STOCK PURCHASE AND SALE AGREEMENT
by and among
XXXXXXX X. XXXXXXX as SELLER
and
AZUREL LTD. as PURCHASER
and
PRIVATE LABEL COSMETICS, INC.,
P.L.C. SPECIALTIES, INC.,
INTERNATIONAL COSMETIC GROUP, INC. and
FASHION LABORATORIES, INC.
for all of the issued and outstanding shares of capital stock of
PRIVATE LABEL COSMETICS, INC.,
P.L.C. SPECIALTIES, INC.,
INTERNATIONAL COSMETIC GROUP, INC. and
FASHION LABORATORIES, INC.
July 17, 1996
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STOCK PURCHASE AND SALE AGREEMENT
STOCK PURCHASE AND SALE AGREEMENT (the "Agreement") dated July 17, 1996,
by and among:
XXXXXXX X. XXXXXXX (the "Seller"), an individual residing at 00 Xxxxxx
Xxxx, Xxxxxx, Xxx Xxxxxx 00000;
and
AZUREL LTD. (the "Purchaser"), a corporation incorporated under the
laws of the state of Delaware, with its principal place of business at 000
Xxxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, Xxx Xxxx 00000;
and
PRIVATE LABEL COSMETICS, INC. ("Private Label"), a corporation with its
principal place of business at 00-00 Xxxxx Xxxxxx, X.X. Xxx 000, Xxxxxxxx, Xxx
Xxxxxx 00000;
and
PLC SPECIALTIES, INC. ("P.L.C."), a corporation with its principal place
of business at 00-00 Xxxxx Xxxxxx, X.X. Xxx 000, Xxxxxxxx, Xxx Xxxxxx 00000;
and
INTERNATIONAL COSMETIC GROUP, INC. ("International"), a corporation
with its principal place of business at 00-00 Xxxxx Xxxxxx, X.X. Xxx 000,
Xxxxxxxx, Xxx Xxxxxx 00000;
and
FASHION LABORATORIES, INC. ("Fashion Labs"), a corporation with its
principal place of business at 00-00 Xxxxx Xxxxxx, X.X. Xxx 000, Xxxxxxxx,
Xxx Xxxxxx 00000.
WITNESSETH
WHEREAS, Private Label is a corporation duly incorporated and in good
standing under the laws of the state of New Jersey, with its principal place of
business at 00-00 Xxxxx Xxxxxx, X.X. Xxx 000, Xxxxxxxx, Xxx Xxxxxx 00000;
WHEREAS, P.L.C. is a corporation duly incorporated and in good standing
under the laws of the state of New Jersey, with its principal place of business
at 00-00 Xxxxx Xxxxxx, X.X. Xxx 000, Xxxxxxxx, Xxx Xxxxxx 00000;
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WHEREAS, International is a corporation duly incorporated and in good
standing under the laws of the state of New Jersey, with its principal place of
business at 00-00 Xxxxx Xxxxxx, X.X. Xxx 000, Xxxxxxxx, Xxx Xxxxxx 00000;
WHEREAS, Fashion Labs is a corporation duly incorporated and in good
standing under the laws of the state of Delaware, with its principal place of
business at 00-00 Xxxxx Xxxxxx, X.X. Xxx 000, Xxxxxxxx, Xxx Xxxxxx 00000 (As
used herein, the term the "Company" refers to each of Private Label, P.L.C.,
International and Fashion Labs, individually and all four companies
collectively.)
WHEREAS, Seller owns 49.7 shares of the capital stock of Private Label
(the "Private Label Shares"); 49.7 shares of the capital stock of P.L.C. (the
"P.L.C. Shares"); 500 shares of the capital stock of International (the
"International Shares"); and 500 shares of the capital stock of Fashion Labs
(the "Fashion Labs Shares"); (the Private Label Shares, P.L.C. Shares,
International Shares and the Fashion Labs Shares are collectively referred to
herein as the "Company Shares");
WHEREAS, the Company Shares constitute all of the issued and outstanding
capital stock of the Company;
WHEREAS, Seller desires to sell and Purchaser desires to purchase at the
Closing (as hereinafter defined) the Company Shares on the terms and conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the agreements
set forth below, the parties hereto agree to the following:
I. PURCHASE AND SALE
A. Shares to be Purchased and Sold. At the Closing and upon the terms
and subject to the conditions of this Agreement, and upon the representations,
warranties and covenants herein made, Seller agrees to sell, assign, transfer,
convey and deliver to Purchaser, and Purchaser agrees to purchase from Seller,
the Company Shares, for the Purchase Price (as hereinafter defined), free and
clear of all liens, pledges, security interests, options, claims, charges and
encumbrances of any kind whatsoever, together with all rights now and hereafter
attaching thereto.
B. Purchase Price.
1. Payments. Upon the terms and subject to the conditions set forth
in this Agreement, upon the representations, warranties and covenants made
herein, and in exchange for the Company Shares, Purchaser hereby agrees to:
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(i) pay and deliver to Seller at the Closing, by certified
or bank check or wire transfer, One Hundred Twenty-Five
Thousand Dollars ($125,000) (the "Initial Payment");
(ii) issue and deliver to Seller at the Closing a promissory
note (the "Note") in the original principal amount of
One Million Six Hundred Seventy-Five Thousand Dollars
($1,675,000), bearing interest at the rate of nine
percent (9%) per annum, payable in nine installments
with the first installment of $150,000, plus accrued but
unpaid interest, to be paid on the date, if any, that a
public offering of Purchaser's common stock is
consummated (the "IPO"), or January 1, 1997, whichever
is earlier, the second installment of $209,375, plus
accrued but unpaid interest, to be paid three months
thereafter, the third installment of $209,375, plus
accrued but unpaid interest, to be paid six months after
the second installments and each of the fourth through
ninth installments of $184,375, each, plus accrued but
unpaid interest, to be paid six months after the prior
installment, subject to adjustment as hereinafter
provided, substantially in the form set forth in
Exhibit I-B-1(ii);
(iii) issue and deliver to Seller such number of shares of the
Purchaser's common stock (the "IPO Shares") which, in the
aggregate, are valued at Eight Hundred Fifty Thousand
Dollars ($850,000), and are to be issued if and when a
public offering of the Purchaser's common stock is
consummated, and are to be valued at the proposed public
offering price of the Company's common stock and subject
to a registration rights agreement and lock-up agreement
on terms similar to those executed by members of the
Company's management;
(iv) pay and deliver to Xxxxx XxXxxx ("XxXxxx") at the
Closing, on behalf of Seller, Six Thousand Two Hundred
Fifty Dollars ($6,250)(the "XxXxxx Payment"); and
(v) issue and deliver to XxXxxx at the Closing, on behalf
of Seller, a promissory note (the "XxXxxx Note") in the
original principal amount of Eighty-Three Thousand Seven
Hundred Fifty Dollars ($83,750), plus accrued but unpaid
interest, payable in nine installments of principal and
interest, in the same proportion and on the same schedule
as the Note, subject to adjustment, substantially in the
form set forth in Exhibit I-B-1(v).
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(vi) issue and deliver to XxXxxx such number of shares of the
Purchaser's common stock (the "XxXxxx IPO Shares") which
in the aggregate, are valued at Forty-Two Thousand Five
Hundred Dollars ($42,500), and are to be issued if and
when a public offering of the Purchaser's common stock
is consummated, and are to be valued at the proposed
public offering price, of the Company's common stock and
subject to a registration rights agreement and lock-up
agreement on terms similar to those executed by
members of the Company's management.
The Initial Payment, Note, IPO Shares, XxXxxx Payment,
the XxXxxx Note and the XxXxxx IPO Shares collectively comprise the purchase
price (the "Purchase Price").
2. Adjustment. The final determination of the amounts paid or payable
by the Company (the "Reduction Amount") in respect of any cost or expense,
incurred subsequent to the Closing arising from or in connection with any matter
relating to compliance with ISRA (as hereinafter defined) and the Environmental
Remediation (as hereinafter defined), shall be made upon completion of the
Environmental Remediation (the "Completion Date"). Within twenty (20) business
days following the Completion Date, the original principal amount of the Note
shall be reduced by an amount equal to ninety-five percent (95%) of the
Reduction Amount (the "Note Reduction"), and the original principal amount of
the XxXxxx Note shall be reduced by an amount equal to five percent (5%) of the
Reduction Amount (the "XxXxxx Note Reduction"); provided however, that the
aggregate amount of the Note Reduction and the XxXxxx Note Reduction shall not
exceed Four Hundred Thousand Dollars ($400,000).
C. Delivery of Shares and Payment.
1. At the Closing:
(i) Seller shall cause the Company to cancel the outstanding
certificates representing the Company Shares and to issue
and register in the name of Purchaser, or its
designee(s), and deliver such new certificates
(the "Certificates") representing all of the Company
Shares to the Purchaser. The transfer of the Company
Shares shall be duly acknowledged by the Board of
Directors of the Company and registered in the records
of the Company;
(ii) Purchaser shall deliver the Certificates, together with
stock powers in blank duly endorsed for transfer, to
Gersten, Savage, Xxxxxxxxx & Xxxxxx, LLP, as escrow agent
(the "Escrow Agent"), which shall deliver the
Certificates in accordance with the escrow agreement to
be executed and delivered by the parties and the Escrow
Agent at the Closing (the "Escrow Agreement"), which
shall be substantially in the form set forth in
Exhibit I-C-1(ii);
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(iii) Purchaser shall pay the Initial Payment and the
XxXxxx Payment to Seller and shall deliver the Note and
the XxXxxx Note to Seller;
(iv) Purchaser shall contribute One Hundred Fifty Thousand
Dollars ($150,000) to the working capital of the Company;
D. Closing. The closing of the purchase and sale of the Company Shares
(the "Closing") will take place at the offices of the Escrow Agent, at 000
Xxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000, on or before August 30,
1996 (the "Closing Date").
II. REPRESENTATIONS AND WARRANTIES
A. Representations and Warranties of Seller and the Company. Seller and
each entity comprising the Company hereby jointly and severally represent and
warrant to Purchaser as follows, and acknowledge and confirm that Purchaser is
relying upon such representations and warranties in connection with the
execution, delivery and performance of this Agreement, notwithstanding any
investigation made by Purchaser or on its behalf, which shall be true as of the
Closing and shall survive the Closing:
1. Organization, Standing and Power. Each entity comprising the
Company is a corporation duly organized, validly existing and in good standing
under the laws of its respective state of incorporation, has all requisite
corporate power and authority to own and operate its respective properties and
to carry on business as now being conducted or as conducted in the past and is
qualified to do business and is in good standing as a foreign corporation in
each state or other jurisdiction in which the nature of its respective
properties, assets or conduct of its respective business requires such
qualification. Exhibit II-A-1 sets forth the date and jurisdiction of the
incorporation, stockholders, and officers and directors of each entity
comprising the Company and the states or other jurisdictions in which each
entity comprising the Company is qualified to conduct business. The Company has
no subsidiaries.
2. Authorization. Seller and each entity comprising the Company each
have the requisite power and authority to enter into this Agreement and to
consummate the transaction contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transaction contemplated hereby has
been or will be duly authorized by all necessary action on the part of Seller
and each entity comprising the Company. This Agreement has been duly executed
and delivered by Seller and the Company, and constitutes a legal, valid and
binding obligation of Seller and each entity comprising the Company, enforceable
against Seller and each entity comprising the Company in accordance with its
terms subject as to enforcement of remedies, to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally. None of the entities comprising the Company is the subject of,
nor the debtor in, any pending, potential or threatened bankruptcy proceeding,
voluntary or involuntary, or any similar proceeding, claim or action which could
result in such an event. No consent, approval, order or authorization of, or
registration, declaration or filing with any
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governmental authority or any other party is required to be made or obtained by
Seller or any entity comprising the Company in order to execute this Agreement
or fulfill the obligations provided for hereby.
3. Compliance With Laws. Each entity comprising the Company has all
permits, licenses and authorizations required by any applicable government
authority or agency for the conduct of its respective business. Each entity
comprising the Company has complied with the applicable laws, rules and
regulations of each jurisdiction, regulatory bodies and any industry,
governmental or trade organization required by law in which it conducts its
respective business. Exhibit II-A-3(a) lists each of such registrations,
permits, licenses, consents, approvals, memberships, authorizations and
qualifications. All employees of each entity comprising the Company who are
required to be licensed by any governmental authority or regulatory authority
are duly licensed. Except as set forth on Exhibit II-A-3(b), each entity
comprising the Company and each employee and independent contractor employed by
or affiliated with each entity comprising the Company are in compliance in all
respects with all laws, regulations, ordinances, orders and decrees of any
authority applicable to the conduct of business of each entity comprising the
Company and ownership and use of the properties of each entity comprising the
Company. Except as set forth on Exhibit II-A-3(c), none of the entities
comprising the Company has in the past been, nor is presently subject to any
restriction on the conduct of its business imposed by any governmental or
regulatory authority as a result of actions or failure to act, nor is any entity
comprising the Company aware of any pending investigation or order against it or
any of its respective employees, nor any circumstances which may give rise to
any order or orders which could result in a formal or informal investigation
which could have an adverse affect on it or its ability to conduct its
respective present or proposed business.
4. Capital Structure and Ownership of the Company Shares.
(a) The authorized capital stock of Private Label consists of
2,500 shares of common stock, no par value per share, of which 49.7 shares are
issued and outstanding and owned by Seller (the "Private Label Shares"). At the
Closing, the Private Label Shares shall constitute the only shares of Private
Label's capital stock that are issued and outstanding and, other than Seller,
there shall be no other individual owning any of Private Label's capital stock.
Seller has good and marketable title to the Private Label Shares, free and clear
of all liens, pledges, encumbrances or claims of rights of ownership whatsoever.
None of the Private Label Shares are subject to any proxy, shareholders'
agreement or voting trust agreement. No person has any preemptive rights or
options or warrants to purchase any capital stock of Private Label. The Private
Label Shares have been duly authorized and validly issued and are fully paid and
nonassessable, and no personal liability will attach to the Purchaser solely by
reason of being a holder of the Private Label Shares.
(b) The authorized capital stock of P.L.C. consists of 2,500
shares of common stock, no par value per share, of which 49.7 shares are issued
and outstanding and owned by Seller (the "P.L.C. Shares"). At the Closing, the
P.L.C. Shares shall constitute the only shares
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of P.L.C.'s capital stock that are issued and outstanding and, other than
Seller, there shall be no other individual owning any of P.L.C.'s capital stock.
Seller has good and marketable title to the P.L.C. Shares, free and clear of all
liens, pledges, encumbrances or claims of rights of ownership whatsoever. None
of the P.L.C. Shares are subject to any proxy, shareholders' agreement or voting
trust agreement. No person has any preemptive rights or options or warrants to
purchase any capital stock of P.L.C. The P.L.C. Shares have been duly authorized
and validly issued and are fully paid and nonassessable, and no personal
liability will attach to the Purchaser solely by reason of being a holder of
the P.L.C. Shares.
(c) The authorized capital stock of International consists of
1,000 shares of common stock, no par value per share, of which 500 shares are
issued and outstanding and owned by Seller (the "International Shares"). At the
Closing, the International Shares shall constitute the only shares of
International's capital stock that are issued and outstanding and, other than
Seller, there shall be no other individual owning any of International's capital
stock. Seller has good and marketable title to the International Shares, free
and clear of all liens, pledges, encumbrances or claims of rights of ownership
whatsoever. None of the International Shares are subject to any proxy,
shareholders' agreement or voting trust agreement. No person has any preemptive
rights or options or warrants to purchase any capital stock of International.
The International Shares have been duly authorized and validly issued and are
fully paid and nonassessable, and no personal liability will attach to the
Purchaser solely by reason of being a holder of the International Shares.
(d) The authorized capital stock of Fashion Labs consists of
1,000 shares of common stock, no par value per share, of which 500 shares are
issued and outstanding and owned by Seller (the "Fashion Labs Shares"). At the
Closing, the Fashion Labs Shares shall constitute the only share of Fashion
Labs' capital stock that are issued and outstanding and, other than Seller,
there shall be no other individual owning any of Fashion Labs' capital stock.
Seller has good and marketable title to the Fashion Labs Shares, free and clear
of all liens, pledges, encumbrances or claims of rights of ownership whatsoever.
None of the Fashion Labs Shares are subject to any proxy, shareholders'
agreement or voting trust agreement. No person has any preemptive rights or
options or warrants to purchase any capital stock of Fashion Labs. The Fashion
Labs Shares have been duly authorized and validly issued and are fully paid and
nonassessable, and no personal liability will attach to the Purchaser solely by
reason of being a holder of the Fashion Labs Shares.
5. Conflict with Authority, Bylaws, etc. Neither the execution,
delivery, and performance of this Agreement nor the consummation of the
transaction contemplated hereby in the manner herein provided will:
(a) contravene any provision of the Certificate of Incorporation, as
amended, or the Bylaws, as amended, as the case may be, of any entity
comprising the Company;
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(b) result in a breach or violation of, conflict with, constitute a
default under, result in (or create in any party the right to cause) the
acceleration of any performance or any increase in any payments pursuant to,or
otherwise impair, or result in the loss, revocation, suspension, forfeiture or
limitation of any rights or privileges of any entity comprising the Company
under any material agreement, contract, insurance policy, indenture, mortgage,
lease, license, permit, right or authorization, impair the right or privilege
of any entity comprising the Company to conduct its respective business, or
subject any material property or asset of any entity comprising the Company to
any indenture, mortgage, contract, commitment, or agreement, other than this
Agreement, to which any entity comprising the Company is a party or by which the
Company or its respective assets are bound;
(c) violate any provision of law, statute, ordinance, judgment,
decree, rule, regulation, order, permit, or license of any court, governmental
authority applicable to any entity comprising the Company or its respective
assets or business; or
(d) result in the creation of any liens, charges, mortgages,
encumbrances, upon any of the assets of any entity comprising the Company.
6. Financial Statements. All of the notes, accounts or other
receivables of each entity comprising the Company are properly reflected on the
books and records of each such entity and are in their entirety valid accounts
receivable arising from bona fide transactions in the ordinary course of
business. Each entity comprising the Company has and maintains books and records
which accurately and validly reflect its respective transactions, and such
transactions are recorded therein and reflected thereon in conformity with
generally accepted accounting principles consistently applied ("GAAP"). Seller
has furnished to Purchaser the tentative audited annual financial statements,
including the related schedules and notes of entities comprising the Company for
the preceding two fiscal years and unaudited financial statements for the period
through March 31, 1996 (the "Financial Statements"), which are attached hereto
as Exhibit II-A-6. The Financial Statements are correct and complete and were
prepared in accordance with GAAP and provide a true and accurate representation
of the present and historical financial condition of each entity comprising the
Company for the periods presented. Except as disclosed on Exhibits hereto, none
of the entities comprising the Company has any liabilities or obligations of any
nature to any shareholders, employees or independent contractors affiliated with
any entity comprising the Company that are not reflected or reserved against in
the Financial Statements. The accounts receivable reflected on Financial
Statements and ledgers are or shall be bona fide accounts receivable created in
the ordinary course of business and have been collected or are fully
collectible, except as reserved for in the Financial Statements. The inventory
reflected on Financial Statements and ledgers are or shall be purchased and used
in the ordinary course of business in such quantities as reasonable for its
intended use, except as reserved for in the Financial Statements.
7. Absence of Undisclosed Liabilities. The liabilities of each
entity comprising the Company as of the date hereof are set forth in detail on
Exhibit II-A-7. None of the entities comprising the Company, at the time of
this Agreement, has nor has had any
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other liabilities or obligations of any kind, character or description not
reflected on Exhibit II-A-7 or in the Financial Statements, whether accrued,
absolute, contingent or otherwise.
8. Absence of Adverse Change. Since February 16, 1996 there has been
no material adverse change in the business, the financial condition, assets,
inventories, liabilities, regulatory compliance, licenses, permits, or
operations of each entity comprising the Company, other than changes in the
ordinary course of business. For the purposes of this Agreement, "material
adverse change" shall mean, any single fact or circumstance or series of related
facts or circumstances which may cause a material change in the value of any
entity comprising the Company, or its respective ability to conduct business in
the future in a manner consistent with the prior conduct of its business.
9. Taxes and Tax Returns. Each entity comprising the Company has
filed on a timely basis, either within the original filing period or any
applicable extension period relating thereto, all returns and reports of all
taxes including without limitation federal and state tax returns, local tax
returns, withholding tax returns, declarations of estimated tax and tax reports,
or any other tax which may be required to be filed with respect to it. All
information provided in such returns, filings, notices, reports and accounts is
accurate, true and complete in all material respects. All taxes required to be
paid by each entity comprising the Company that are or were due and payable or
accrued prior to the date hereof (without regard to whether such taxes have been
assessed) have been paid. Adequate provisions in accordance with generally
accepted accounting principles appropriately and consistently applied to each
entity comprising the Company have been made in the Financial Statements, for
the payment of all taxes for which any entity comprising the Company may be
liable for the periods covered thereby that were not yet due and payable as of
the dates thereof, regardless of whether the liability for such taxes is
disputed. Except as set forth on Exhibit II-A-9(a), each entity comprising any
entity comprising the Company has in all material respects satisfied for all
periods through the date hereof all applicable federal, state, municipal,
foreign and local withholding tax requirements (including without limitation,
income, social security and employment tax withholding for all types of
compensation). There is no unpaid interest, penalty or addition to tax due or
claimed to be due from, or any unpaid tax deficiency, determination, or
assessment outstanding against any entity comprising the Company for which the
Company is liable, or for which any basis is known to Seller or any entity
comprising the Company. Except as set forth on Exhibit II-A-9(b), there are no
tax liens upon, pending against, or threatened against any entity comprising the
Company, or its respective assets. None of the entities comprising the Company
has been advised of any taxing authority of the assessment of any deficiency or
the imposition of any deficiency or the imposition of any assessment relating to
such entity.
10. Legal Proceedings. Except as identified in Exhibit II-A-10(a),
there are no legal, administrative or other proceedings or governmental
investigations pending or threatened, which, alone or in the aggregate, would
result in money damages payable by any entity comprising the Company or which
might otherwise materially adversely affect its respective condition (financial
or otherwise), business, operations, prospects or properties. None of the
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entities comprising the Company is a party to any agreement or instrument or
subject to any judgment, order, regulation, code or ordinance of any court or
governmental body or authority, domestic or foreign, which adversely affects,
or might reasonably be expected to adversely affect, its respective business,
operations, prospects, properties or condition (financial or otherwise). None
of the entities comprising Company has initiated any legal proceedings or any
other kind of action against any individual, employee, shareholder, director or
any other third party except as fully described in Exhibit II-A-10(b). Copies
of all examination reports, audits, reviews or correspondence with respect to
entities comprising the Company prepared by any authority have been provided to
Purchaser, and no deficiency or violation was found by such authorities except
as described in the respective examination reports.
11. Employment Agreements and Contracts. Exhibit II-A-11(a) is a
complete and correct list of all directors, officers, employees, independent
contractors and persons employed or engaged by each entity comprising the
Company or deriving any benefits from any entity comprising the Company,
including therein the title, salary, description of benefits and other
compensation (including any loans by any entity comprising the Company).
Except as set forth on Exhibit II-A-11(b), there are no employment, severance,
termination or compensation agreements, arrangements or understandings of any
entity comprising the Company, as the case may be, with any present or former
stockholder, director, officer, employee, independent contractor, consultant or
group of employees. Except as set forth on Exhibit II-A-11(c) all employees are
terminable at will without expense or liability to any entity comprising the
Company. Except as set forth on Exhibit II-A-11(d), None of the entities
comprising the Company maintains or has maintained any employee benefit plans
or any related trust agreements, annuity contracts, insurance contracts or other
funding instruments subject to compliance with the requirements of ERISA and the
Internal Revenue Code of 1986, as amended (the "Code"), or any other applicable
laws, rules and regulations, or
otherwise.
12. Insurance. Each entity comprising the Company maintains adequate
insurance in such amounts and against such risks as are reasonable for the
conduct of its respective business, in the aggregate amounts and the amounts per
individual and/or per occurrence set forth on Exhibit II-A-12. Neither Seller
nor any entity comprising the Company is aware of any termination, or threat of
termination, or other circumstances which would cause the failure to renew any
such policies. All premiums payable under such insurance policies have been duly
paid and each such insurance policy is in full force and effect at the full
amount of the stated coverage. Exhibit II-A-12 sets forth each insurance policy
owned by each entity comprising the Company under which each such entity or any
director, officer or shareholder thereof is a beneficiary, the name of the
insurer with which such policy is or was carried, the annual premium payable
thereunder, the liabilities and risks covered thereunder, the amount of the
coverage (including the amount of any deductible) and the period of coverage.
There are no claims pending or threatened under any of said policies or disputes
with underwriters thereof.
13. Tangible Property. Exhibit II-A-13 sets forth all of the premises
of and offices maintained by each entity comprising the Company, including their
locations, machinery, equipment, office fixtures, furniture, computers and
office supplies currently located at the
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premises of and offices maintained by each entity comprising the Company. Each
entity comprising the Company has good and marketable title to the tangible
(real and personal) assets and properties reflected in Exhibit II-A-13, in each
case, free and clear of all mortgages, liens, security interests, pledges,
charges and encumbrances of any nature whatsoever. All of the assets owned,
leased or used by each entity comprising the Company as reflected in Exhibit
II-A-13, are in good condition and repair (other than equipment, and in the
case of equipment, is in good operating condition and in the aggregate is
adequate to carry on the respective business of each entity comprising the
Company), conform in all material respects to all applicable laws, including
without limitation, laws relating to the environment and to pollution control,
building and zoning laws, statutes, ordinances or regulations and no violation
of any such laws, statutes, ordinances or regulations exists in respect of such
assets or properties.
14. Intangible Property. Exhibit II-A-14 sets forth all patents,
patent applications, trademarks and service marks (whether registered or
unregistered), trade names, brand names, copyrights and franchises owned or used
by the Company, all applications for any of the foregoing, and all permits,
grants and licenses or other rights running to or from any entity comprising the
Company relating to any of the foregoing. Except as set forth in
Exhibit II-A-14, identified entity comprising the Company is the sole and
exclusive owner or licensee of all rights set forth in Exhibit II-A-14, and
except as set forth therein and as otherwise provided by law, such rights are
free and clear of any attachments, liens or encumbrances. Exhibit II-A-14 also
contains a brief description of each trade secret, right or other intellectual
property right material to the operations of each entity comprising the Company.
There are no outstanding or unresolved charges against Seller or any entity
comprising the Company relating to any claim of infringement of any invention,
patent, trademark, service xxxx, trade name, brand name, trade right or
intellectual property right or copyright of any other person, and neither Seller
nor any entity comprising the Company (i) has been notified of any claim of any
other person relating to any of the properties listed in Exhibit II-A-14 or to
any process or confidential information of any entity comprising the Company, or
(ii) knows of any basis for any such charge or claim.
15. Environmental Matters.
(a) Except as set forth in Exhibit II-A-15(a), each entity
comprising the Company has obtained all permits, licenses and other
authorizations (collectively, the "Licenses") which are required in connection
with each such entity's respective business under all applicable Environm Laws
(as hereinafter defined) and regulations relating to pollution or protection of
the environment, including Environmental Laws and regulations relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including without limitation, ambient air, surface water,
groundwater, or land) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
- 12 -
(b) Except as set forth in Exhibit II-A-15(b), each entity
comprising the Company is in compliance with all terms and conditions of the
Licenses and is in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedul and
timetables contained in the Environmental Laws or contained in any regulation,
code, plan, order, decree, judgment, injunction, notice (written or verbal) or
demand letter issued, entered, promulgated or approved thereunder.
(c) Except as set forth in Exhibit II-A-15(c), none of the
entities comprising the Company has received any written or verbal notice of,
any past, present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans which would interfere with o prevent
compliance or continued compliance with any Environmental Laws or any
regulations, code, order, decree, judgment, injunction, notice (written or
verbal) or demand letter issued, entered, promulgated or approved thereunder, or
which would give rise to any common law or legal liability, or otherwise form
the basis of any claim, action, demand, suit, proceeding, hearing, study or
investigation, based on or related to the manufacture, processing, storage,
distribution, use, treatment, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, of any pollutant,
contaminant, chemical, or industrial, toxic or hazardous substance or waste, by
any entity comprising the Company.
(d) Except as set forth in Exhibit II-A-15(d), there is no
civil, criminal or administrative action, suit, demand, claim, hearing, notice
or demand letter, notice of violation, investigation, or proceeding pending or
threatened against any entity comprising the Company, in conne with the conduct
of business of any entity comprising the Company relating in any way to any
Environmental Laws or regulation, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder.
(e) For purposes of this Agreement, "Environmental Laws" means
collectively, all federal, state and local environmental laws, common law,
statutes, rules and regulations, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Sec. 9061 et esq.), as amended, the Hazardous Materials Transportation Act (49
U.S.C. Sec 1801 et seq.), as amended, the Resource Conservation and Recovery Act
(42 U.S.C. Sec. 6901 et seq.), as amended, the Federal Water Pollution Control
Act (33 U.S.C. Sec 1251 et seq.), as amended, the Safe Drinking Water Act
(42 U.S.C. Sec 300f et seq.), as amended, the Clean Air Act (42 U.S.C. Sec. 7401
et seq.), as amended, the Toxic Substances Control Act (15 U.S.C. Sec 2601 et
seq.), as amended, the Industrial Site Recovery Act, P.L. 1993 c.139, amending
and renaming the Environmental Cleanup Responsibility Act (N.J.S.A. 13:1K-6
et seq.) ("ISRA"), the Spill Compensation and Control Act (N.J.S.A. 58:10-23.11
et seq., the Federal Emergency Planning and Community Right-to-Know Act (42
U.S.C. Sec. 11001 et seq.), as amended, any so-called "superfund" or
"super-lien" law and such statutes and ordinances as may be enacted by state
and local governments with jurisdiction over any real property now or ever owned
or leased by any entity comprising the Company or any real property upon
which any entity comprising the Company now conducts or has ever conducted its
respective business and any permits, licenses, authorizations, variances,
consents, approvals, directives or requirements of, and any agreements
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with, any governments, departments, commissions, boards, courts, authorities,
agencies, officials and officers applicable to such real property or the use
thereof and regulating, relating to, or imposing liability or standards of
conduct concerning any pollutant, contaminant, chemical, or industrial, toxic
or hazardous substance or waste.
(f) Except as set forth in Exhibit II-A-15(f), (i) At present
there do not exist, and at no time since the Company acquired any premises
owned, leased or used by any entity comprising the Company (the"Subject
Premises") have there existed "Environmental Defects," (defined as a condition
or conditions which would require remediation under any of the Environmental
Laws); (ii) Seller has no knowledge that such Environmental Defects existed
prior to its purchase or occupation of the Subject Premises; (iii) there are no,
and have never been, underground tanks located on the Subject Premises; (iv)
Seller has at all times during its ownership or occupation of the Subject
Premises disposed of all wastes, hazardous or otherwise, generated by the use of
the Subject Premises in accordance; (v) Seller has not received any letter or
other communication, written or oral, from any local, state or federal
regulatory agency, relating to the existence of Environmental Defects at the
Subject Premises; (vi) the Subject Premises and all operations conducted thereon
are in compliance with all Environmental Laws; and (vii) there are no "Hazardous
Substances or Hazardous Waste" on, under or about the Subject Premises. For
purposes hereof, "Hazardous Substances or Hazardous Waste" are defined as any
pollutant, contaminant, chemical or industrial or toxic substance, or waste,
petroleum products, asbestos, urea formaldehyde, radon, polychlorinated
biphenyls, flammable explosives, nuclear radioactive fuel or waste, or any other
substance, waste, material, substance, pollutant or contaminant that may cause
damage to human health or the environment, safety or real property and/or any
substance for which the generation, manufacture, storage, treatment, or release
is prohibited or regulated under any Environmental Law.
(g) Except as set forth in Exhibit II-A-15(g). There are no
existing storage tanks (both above and below ground) located at the subject
Premises. All of the tanks identified on Exhibit II-A-15(g) have been
registered to the extent required by applicable state and federal statutes
rules and regulations as evidenced by the registration set forth on Exhibit
II-A-15(g).
16. Warranty Claims. There are no pending or threatened claims
against any entity comprising the Company with respect to the operations of
any entity comprising the Company or any work performed by any entity
comprising the Company for any customer, including, but not limited to, any
services rendered under any warranties, whether express or implied, by the
customers of any entity comprising the Company, nor does there exist any basis
therefor.
17. Product Liability Claims. There are no pending or threatened
product liability claims by customers of any entity comprising the Company with
respect to the business or operations of the Company, any products now or
previously manufactured and/or sold by any entity comprising the Company, nor
does there exist any basis therefor.
- 14 -
18. Customer Complaints. There are no claims or complaints against
any entity comprising the Company initiated, pending or threatened by any
customer with respect to the conduct of business of any entity comprising the
Company.
19. Contracts. All material contracts, agreements, assignments,
licenses, commitments, loan or credit agreements, guarantees, leases, subleases,
assignment and assumption of leases, mortgages, indentures and letters of
credit, whether written or oral, to which any entity comprising the Company is a
party or by which any of its assets are or could be bound or affected
(hereinafter individually, a "Contract" and collectively, the "Contracts") are
valid and in full force and effect and are set forth in Exhibit II-A-19. There
are no existing defaults by any entity comprising the Company by any other party
under such Contracts and no event, act or omission has occurred which (with or
without notice, lapse of time or the happening or occurrence of any other event)
would result in a default thereunder by any entity comprising the Company. No
other party to any such Contract has asserted, verbally or in writing, the
right, to renegotiate the terms or conditions of any Contract. None of the
Contracts is in excess of the normal, ordinary and usual requirements of the
respective business of any entity comprising the Company or at any excessive
terms or prices, and, except as set forth on Exhibit II-A-19, no loss of a
Contract could reasonably be expected to create a material loss or material
adverse change in the business, operations or financial condition of any entity
comprising the Company. True and complete copies of all contracts listed on
Exhibit II-A-19, have heretofore been furnished to Purchaser.
20. Special Payments. There have been no special payments, other than
payments made in the ordinary course of business, made by or to Seller, any
entity comprising the Company, any member of the Board of Directors of any
entity comprising the Company, or any customer or supplier, or employee of any
customer or supplier, nor have there been any loans provided by or to Seller,
any entity comprising the Company, any member of the Board of Directors of any
entity comprising the Company, or any customer or supplier, or employee of any
customer or supplier, to any affiliate thereof, nor does any entity comprising
the Company have any business transactions with any of these persons other than
in their respective roles. Except as set forth on Exhibit II-A-20, no
stockholder nor any officer, director or employee of any entity comprising the
Company, nor any relative of any such stockholder, officer, director or
employee, is a party to or has an interest, directly or indirectly, in any
contract or commitment which relates to or affects the respective business of
any entity comprising the Company or by which any of its respective assets is or
may be bound.
21. Powers of Attorney. Except as specified in Exhibit II-A-21,
there are no powers of attorney, limited powers of attorney, proxies or
discretionary accounts in place which entitle any employee, independent
contractor or the third party to deal with any account of any entity comprising
the Company or which would bind any entity comprising the Company in any other
way.
- 15 -
22. Operation Since Balance Sheet Date. Since the Balance Sheet
Date, as defined in Section IV-A-11, except as set forth in Exhibit II-A-22,
each entity comprising the Company:
(a) has operated its business substantially as it was
operated prior to that date and only in the ordinary course;
(b) has not created or otherwise become liable with respect to
any indebtedness or declared or made any dividend or distribution on the capital
stock of any entity comprising the Company;
(c) has maintained or kept current its books, accounts,
records, registrations, filings and payrolls in the usual, regular and
ordinary course of business, consistent with standard practice and in
accordance with all regulatory and statutory provisions;
(d) has not made any capital expenditure, commitment or
investment other than in the ordinary course of business; and
(e) has not lost any customer which accounted for five percent
(5%) or more of the business of any entity comprising the Company.
23. Illegal Transactions. Except as set forth in Exhibit II-A-23,
none of the entities comprising the Company has been involved in any
transactions which violate any applicable local, state, federal or industry
laws or regulations or has a material adverse affect on the ability of any of
the entities the Company to conduct its respective business in the future.
24. Disclosure. Neither this Agreement nor any document or written
information furnished to Purchaser by Seller or any of its respective agents,
employees, affiliates or representatives pursuant to this Agreement or in
connection with the transaction contemplated herein, contains any untrue
statement of a material fact or omits to state a fact necessary to make the
statements contained herein or therein not misleading.
25. Documents Furnished. Before the Closing, Seller will have
delivered to Purchaser all documents which are set forth in Exhibit II-A-25,
in each case certified by the Board of Directors of each entity comprising the
Company to be complete and accurate in all respects including but not
limited to:
(a) insurance policies in force under which each entity
comprising the Company is insured;
(b) all permits and licenses held by each entity comprising
the Company or by any of the Directors of any entity comprising the Company
with respect to the business of each entity comprising the Company;
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(c) all audits, reviews and correspondence referring to
management's accounting policies and practices between each entity comprising
the Company and its respective independent accountants;
(d) all compensation and employment agreements and any other
material agreement between each entity comprising the Company and any present
or former employee, independent contractor, head hunter or any other third
party;
(e) all minute books and stock transfer records of each entity
comprising the Company.
26. Minute and Stock Transfer Books. The minute books of each entity
comprising the Company are correct (including signatures), complete and current
in all respects and accurately reflect the corporate actions of the Board of
Directors and the shareholders of each entity comprising the Company. The stock
transfer books of each entity comprising the Company are correct (including
signatures), complete and current.
27. Labor Relations.
(a) Except as set forth on Exhibit II-A-27(a), no employees of
any entity comprising the Company are covered by any collective bargaining
agreement. The operation of the business of each entity comprising the Company
does not contravene any collective bargaining agreement to which any entity
comprising the Company is a party. None of the entities comprising the Company
is engaging in, or has engaged in, any unfair labor practice; there are no
complaints against any entity comprising the Company pending before the
National Labor Relations Board or any similar state or local labor agency by
or on behalf of any employee of any entity comprising the Company. There are
no representation questions, arbitration proceedings, labor strikes, slow-downs
or stoppages, or other labor troubles pending or threatened with respect to
the employees of any entity comprising the Company. Except as set forth on
Exhibit II-A-27(a), there are no grievances asserted which might have a material
adverse effect upon the respective business, operations or financial condition
of any entity comprising the Company, nor is there pending any arbitration
proceeding arising out of or under any labor agreement or arrangement. True and
complete copies of all agreements listed on Exhibit II-A-27(a) have heretofore
been furnished to Purchaser.
(b) Each entity comprising the Company has complied in all
material respects with applicable laws (including, without limitation, ERISA),
rules and regulations relating to employment matters including without
limitation those relating to wages, hours, discrimination, pay of social
security and similar taxes. There are no charges or complaints filed against
any entity comprising the Company which are pending before the Equal Employment
Opportunity Commission, or any similar state agency.
(c) Each entity comprising the Company has made all union and
employee benefit payments as scheduled to be paid and has properly withheld
income taxes and
- 17 -
payroll taxes and remitted them to appropriate government agencies through the
first quarter of 1996.
28. Employee Benefit Plans. Except as set forth in Exhibit II-A-28,
none of the entities comprising the Company has any employee benefit plan in
place. Each employee benefit plan listed on Exhibit II-A-28 and any related
trust agreements, annuity contracts, insurance contracts or other funding
instruments are currently, and have been in the past, in compliance with the
requirements of ERISA and the Internal Revenue Code of 1986, as amended (the
"Code"), and all other applicable laws, rules and regulations, as to the form,
operation and administration of such plans. All reports, notices and
applications relating thereto required by any government agency have been
timely filed. All contributions required to be made on or before the date of
this Agreement to each employee benefit plan under the terms of such plan,
ERISA, the Code or other applicable law have been timely made. Seller has
delivered to Purchaser the most recent actuarial valuation reports with respect
to the qualified defined pension plans sponsored by any entity comprising the
Company (if any).
29. Bank Accounts. Exhibit II-A-29 sets forth the names and
locations of all banks, depositories and other financial institutions in which
any entity comprising the Company has an account or safe deposit box and the
names of all persons authorized to draw thereon or to have access thereto.
B. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller as follows, and acknowledges and confirms
that Seller is relying upon such representations and warranties in connection
with the execution, delivery and performance of this Agreement, notwithstanding
any investigation made by Seller or on its behalf:
1. Organization, Standing and Power. Purchaser represents and
warrants that it is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware.
2. Authorization. Purchaser represents and warrants that it has the
requisite corporate power and authority to enter into this Agreement and to
consummate the transaction contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transaction contemplated hereby have
been duly authorized by all necessary corporate action on the part of Purchaser.
This Agreement has been duly executed and delivered by Purchaser and constitutes
a legal, valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights generally.
Purchaser is not the subject of, or the debtor in, any pending, potential or
threatened bankruptcy proceeding, voluntary or involuntary, or any similar
proceeding, claim or action which could result in such an event. No consent,
approval, order or authorization of, or registration, declaration or filing with
any authority or any third party is required to be made or obtained by Purchaser
in order to execute this Agreement or fulfill the obligations provided for
hereby.
- 18 -
3. Conflict with Authority, Bylaws, etc. Neither the execution,
delivery, and performance of this Agreement nor the consummation of the
transactions contemplated hereby in the manner herein provided will:
(a) contravene any provision of the Certificate of Incorporation,
as amended, or the Bylaws, as amended, as the case may be, of the Purchaser;
(b) result in a breach or violation of, conflict with, constitute
a default under, result in (or create in any party the right to cause) the
acceleration of any performance or any increase in any payments pursuant to,
or otherwise impair, or result in the loss, revocation, suspension, or
forfeiture of any rights or privileges of the Purchaser under any agreement,
contract, indenture, mortgage, lease, license, permit or authorization, or
subject any property or asset of the Purchaser to any indenture, mortgage,
contract, commitment, or agreement, other than this Agreement, to which the
Purchaser is a party or by which the Purchaser, or its assets are bound, which
would have a material adverse effect on the business or operations of the
Purchaser;
(c) violate any provision of law, statute, ordinance, judgment,
decree, rule, regulation, order, permit, or license of any court, governmental
authority or arbitrator applicable or relating to the Purchaser or its
respective assets or business, which would have a material adverse effect on the
business or operations of the Purchaser; or
(d) result in the creation of any liens, charges, mortgages,
encumbrances, upon any of the assets of the Purchaser pursuant to the
provisions of any of the foregoing, which would have a material adverse effect
on the business or operations of the Purchaser.
III. COVENANTS
A. Access to Records and Properties of the Company.
1. Between the date of this Agreement and the Closing, Seller and
the Company shall give to Purchaser and its agents and representatives,
including but not limited to its accountants, attorneys and consultants, such
access to the premises, books and records of the Company, and to cause the
officers and employees of the Company to furnish such financial and operating
data and other information with respect to the Company, as Purchaser shall from
time to time reasonably request in a manner so as not to interfere with the
ordinary course of business of the Company.
2. In the event the sale and purchase contemplated herein shall
not be consummated, Seller, the Company and Purchaser shall treat as
confidential all documents, materials and other information which they shall
have obtained regarding Seller, the Company or Purchaser during the course of
the negotiations leading to the transaction contemplated hereby, the
investigation of the Company or Purchaser, and the preparation of this
Agreement,
- 19 -
and shall return all copies of non-public documents and materials which have
been furnished in connection therewith. However, nothing contained herein shall
prohibit Seller, the Company or Purchaser from:
(a) using such documents, materials and other information in
connection with any action or proceeding brought or any claim asserted by
Seller, the Company or Purchaser in respect of any breach of any representation,
warranty or covenant made pursuant to this Agreement; or
(b) supplying or filing such documents, materials or other
information (i) to federal, state or local government, agency or authority to
the extent required in connection with the obtaining of any other consent,
waiver, amendment, modification, approval, authorization, permit or license
which may be necessary to effectuate this Agreement and to consummate the
transactions contemplated hereby or (ii) to the extent required under legal
process by subpoena or other court order.
B. Operation of the Company Prior to Closing. From the date hereof until
Closing, except as otherwise expressly contemplated by this Agreement or to the
extent that Purchaser shall otherwise expressly consent in writing, the Company
shall conduct its business as presently operated and solely in the ordinary
course, and, consistent with such operation, the Company:
1. shall not effect any amendment to the Company's Certificate or
Articles of Incorporation or Bylaws;
2. shall not change the Company's corporate name or permit the use
thereof by any other person;
3. except for matters expressly permitted under this Agreement,
shall not pay or agree to pay to any employee, officer, or director of the
Company, compensation that is in excess of the current compensation level of
such employee, officer, or director, except for annual increases in the
ordinary course of business consistent with prior practices and consistent with
bonus and commission policies in effect on the date of this Agreement;
4. shall not merge or consolidate the Company with any other
corporation, association, partnership, joint venture or other entity or allow
it to acquire or agree to acquire any corporation, association, partnership,
joint venture, or other entity;
5. shall not sell, transfer, or otherwise dispose of any assets of
the Company, except in the ordinary course of business consistent with prior
practices;
6. shall not create, incur, assume, or guarantee any indebtedness
for money borrowed except in the ordinary course of business, or create or
suffer to exist any mortgage, lien, or other encumbrance on any of its
properties or assets, real or personal, except those in existence on the date
hereof;
- 20 -
7. shall not make any capital expenditure, or series of related
capital expenditures, in excess of $50,000 not previously approved by Purchaser;
8. shall not declare or pay any dividends on or make any
distributions of any kind with respect to any of its capital stock;
9. shall maintain the facilities, assets, and properties of the
Company in good operating repair, order, and condition, reasonable wear and
tear excepted, and to notify Purchaser immediately upon any loss of, damage to,
or destruction of any of the assets of the Company;
10. shall maintain in full force and effect with respect to the
assets, employees and business of the Company, all present insurance coverage
of the types and in the amounts as are in effect as of the date of this
Agreement and to apply the proceeds received under any such insurance policy
or as a result of any loss or destruction of or damage to any assets of the
Company to the repair or replacement of such assets;
11. shall use its best efforts to preserve the present employees,
reputation and business organization of the Company, and the relationship of
the Company with its customers and others having business dealings with it;
12. shall not permit the issuance of any additional shares of the
capital stock of the Company or take any action affecting the capitalization
of the Company;
13. shall refrain from taking any action, and not suffer to exist
any event or occurrence, which would render any representation and warranty
contained herein inaccurate in all material respects at any time between the
date hereof and the Closing, including as of the Closing, and to promptly advise
Purchaser of any breach of any representation and warranty, covenant, condition
or obligation of Seller hereunder;
14. shall comply with and not be in default or violation under any
law, regulation, decree or order applicable to the business, operations or
assets of the Company; and
15. shall not enter into any contract or arrangement which obligates
the Company to expend more than $50,000, except in the ordinary course of
business.
C. Fulfillment of Remedial Action Workplan Following the Closing. If in
connection with Seller obtaining ISRA Compliance (as described in Section IV-A-2
hereof) with respect to the transactions contemplated by this Agreement, Seller
and the Company receive the required approval of a completed remedial action
workplan relating to any required remedial action (the "Environmental
Remediation"), Seller shall take all necessary action to complete and satisfy
all conditions of such remedial action workplan or before August 1, 1996. All
fees and expenses incurred and paid by the Company in connection with complying
with ISRA and completing the
- 21 -
Environmental Remediation shall be included in the calculation of the
Reduction Amount described in Section I-B-2 hereof.
D. Consents and Notices. Promptly after the date hereof, Seller, the
Company and Purchaser shall use their best efforts to obtain all consents,
waivers, approvals and authorizations which may be necessary to effectuate this
Agreement and to consummate the transactions contemplated hereby in accordance
with the terms hereof, or to continue in effect and to assure that the Company
shall continue to be entitled to all of the benefits of the Contracts and access
to the bank accounts of the Company, and shall give all notices to third parties
required to be given by the Company in contemplation and as a result of the
transactions contemplated by this Agreement. Seller and the Company shall
promptly advise the Purchaser of any difficulties encountered by the Company in
obtaining any such consents, waivers, approvals and authorizations.
E. Competing Transactions. Seller, the Company and Purchaser shall not
take any action, directly or indirectly, to cause, promote, negotiate or
authorize any transaction competing or interfering with the transaction
contemplated by this Agreement, including without limitation any merger,
consolidation or reorganization, acquisition or disposition of assets of the
Company, except in the ordinary course of business.
F. Best Efforts to Satisfy Conditions. Seller, the Company and Purchaser
shall use their best efforts to cause the obligations contained in Section IV to
be satisfied to the extent that the satisfaction of such conditions is in the
control of such entity; however, the foregoing shall not constitute a limitation
upon the covenants and obligations of the parties hereto otherwise set forth in
this Agreement.
G. Restriction on Transfer. From the date hereof until Closing, Seller
and the Company shall not without the written consent of Purchaser sell, assign,
pledge, donate, transfer or otherwise dispose of the Company Shares or permit
any shares of the capital stock of the Company to be sold, assigned, pledged,
donated, transferred or otherwise disposed of or enter into any agreement in
which the Seller or the Company agree to take such action.
H. Public Disclosure. No press release or public disclosure, either
written or oral, of this Agreement or the transaction contemplated hereby shall
be made by any party except with the prior written consent of the other, or
except as may be required by applicable law.
I. Seller's Guaranty. Purchaser and the Company shall, with the
assistance of Seller, at the consummation of the IPO have Seller released from
his obligations under a certain guaranty in favor of Finova Capital Corporation.
Pending said release, the Company shall enter into no additional corporate
loan agreements, without the prior written consent of Seller.
- 22 -
IV. CONDITIONS TO CLOSING
A. Conditions to Purchaser's Obligations. The commitment of Purchaser
to perform its obligations under this Agreement are subject to the satisfaction
of the following conditions and covenants on or before the Closing, unless
waived in writing by Purchaser:
1. Representations and Warranties. The representations and
warranties made by Seller and the Company in this Agreement and in all
agreements and instruments executed hereto and in connection with the closing
of all transactions hereunder shall be true and correct at and as of the Closing
(except as affected by the transaction contemplated herein) with the same force
and effect as though such representations and warranties had been made at and as
of such date.
2. ISRA Compliance.
(a) Seller and/or the Company shall have received from the
New Jersey Department of Environmental Protection and Energy or its successor
("DEPE"), on or before the Closing Date, either: (i) a nonapplicability
letter; (ii) a de minimis quantity exemption; (iii) a no-action letter or an
unconditional approval of Seller's negative declaration; or (iv) approval of
Seller's completed remedial action workplan; for which Seller shall promptly
apply pursuant to ISRA and the regulations promulgated thereunder.
(b) In no event shall Seller's and/or the Company's negative
declaration, remedial action workplan or any required remediation under ISRA
involve or permit any engineering or institutional controls, at, under or
about the subject Premises or any part thereof including without limitation
capping, a notice of contamination recorded on the record, any use or access
restrictions or the posting of signs. Any soil remediation shall be to
residential standards.
(c) Receipt by the Seller and/or the Company of ISRA approval
pursuant to a clean-up deferral, a remediation already in progress waiver, an
underground storage tank waiver or a minimal environmental concern
determination shall not satisfy Seller's and/or the Company's obligation to
obtain ISRA approval under this Agreement.
(d) To enable the Purchaser the monitor the Seller's and/or
the Company's compliance with ISRA, the Seller and/or the Company shall
promptly provide the Purchaser with a copy of all notices, correspondence,
submissions, reports, sampling results, negative declarations an remedial
action workplans which it intends to submit or receives from the DEPE
or any other relevant party including, but not limited to its consultants and
engineers, related to the Seller's and/or the Company's compliance with ISRA
prior to submission.
(e) Seller and/or the Company shall notify Purchaser in
advance of all meetings scheduled between Seller, Seller's representatives, or
representatives of the Company
- 23 -
and the DEPE or any other governmental agency, and Purchaser and Purchaser's
representatives shall have the right, but not the obligation, to attend and
participate in all such meetings.
3. Other Agreements
(i) Employment Agreement. Purchaser shall enter into a
three (3) year employment agreement with Seller pursuant to which Seller will
act as president of the Company for a period of three (3) years following the
Closing for an annual salary of One Hundred Ninety Five Thousand Dollars
($195,000) with a two (2) year renewal at the option of Seller which agreement
shall provide for annual bonuses payable to Seller and equal to 10% of
the Company's net profits in excess of $500,000 per year (before deducting
interest and taxes, but after deducting depreciation and amortization) based on
the Company's audited financial statements, for each of calendar year 1997, 1998
and 1999 and payable within thirty days of the completion of the audit for each
said calendar year. The Company shall employ Xxxxxx Xxxxxxx for a period of
three (3) years following the Closing, at an annual salary of Fifty-five
Thousand Dollars ($55,000), plus a monthly car allowance of $650 and
reimbursement of reasonable automobile insurance expenses. Said arrangement may
be extended for an additional two (2) years at the option of Xxxxxx Xxxxxxx and
shall be terminable for death, inability to perform, just cause or disability as
such terms are used in the employment agreement with Purchaser provided for
above.
(ii) Escrow Agreement. Seller and Purchaser shall enter
into the Escrow Agreement described in Section I-C-1(ii), regarding the terms
and conditions of the release of the Company Shares to Purchaser.
4. Opinion of Company's Counsel. Purchaser shall have received
from Xxxxx X. Xxxxx, Esq., counsel to the Company an opinion dated as of the
Closing, in form and substance satisfactory to Purchaser, to the effect that,
among other things, the following statements are true as of the Closing:
(a) Each entity comprising the Company is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation, has all requisite corporate power and authority to own and
operate its properties and to carry on business as now being conducted or as
conducted in the past and is qualified to do business and is in good standing as
a foreign corporation in each state or other jurisdiction in which the nature of
its properties, assets or conduct of its business requires such qualification.
(b) Seller and the Company have the requisite power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly author by
all necessary action on the part of Seller and the Company. This Agreement has
been duly executed and delivered by Seller and the Company, and constitutes a
legal, valid and binding obligation of Seller and the Company, enforceable
against Seller and the Company in accordance with its terms subject as to
enforcement of remedies, to applicable
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bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally.
(c) After due inquiry and to the best of counsel's knowledge,
the Company has all permits, licenses and authorizations required by any
applicable government authority or agency for the conduct of its business and
the Company has complied with the applicable laws, rules and regulations of each
jurisdiction, regulatory bodies and any industry, governmental or trade
organization required by law in which it conducts its business.
(d) There is no action, lawsuit, claim, proceeding, or
investigation pending or threatened against, by or affecting Seller or the
Company which if decided adversely against Seller or the Company would have a
material adverse affect upon the business or financial condition of the Company
or which would prohibit consummation of this Agreement. To the knowledge of such
counsel, neither Seller nor the Company is in default with respect to any order,
writ, injunction, or decree of any court or of any federal, sate, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting or relating to the Company.
In giving such opinion, such counsel may rely, as to matters of
fact, upon certificates of public officials and officers of the Company and, as
to matters of law, upon the opinions of other counsel satisfactory to him,
provided that such counsel shall state that they believe that th are justified
in relying upon such certificates and opinions and deliver copies thereof to
Purchaser prior to the Closing Date.
5. Officer's Certificate. Purchaser shall have received from the
Seller and the Company on or prior to the Closing, a certificate dated as of
the Closing Date (i) evidencing compliance with Section III hereof, and (ii)
certifying that the representations and warranties contained in Section II
hereof are true and correct in all respects.
6. Performance of Obligations. Seller and the Company shall have
performed all obligations, covenants and agreements to be performed by them
under this Agreement on or prior to the Closing.
7. Approvals and Consents. All approvals and consents necessary
for the transactions contemplated by this Agreement, including but not limited
to approval by the entities discussed in Section III hereof, shall have been
obtained and evidence thereof shall be satisfactory to Purchaser.
8. Outstanding Obligations. Except as set forth in Exhibit IV-A-8,
as of the Closing Date, the outstanding obligations of the Company shall be
currently paid. These obligations include, but shall not be limited to, rent,
indebtedness for money borrowed and utilities. At Purchaser's request, Seller
and the Company shall produce written evidence that the Company has satisfied
such obligations.
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9. Resignations. Seller and the Company shall cause those members
of the Board of Directors and executive officers of the Company other than
Seller, so requested by Purchaser to resign at or prior to the Closing.
10. Instruments and Documents. All instruments and documents
delivered in connection with the transaction contemplated hereby and relating
thereto shall be reasonably satisfactory in form and substance to Purchaser
and its counsel and consistent with this Agreement.
11. Financial Statements and No Change In Financial Condition.
Seller shall have delivered to Purchaser the balance sheets of the Company as
of the last day of the month immediately preceding the Closing, and the
related statements of income and retained earnings and of cash flows for the
period beginning on January 1, 1996, and ending on the date of such balance
sheet, (together with related notes and schedules), certified by the Company
and the chief financial officer of the Company (the "Balance Sheet Date").
Such financial statements shall be prepared in a manner consistent with the
manner in which the Financial Statements shall have been prepared. Neither
the business, operations or financial condition of the Company as of the
Closing Date shall have changed in a materially adverse manner from that
reflected in the financial statements as of the Balance Sheet Date.
12. Competing Transactions. There shall not have been made, or
publicly proposed to be made, by any person (other than Purchaser, its officers,
directors and affiliates) a transaction competing or interfering with the
transaction contemplated hereby, including without limitation any competing
merger, consolidation or reorganization (whether for cash, securities or other
property), acquisition of assets, tender offer or exchange offer.
13. Completion of Due Diligence. The results of Purchaser's
financial, business, legal and environmental review of the Company, its
financial condition, regulatory status, prospects, and due diligence materials
or disclosure documentation and information reasonably requested by Purchaser
regarding, but not limited to, those items outlined on the exhibits comprising
a part of this Agreement, shall have been completed satisfactorily to Purchaser,
in its sole discretion.
If the conditions to Closing are not met by the Closing Date, Purchaser, in its
sole discretion, may rescind the Agreement, proceed with the Closing of the
Agreement, or allow an additional period of time for Seller and/or the Company
to remedy the conditions before proceeding with either of the above options. In
the event that Purchaser decides to rescind the Agreement, the Company hereby
agrees to repay previous advances made by Purchaser to the Company in the
aggregate amount of $680,000, by issuing a promissory note in the original
principal amount of $680,000 in favor of Purchaser, bearing interest at the rate
of 8 3/4% per annum, payable in six (6) equal quarterly installments.
B. Conditions to Seller's and the Company's Obligations. The commitment
of Seller and the Company to perform their respective obligations under this
Agreement are subject to
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the satisfaction of the following conditions and covenants on or before the
Closing, unless waived in writing by Sellers:
1. Representations and Warranties. The representations and
warranties made by Purchaser in this Agreement shall be true and correct at
and as of the Closing with the same force and effect as though such
representations and warranties had been made at and as of such date.
2. Performance of Obligations. Purchaser shall have performed
all obligations, covenants and agreements to be performed by it under this
Agreement on or prior to the Closing.
3. Approvals and Consents. All approvals and consents necessary
for the transaction contemplated by this Agreement, including, but not limited,
to approval by the entities discussed in Section III-C hereof, shall have been
obtained and evidence thereof shall be satisfactory to Seller.
4. Instruments and Documents. All instruments and documents
delivered in connection with the transactions contemplated hereby and relating
thereto shall be reasonably satisfactory in form and substance to Sellers and
their counsel and consistent with this Agreement.
V. INDEMNIFICATION
A. Indemnification by Seller and the Company. Seller and the Company
jointly and severally hereby agree to indemnify and hold harmless Purchaser and
the Company against all losses, liabilities, costs, damages and expenses
(including reasonable attorney's fees) incurred by Purchaser resulting from,
arising out of or connected with:
1. all undisclosed liabilities of the Company of any nature,
whether accrued, absolute, contingent or otherwise, existing at Closing;
2. any damage or deficiency resulting from any material breach
of the representations and warranties of Seller or the Company contained in this
Agreement or any instrument furnished to Purchaser hereunder, any material
misrepresentation or omission, material breach of warranty, material
nonfulfillment of any agreement on the part of Seller or the Company under this
Agreement or from any misrepresentation in or omission from any certificate,
document or other instrument furnished or to be furnished to Purchaser
hereunder;
3. the material nonfulfillment of any agreement or covenant made
by Seller or the Company in this Agreement or in any instrument furnished by
Seller or the Company to Purchaser hereunder or in connection with the Closing.
- 27 -
4. all actions, suits, proceedings, demands, assessments,
judgments, costs, (including reasonable attorney's fees) and expenses incident
to any of the foregoing.
Seller and the Company agree, jointly and severally, to reimburse
Purchaser for any amounts as to which the indemnity relates, from time to time,
on demand.
B. Claims.
1. If it shall be determined in accordance with this Section V
that the Seller and/or the Company is required to indemnify the Purchaser for
any claim, judgment and expenses (including attorneys' fees) relating to any
litigation by a court of competent jurisdiction or as a result of a settlement
approved by the Purchaser, the amount of such indemnification shall be paid by
the Seller and the Company, jointly and severally, from time to time, on
demand, for any amounts as to which the indemnity relates.
2. In the event of a determination of the amount of any
indemnification pursuant to this Section V, the Purchaser shall give the
Seller and/or the Company written notice of the existence of any claim by the
under this Agreement and shall give written notice of the amount of loss or
damage relating to any such claim within sixty (60) days after the Purchaser
has actual notice thereof in the case of any claim made by a third party of
which the Purchaser has no reason to know. The Purchaser shall give the Seller
and/or the Company notice before settling any claim for which the Purchaser
expects to be reimbursed by the Seller and/or the Company in whole or in part,
and the Seller and/or the Company shall have the right to participate in the
defense of any such claim at their own expense.
VI. GENERAL PROVISIONS
A. Entire Agreement. This Agreement, and any agreements specifically
referred to herein, constitute the entire agreement among the parties hereto and
supersede all prior agreements and understandings, oral and written, among the
parties hereto with respect to the subject matter hereof.
B. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation conducted or notice or knowledge obtained by
or on behalf of any party hereto, each representation and warranty in this
Agreement and in the Exhibits and certificates delivered pursuant to this
Agreement and each agreement or covenant in this Agreement which does not by
its own terms expire on or prior to the Closing, shall survive the Closing
without limitation as to time.
C. Descriptive Headings. Descriptive headings used in this Agreement
are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement.
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D. Notices. All notices or other communications which are required or
permitted hereunder, shall be in writing and shall be sufficient if delivered
or mailed by registered or certified mail, postage prepaid, or by overnight
courier, or faxed (but then confirmed by mailing of the original by registered
or certified mail, or overnight courier) at the following addresses or as the
appropriate party may advise each other hereto in writing:
To the Purchaser:
AZUREL LTD.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx Xxxxx, President
With a copy to:
GERSTEN, SAVAGE, KAPLOWITZ & XXXXXX, LLP
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Xx., Esq.
To the Seller:
Xxxxxxx X. Xxxxxxx
00 Xxxxxx Xxxx
Xxxxxx, Xxx Xxxxxx 00000
With a copy to:
Xxxxx X. Xxxxx, Esq.
00 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
To the Company:
Private Label Cosmetics, Inc.
00-00 Xxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxx, Xxx Xxxxxx 00000
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With a copy to:
Xxxxx X. Xxxxx, Esq.
00 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
E. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
F. Binding Nature: Assignment. This Agreement is binding upon, and
inures to the benefit of the parties hereto and their respective heirs,
successors and assigns, only. There are no third party beneficiaries to this
Agreement. This Agreement may not be assigned by Seller and the Company
on the one hand, or Purchaser, on the other hand, without the prior written
consent of Purchaser or Seller and the Company, respectively.
G. Exhibits and Documentation. All Exhibits annexed hereto and all
documentation referred to herein, are incorporated in and made a part of this
Agreement as if set forth herein. Any matter disclosed on any documentation
herein or Exhibit hereto shall be deemed also to have been disclose on any
other applicable documentation referred to herein and/or Exhibit hereto, as the
case may be.
H. Expenses. Seller, the Company and Purchaser shall each be responsible
for their respective expenses in connection with the transaction contemplated
hereby, including but not limited to attorneys fees, except that Purchaser shall
pay the attorneys fees of Seller as follows: up to $25,000 in cash and such
number of Shares of Purchaser's common stock which in the aggregate are valued
at Seven Thousand Five Hundred Dollars ($7,500) if and when a public offering of
the Purchaser's common stock is consummated, and which are to be valued at the
proposed public offering price of the Company's common stock and subject to a
registration rights agreement and lock-up agreement on terms similar to those
executed by members of the Company's management.
I. Waivers and Amendments. Any waiver of any term or condition of this
Agreement, or any amendment or supplementation of this Agreement, shall be
effective only if in writing. A waiver of any breach or failure to enforce any
of the terms or conditions of this Agreement shall not in any way affect, limit
or waive a party's rights hereunder at any time to enforce strict compliance
thereafter with every term or condition of this Agreement.
J. Severability of Provisions. If any provision or any portion of any
provision of this Agreement or the application of any such provision or any
portion thereof to any person or circumstance, shall be held invalid or
unenforceable, the remaining portion of such provision and the remaining
provisions of this Agreement, or the application of such provision or portion of
such provision as is held invalid or unenforceable to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby.
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K. Governing Law. This Agreement shall be governed by, and construed
in accordance with the laws of the State of New York.
L. Brokerage Fees. Seller and the Company represent and warrant to
Purchaser that they have no obligation or liability to any broker or finder by
reason of the transactions which are the subject of this Agreement. Seller
agrees to indemnify Purchaser against and to hold Purchaser harmless from, at
all times from and after the date hereof all claims for brokerage fees,
commissions, or other finders fees or commissions of any person with respect to
this Agreement and the transaction contemplated hereby to the extent such
services were purportedly rendered by or on behalf of Seller or the Company.
Purchaser represents and warrants to Sellers that, other than with respect to
the fees of V.A.N. Marketing Ltd., it has no obligation or liability to any
broker or finder by reason of the transactions which are the subject of this
Agreement. Purchaser agrees to indemnify Seller against and to hold Seller
harmless from, at all times from and after the date hereof, all claims for
brokerage fees, commissions, or other finders' fees or commissions of any person
with respect to this Agreement and the transaction contemplated hereby to the
extent such services were purportedly rendered to or on behalf of Purchaser.
- 31 -
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
AZUREL LTD.
By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: Chairman / CEO
XXXXXXX X. XXXXXXX
/s/ Xxxxxxx X. Xxxxxxx
PRIVATE LABEL COSMETICS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: President
P.L.C. SPECIALTIES CORP.
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: President
INTERNATIONAL COSMETIC GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: President
FASHION LABORATORIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: President
EXHIBITS
I-B-1(ii) The Note
I-B-1(v) The XxXxxx Note
I-C-1(ii) Escrow Agreement
II-A-1 Incorporation and Authorizations to Do Business
II-A-3(a) Licenses, Approvals, Registration, etc.
II-A-3(b) Non-Compliance
II-A-3(c) Investigations
II-A-6 Financial Statements
II-A-7 Assets and Liabilities
II-A-9(a) Tax Non-Compliance
II-A-9(b) Tax Liens
II-A-10(a) Legal Proceedings Against Company
II-A-10(b) Company Initiated Legal Proceedings
II-A-11(a) Employees, Consultants, etc.
II-A-11(b) Employment Agreements
II-A-11(c) Employee Information
II-A-11(d) Employee Benefit Plans
II-A-12 Insurance
II-A-13 Tangible Property
II-A-14 Intangible Property
II-A-15(a) Licenses
II-A-15(b) Non Compliance with Licenses
II-A-15(c) Environmental - Notices
II-A-15(d) Environmental - Actions
II-A-15(f) Environmental Defects
II-A-15(g) Storage Tanks
II-A-19 Contracts
II-A-20 Special Payments
II-A-21 Powers of Attorney
II-A-22 Operation since Balance Sheet Date
II-A-23 Illegal Transaction
II-A-25 Documents
II-A-27(a) Collective Bargaining Agreements/Labor Grievances
II-A-28 Employee Benefit Plans
II-A-29 Bank Accounts
IV-A-8 Outstanding Obligations
