to state a material fact necessary in
order to make the statement therein not misleading.
ARTICLE 7.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations, warranties, and obligations made by the
parties to each other shall survive the Closing and delivery of the Xxxxxxx
Common Stock under this Agreement, except to the extent otherwise provided
in this Agreement or otherwise specifically waived in writing by the
parties. Without limiting the foregoing, all representations, warranties,
and obligations by Seller, its Partners and Shaheen and by Buyer and
Xxxxxxx shall survive the Closing for a period of two (2) years after the
Closing Date, except for breaches with respect to (i) Seller's and its
Partners' authority to enter into and the binding effect of this Agreement,
(ii) the good and marketable title to the Acquired Assets; (iii) all
employee benefit plans, which were established or maintained by Seller to
be qualified for federal income tax exemption under Sections 401 and 501 of
the Internal Revenue Code of 1986, as amended, being in compliance with
ERISA and other related federal income tax laws and Treasury regulations;
(iv) the timely filing of true and correct tax returns, and the timely
payment of all taxes; and (v) Seller's compliance with all applicable
federal, state and local laws and regulations. Each of (i) and (ii) hereof
shall survive indefinitely after the Closing Date, and each of (iii), (iv)
and (v) shall survive up to the applicable statute of limitations.
ARTICLE 8.
SELLER'S OBLIGATIONS BEFORE CLOSING
Seller covenants that, except as otherwise agreed to in writing
by Buyer and Xxxxxxx, from the date of this Agreement until the Closing:
8.1 Buyer's and Stephan's Access to Premises and Information
Buyer, Xxxxxxx and their counsel, accountants, and other
representatives and agents shall be entitled to have reasonable access
during normal business hours to all of Seller's properties, books,
accounts, records, contracts, and documents of or relating to the Acquired
Assets or the Business for the purpose of conducting Buyer's and Stephan's
due diligence review, provided, that any due diligence review conducted by
Buyer or Xxxxxxx or any representative of Buyer or Xxxxxxx shall not affect
any of the representations and warranties made by Seller, its Partners or
Shaheen hereunder. Seller shall furnish or cause to be furnished to Buyer,
Xxxxxxx and their representatives all data and information concerning the
business, finances, and properties of Seller that may reasonably be
requested, and Buyer and Xxxxxxx and/or their representatives shall have
the right to make copies thereof and excerpts therefrom.
8.2 Conduct of Business in Ordinary Course
Seller shall carry on its Business diligently and in
substantially the same manner as it previously has been carried on, and
Seller shall not make or institute any material change in the character of
the Business or any unusual or novel methods of purchase, sale, lease,
management, accounting or operation that will vary materially from the
methods used by Seller as of the date of this Agreement, and shall not
incur any additional Fleet Capital Indebtedness other than accrued
interest.
8.3 Preservation of Business and Relationships
Seller shall use its best efforts to preserve its business
organization intact, to keep available its present employees, and to
preserve its present relationships with suppliers, customers, and others
having business relationships with it. Seller shall maintain all of the
Acquired Assets in good repair, order, and condition, except for normal
wear and tear.
8.4 Maintenance of Insurance
Seller shall continue to carry its existing insurance, subject to
variations in amounts required by the ordinary operations of its business.
8.5 Employees and Compensation
Seller shall not do, or agree to do, any of the following acts:
(i) grant any increase in salaries payable or to become payable to any
employee, sales agent or representative, (ii) increase benefits payable to
any employee, sales agent, or representative under any bonus or pension
plan or other contract or commitment, or (iii) adopt any new pension,
welfare, benefit or severance plan. Seller shall permit Buyer and Xxxxxxx,
in coordination with Seller, to contact its employees at reasonable times
for the purpose of discussing with such employees prospective employment by
Buyer.
8.6 New Transactions
Seller shall not do or agree to do any of the following acts:
(i) enter into any contract, commitment, or transaction not in the usual
and ordinary course of its business or which is inconsistent with Seller's
past practice; (ii) enter into any contract, commitment, or transaction in
the usual and ordinary course of business involving an amount exceeding
$20,000.00 (iii) make any capital expenditures in excess of $15,000.00 for
any single item or $20,000.00 in the aggregate, or enter into any leases of
capital equipment or property under which the annual lease charge is in
excess of $15,000.00; (iv) sell, dispose, or lease of any capital assets;
or (v) incur any indebtedness, other than current trade payables, ordinary
in nature and amount, incurred in the ordinary course of its business and
consistent with past practices, or (vi) enter into any agreements or
transaction with any person or entity who or which is an associate or an
affiliate of Seller, its Partners or Shaheen.
8.7 Distributions or Dividends
Seller shall not make any cash distributions or dividend type payments
to any of its Partners.
8.8 Advise Buyer and Xxxxxxx of Adverse Change
Seller shall promptly advise Buyer and Xxxxxxx of (i) the
occurrence of any material adverse change in Seller's financial condition
or in the results of its operations; (ii) the occurrence of any other event
or condition that materially and adversely affects the Acquired Assets or
the Seller's Business; or (iii) the imposition of any lien, pledge, or
encumbrance on any of the Acquired Assets. Seller shall promptly notify
Buyer and Xxxxxxx of: (A) any notice or other communication from any person
alleging that the consent of such person is or may be required in
connection with the transactions contemplated by this Agreement; (B) any
notice or other communication from any governmental or regulatory agency or
authority in connection with the transactions contemplated by this
Agreement; (C) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or involving
or otherwise affecting Seller, the Acquired Assets or the Business that, if
pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 5.17 or that relate to the consummation
of the transactions contemplated by this Agreement; (D) the damage or
destruction of any Acquired Asset or part thereof; or (E) any Acquired
Asset or part thereof becoming the subject of any proceeding or, to the
best knowledge of Seller, threatened proceeding for the taking thereof or
any part thereof or of any right relating thereto by condemnation, eminent
domain or other similar governmental action.
8.9 Representations and Warranties True at Closing
Seller, its Partners and Shaheen shall assure that all of their
representations and warranties set forth in this Agreement and in any
written statements delivered to Buyer and Xxxxxxx by them under this
Agreement are true and correct as of the date of this Agreement and shall
be true and correct as of the Closing Date, as if made on those dates and
that all conditions precedent to Closing shall have been met.
ARTICLE 9.
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND XXXXXXX
The obligations of Buyer and Xxxxxxx to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction, on or before the Closing, of each of the following
conditions, any of which may be waived by Buyer or Xxxxxxx:
9.1 Accuracy of Representations and Warranties
The representations and warranties of Seller, its Partners and
Shaheen set forth in this Agreement shall be or shall have been true and
correct in all respects (i) as of the date of this Agreement, and (ii) as
of the Closing Date.
9.2 Seller's, its Partners' and Shaheen's Performances
Seller, its Partners and Shaheen shall have performed,
satisfied, and complied with all covenants, agreements, and conditions
required by this Agreement to be performed or complied with by Seller, its
Partners and Shaheen on or before the Closing.
9.3 Absence of Litigation
No action, suit, or proceeding before any court or any
governmental body or authority, pertaining to the transactions contemplated
by this Agreement or to their consummation, shall have been instituted or
threatened on or before the Closing.
9.4 Consents
All necessary agreements and consents of any party to the
consummation of the transactions contemplated by this Agreement set forth
on Schedule 5.22 shall have been obtained by Seller and delivered to Buyer
and Xxxxxxx.
9.5 Approval of Documentation
The form and substance of all certificates, instruments,
opinions, and other documents delivered to Buyer and Xxxxxxx under this
Agreement, shall be satisfactory in all reasonable respects to Buyer and
Xxxxxxx and their counsel.
9.6 Partners' and Shaheen's Certificate
Buyer shall have received a certificate, executed by the
Partners and Shaheen, dated as of the Closing Date, in form and substance
satisfactory to Buyer and its counsel, certifying that the conditions
specified in Sections 9.1, 9.2, 9.3, 9.4 and 9.7 have been satisfied.
9.7 Partner Approval
The execution and delivery of this Agreement by Seller, and the
performance of its covenants and obligations under it, shall have been duly
authorized by all necessary partner action, and Buyer shall have received
copies of all resolutions pertaining to that authorization, certified by
the General Partner of Seller.
9.8 Due Diligence
Buyer and Xxxxxxx shall have completed their legal and financial
due diligence review of Seller.
9.9 Opinion of Seller's Counsel
Buyer shall have received an opinion of Xxxxxxx & Xxxxxx, LLP,
counsel to Seller, dated as of the Closing, substantially in the form set
forth as Exhibit B hereto.
9.10 Termination of Notes Payable
If Buyer issues any new notes payable or other written evidence
of indebtedness in payment of any of Seller's creditors, any existing notes
payable or other written evidences of indebtedness owed by Seller shall be
canceled and such canceled notes payable or other written evidences of
indebtedness shall be delivered to Buyer.
9.11 UCC Termination Statement
Xxxxxxx and Buyer shall have received UCC-Termination Statements from Fleet
Capital.
9.12 Escrow Agreement
Buyer and Xxxxxxx shall have received a fully executed copy of
the Escrow Agreement substantially in the form set forth as Exhibit A
hereto.
9.13 No Loss or Damage
There shall have been no loss or damage to any of Seller's assets
in excess of $5,000.00, whether or not covered by insurance, and no
material adverse change in the business or financial condition of Seller.
9.14 Xxxx of Sale and Assignment
Buyer shall have received a Xxxx of Sale and Assignment for the
Acquired Assets duly executed by Seller and in substantially the form of
Exhibit C hereto, and other good and sufficient instruments of transfer and
conveyance in form and substance reasonably satisfactory to Buyer and its
counsel (e.g., documents necessary for the transfer of the vehicles).
9.15 Sublease in California
Buyer and Seller shall have entered into a sublease for the
premises described on Schedule 2.1(g) as Item 2, with the prior approval of
Oro Construction Company.
9.16 Good Standing Certificate
Buyer shall have received a Certificate (s) of good standing of
Seller dated within ten ( 10) days before the Closing, issued by the
Secretaries of State of the jurisdictions in which Seller is qualified to
transact business.
ARTICLE 10.
CONDITIONS PRECEDENT TO SELLER'S, ITS PARTNERS', AND SHAHEEN'S
PERFORMANCES
The obligations of Seller, to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or
before the Closing, of each of the following conditions:
10.1 Accuracy of Representations and Warranties
The representations and warranties of Buyer and Xxxxxxx set forth
in this Agreement shall be true and correct in all respects (i) as of the
date of this Agreement; and (ii) as of the Closing Date.
10.2 Buyer's and Stephan's Performances
Buyer and Xxxxxxx shall have performed, satisfied, and complied
with all covenants, agreements, and conditions required by this Agreement
to be performed or complied with by Buyer and Xxxxxxx on or before the
Closing.
10.3 Corporate Approval
The execution and delivery of this Agreement by Buyer and
Xxxxxxx, and the performance of their covenants and obligations under it,
shall have been duly authorized by all necessary corporate action.
10.4 Absence of Litigation
No action, suit, or proceeding before any court or any
governmental body or authority, pertaining to the transaction contemplated
by this Agreement or to its consummation, shall have been instituted or
threatened on or before the Closing.
10.5 Officer's Certificate
Seller shall have received a certificate, executed by an
executive officer of Buyer and Xxxxxxx, where applicable, dated as of the
Closing, in form and substance satisfactory to Seller and its counsel,
certifying that the conditions specified in Sections 10.1, ]0.2, 10.3 and
10.4 have been satisfied.
10.6 Approval of Documentation
The form and substance of all certificates, instruments,
opinions, and other documents delivered to Seller, its Partners and Shaheen
under this Agreement, shall be satisfactory in all reasonable respects to
Seller, its Partners, Shaheen and their counsel.
10.7 Xxxxxxx Common Stock
Seller shall have received a certificate for Xxxxxxx Common Stock
representing seventy percent (70%) of the Purchase Price, as determined
pursuant to Section 3.1 hereof.
10.8 Escrow Agent
Escrow Agent shall have received a certificate for Xxxxxxx Common
Stock representing the remaining thirty percent (30%) of the Purchase
Price, together with an executed copy of the Escrow Agreement.
10.9 Escrow Agreement
Seller shall have received a fully executed copy of the Escrow
Agreement. substantially in the form set forth as Exhibit A hereto.
10.10 Lease
Seller shall have received a Lease Agreement substantially in the
form annexed to this Agreement as Exhibit D.
ARTICLE 11.
OBLIGATIONS AFTER THE CLOSING DATE
11.1 Change of Name
Seller, the Partners and Shaheen agree that after the Closing
they shall not use or employ in any manner directly or indirectly the name
"Xxxxxx-Flamingo", or any variation thereof, and that Seller, the Partners
and Shaheen will immediately take and cause to be taken all necessary
action by himself, its Partners, and owners, as applicable, and any other
required persons to change their name by the Closing to a name approved by
Buyer.
11.2 Indemnification by Seller, its Partners, and Shaheen
Seller, its Partners, and Shaheen agree to indemnify and defend
Buyer, Xxxxxxx, and their respective affiliates, officers, directors,
employees and agents and hold each of them harmless after the Closing Date,
and agrees to pay and reimburse such aforementioned entities and/or
persons, (net of the proceeds of insurance, if any) against and in respect
of:
(a) All liabilities and obligations of, or claims, of Seller
other than the Fleet Capital Indebtedness and the Assumed Liabilities
including, without limitation, any claims which may be made by either
Xxxxxx'x Hair Beauty Supply Co., Ltd. or LePachu, Ltd. with respect to the
Major Note under the provisions of Section 2.4 hereof;
(b) Any and all damages, losses, deficiencies, costs, and
expenses, including without limitation, interest, penalties and reasonable
attorneys' fees, ("Losses"), arising out of or resulting from any
misrepresentation, inaccuracy in, breach or alleged breach of any
representation or warranty, or breach or alleged breach or nonfulfillment
of any obligation, agreement or covenant on the part of Seller, its
Partners or Shaheen under this Agreement or from any misrepresentation in,
omission from, or occasioned by any certificate or other document furnished
to Buyer or Xxxxxxx under this Agreement whether in respect of a third
party action or otherwise;
(c) Any and all actions, suits, proceedings, demands,
assessments, judgements, costs, and reasonable legal and other reasonable
expenses incident to any of the foregoing.
(d) Any losses, claims or reasonable expenses incurred by
Xxxxxxx in connection with any information or omissions provided by Seller,
its Partners, or Shaheen in any registration statement pursuant to Article
12 hereof.
(e) Any and all Losses arising in connection with the ownership
or use of the Acquired Assets (including, without limitation, any Losses
attributable to product liability or warranty claims, and pending
litigation, but excluding any losses incurred by Buyer as a result of the
sale or other disposition of any Acquired Assets by Buyer after the Closing
Date or resulting from the actions or inactions of Buyer), or resulting
from or arising out of any liability or obligation of the Seller (other
than, after the Closing Date, the Fleet Capital Indebtedness and the
Assumed Liabilities) or any of its affiliates, prior to the Closing Date,
whether in respect of a third-party action or otherwise. In regard to any
union contract or collective bargaining agreement, Seller shall be
responsible for all obligations prior to the Closing Date. As of the
Closing Date, Buyer shall be responsible for any union contract or
collective bargaining agreement obligations arising or occurring thereunder
on or after the Closing Date.
(f) Notwithstanding the foregoing, Seller, its Partners and
Shaheen shall not indemnify Buyer and Xxxxxxx for any such indemnification
obligations until such obligations, excluding any reasonable attorneys'
fees actually incurred by Buyer and Xxxxxxx and excluding any claims which
may be made by either Xxxxxx'x Hair Beauty Supply Co., Ltd. or Lepachu,
Ltd. with respect to and in connection with the indebtedness owed to them
by Major International Supply, equal or exceed $50,000.00 in the aggregate,
in which case such indemnification obligations of Seller, its Partners and
Shaheen shall include all such indemnification obligations including such
$50,000.00 amount actually incurred by Buyer and Xxxxxxx, and provided
further, that all such indemnification obligations of Seller's Partners and
Shaheen shall in all events be limited to the Xxxxxxx Common Stock or the
proceeds from the sale thereof received by Seller, its Partners or Shaheen
as the Purchase Price hereunder. The reasonable attorneys' fees actually
incurred by Buyer and Xxxxxxx and any claims which may be made by either
Xxxxxx'x Hair Beauty Supply Co., Ltd. or Lepachu, Ltd. with respect to and
in connection with the indebtedness owed to them by Major International
Supply shall be indemnified regardless of the $50,000.00 amount.
(g)To provide Buyer and Xxxxxxx with partial security for
Seller's, its Partners', and Shaheen's indemnification obligations
hereunder, as well as to adjust the Purchase Price downward on a dollar for
dollar basis as provided for in Section 3.1 (c) hereof, Seller, its
Partners, and Shaheen shall execute an Escrow Agreement substantially in
the form attached hereto as Exhibit A, with thirty percent (30%) of the
Xxxxxxx Common Stock issued at Closing to be held in escrow and disposed of
as provided for in the Escrow Agreement. If, and to the extent that, there
may be insufficient Escrow Property (as defined in the Escrow Agreement) to
satisfy any indemnification obligations hereunder, the Seller shall, at its
option, either satisfy such Loss by the payment of cash to Buyer or by the
satisfaction of such Loss with Xxxxxxx Common Stock. For purposes of any
such payments made by Seller with Xxxxxxx Common Stock, the Xxxxxxx Common
Stock shall be valued at $11.00, subject to adjustment upward or downward
of up to ten percent ( 10%) based on the average closing sales price of
Stephan's Common Stock as reported by the American Stock Exchange for the
twenty (20) trading days prior to the Closing Date.
(h) The procedure for seeking indemnification shall be as follows:
Buyer and Xxxxxxx agree that promptly upon receipt by either of
them of notice of any demand, assertion, claim, action or proceeding,
judicial or otherwise with respect to any matter as to which Seller, its
Partners and Shaheen have agreed to indemnify Buyer and Xxxxxxx, Buyer and
Xxxxxxx shall give prompt notice thereof in writing to the Seller, its
Partners and Shaheen, together with the statement of such information
respecting such demand, assertion, claim, action or proceeding as Buyer and
Xxxxxxx shall then have; provided, however, that Seller, its Partners and
Shaheen shall not be relieved of liability hereunder for failure by the
Buyer and Xxxxxxx to give prompt written notice, unless Seller, its
Partners and Shaheen are materially prejudiced by such failure, in which
case Seller, its Partners and Shaheen shall not be liable for any indemnity
under this Agreement to the extent so prejudiced. If Seller, its Partners
and Shaheen acknowledge full responsibility under this Agreement, Seller,
its Partners and Shaheen shall contest and defend by all appropriate legal
or other proceedings any demand, assertion, claim, action or proceeding
with respect to which they have been called upon to indemnify the Buyer and
Xxxxxxx under the provisions of this Agreement; provided, however, that:
(i) notice of intention to contest and defend shall be delivered to the
Buyer and Xxxxxxx within fifteen (15) calendar days from the receipt by
Seller, its Partners and Shaheen of notice of the assertion of such
demand, assertion, claim, action or proceeding;
(ii) Seller, its Partners and Shaheen shall pay all costs and expenses of
such contest, including all attorneys' and accountants' fees, and the
cost of any bond required by law to be posted in connection with such
contest;
(iii) such contest shall be conducted by reputable attorneys employed by
Seller, its Partners and Shaheen (with the reasonable approval of the
Buyer and Xxxxxxx) at Seller's, its Partners' and Shaheen's sole cost
and expense, but Buyer and Xxxxxxx shall have the right to participate
in such proceedings and to be represented by attorneys of its own
choosing, at its own cost and expense;
(iv) if, after such opportunity, Seller, its Partners and Shaheen do not
elect to assume the defense in any such proceeding, then Xxxxxxx and/or
Buyer may contest and defend against such asserted claim or liability
in such manner as it may deem appropriate, including settling such
claim, and Seller, its Partners and Shaheen shall (A) be bound by the
results obtained by Buyer and Xxxxxxx, including any out-of-court
settlement or compromise and (B) pay all of Stephan's and/or Buyer's
costs and expenses (including reasonable legal fees) in defending such
matter;
(v) Seller, its Partners and Shaheen will not settle any claim without the
prior written consent of Buyer and Xxxxxxx, unless the settlement
contains a complete and unconditional release of the Buyer and Xxxxxxx,
and the settlement does not involve the imposition of any nonmonetary
relief on Buyer and Xxxxxxx.
11.3 Retention of Shares or Proceeds
Seller, its Partners, and Shaheen covenant that during the two
(2) years following the Closing Date, they shall hold the Xxxxxxx Common
Stock or the proceeds from the sale of any Xxxxxxx Common Stock. During
this two (2) years, Seller may distribute some or all of such Xxxxxxx
Common Stock solely to its Partners or Shaheen to be held by its Partners
and Shaheen, in accordance with their ownership interests in Seller or with
respect to Shaheen, according to his ownership of MFB.
11.4 Access to Records
For a four (4) year period from and after the Closing Date,
Buyer shall retain all books and records received from Seller, including,
but not limited to, the books and records referred to in Section 2.1(f) of
this Agreement. Buyer shall allow Seller, its Partners, and Shaheen, their
counsel, accountants and other representatives and agents, reasonable
access to such books and records which Seller, its Partners and Shaheen,
their counsel, accountants and other representatives and agents may
reasonably require to comply with their obligations under this Agreement
and the law (e.g., audit of Seller's income tax or sales tax returns by
federal or state agencies). Seller agrees to provide Buyer with fifteen
(15) days prior written request for access to such books and records. Such
request shall contain the specific books and records which are needed by
Seller together with the reasons why Seller needs access to such books and
records. Buyer's consent to such request shall not be unreasonably
withheld. In the event that Seller is required by Buyer or is otherwise
required to have access to such books and records upon Buyer's business
premises, then such access must be during normal business hours without
unreasonable interference with Buyer's employees. Such access must also be
concluded within a reasonable time period and all costs which may be
incurred by Buyer in granting such access to Seller shall be the
responsibility of Seller.
11.5 Deposits of Checks
Seller shall cooperate with Buyer in making all necessary
arrangements so that checks, wire transfers and/or other payments on the
accounts receivable shown on Schedule 2.1 (c) may be deposited into Buyer's
bank accounts without endorsement by Seller.
ARTICLE 12.
REGISTRATION RIGHTS
12.1 Request for Registration
Notwithstanding Seller's, its Partners', and Shaheen's
(hereinafter in this Article 12 referred to as "Holders") present
intentions to acquire the Xxxxxxx Common Stock for the purpose of
investment, as set forth in this Agreement, Xxxxxxx shall prepare and file
a registration statement, under the Securities Act with respect to all of
the Xxxxxxx Common Stock then owned by Holders, as and when such filing is
requested by Holders; provided, however, that such request shall not be
made by Holders before one (I ) year from the Closing Date. Xxxxxxx shall
use its best efforts to make the registration statement effective as
promptly as practicable, including, without limitation, filing
post-effective amendments, appropriate qualifications under applicable blue
sky or other state securities laws, and appropriate compliance with the
Securities Act. Xxxxxxx shall not be obligated to effect, or to take any
action to effect any such registration pursuant to this Section 12.1 after
Xxxxxxx has initiated one such registration pursuant to this Section 12.1
(counting for these purposes only registrations which have been declared or
ordered effective). For purpose of this Section 12.1, Holders shall have
three (3) years, commencing one (1) year from the Closing Date, within
which to exercise their rights to request such registration but if
registration of all of the Shares has not occurred by the end of such three
(3) years, then Xxxxxxx agrees to register all of the unregistered Shares
immediately upon the expiration of such three (3) years. Notwithstanding
anything to the contrary set forth herein, Xxxxxxx shall not be required to
register the Xxxxxxx Common Stock if in the opinion of counsel to Xxxxxxx
the disposition of the Xxxxxxx Common Stock is exempt from the registration
and prospectus requirements of the Act.
12.2 Inclusion of Shares in Registration
If, within three (3) years after the Closing Date, Xxxxxxx files
a registration statement under the Securities Act, covering a sale by
Xxxxxxx of its common stock (other than a registration statement or a form
that does not permit the inclusion of shares by its securities holders),
Xxxxxxx shall mail to each Holder (at Holder's address in the Stephan's
share transfer records) written notice of its intent to file such
registration statement. If a Holder delivers a written request to Xxxxxxx,
within twenty (20) days after the mailing of the notice, setting forth the
number of shares of Xxxxxxx Common Stock Holder desires to include in such
registration, Xxxxxxx agrees to use its best efforts to include those
shares of Xxxxxxx Common Stock of each such Holder in the registration
statement and related underwriting arrangements; provided, however, that
Xxxxxxx shall not be so obligated if, in the opinion of counsel for
Xxxxxxx, the disposition of such shares requested to be included in such
registration is exempt from the registration and prospectus requirements of
the Act. Each Holder agrees that, if the offering by Xxxxxxx is
underwritten, Holder's shares of Xxxxxxx Common Stock are to be
underwritten by the same underwriter or underwriters on the same basis as
the other shares of Xxxxxxx Common Stock included. If, in spite of
reasonable efforts of Xxxxxxx, the inclusion of all of the shares of
Xxxxxxx Common Stock that each Holder intends to sell shall not be
acceptable to the managing underwriter or underwriters of the offering,
Xxxxxxx may limit or eliminate the number of shares of Xxxxxxx Common Stock
of each Holder to be sold. If the offering is not completed within ninety
(90) days after the effective date of the registration statement, Xxxxxxx
shall be entitled to register any unsold portion of the shares of Xxxxxxx
Common Stock. The manner and conduct of any registration, including the
contents of the registration statement and of any underwriting or other
related agreements, shall be entirely in the control and discretion of
Xxxxxxx. Each Holder agrees to cooperate with Xxxxxxx in the preparation
and filing of any registration statement prepared and filed under this
Section 12.2. Each Holder shall make the customary agreements,
representations, warranties, and indemnifications to the underwriters in
any offering with respect to any Xxxxxxx Common Stock included at such
Holder's request.
12.3 Expenses of Registration
All expenses of every kind relating to the preparation and filing
of all registration statements, amendments, supplements, prospectuses, and
other documents under this Article 12 shall be paid by Xxxxxxx, including
all costs and expenses, ordinarily incurred in connection with the public
offering of securities, including, without limitation, printing costs and
fees and expenses of counsel and accountants for Xxxxxxx. However, the
expenses payable by Xxxxxxx shall not include the fees and expenses of
counsel of the selling Holders or underwriting discounts, commissions or
expenses, which are customarily incurred by Holders in such transactions,
which shall be the responsibility of Holders.
12.4 Additional Request for Registration and Extension of Time
If Xxxxxxx and/or the underwriters limit the Xxxxxxx Common
Stock which Holders desire to register in exercising either their request
for registration under Section 12.1 hereof or their "piggyback" rights
under Sections 12.2 hereof, then Holders shall be entitled to an additional
request for registration under Section 12.1 hereof, and the three (3) years
as specified in Sections 12.1 and 12.2 hereof shall be extended by six (6)
months, if, and only if, any such limitation is imposed by Xxxxxxx and/or
the underwriters during the last six (6) months of the applicable periods
of Section 12.1 or 12.2.
12.5 Information by Holder; Indemnification
Each Holder shall furnish to Xxxxxxx such information regarding
such Holder as Xxxxxxx may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification, or
compliance referred to in this Article 12. Each Holder agrees to indemnify
Xxxxxxx for any omissions or misstatements in information provided to
Xxxxxxx, and Xxxxxxx agrees to indemnify each Holder for any omissions or
misstatements made in connection with any registration, qualification, or
compliance referred to in this Article 12 and relating to the registration
of Xxxxxxx Common Stock except insofar as such omissions or misstatements
are caused by or relate to the information provided to Xxxxxxx by each
Holder.
ARTICLE 13.
GENERAL
13.1 Cooperation
From and after the Closing, Seller and Buyer shall cooperate
fully with each other to the end that the Acquired Assets (and all other
assets relating to the Business) and title thereto shall be fully and
effectively transferred to and conveyed to Buyer. Such cooperation shall
include execution and delivery of such further instruments, consents,
notices, acknowledgments, applications and other documents, as may be
reasonably requested by either party hereto.
13.2 Bulk Sales
The transactions contemplated herein shall be consummated
without compliance with the bulk sales laws of any of the states in which
Seller is located. Seller, its Partners and Shaheen shall indemnify and
hold Buyer harmless from any and all losses arising as a result of any
non-compliance with any bulk sales law unless such losses arise from
Buyer's failure to pay obligations Buyer has assumed under this Agreement.
13.3 No Third Party Beneficiaries
Nothing contained in this Agreement shall be construed to confer
upon or give to any person or entity other than the parties hereto and
their successors and assigns, any rights or remedies under or by reason of
this Agreement.
13.4 Notices
All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom
notice is to be given, or on the third day after mailing to the party to
whom notice is to be given, by first class mail registered or certified,
postage prepaid, and properly addressed and via facsimile as follows:
Seller or Partners: Xxxxxx X. Xxxxxxx
0000 Xxxxxxxxx Xxxxxxx
000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
fax: (404) 000- 0000
With copy to: Xxxxxxx X. Xxxxxxx
Xxxxxxx & Xxxxxx LLP
000 Xxxxxxxx Xxxxxxx, X X.
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000-0000
fax: (000) 000-0000
Buyer: Xxxxx X. Xxxxxx, Xx.
The Xxxxxxx Co.
0000 Xxxx XxXxx Xxxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
fax: (000) 000-0000
With copy to: Xxxxxxx X. Xxxxxxxxxx, Esq.
Xxxxxxx, Calamari & Gleason
lOO Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
fax: (000) 000-0000
13.5 Binding Effect
This Agreement shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors, assigns, heirs,
executors and personal representatives.
13.6 Entire Agreement; Modification; Waiver
This Agreement and the schedules and exhibits attached to this
Agreement set forth the entire agreement of the parties hereto with respect
to the matters contained herein and no prior or contemporaneous agreement
or understanding, oral or written, pertaining to any such matter shall be
effective for any purpose. No supplement, modification or amendment to this
Agreement shall be binding unless executed in writing by all of the parties
hereto. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, any waiver of any other provision, whether or
not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party making the waiver.
13.7 Expenses
Each of the parties shall pay all costs and expenses incurred or
to be incurred by it in negotiating and preparing this Agreement and in
closing and carrying out the transactions contemplated by this Agreement.
13.8 Construction
This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida, and the parties hereby agree that
exclusive jurisdiction as to any and all claims or causes of action shall
be in the State of Florida.
13.9 Brokerage
The parties acknowledge that Croft & Xxxxxx, LLC, 0000 Xxxxxxxxx
Xxxxxxx, X.X.- Xxxxxxxx 0-X, Xxxxxxx, Xxxxxxx 00000 was a procuring cause
of this transaction, and Seller shall pay to Croft & Xxxxxx, LLC, an
investment banking fee in connection with this transaction by separate
agreement between Seller and Croft & Xxxxxx, LLC. Neither Buyer nor Xxxxxxx
engaged a broker in this transaction. Seller agrees to indemnify and hold
harmless Buyer and Xxxxxxx from and against any claims made by Croft &
Xxxxxx, LLC which may arise in connection with the separate brokerage
agreement between Seller and Croft & Xxxxxx, LLC, or claims of any other
broker or finder.
13.10 Assignment
This Agreement may not be assigned by any party, by operation of
law or otherwise, without the prior written consent of all other parties to
this Agreement.
13.11 Counterparts
This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which shall constitute one
instrument.
13.12 Headings
The subject headings of the articles and sections of this
Agreement are for purposes of convenience only, and shall not affect the
construction or interpretation of any of its provisions.
IN WITNESS WHEREOF, this Asset Purchase Agreement has been
executed by the parties hereto as of the date first above written.
