SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 15, 1998
THE LAMAUR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-28174 68-0301547
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer)
incorporation or organization) Identification No.)
One Lovell Avenue
Mill Valley, California 94941
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 380-8200
Not applicable.
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Other Events.
On July 15, 1998, The Lamaur Corporation (Lamaur) entered into an asset sale
agreement with Zotos International, Inc., a subsidiary of Shiseido Co., Ltd.,
Tokyo, Japan, for the sale of the Companys Professional Salon Brands, including
goodwill, inventory and other related assets. The purchase price is anticipated
to be $11 million. The transaction closed on July 31, 1998. The proceeds of the
sale will be used to pay down a portion of the Companys bank debt, reduce trade
payables and for working capital.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired. None.
(b) Pro forma financial information.
The unaudited pro forma condensed statement of operations
of The Lamaur Corporation for the twelve months ended December 31, 1997, for the
six months ended June 30, 1998 and _____________ are attached hereto as exhibit
99.1 and incorporated herein by reference.
(c) Exhibits.
Exhibit No. Description
2.1 Asset Purchase Agreement by and between The Lamaur Corporation, a Delaware
corporation; and Zotos International, Inc., a New York corporation dated as of
July 15, 1998.
99.1 Pro Forma Fianancials
99.2 Press release dated July 15, 1998.
99.3 Press release dated August 4, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
The Lamaur Corporation
August 17, 1998 By: /s/ John D. Hellmann
John D. Hellmann,
Vice President, Chief Financial Officer
and Secretary
<PAGE>
Exhibit Index
Exhibit No. Description
2.1 Asset Purchase Agreement by and between The Lamaur
Corporation, a Delaware corporation; and Zotos International, Inc., a New York
corporation dated as of July 15, 1998.
99.1 Pro Forma Financials
99.2 Press release dated July 15, 1998.
99.3 Press release dated August 4, 1998.
<PAGE>
Exhibit 2.1
ASSET PURCHASE AGREEMENT
by and between
The Lamaur Corporation,
a Delaware corporation;
and
Zotos International, Inc.,
a New York corporation.
_______________________________
Dated as of July 15, 1998
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this Agreement) is entered into as of July 15,
1998 by and between THE LAMAUR CORPORATION, a Delaware corporation (Seller),
and ZOTOS INTERNATIONAL, INC., a New York corporation (Purchaser).
RECITALS
A. Seller is engaged in, among other things, the business of developing,
formulating, manufacturing and marketing personal hair care products and other
styling aids under the APPLE PECTIN, APPLE PECTIN NATURALS, NUCLEIC A,
VITA/E, PATIVA, LAMAUR and other brand names (collectively, the
Brands);
B. Purchaser is interested in purchasing from Seller, and Seller is interested
in selling to Purchaser, certain assets related to the Brands;
C. Purchaser is interested in licensing from Seller, and Seller is interested in
licensing to Purchaser, certain assets related to the Lamaur Brand; and
D. The parties to this Agreement desire that Seller sell, assign, transfer and
convey to Purchaser, and that Purchaser purchase and acquire from Seller,
certain assets of Seller related to the Brands, in exchange for cash and
Purchasers assumption of certain specific obligations and liabilities related
to the Brands, all according to the terms and conditions but subject to the
limitations set forth in this Agreement.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth
or referenced below:
Affiliate
of a Person shall mean any other person that directly or indirectly,
through one or more intermediaries, controls, is controlled by or is under
common control with such person.
Business shall mean Sellers open and exclusive, worldwide professional hair
care products business relating to the manufacture, development, marketing,
distribution and sale of permanent wave products, shampoos, conditioners,
mousses, gels, hair sprays and other styling aids, hair coloring and other
personal hair and skin-care products that are sold to the Professional Market.
Products shall mean any and all products marketed by the Business, all
modifications thereof and such additional products based thereon, derived
therefrom or related thereto, including but not limited to those products set
forth on Schedule 1.3 of the Seller Disclosure Schedule (as defined below), and
all files and books and records related thereto.
Assets shall mean, collectively, all right, title and interest in and to all
of the Inventory, Products and Intellectual Property, all rights and benefits of
Seller in, to and under the Assumed Contracts, the Ordinary Course P.O.s and
all Miscellaneous Assets.
Assumed Contracts shall mean only the Ordinary Course P.O.s and those
Contracts set forth on Schedule 0 of the Seller Disclosure Schedule except
those, if any, which are specifically identified as not being assumed by
Purchaser and excluding those there listed for which Seller has not received an
executed signature page from the other party thereto by Thursday, July 16, 1998.
Code shall mean the Internal Revenue Code of 1986, as amended.
Confidentiality Agreement shall mean the mutual confidentiality agreement,
dated April 17, 1998, as amended, by and
between Purchaser and Seller.
Customers shall mean those Customers listed on Schedule 0 of the Seller
Disclosure Schedule, which Schedule 0 includes contact, pricing, discount,
returns and aging information for each Customer.
Encumbrances shall mean any and all restrictions on or conditions to transfer
or assignment, claims, liabilities, liens, pledges, mortgages, restrictions,
security interests, assessments, options, and encumbrances of any kind, whether
accrued, absolute, contingent or otherwise affecting the Assets.
Environmental Laws shall mean all applicable foreign, federal, state,
provincial and local laws, ordinances, rules, statutes, regulations, orders,
writs, injunctions, awards, judgments and decrees pertaining to the protection
of the environment and pertaining to environmental matters.
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
Escrow Agent shall mean a national banking institution selected by Purchaser
and Seller.
Escrow Agreement shall mean the Escrow Agreement among Seller,
Purchaser and the Escrow Agent, in substantially the form of Exhibit A.
Escrow Fund shall have the meaning set forth in the Escrow Agreement.
GAAP shall mean generally accepted accounting principles, as in effect in the
United States from time to time.
Governmental Entity shall mean any court, or any federal, state, municipal,
provincial or other governmental authority, department, commission, board,
service, agency or other instrumentality.
Intellectual Property shall mean any and all of the following developed or
under development for or in, or used in or relating to, the Business
(a) trademarks, trade secrets, service marks, patents and patent applications
(including applications to register), (b) related know-how, (c) copyrights,
moral rights, trade dress, trade names, logos and other rights in works of
authorship, or other intellectual property for or relating to, the Business
(whether registered or unregistered), including all applications therefor,
(d) inventions, ideas, discoveries, technologies, customer lists, and vendor
lists, distributor lists, pricing information, sales records, advertising and
promotional materials, methodologies, processes, product information, formulae
(including product formulations and formulations currently being tested),
databases, designs, industrial designs, design information, service codes,
manufacturing processes and specifications, algorithms, engineering
specifications and work papers, techniques, prototypes and development, research
and development (both completed and in progress) work-in-progress and all other
intangible, intellectual, proprietary and industrial property rights, (e) all
rights of Seller pursuant to any waivers or similar documents, (f) tangible
embodiments, documentation and media developed by or for Seller constituting,
describing or relating to any of (a) through (e) above, including internet
domain names which relate exclusively thereto which internet domain names, for
the avoidance of doubt, shall exclude any which use the name Lamaur, (g) copies
of the items described in (a) through (e) above and (h) goodwill, files, books
and records, licenses, written agreements, registrations or applications
relating to any of (a) through (f) above and (i) the assets described on
Schedule 0 of the Seller Disclosure Schedule; provided, however, that the
definition of Intellectual Property shall not include the Lamaur Brand Name.
Inventory shall mean all finished goods inventory of Seller related to the
Business and all files and books and records related thereto.
Inventory Value shall have the meaning set forth in Section 2.5(a).
Lamaur Brand shall mean personal hair care products and other styling aids
sold exclusively under the name LAMAUR.
Lamaur Brand Name shall mean any and all of the following developed or under
development exclusively for or in, or used in or relating exclusively to, the
Lamaur Brand: (i) trademarks, (ii) trade dress, (iii) trade names, and (iv)
logos, including all registrations and applications therefor, but shall not
include any of the items described in (i) through (iv) relating to the Business.
Laws or Decrees shall mean all applicable foreign, federal, state, provincial
and local laws, ordinances, rules, statutes, regulations and all orders, writs,
injunctions, awards, judgments or decrees (including Environmental Laws).
Liability shall mean any direct or indirect liability, indebtedness,
obligation, claim, guarantee or endorsement, whether known or unknown, whether
accrued or unaccrued, whether absolute or contingent, whether due or to become
due, whether determined or determinable, or whether liquidated or unliquidated.
License Agreement shall have the meaning set forth in Section 2.1(b) hereof.
Losses shall mean any loss, demand, action, cause of action, assessment,
damage, liability, cost or expense, including without limitation, interest,
penalties, fines, fees, deficiencies, claims of damage, attorneys and other
professional fees and expenses incurred in the investigation, prosecution,
defense or settlement thereof.
Manufacturing Agreement shall mean the agreement between Seller and Purchaser
in the form of Exhibit B.
Miscellaneous Assets shall mean the assets, if any, listed on Schedule 0 of
the Seller Disclosure Schedule, including Sellers right and interest in any
prepaid expenses set forth therein.
Patent License Agreement shall mean the license referred to in Section 2.1(d).
Permit shall mean all permits, approvals, franchises, licenses or other rights
granted to Seller by governmental authorities relating to the Assets or the
lawful conduct of the Business as and where presently conducted by Seller.
Person shall mean any individual, corporation, partnership, joint venture,
limited liability corporation or partnership, trust, association or other entity
(governmental or private).
Professional Market means salon chains, salon franchises, independent salons,
professional beauty distributors and stores selling only to licensed
cosmetologists, or professional beauty distributors and stores promoting to
licensed cosmetologists, including such stores that sell to both licensed
cosmetologists and to consumers, and the sale of products under the Beautilac
trademark in Puerto Rico.
Purchase Price shall have the meaning set forth in Section 0 hereof.
Security Agreement shall mean a security agreement granting Purchaser a
security interest in the property licensed under the License Agreement.
Solvent shall mean that the fair saleable value on a going concern basis of
the assets and property of Seller is, on the date of determination, greater than
the total amount of liabilities (including contingent and unliquidated
liabilities) of Seller as of such date and that, as of such date, Seller is able
to pay all of its liabilities as such liabilities mature. In computing the
amount of contingent or unliquidated liabilities at any time, such liabilities
will be computed as the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that is probable to
become an actual or matured liability.
Suppliers shall mean each supplier of raw materials and components used in the
manufacture of the Products including those specified in Schedule 1.35 of the
Seller Disclosure Schedule.
Transaction Documents shall mean this Agreement, the Manufacturing Agreement,
the Transition Services Agreement, the Escrow Agreement, the License Agreement,
the Security Agreement, the Patent License Agreement and the other agreements
entered into in connection with Acquisition.
Transition Services Agreement shall mean a form of the Transition Services
Agreement between Seller and Purchaser to be negotiated prior to Closing.
Ordinary Course P.O. shall mean any purchase orders for the purchase of
Products which at the Closing Date, are unfulfilled in whole or in part, and
were accepted by Seller in the ordinary course and are on terms consistent with
past practices.
Descriptive Headings; Certain Interpretations.
Descriptive headings are for convenience only and shall not control or affect
the meaning or construction of any provision of this Agreement.
Whenever any party makes any representation, warranty or other statement to such
partys knowledge, such party will be deemed to have made reasonable inquiry
into the subject matter of such representation, warranty or other statement.
Except as otherwise expressly provided in this Agreement, the following rules of
interpretation apply to this Agreement: (i) the singular includes the plural and
the plural includes the singular; (ii) or and any are not exclusive and
include and including are not limiting; (iii) a reference to any agreement
or other contract includes permitted supplements and amendments; (iv) a
reference to a law includes any amendment or modification to such law and any
rules or regulations issued thereunder; (v) a reference to a person includes its
permitted successors and assigns; and (vi) a reference in this Agreement to an
Article, Section, Annex, Exhibit or Schedule is to the Article, Section, Annex,
Exhibit or Schedule of this Agreement.
<PAGE>
ARTICLE II
PURCHASE AND SALE OF ASSETS;
ASSUMPTION OF LIABILITIES
Purchase and Sale of Assets and Assumption of Assumed Liabilities. Upon the
terms and subject to the conditions set forth in this Agreement, effective as of
the Closing Date:
Seller shall sell, assign, transfer, convey and deliver to Purchaser, and
Purchaser shall purchase and acquire from Seller, all of Sellers right, title
and interest in and to the Assets, free and clear of all Encumbrances;
Seller shall license to Purchaser, and Purchaser shall license from Seller
certain rights in the brand names LAMAUR, STYLE and STYLAC, pursuant to
the terms and conditions set forth in the form of license agreement (the
License Agreement) attached hereto as ExhibitC with such changes as the
parties mutually agree;
Seller shall assign to Purchaser, and Purchaser shall assume from Seller, all of
Sellers rights and obligations under the Assumed Contracts; and
Seller shall license to Purchaser patents #s 5,462,727 and 5,656,257, on the
following terms: Purchaser will be granted a perpetual, exclusive, royalty free,
worldwide, license for the sale of all Products to the Professional Market.
Further, as to any of Sellers inactive patents #4,552,685, 5,344,643 and
1,156,151, which the parties determine in good faith are applicable to Products
for the Professional Market as well as to the consumer market for hair care
products, Purchaser shall be granted a license to such patent(s) on the terms
provided in this Section 2.1(d). If the parties determine in good faith that any
of such inactive patents related exclusively to Products for the Professional
Market, Seller shall transfer ownership of such patents to Purchaser without the
payment of any additional consideration.
(collectively, (a), (b), (c) and (d) are hereinafter referred to as the
Acquisition).
In connection with the Acquisition, on the Closing Date, Seller shall take (and
shall cause its Affiliates to take) any and all actions that may be required, or
reasonably requested by Purchaser, to transfer good and marketable title to all
of the Assets including, without limitation, the Intellectual Property, free and
clear of all Encumbrances to Purchaser. Seller shall deliver possession of all
of the Assets to Purchaser on the Closing Date and Seller shall further deliver
to Purchaser proper assignments, bills of sale, conveyances and other
instruments of sale and/or transfer in forms reasonably satisfactory to counsel
to Purchaser in order to convey to Purchaser good and marketable title to all
Assets, free and clear of all Encumbrances. Possession of the Inventory shall
pass at Sellers warehouse and Purchaser shall be responsible for the costs of
shipment therefrom in accordance with the shipping costs as provided in
Schedule 1(c) of the Manufacturing Agreement.
Assumption of Liabilities under Assumed Contracts.
Subject to and upon the terms and conditions of this Agreement, effective as of
the Closing Date, Purchaser agrees to assume from Seller and to pay, perform and
discharge according to their terms all of the Liabilities arising after the
Closing Date under the Assumed Contracts other than (A) Liabilities performed or
paid, or required under any Assumed Contracts to have been performed or paid, on
or prior to the Closing Date, (B) Liabilities arising from any breach or default
of any Assumed Contracts to the extent occurring (or arising from facts and/or
activities occurring) on or prior to the Closing Date, or (C)Liabilities
arising from any tort, infringement or violation of law by Seller that occurred
(or arose from facts occurring) on or prior to the Closing Date and (D) any
claims, disputes and Liabilities with respect to products sold or manufactured
on or prior to the Closing Date. For purposes of clause (D) only of the
foregoing sentence, unless otherwise determinable, claims, disputes or
liabilities asserted, arising or incurred (i) within three months following the
Closing Date shall be deemed to be attributable to products sold or manufactured
on or prior to the Closing Date and (ii) after three months following the
Closing Date shall be deemed to be attributable to products sold or manufactured
after the Closing Date.
Except as expressly set forth in Section 0(0) above, Purchaser shall not assume
or become liable or obligated in any way, and Seller shall retain and remain
solely liable for and obligated to discharge and indemnify and hold Purchaser
and Purchasers Affiliates harmless for, all Liabilities, debts, expenses,
accounts payable, contracts, agreements, commitments, obligations, claims, suits
and other liabilities of any nature whatsoever of Seller, whether known or
unknown, accrued or not accrued, fixed or contingent, current or arising
hereafter, due or to become due, determined or determinable, liquidated or
unliquidated, related or unrelated to the Business (collectively referred to
herein as Excluded Liabilities).
Seller agrees to take such commercially reasonable actions necessary in order to
cause each Supplier to release to Purchaser any Assets which are in the
possession of such Supplier, which such obligation of Seller shall include, as
soon as reasonably practicable after the execution of this Agreement, delivery
of a letter to each Supplier, informing such Supplier that as soon as reasonably
practicable after the Closing Date, any Assets in such Suppliers possession
shall be released forthwith to Purchaser pursuant to Purchasers reasonable
instructions relating thereto; provided, however, that Seller shall have no
obligation under this subsection (c) if the Purchaser arranges to have such
Supplier continue to produce any applicable Products for the benefit of
Purchaser on the same terms as such Products were produced by such Supplier for
Seller.
Purchase Price; Sales Tax. In consideration for the purchase of the Assets
Purchaser shall pay to Seller a purchase price (the Purchase Price) equal to
the sum of Ten Million Nine Hundred Thousand Dollars ($10,900,000). At the
Closing, Purchaser shall (a) pay to Seller $10,400,000 of the Purchase Price and
$100,000 in consideration of the covenants in Section 7.6 by wire transfer to an
account designated in writing by Seller and (b) deposit with the Escrow Agent
$500,000 of the Purchase Price pursuant to the terms of the Escrow Agreement.
Seller shall pay any excise, sales, use or transfer taxes or any other taxes, if
any, relating to the Acquisition or this Agreement.
Allocation. Purchaser and Seller agree prior to Closing to allocate the Purchase
Price (and all other capitalizable costs) among the Assets for tax purposes.
Neither Purchaser nor Seller shall take any position for purposes of any
federal, state, provincial or local income tax with respect to the allocation of
the Purchase Price which is inconsistent with such allocation.
Post-Closing Purchase Price Adjustment and Procedure.
On the Closing Date, a physical count of the Inventory shall be taken by Seller
at which Purchaser shall be entitled to have representatives present (the
Closing Inventory). As soon as practicable (but in no event later than 30
business days after the Closing Date), Seller shall deliver to Purchaser a
statement of Inventory purchased pursuant to the Acquisition as of the close of
business on the Closing Date (the Closing Statement) that lists inventory by
SKU and both value thereof (and which shall include all items solely related to
the Business even if carried at zero cost) based on Lamaurs past practice
exclusive of any reserves (the Closing Inventory Value), which schedule shall
be certified by the Vice President and Treasurer or the Chief Financial Officer
of Seller as to accuracy and fairness of presentation. Inventory carried at zero
cost shall be determined in a manner consistent with the Sellers inventory
schedule dated June 19, 1998 previously delivered to Purchaser.
The Closing Statement shall become final and binding on Seller and Purchaser
unless Purchaser gives written notice of its disagreement (a Notice of
Disagreement) to Seller within twenty (20)business days following the receipt
by Purchaser of the Sellers determination of the Closing Inventory Value. Any
such Notice of Disagreement shall specify in all reasonable detail the nature of
any disagreements so asserted. Upon such notice, the parties shall use their
good faith efforts to resolve any such disagreements as promptly as practicable
following the delivery of the Notice of Disagreement, provided that if any
matters are not resolved by the parties within thirty (30)days after the
delivery of the Notice of Disagreement, it will be referred immediately to an
independent public accounting firm of national stature, which firm has not been
employed by either party hereto for the two(2) years preceding the date of such
referral, jointly designated by the parties current outside accountants (the
Selected Accountants) which selection shall be made within thirty five (35)
days of the delivery of the Notice of Disagreement. The Selected Accountants
shall determine the resolution of any disagreement between the parties within
thirty (30) days following such referral. The determination of such firm shall
be conclusive and binding on each party. The fees and expenses of the Selected
Accountants shall be paid one-half by Seller and one-half by Purchaser. The
amount of Inventory Value that becomes final and binding on Purchaser and Seller
under this Section 2.5 is hereinafter referred to as the Final Inventory
Value.
Promptly following the determination of the Final Inventory Value
If the Final Inventory Value is less than Three Million Five Hundred
Eighty-Three Thousand Dollars ($3,583,000), then Purchaser shall be entitled to
receive the total dollar amount of any such deficiency which may be received at
Purchasers option by any of the following methods (or any combination thereof
which totals such deficiencies):
Purchaser shall be issued a credit which may be used for future purchase of
inventory from the Seller during the term of the Manufacturing Agreement but
which purchases shall be at Sellers BMC as such term is defined in the
Manufacturing Agreement at such values as provided in the related bills of
material dated July 13, 1998 (the July BMC);
Payment in cash within 10 days of request;
Debit against the Escrow Fund as provided pursuant to the Escrow Agreement.
If the value is more than Three Million Five Hundred Eighty-Three Thousand
Dollars ($3,583,000), the Purchaser shall issue a purchase order to Seller for
the purchase of such amounts of inventory as exceed $3,583,000 and are less than
Four Million Dollars ($4,000,000). At the sole option of Purchaser, amounts of
inventory in excess of $4,000,000 may be so purchased. Payment for such
additional inventory purchased hereunder shall be due within 5 business days of
the determination of the Final Inventory Value and shall be at Sellers July
BMC.
<PAGE>
ARTICLE III
THE CLOSING
The Closing. The consummation of the Acquisition will take place at a closing to
be held at the principal offices of the Purchaser (the Closing) on July 31,
1998, at 9:00 a.m., Pacific Standard Time, or at such other time, place or date
as may be agreed to by the parties to this Agreement or upon which the
conditions in Section 6 have been satisfied (the Closing Date).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as specifically set forth in Sellers disclosure schedule (the Seller
Disclosure Schedule) and cross-referenced to the specific sections to which an
exception is made (which references shall qualify only such cross-referenced
sections), Seller hereby represents and warrants to Purchaser as set forth
below:
Organization; Authorization. Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. Seller
has all requisite power and authority to own, lease and operate its property and
to carry on its business as now being conducted. Seller is duly qualified or
licensed and in good standing to do business in each jurisdiction in which its
property is owned, leased or operated or the nature of the Business makes such
qualification necessary. Seller has delivered true and complete copies of its
certificate of incorporation and bylaws to Purchaser. This Agreement has been,
and, upon the execution and delivery thereof by Seller, the Manufacturing
Agreement and each other Transaction Document will be, duly and validly executed
and delivered by Seller. Each Transaction Document constitutes, or, upon the
execution and delivery thereof by Seller, each Transaction Document will
constitute the valid and binding agreement of Seller, enforceable against Seller
in accordance with its respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors rights generally or by general equitable principles or the
exercise of judicial discretion in accordance with such principles. Seller has
all requisite power and authority to execute and deliver this Agreement and the
other Transaction Documents to carry out the transactions contemplated in this
Agreement. All requisite corporate action on the part of Seller has been taken
to authorize the execution and delivery of this Agreement and the other
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby.
No Conflicts; Consents. Except as set forth in Schedule 4.2 of the Seller
Disclosure Schedule, the execution and the delivery of this Agreement and the
other Transaction Documents by Seller do not, and the consummation of the
transactions contemplated herein and therein and compliance with the provisions
hereof and thereof will not, (a) conflict with, result in a breach of,
constitute a default (with or without notice or lapse of time, or both) under or
violation of or give rise to any right of termination, cancellation,
acceleration, modification or other right pursuant to (i) the certificate of
incorporation or bylaws of Seller, (ii) any Law or Decree or (iii) any provision
of any agreement or instrument, license, permit, lease, mortgage, indenture,
note or other obligation to which Seller is a party or by which Seller or any of
its properties or assets is bound, or (b) result in the creation or imposition
of any Encumbrance upon any property or assets used or held in connection with
the Business. No consent of any party or any Governmental Entity is required to
be obtained on the part of Seller to permit the consummation of the transactions
contemplated in this Agreement and the other Transaction Documents.
Assets. Seller has good, valid and marketable title to all of the Assets, which,
at closing, will be free and clear of all Encumbrances. At the Closing, Seller
will sell, convey, assign, transfer and deliver to Purchaser good, valid and
marketable title and all the Sellers right and interest in and to all of the
Assets, free and clear of any Encumbrances. The Assets constitute all of the
assets used or held for use and needed to operate the Business as it is
currently conducted and in accordance with recent historical practice. The
tangible property included in the Assets is in good operating condition,
reasonable wear and tear excepted.
Inventory. Set forth on Schedule 0 of the Seller Disclosure Schedule is a
complete and accurate list of the Inventory as of June 19, 1998. The Inventory
listed on Schedule 0 of the Seller Disclosure Schedule is all of the Inventory
used or held for use in the Business. A copy of Sellers price list is included
on Schedule 0 of the Seller Disclosure Schedule. Seller is not under any
liability or obligation with respect to the return of any item of Inventory in
the possession of wholesalers, retailers or other customers.
Litigation and Claims. There are no, and for the two years preceding the date of
this Agreement there have not been any, (i) claims, actions, suits, proceedings,
dispute resolution procedures or investigations in progress or pending or, to
Seller s knowledge, threatened affecting Seller, the Business or the Assets
(including any product liability claims), or (ii) any orders, writs, injunctions
or decrees against or involving Seller, the Business or the Assets, except, in
each case, as disclosed on Schedule 4.5(a) of the Seller Disclosure Schedule.
Seller has delivered to Purchaser true and complete copies of all pleadings and
material documents relating to such proceedings. Except as set forth on
Schedule 4.5(a) of the Seller Disclosure Schedule, there are no recalls pending
or under active consideration by Seller or its Affiliates, or to the best
knowledge of Seller threatened, with respect to any of the Products. The top
twenty (20) customers of Seller with respect to the Products are listed on
Schedule 0(b) of the Seller Disclosure Schedule. No customer listed on
Schedule 0(b) of the Seller Disclosure Schedule has notified Seller of such
customers intent, and Seller has no knowledge that any such customer intends,
to discontinue purchasing any of the Products or to otherwise materially curtail
its business relationship with the Business, and there is no dispute regarding
mark-downs, quality, pricing or similar matters related to the Products. The 20
largest customers have been determined on the basis of the value of Products
sold for the fiscal year ended December 31, 1997. Seller maintains product
liability insurance for the Products sold by Seller, and will maintain such
insurance for a period of one (1) year following the Closing Date, in an amount
not less than $1,000,000 per occurrence and $2,000,000 in aggregate and any
related umbrella excess coverage.
Compliance with Laws and Regulations; Governmental Licenses, Etc. Seller is in
compliance with all applicable Laws or Decrees with respect to or affecting the
Business or the Assets or which could materially adversely affect Purchasers
use and enjoyment of the Business or the Assets from and after the Closing Date.
Seller is not subject to any order, injunction or decree issued by any
Governmental Entity which could impair the ability of Seller to consummate the
transactions contemplated herein or which could materially adversely affect
Purchasers use and enjoyment of the Assets from and after the Closing Date.
Seller possesses all Permits which are required in order for Seller to conduct
the Business and sell the Inventory as presently sold by Seller, and is in
compliance with all such Permits and no proceeding is pending or, to the
knowledge of Seller, threatened to revoke or limit the effectiveness of any such
Permit.
Aerosol Product Formulation. The Products to which regulatory requirements
regarding aerosol formulations apply are set forth on Schedule 0 of the Seller
Disclosure Schedule. The Products listed on Schedule 0 of the Seller Disclosure
Schedule are in compliance with all applicable regulatory requirements regarding
aerosol formulations and Seller has created and is currently testing new aerosol
formulations in order to comply with proposed regulatory requirements.
Intellectual Property; Proprietary Rights. At the Closing, Seller will own and
possess the exclusive right, title and interest to all Intellectual Property
free and clear of all Encumbrances. Except as disclosed thereon, the
Intellectual Property set forth on Schedule 0 of the Seller Disclosure Schedule
has been duly registered with, filed in or issued by, as the case may be, the
United States Patent and Trademark Office, United States Copyright Office or
such other filing offices, domestic or foreign, and Sellers agents have taken
such other actions to ensure full protection under any applicable laws or
regulations and such registrations, filing, issuance and other actions remain in
full force and effect to the extent material to the Business. There are no
outstanding options, licenses, or agreements of any kind relating to any
Intellectual Property, nor is Seller bound by or a party to any options,
licenses, or agreements of any kind with respect to the intellectual property of
any other Person. Seller has not received any communications alleging that any
Intellectual Property violates any of the intellectual property of any other
Person. Seller has not granted any third party any right to manufacture,
reproduce, distribute, market or exploit any of the Intellectual Property, or
the Products. To the knowledge of the Seller no Intellectual Property or product
or services sold with respect to the Business or the Assets violates or
infringes any rights owned or held by any other Person. To the knowledge of the
Seller no Person is infringing the rights of Seller in any Intellectual
Property.
Contracts and Arrangements. Except for items indicated as unsigned, each of
the Assumed Contracts is valid, binding and in full force and effect and
enforceable by Seller in accordance with its terms, except as enforcement may be
limited by general equitable principles and the exercise of judicial discretion
in accordance with such principles. Each Assumed Contract is related only to the
Assets. Neither Seller nor, to Sellers knowledge, any other party, is in
default under any Assumed Contract, and there are no existing disputes or claims
of default relating thereto, which could reasonably be expected to have a
material adverse effect on the Assets or the Business. No party to any Assumed
Contract has given notice to Seller or any of its Affiliates of such partys
intention, and, to Sellers knowledge, no such party intends, to cancel,
withdraw, modify, fail to renew or amend such Assumed Contract. Except as set
forth on Schedule 0 of the Seller Disclosure Schedule, no consents are necessary
for the effective assignment to and assumption by Purchaser of any of the
Assumed Contracts. True and complete copies of the Assumed Contracts have been
delivered to Purchaser. Except for the Assumed Contracts, there is no agreement,
contract or other understanding (written or oral) that is material to the
Business or the Assets.
Operation in Ordinary Course of Business. Except as set forth on Schedule 0 of
the Seller Disclosure Schedule, since December 31, 1997, Seller (i) has operated
only in the ordinary course of business consistent with past practice, and
(ii) has not, in each case with respect to the Business:
suffered any event, or other occurrence that would have a material adverse
effect on the business, condition, assets, liabilities, operations, condition
(financial or otherwise), properties or prospects of the Business;
suffered any material casualty loss (whether or not insured) or condemnation or
other taking adversely affecting the Business;
changed or committed to change the compensation payable or to become payable to
any distributors, suppliers, or agents of the Business;
incurred any obligation or Liability other than obligations under customer
contracts, current obligations and Liabilities incurred in the ordinary course
of business and consistent with past practice;
paid, discharged or otherwise satisfied any claim or obligation relating to the
Business, except in the ordinary course of business and consistent with past
practice;
sold, assigned, pledged, encumbered, transferred or otherwise disposed of any
tangible asset (except for obsolete equipment disposed of in the ordinary course
of business consistent with past practice) or any patents, trademarks, service
marks, trade names, copyrights, licenses, franchises, know-how or any other
intangible asset in each case related to the Business;
taken any material write-down of the value of any asset or any material
write-off as uncollectible of any accounts or notes receivable or any portion
thereof;
engaged in any trade loading practices or any other promotional sales or
discount activity of a material amount of Products; or
waived any material rights of value to the Business.
Accuracy of Financial Statements and Schedules. The financial statements of
Seller for the year ended December 31, 1997 (the Audited Financials), which
have been audited by Deloitte & Touche LLP and the unaudited financial
statements for the quarter ended March 31, 1998 (the Interim Financials) (the
Audited Financials and the Interim Financials are collectively referred to as
the Financial Statements) are contained in the Sellers Form 10-K for the year
ended December 31, 1997 (the Form 10-K) and Form 10-Q for the quarter ended
March 31, 1998 (the Form 10-Q). Each balance sheet included in the Financial
Statements is true, complete and correct and presents fairly the financial
position of Seller as of the respective date of such balance sheet and each of
the statements of income, retained earnings (deficit) and cash flows included in
the Financial Statements is true, complete and correct and presents fairly the
results of operations and cash flows of Seller for the periods set forth
therein, in each case in accordance with GAAP, except as stated in the Financial
Statements and except that the Interim Financials do not contain footnotes.
Except as set forth in the Form 10-K and Form 10-Q, there are no Liabilities or
obligations (whether absolute, accrued, contingent or otherwise, and whether due
or to become due) in respect of the Business or the Assets (including with
respect to Environmental Laws) other than (a) Liabilities disclosed or provided
for in the Interim Financials and (b)Liabilities incurred in the ordinary
course of business consistent with past practice since the date of the Interim
Financials.
Process; Brokers. Seller represents that the Purchase Price is the market value
of the assets based upon an extensive market search performed by Seller. There
is no broker, finder, investment banker or other person, other than McCabe,
Mintz & Company, L.L.P., whose fees are to be paid by Seller, who would have any
valid claim against any of the parties to this Agreement for a commission or
brokerage fee or payment in connection with this Agreement or the transactions
contemplated herein as a result of any agreement of, or action taken by, Seller.
Taxes. Except as set forth on Schedule 4.13 of the Seller Disclosure Schedule,
there are no pending issues, adjustments, audits or controversies relating to,
nor claims asserted for, ad valorem taxes or assessments upon the Assets. Except
for real estate taxes not yet due, there are no tax liens outstanding against
any of the Assets. Seller has withheld and paid or caused to be paid pursuant to
Federal, state, local or foreign laws, rules or regulations such amounts
required to be withheld and paid from the wages of the employees of Seller or
the Business. Seller has made all foreign, Federal, state and local filings,
reports and declarations relating to taxes of any kind required to be filed and
has paid all taxes shown thereon. Except as set forth on Schedule 4.13 of the
Seller Disclosure Schedule, none of the Assets is, or is subject to, a lease
subject to (i) Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect on the day before the date of enactment of the Tax Equity
and Fiscal Responsibility Act of 1982; or (ii) Section 7701(h) of the Code or
any predecessor thereto. Except as set forth on Schedule 4.13 of the Seller
Disclosure Schedule, none of the Assets (i) is tax-exempt use property within
the meaning of Section 168(h) of the Code; or (ii) secures any debt, the
interest of which is tax exempt under Section 103 of the Code. Seller is not a
person other than a United States person within the meaning of the Code. The
transactions contemplated herein are not subject to tax withholding provisions
of the Code or any other provisions of law.
Products. The Products included in the Inventory were produced in all material
respects in accordance with all Laws or Decrees, including the U.S. Federal
Food, Drug and Cosmetic Act, and do not constitute adulterated or misbranded
goods within the meaning of such Act.
Solvency. Seller is on the date hereof, and after giving effect to the
Acquisition and the consummation of the transactions contemplated hereby will
be, Solvent.
Diverted Sales. Not more than five percent of the U.S. sales revenues of the
Business for (a) the fiscal year ended December 31, 1997 and (b) the five months
ended May 31, 1998 was attributable to sales other than to the Professional
Market or distributors or brokers known to sell Products of the Business to
businesses other than those in the Professional Market.
Supplier Lists. Schedule 4.17 of the Seller Disclosure List lists all Suppliers
and accounts payable of Sellers Suppliers as of July 7, 1998 and the amount
thereof. As of the date hereof, Seller has no knowledge of any pending price
increase relating to raw materials or components used in the manufacture of the
Products.
Orders.
As of July 13, 1998, the aggregate amount of orders for the sale of finished
Products to customers is not more than $337,687.
Schedule 4.18 of the Seller Disclosure Schedule sets forth a list of the dollar
amount of outstanding customer orders as of July 13, 1998 for the purchase of
Products by the customers of the Business. Set forth on Schedule 4.18 are the
standard terms under which the Products are sold.
Raw Materials. Seller does not provide any proprietary raw materials or
components to the Business for which substitutes are not commercially available.
Employee Benefit Plans.
Schedule 4.20 of the Seller Disclosure Schedule contains a list and a brief,
general description of each pension, retirement, savings, deferred compensation,
and profit-sharing plan and each stock option, stock appreciation, stock
purchase, performance share, bonus or other incentive plan, severance plan,
health, group insurance or other welfare plan, or other similar plan and any
employee benefit plan within the meaning of Section 3(3) of ERISA, under which
Seller has any current or future obligation or liability or under which any
employee or former employee (or beneficiary of any employee or former employee)
of Seller has or may have any current or future right to benefits (the term
plan shall include any contract, agreement, policy or understanding, each such
plan being hereinafter referred to individually as a Plan). Seller has
delivered to Purchaser true and complete copies of (i) each Plan, (ii) the
summary plan description for each Plan for which a summary plan description is
required by law to be furnished to participants, (iii) the latest annual report,
if any, which has been filed with the IRS for each Plan, and (iv) with respect
to any Plan intended to comply with Section 401(k) of the Code, copies of
calculations for the most recent three Plan years showing such Plans compliance
with the requirements under Section 401(k)(3) and, if applicable, 401(m)(2) of
the Code. Each Plan intended to be tax qualified under Sections 401(a) and
501(a) of the Code has been determined by the IRS to be tax qualified under
Sections 401(a) and 501(a) of the Code and, since such determination, no
amendment to or failure to amend any such Plan or any other circumstance or
event has adversely affected its tax qualified status. No plan is subject to
Title IV of ERISA.
There are no actions, claims, lawsuits or arbitrations pending, or, to the
knowledge of Seller, threatened, with respect to any Plan which could result in
liability to Purchaser.
No Plan provides or is required to provide, now or in the future, health,
medical, dental, accident, disability, death or survivor benefits to or in
respect of any person beyond termination of employment, except to the extent
required under any state insurance law or under Part 6 of Subtitle B of Title I
of ERISA and under Section 4980(B) of the Code. No Plan covers any individual
other than an employee of Seller, other than spouses or dependents of employees
under health and child care policies listed on Schedule 4.20 of the Seller
Disclosure Schedule and delivered to Purchaser.
The consummation of the transactions contemplated by this Agreement will not (i)
entitle any employee of Seller to severance pay or termination benefits for
which Purchaser or any of its Affiliates may become liable, (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due to any
such employee or former employee for which Purchaser or any of its Affiliates
may become liable or (iii) obligate Purchaser or any of its Affiliates to pay or
otherwise be liable for any compensation, vacation days, pension contribution or
other benefits to any employee, consultant or agent of Seller for periods before
the Closing Date or for personnel whom Purchaser does not actually employ.
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as specifically set forth in Purchasers disclosure schedule (the
Purchaser Disclosure Schedule) provided to Seller in connection with this
Agreement, Purchaser hereby represents and warrants to Seller that:
Organization, Authorization and Validity. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of New York. Purchaser has all requisite power and authority to own, lease and
operate its property and to carry on its business as now being conducted.
Purchaser is duly qualified or licensed and in good standing to do business in
each jurisdiction in which its property is owned, leased or operated or the
nature of Purchasers business makes such qualification necessary. Purchaser has
delivered true and complete copies of its certificate of incorporation and
bylaws to Seller. This Agreement has been, and, upon the execution and delivery
thereof by Purchaser, the Manufacturing Agreement and each other Transaction
Document will be, duly and validly executed and delivered by Purchaser. Each
Transaction Document constitutes, or, upon the execution and delivery thereof by
Purchaser, each Transaction Document will constitute, the valid and binding
agreement of Purchaser, enforceable against Purchaser in accordance with its
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors rights generally or by general equitable principles or the exercise
of judicial discretion in accordance with such principles. Purchaser has all
requisite power and authority to execute and deliver this Agreement and the
other Transaction Documents, and to carry out the transactions contemplated by
this Agreement and the other Transaction Documents. All requisite corporate
action on the part of Purchaser has been taken to authorize the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby and thereby.
No Conflicts. The execution and the delivery of this Agreement and the other
Transaction Documents by Purchaser do not, and the consummation of the
transactions contemplated herein and therein and compliance with the provisions
hereof and thereof will not (a) conflict with, result in a breach of, constitute
a default (with or without notice or lapse of time, or both) under or violation
of, or give rise to any right of termination, cancellation, acceleration,
modification or other right pursuant to (i) the certificate of incorporation or
bylaws of Purchaser, (ii) any Law or Decree, (iii) any provision of any
agreement or instrument, license, permit, lease, mortgage, indenture, note or
other obligation to which Purchaser is a party or by which Purchaser or any of
its properties or assets is bound, or (b) result in the creation of any
Encumbrance upon any property or assets used or held in connection with
Purchasers business. No consent of any third party or any Governmental Entity
is required to be obtained on the part of Purchaser to permit the consummation
of the transactions contemplated in this Agreement and the other Transaction
Documents.
Financing. Purchaser has sufficient cash and/or available borrowing capacity
under existing credit facilities to pay the Purchase Price and to make all other
necessary payments of fees and expenses in connection with the transactions
contemplated by this Agreement.
Non-Interference. Except for competition in the ordinary course consistent with
past practice, Purchaser has not engaged in any activity with the intent or, to
Purchasers knowledge, which has had the effect of interfering with Sellers
operation of the Business. Except for competition in the ordinary course
consistent with past practice, Purchaser further covenants and agrees that it
will not engage in any activity which could interfere with the Sellers
operation of the Business in the ordinary course prior to the Closing Date.
<PAGE>
ARTICLE VI
CONDITIONS TO CLOSING
Conditions to Each Partys Obligations. The respective obligations of each party
to this Agreement to consummate the transactions to be performed by such party
at the Closing are, at the option of such party, subject to the satisfaction or
waiver by such party at or prior to the Closing of the following conditions:
No Orders. No order shall have been entered, and not vacated, by a court or
administrative agency of competent jurisdiction, in any action or proceeding
which enjoins, restrains or prohibits the Acquisition or consummation of any
other transaction contemplated herein.
Permits, Authorizations and Approvals. All permits, authorizations, approvals
and orders required to be obtained under all applicable Laws or Decrees in
connection with the transactions contemplated herein, shall have been obtained
and shall be in full force and effect at the Closing Date.
Conditions to Obligations of Seller. The obligations of Seller to consummate the
transactions to be performed by it at the Closing are subject to the
satisfaction or waiver by Seller at or prior to the Closing of the following
additional conditions:
Representations and Warranties. All of the representations and warranties of
Purchaser set forth in ARTICLE V hereof shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as if such representations and warranties had been made at the Closing, and
Purchaser shall have delivered to Seller a certificate (the Purchaser
Compliance Certificate) to such effect dated as of the Closing Date and signed
by the President, Chief Financial Officer or Senior Vice President, Finance &
Administration of Purchaser.
Performance. All of the terms, covenants and conditions of this Agreement to be
complied with and performed by Purchaser at or prior to the Closing shall have
been duly complied with and performed in all material respects, and Purchaser
shall have delivered to Seller the Purchaser Compliance Certificate to such
effect.
Purchase Price. Purchaser shall have delivered the Purchase Price to Seller and
the Escrow Agent in accordance with Section 2.4 hereof.
Purchasers Closing Deliverables. At the Closing, Purchaser shall have delivered
to Seller the following items:
the Purchase Price due and $100,000 pursuant to Section 7.6 on the Closing Date
via wire transfer in accordance with Section 2.4;
the Purchaser Compliance Certificate in accordance with Sections 0(0) and (0)
hereof;
the License Agreement in accordance with Section 2.1(b) hereof; and
Conditions to Obligations of Purchaser. The obligations of Purchaser to
consummate the transactions to be performed by it at the Closing are subject to
the satisfaction or waiver by Purchaser at or prior to the Closing of the
following additional conditions:
Representations and Warranties. All the representations and warranties of Seller
set forth in ARTICLE IV hereof shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if such
representations and warranties had been made at the Closing, and Seller shall
have delivered to Purchaser a certificate (the Seller Compliance Certificate)
to such effect dated as of the Closing Date and signed by the President or the
Chief Financial Officer of Seller.
Performance. All of the terms, covenants and conditions of this Agreement to be
complied with and performed by Seller at or prior to the Closing shall have been
duly complied with and performed in all material respects, and Seller shall have
delivered to Purchaser the Seller Compliance Certificate to such effect.
Required Consents. Any and all required consents from third parties to the
Assumed Contracts set forth on Schedule 4.9 of the Seller Disclosure Schedule
and other consents required to allow the consummation of the Acquisition and the
transactions contemplated by the Transaction Documents shall have been obtained
and delivered to Purchaser.
Transfer Documents. All documentation pursuant to which the Acquisition and the
other transactions contemplated by the Transaction Documents are to be
consummated and effected, including bills of sale, assignments and other
documents or instruments of transfer, shall have been duly executed and
delivered by Seller in form and substance reasonably satisfactory to Purchaser
and its counsel. All of the Assets, including the Assumed Contracts, shall have
been transferred or assigned to Purchaser free and clear of all Encumbrances and
Purchaser and its counsel shall have received evidences of such transfers
reasonably satisfactory to them.
Bulk Sales. Seller shall have complied with any and all bulk sales, bulk
transfer or similar laws, if any, applicable to the transactions contemplated in
this Agreement herein.
Sellers Closing Deliverables. Seller shall have delivered to Purchaser the
following items:
bills of sale, intellectual property assignments, assignments and assumptions of
contracts and such other good and sufficient instruments of conveyance,
assignment and transfer, in form and substance satisfactory to counsel to
Purchaser, as shall be legally sufficient to vest in Purchaser good and
marketable title to the Assets;
the Seller Compliance Certificate in accordance with Sections 0(0) and (0)
hereof;
the License Agreement and the Patent License Agreement in accordance with
Section 2.1 hereof;
all required consents from third parties to the Assumed Contracts in accordance
with Section 0(0) hereof, the consent of Norwest Business Credit, Inc. to the
Acquisition and to the Security Agreement in the Escrow and other consents
listed in Schedule 4.2 to the Seller Disclosure Schedule;
documentation evidencing, to the reasonable satisfaction of Purchaser,
compliance with all applicable bulk sales laws;
a certificate, signed by the Secretary of Seller, certifying as to the truth and
accuracy of, and attaching copies of, Sellers charter documents and board of
directors and shareholder resolutions adopted in connection with the
Acquisition; and
the Manufacturing Agreement and the Transition Services Agreement, each duly
executed and delivered by Seller;
the Escrow Agreement, and Form UCC-1 and other documents regarding the security
interests granted therein duly executed and delivered by Seller and the Escrow
Agent;
evidence, reasonably satisfactory to Purchaser, of the application of the
Purchase Price to retirement of $6.5 million of Sellers indebtedness under the
Restated Credit and Security Agreement dated as of May 16, 1997 as subsequently
amended between Seller and Norwest Business Credit, Inc. or such similar
financing arrangement Seller has in effect at the time of Closing;
an opinion of Gray Cary Ware & Freidenrich LLP, counsel to Seller, in form and
substance reasonably satisfactory to Purchaser;
a certificate of Seller, in compliance with Section 1.1445-2(b)(2) of the
regulations under the Code, listing Sellers name, address and U.S. employer
identification number and stating that Seller is not a foreign person;
the Security Agreement and FormsUCC-1 and all other documents regarding the
security interest granted thereby;
lab books containing technical data and information (the Lab Books) and all
other books and records (the Business Records) relating to the Business, based
on Sellers good faith determination, as follows:
Originals of such Lab Books and Business Records which contain information
relating solely to the Business,
Copies of such Lab Books and Business Records which contain information relating
to the Business and other products or businesses of the Seller not sold to the
Purchaser pursuant to this Agreement;
UCC-3 termination statements relating to the release of security interests of
third parties in any of the Assets; and
all other documents required to be delivered to Purchaser under the provisions
of this Agreement.
<PAGE>
ARTICLE VII
COVENANTS
Further Assurances. Subject to the terms and conditions of this Agreement, at
any time or from time to time after the Closing, without further consideration,
Seller and/or Purchaser shall execute and deliver such other instruments of
sale, transfer, conveyance, assignment and confirmation, provide such materials
and information and take such other actions as may be necessary or desirable in
order more effectively to transfer, convey and assign to Purchaser, and to
confirm Purchasers title to or other interest in, the Assets including, without
limitation, the Intellectual Property, and, to the full extent permitted by law,
to put Purchaser in actual possession and operating control of the Assets and to
assist Purchaser in exercising all rights with respect thereto, and to comply
with the requirements of any regulatory or governmental authority.
Access to Information. So long as this Agreement is in effect, and subject to
the provisions of the Confidentiality Agreement between Seller and Purchaser,
Seller will (and will cause each of Sellers Affiliates and such Affiliates
respective accountants, counsels, consultants, employees and agents) to provide
to Purchaser or Purchasers accountants, counsels, consultants, employees or
agents full access during normal business hours to, and furnish them with all
documents, records, work papers and information with respect to all of such
properties, assets, books, contracts, commitments, reports and records relating
to, the Business as the Purchaser shall from time to time reasonably request. In
addition, Seller shall permit Purchaser or Purchasers accountants, counsels,
consultants, employees or agents reasonable access to qualified personnel of
Seller during normal business hours as may be necessary or useful to Purchaser,
provided that such access has been approved in advance by Seller and relates to
review of Sellers business as it relates to the Assets and the above-mentioned
documents, records, work papers and information.
Conduct of Business. From and after the date of this Agreement until the Closing
Date, Seller shall, and shall cause its Affiliates to, with respect to the
Business and the Assets, (i) carry on the Business in the ordinary course in
substantially the same manner as currently conducted and use reasonable efforts
to preserve intact the business relationships with third parties, (ii) not take
any action or fail to take any action to cause or permit any of the
representations and warranties in Section 4.10 to be untrue at the Closing Date,
(iii) not terminate or amend, or waive any material right under, any Assumed
Contract and (iv) not make any material changes to currently planned marketing,
advertising, promotional and manufacturing expenditures in connection with the
Business.
Removal of Property.
Warehousing of Purchased Inventory. Subject to the terms of any agreement that
may be entered into between Seller and Purchaser to the contrary, following the
Closing, Seller shall permit Purchaser access to its premises for purposes of
removing any tangible Assets, including Inventory, and shall cooperate with
Purchaser in such removal.
Purchaser shall be entitled to warehouse such amounts of the Inventory purchased
pursuant to this Agreement (Purchased Inventory) at Sellers warehouse on the
following terms:
Up to 1,000 pallets of Purchased Inventory may be so warehoused from the Closing
Date through January 31, 1999 at no charge to Purchaser;
Purchased Inventory in excess of 1,000 pallets will incur a storage charge of
$0.05 per case per month (pro rated for each partial month) (the Storage Fee);
All Purchased Inventory remaining in Sellers warehouse after January 31, 1999
will be subject to the Storage Fee and shall be removed therefrom by Purchaser
as soon as reasonably possible;
All Inventory manufactured for Purchaser pursuant to the Manufacturing Agreement
shall be subject to storage charges as provided therein.
Reasonable Efforts. Each of Seller and Purchaser shall use their reasonable
efforts to take or cause to be taken all actions and to do or cause to be done
all things necessary or appropriate, subject to applicable laws, to perform its
obligations under this Agreement and the other Transaction Documents and to
satisfy the conditions to Closing.
Non-Compete Covenant; Confidentiality.
Seller hereby acknowledges and recognizes its possession of confidential or
proprietary information and the highly competitive nature of the Business and
accordingly agrees that, in consideration of Purchaser entering into this
Agreement and the other transactions contemplated hereby and the premises
contained herein, Seller will not, from and after the date of the Closing for a
period of two years after the date of the Closing, for any reason whatsoever,
(i) directly or indirectly, or by action in concert with others, own, manage,
operate, join, control, finance or participate in, or participate in the
ownership, management, operation, control or financing of, or be connected as a
principal, agent, representative, consultant, employee, investor, owner,
partner, manager, joint venturer or otherwise with, or permit its name to be
used by or in connection with, any business, enterprise or other entity engaged
anywhere in the world in the sale or marketing of any of Sellers current
products, as set forth in Schedule 7.6, to the Professional Market or
participate in the Professional Market using the Lamaur name; provided, however,
that this Section shall not prevent the beneficial ownership for investment
purposes of 2% or less of any class of equity securities of any such Person
which are registered under Section 12 of the Securities Exchange Act of 1934, or
the use by Seller in its retail (non-professional) business of the Lamaur
name; or (ii) directly or indirectly (either through an Affiliate or otherwise)
seek to hire or otherwise solicit to employ in any capacity, as employee,
consultant, agent or otherwise any current or future employee of any member of
the Purchaser Group (as defined in Section 8.2(a)) or any Affiliate of a member
of the Purchaser Group. Seller further acknowledges that pursuant to the License
Agreement it will not participate in the Professional Market using the Lamaur
name.
Seller shall at all times subsequent to the execution of this Agreement
maintain, and shall use reasonable efforts to cause its Affiliates and its and
their officers, directors, employees, accountants, counsel, consultants,
advisors and agents to maintain, the confidentiality of non-public information
regarding the Business except subject to the extent disclosure of such
information is required by law (in which case, if the disclosure is required in
connection with a judicial or quasi-judicial proceeding, Seller shall promptly
notify Purchaser and give Purchaser the opportunity to oppose or seek
confidential treatment of such disclosure) or in connection with a proceeding
arising out of or relating to this Agreement. On and after the Closing Date,
Seller shall grant Purchaser the right to enforce the confidentiality provisions
of any existing agreements with persons employed in the Business on or prior to
the Closing Date. Seller agrees to use reasonable efforts to assist Purchaser in
enforcing such provisions or agreements, irrespective of whether such employees
shall have been terminated at such time.
In the event of a breach or threatened breach by Seller of the provisions of
this Section, Purchaser shall be entitled to an injunction restraining such
party from such breach. Nothing contained in this paragraph (c) or elsewhere in
this Agreement (including Article VIII) shall be construed as prohibiting
Purchaser from pursuing any other remedies available at law or equity for such
breach or threatened breach of this Agreement nor limiting the amount of damages
recoverable in the event of a breach or threatened breach by Seller of the
provisions of this Section.
Purchaser shall pay Seller $100,000 at Closing in consideration of the covenants
set forth in this Section 7.6.
No Solicitation by Seller. Seller shall immediately cease any existing
discussions or negotiations with any third parties conducted prior to the date
hereof with respect to the sale or other disposition of the Assets (an
Acquisition Transaction). Seller shall not, and shall use its reasonable
efforts to cause Sellers employees or other Affiliates not to, directly or
indirectly, encourage, solicit, participate in, facilitate or initiate
discussions or negotiations with, or provide any information to, any Person or
group (other than Purchaser or its respective directors, officers, employees or
other Affiliates or representatives) concerning any Acquisition Transaction or
any discussions or negotiations with respect thereto. Seller shall immediately
communicate to Purchaser any such inquiries or proposals regarding an
Acquisition Transaction and the terms thereof.
Payment of Performance-Related Compensation. Seller shall continue to pay to its
employees, distributors, suppliers and other agents all commissions and other
compensation accrued or earned in a manner consistent with its past practices.
Research and Development. At Purchasers request and as part of the services
under the Transition Services Agreement, following the Closing Date, Seller
shall provide research and development with respect to the Products, including
new aerosol formulations in order to comply with proposed regulatory
requirements.
Removal of Lamaur Name. As soon as practicable following the Closing Date,
Seller will remove from all of its Salon Style products and packaging the
Lamaur Brand name. Seller shall not introduce any new Salon Style products
using the Lamaur Brand name.
Seller Obligations under Assumed Contracts. Seller shall pay when due its
obligations under the Assumed Contracts in accordance with their terms, provided
that, Seller shall not be responsible for those obligations being assumed by the
Purchaser, pursuant to Section 2.2(a). If Seller shall not pay such amounts
described herein when due, Purchaser shall be entitled to immediate release of
funds from the Escrow Fund upon delivery to the Escrow Agent of a claim with
respect to this Section 7.11 in such form as is provided by the Escrow
Agreement. Purchaser shall copy the Seller on all such claims submitted to the
Escrow Agent and shall include therewith detailed information regarding such
claim. Unless objected to within 30 days of receipt by Seller, such claims shall
be deemed accepted by the Seller. Claims under this Section 7.11 shall not be
included in determining whether the Purchaser Floor has been exceeded. If any
obligation on the part of the Seller relating to such Assumed Contracts remain
accrued and unpaid at January 31, 1999, whether or not due, the Purchaser may
require that such obligations be satisfied from the Escrow Fund.
Technical Information.
Seller agrees that at such time as Purchaser is engaged in litigation which
pertains to any of the information contained in the Lab Books or the Business
Records, upon notice from the Purchaser, Seller shall transfer to the Purchaser
such original Lab Books or the Business Records as pertain to such litigation.
Seller shall be entitled to retain a copy of any Lab Books or the Business
Records transferred pursuant to this Section 7.12.
Purchaser acknowledges that as compiled the Lab Books and Business Records may
contain data which does not relate solely to the Business. Purchaser shall at
all times, and shall use reasonable efforts to cause its Affiliates and its and
their officers, directors, employees, accountants, counsel, consultants,
advisors and agents to, maintain, the confidentiality of non-public information
not related to the Business except subject to the extent disclosure of such
information is required by law (in which case, if the disclosure is required in
connection with a judicial or quasi-judicial proceeding, Seller shall promptly
notify Purchaser and give Purchaser the opportunity to oppose or seek
confidential treatment of such disclosure) or in connection with a proceeding
arising out of or relating to this Agreement. Purchaser agrees to use reasonable
efforts to assist Seller in enforcing such provisions or agreements,
irrespective of whether such employees shall have been terminated at such time.
In the event of a breach or threatened breach by Seller of the provisions of
this Section, Purchaser shall be entitled to an injunction restraining such
party from such breach. Nothing contained in this paragraph (c) or elsewhere in
this Agreement (including Article VIII) shall be construed as prohibiting
Purchaser from pursuing any other remedies available at law or equity for such
breach or threatened breach of this Agreement nor limiting the amount of damages
recoverable in the event of a breach or threatened breach by Seller of the
provisions of this Section.
Sellers Application of Purchase Price Proceeds. Seller agrees that the proceeds
of the sale under this Agreement, exclusive of such amounts as are applied as
provided in Section 6.3(f)(ix), shall be used to pay creditors of the Seller as
it deems appropriate or for working capital purposes.
<PAGE>
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Survival of Representations and Warranties. The representations and warranties
made by Seller or Purchaser herein, or in any certificate, schedule or exhibit
delivered pursuant hereto, shall terminate as of six (6) months following the
Closing Date.
The obligations of Seller to indemnify members of the Purchaser Group for any
Indemnifiable Losses is subject to the condition that Seller shall have received
an Indemnification Claim for all Indemnifiable Losses (as such terms are defined
below) for which indemnity is sought on or before the expiration date for the
applicable representation or warranty set forth in the preceding paragraph. The
obligation of Purchaser to indemnify members of the Seller Group for Seller
Losses (as such terms are defined below) is subject to the condition that
Purchaser shall have received an Indemnification Claim for all Seller Losses for
which indemnity is sought on or before the expiration date for the applicable
representation set forth in the preceding paragraph.
Indemnification by Seller.
Subject to the terms and conditions of this ARTICLE VIII, Seller agrees to
indemnify, defend and hold harmless Purchaser and its partners and their
successors, assigns and each of their respective officers, managers, members,
partners, directors, shareholders, employees, attorneys, representatives and
agents (all such persons and entities being collectively referred to as the
Purchaser Group) from and against any and all Losses, up to an amount equal to
the Purchase Price, which were incurred or sustained by any member of the
Purchaser Group as a result of or arising under or in connection with (i) any
inaccuracy or breach of any representation, warranty or covenant made by Seller
pursuant to this Agreement or any other Transaction Document, (ii) the
manufacture, use by Seller of the Assets on or prior to the Closing Date,
(iii) any and all Excluded Liabilities, (iv) any claims arising under any
Environmental Law with respect to Products manufactured by or on behalf of
Seller, (v) the conduct of the Business on or prior to the Closing Date and (vi)
any Products sold on or prior to the Closing Date, including any product
liability claims related thereto (collectively, Indemnifiable Losses). For
purposes of clause (vi) of the foregoing sentence, unless otherwise
determinable, Losses asserted, arising or incurred (i) within three months
following the Closing Date shall be deemed to be attributable to products sold
on or prior to the Closing Date and (ii) after three months following the
Closing Date shall be deemed to be attributable to products sold after the
Closing Date.
The indemnification obligations of Seller pursuant to Section 8.5(a) shall be
satisfied, first, from the Escrow Fund in accordance with the terms of the
Escrow Agreement and, second, by Seller delivering to Purchaser by certified
check or wire transfer the amount of such indemnity payable pursuant to this
Section 8.2.
Except as provided in Section 8.2(d), and Section 7.11, Seller shall not be
required to indemnify Purchaser and/or any other member of the Purchaser Group
for any Indemnifiable Losses under this Section 0 until the aggregate amount of
all Indemnifiable Losses under all individual Indemnification Claims (as defined
below) shall exceed Fifty Thousand Dollars ($50,000) (the Purchaser Floor);
provided, however, that if the aggregate amount of Indemnifiable Losses shall
exceed the Purchaser Floor, Seller shall indemnify Purchaser for all
Indemnifiable Losses, subject to the further limitations set forth in this
ARTICLE VIII.
Purchaser shall be entitled to indemnification by Seller under
Section 8.2(a)(vi) above for claims which relate to Product returns and
allowances, granted by Purchaser in good faith in commercially reasonable
amounts (but not including any returns arising as a result of termination of any
distributor or refusing to fulfill purchase orders of a distributor who actively
distributed Products prior to the Closing Date) during the three months
following the Closing Date (Product Returns).
Purchaser shall be entitled to immediate release of funds from the Escrow Fund
upon delivery to the Escrow Agent of a claim with respect to Product Returns in
such form as is provided by the Escrow Agreement. Purchaser shall copy Seller on
all such Product Return Claims submitted to the Escrow Agent and shall include
therewith detailed information regarding such Product Returns. Unless objected
to within 30 days of receipt by Seller, such Product Return claim shall be
deemed accepted by Seller.
Purchaser shall further be entitled to indemnification for allowances granted
subsequent to the third month following the Closing Date and before January 31,
1999, which relate to periods prior to the Closing Date (Product Allowances).
Purchaser may make claims against the Escrow Fund for Product Allowances in
accordance with the terms of the Escrow Agreement.
The Escrow Fund shall be the Purchasers sole source of indemnification for
Product Returns and Product Allowances. Claims for Product Returns and Product
Allowances shall not be included in determining whether the Purchaser Floor has
been exceeded.
Subject to Section 7.6, Purchasers exclusive remedy against Seller for any
Indemnifiable Losses hereunder shall be indemnification under this ARTICLE VIII;
provided, however, that nothing contained in this ARTICLE VIII shall limit in
any manner, any remedy at law or in equity to which Purchaser or any other
member of the Purchaser Group shall be entitled against Seller as a result of
fraud or intentional misrepresentation by Seller, or any of its representatives
or agents.
Indemnification by Purchaser.
Subject to the terms and conditions of this ARTICLE VIII, Purchaser agrees to
indemnify, defend and hold harmless Seller and its partners and their
successors, assigns and each of their respective officers, managers, members,
partners, directors, shareholders, employees, attorneys, representatives and
agents (all such persons and entities being collectively referred to as the
Seller Group) from and against any and all Losses, up to an amount equal to
the Purchase Price, which were incurred or sustained by any member of the Seller
Group as a result of or arising under or in connection with (i) any inaccuracy
or breach of any representation, or warranty or covenant made by Purchaser
pursuant to this Agreement, (ii) the use by Purchaser of the Assets following
the Closing Date (collectively, Seller Losses).
Purchaser shall not be required to indemnify Seller and/or any other member of
the Seller Group for any Seller Losses under this Section 0(0) until the
aggregate amount of all Seller Losses under all individual Indemnification
Claims (as defined below) shall exceed Fifty Thousand Dollars ($50,000) (the
Seller Floor); provided, however, that if the aggregate amount of Seller
Losses shall exceed the Seller Floor, Purchaser shall indemnify Seller for all
Seller Losses, subject to the further limitations set forth in this
ARTICLE VIII.
Sellers exclusive remedy against Purchaser for any Seller Losses hereunder
shall be indemnification under this ARTICLE VIII; provided, however, that
nothing contained in this ARTICLE VIII shall limit in any manner, any remedy at
law or in equity to which Seller or any other member of the Seller Group shall
be entitled against Purchaser as a result of willful fraud or intentional
misrepresentation by Purchaser, or any of its representatives or agents.
Procedures for Indemnification.
As used in this ARTICLE VIII, the term Indemnitor means the party against whom
indemnification hereunder is sought, and the term Indemnitee means the party
seeking indemnification hereunder.
A claim for indemnification hereunder (an Indemnification Claim,) shall be
made by Indemnitee by delivery of a written notice to Indemnitor as soon as
reasonably practicable following Indemnitees awareness of circumstances giving
rise to such Indemnification Claim, requesting indemnification and specifying
the basis on which indemnification is sought in reasonable detail (and shall
attach relevant documentation related to the Indemnification Claim), the amount
of the asserted Indemnifiable Losses or Seller Losses, as the case may be, and,
in the case of a Third Party Claim (as defined below), containing (by attachment
or otherwise) such other information as Indemnitee shall have concerning such
Third Party Claim; provided that the failure to give such notice shall not
prejudice the rights of the Indemnitee under this Agreement, except to the
extent the Indemnitor is materially prejudiced thereby.
If the Indemnification Claim involves a Third Party Claim, then the procedures
set forth in Section 0 hereof shall be observed by Indemnitee and Indemnitor.
If the Indemnification Claim involves a matter other than a Third Party Claim,
Indemnitor shall have thirty (30) days to object to such Indemnification Claim
by delivery of a written notice of such objection to Indemnitee specifying in
reasonable detail the basis for such objection. Failure to timely so object
shall constitute a final and binding acceptance of the Indemnification Claim by
Indemnitor, and the Indemnification Claim shall thereafter be paid by Indemnitor
in accordance with Section 0(0) hereof. If an objection is timely delivered by
Indemnitor and the dispute is not resolved within twenty (20) business days from
the delivery of such objection (the Negotiation Period), either party may
bring an action in court to resolve such dispute. The right of Indemnitee to be
indemnified hereunder shall not limit or otherwise affect any other rights or
remedies it may have with respect to the matters indemnified.
Subject to Section 0(0), upon determination of the amount of an Indemnification
Claim, whether by (i) an agreement between Indemnitor and Indemnitee, (ii) an
arbitration award or (iii) a final judgment (after expiration of all periods for
appeal of such judgment) or other final nonappealable order, such amount shall
be paid, first, by drawing on the Escrow Fund in accordance with the terms of
the Escrow Agreement and, second, by certified check delivered by Indemnitor to
the Indemnified Party, in each case within ten (10) days of the date such amount
is determined.
Defense of Third Party Claims. Should any claim be made, or suit or proceeding
(including, without limitation, a binding arbitration or an audit by any taxing
authority) be instituted against Indemnitee which, if prosecuted successfully,
would be a matter for which Indemnitee is entitled to indemnification under this
Agreement (a Third Party Claim), the obligations and liabilities of the
parties hereunder with respect to such Third Party Claim shall be subject to the
following terms and conditions:
Indemnitee shall give Indemnitor written notice of any such claim promptly after
receipt by Indemnitee of notice thereof. Any delay in giving notice to the
extent it does not materially prejudice Indemnitor, shall not affect
Indemnitees rights to Indemnification hereunder. With respect to Third Party
Claims for which indemnification is claimed hereunder, the Indemnitor shall be
entitled to participate in and, if (i) in the judgment of the Indemnitee such
claim can properly be resolved by money damages alone and the Indemnitor has the
financial resources to pay such damages and (ii) the Indemnitor admits that this
indemnity fully covers the claim or litigation, the Indemnitor shall be entitled
to direct the defense of any claim at its expense, but such defense shall be
conducted by legal counsel reasonably satisfactory to the Indemnitee, and to
settle and compromise any such claim or action for money damages alone;
provided, however, that if the Indemnitee has elected to be represented by
separate counsel pursuant to the proviso below, or if such settlement or
compromise does not include an unconditional release of the Indemnitee for any
liability arising out of such claim or action, such settlement or compromise
shall be effected only with the consent of the Indemnitee, which consent shall
not be unreasonably withheld. It shall not be unreasonable for the Indemnitee to
withhold consent to any settlement that does not contain such an unconditional
release of the Indemnitee. After notice from the Indemnitor to the Indemnitee of
its election to assume the defense of such claim or action, the Indemnitor shall
not be liable to the Indemnitee under this Section 8.5 for any legal or other
expenses subsequently incurred by the Indemnitee in connection with the defense
thereof other than reasonable costs of investigation or of assistance as
contemplated by this Section 8.5; provided, however, that the Indemnitee shall
have the right to employ counsel to represent it if, in the opinion of counsel
to the Indemnitee, it is advisable for the Indemnitee to be represented by
separate counsel due to actual or potential conflicts of interest, and in that
event the fees and expenses of such separate counsel shall be paid by the
Indemnitor; provided, that in no event shall the Indemnitor be responsible for
the fees of more than one counsel to the Indemnitee. The Indemnitee and the
Indemnitor shall each render to each other such assistance as may reasonably be
requested in order to ensure the proper and adequate defense of any such claim
or proceeding.
Purchaser agrees that all claims made by any member of the Purchaser Group with
respect to the indemnification obligations of Seller hereunder shall be made in
accordance herewith and, for as long as the Escrow Fund shall be in existence,
with the terms of the Escrow Agreement. The Escrow Fund shall not represent a
limitation on the amount of damages or Loss recoverable by Purchaser or any
other member of the Purchaser Group against Seller.
<PAGE>
ARTICLE IX
GENERAL
Governing Law. It is the intention of the parties hereto that the internal laws
of the State of New York (irrespective of its choice of law principles) shall
govern the validity of this Agreement, the construction of its terms, and the
interpretation and enforcement of the rights and duties of the parties hereto.
Assignment; Binding upon Successors and Assigns. None of the parties hereto may
assign any of its rights or obligations hereunder without the prior written
consent of the other party, which consent shall not be unreasonably withheld;
provided that Purchaser may assign this Agreement to any of its Affiliates. This
Agreement will be binding upon and inure to the benefit of the parties hereto
and their respective permitted successors and assigns. Seller further agrees and
covenants that it will not enter into any agreement relating to the sale of
substantially all its assets or the retail business of the Seller without the
agreement by such purchaser under such agreement to be bound by the provision of
Section 7.6.
Severability. If any provision of this Agreement, or the application thereof,
shall for any reason and to any extent be held to be illegal, invalid or
unenforceable, the remainder of such provision shall not thereby be affected and
shall be given full effect, without regard to the invalid portion. It is the
intention of the parties hereto that, if any court construes any provision or
clause of this Agreement, or any portion thereof, to be illegal, void or
unenforceable because of the duration of such provision or the geographic scope
covered thereby, such court shall reduce the duration or the geographic scope of
such provision, and, in its reduced form, such provision shall then be
enforceable and shall be enforced. With respect to any other provision found to
be illegal, void or unenforceable, the parties agree to replace such invalid or
unenforceable provision of this Agreement with a valid and enforceable provision
which will achieve, to the extent possible, the economic, business and other
purposes of the illegal, invalid or unenforceable provision.
Entire Agreement. This Agreement, the Manufacturing Agreement, Transition
Services Agreement, Escrow Agreement, Security Agreement, License Agreement, the
Patent License Agreement, the exhibits and schedules hereto and thereto, the
documents referenced herein and therein, and the exhibits thereto, constitute
the entire understanding and agreement of the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto.
Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall constitute an original and all of which together shall constitute
one and the same instrument.
Expenses. Except as otherwise expressly set forth herein, the parties shall each
pay their own fees and expenses (including but not limited to any and all
accountants, attorneys, investment bankers or brokers fees and costs)
incurred incident to the negotiation, preparation and carrying out of this
Agreement and the transactions contemplated herein, whether or not the
transactions contemplated herein are consummated.
Other Remedies. Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party shall be deemed cumulative with and not
exclusive of any other remedy conferred hereby or by law on such party, and the
exercise of any one remedy shall not preclude the exercise of any other.
Amendment and Waivers. Any term or provision of this Agreement may be amended,
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively) only by a
writing signed by the party to be bound thereby. The waiver by a party of any
breach hereof for default in payment of any amount due hereunder or default in
the performance hereof shall not be deemed to constitute a waiver of any other
default or any succeeding breach or default.
Waiver. Each party hereto may, by written notice to the others: (a) waive any of
the conditions to its obligations hereunder or extend the time for the
performance of any of the obligations or actions of the others, (b) waive any
inaccuracies in the representations of the others contained in this Agreement or
in any documents delivered pursuant to this Agreement, (c) waive compliance with
any of the covenants of the others contained in this Agreement or (d) waive or
modify performance of any of the obligations of the others. No action taken
pursuant to this Agreement, including without limitation any investigation by or
on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representation, warranty, condition or
agreement contained herein. Waiver of the breach of any one or more provisions
of this Agreement shall not be deemed or construed to be a waiver of other
breaches or subsequent breaches of the same provisions.
Public Announcement. Neither Purchaser nor Seller shall disclose the existence
or the terms of this Agreement without prior written consent of the other party,
unless and until such disclosure is required by law or applicable regulation,
and then only to the extent of such requirement.
Notices. All notices and other communications hereunder will be in writing and
will be deemed given (a) upon receipt if delivered personally (or if mailed by
registered or certified mail), (b) the day after dispatch if sent by overnight
courier, (c) upon dispatch if transmitted by telecopier or other means of
facsimile transmission (and confirmed by a copy delivered in accordance with
clause (a) or (b)), properly addressed to the parties at the following
addresses:
Seller: The Lamaur Corporation
One Lovell Avenue
Mill Valley, California 94941
Attention: Don G. Hoff
Telephone No.: (415) 380-8200
Facsimile No.: (415) 380-8170
with copies to: Gray Cary Ware & Freidenrich LLP
139 Townsend Street
San Francisco, California 94107
Attention: J. Howard Clowes, Esq.
Telephone No.: (415) 836-2500
Facsimile No.: (415) 836-9220
Purchaser: Zotos International, Inc.
100 Tokeneke Road
Darien, Connecticut 06820
Attention: Herb B. Nieporent
Telephone No.: (203) 655-8911
Facsimile No. (203) 656-7794
with a copy to: Zotos International, Inc.
100 Tokeneke Road
Darien, Connecticut 06820
Attention: Joseph S. Kendy, Jr.
Telephone No.: (203) 656-7866
Facsimile No. (203) 656-7887
Either party may change its address for such communications by giving notice
thereof to the other party in conformity with this Section.
Absence of Third Party Beneficiary Rights. No provisions of this Agreement are
intended, nor shall be interpreted, to provide or create any third party
beneficiary rights or any other rights of any kind in any client, customer,
affiliate, shareholder, partner of any party hereto or any other person or
entity unless specifically provided otherwise herein, and, except as so
provided, all provisions hereof shall be personal solely between the parties to
this Agreement.
Termination. This Agreement may be terminated and the transactions contemplated
hereby abandoned at any time prior to the Closing:
by mutual written consent of Purchaser and Seller;
by notice of Purchaser to Seller if Seller shall have breached in any material
respect any of its representations, warranties or covenants contained in this
Agreement;
by notice of Seller to Purchaser if Purchaser shall have breached in any
material respect any of its representations, warranties or covenants contained
in this Agreement; or
by notice of either Purchaser or Seller, if such party is not in breach of any
representation, warranty or covenant contained in this Agreement and the Closing
shall not have occurred on or prior to July 31, 1998.
Nothing in this Section shall relieve any party of any liability for a breach of
this Agreement prior to the termination hereof. Except as aforesaid, upon a
termination of this Agreement, all rights and obligations of the parties
hereunder shall terminate, except their obligations under Sections 9.6 and 9.10.
[REST OF THIS PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
___________, 1998.
THE LAMAUR CORPORATION,
a Delaware corporation
By:
Title:
ZOTOS INTERNATIONAL, INC.,
a New York corporation
By:
Title:
<PAGE>
<TABLE>
<CAPTION>
Exhibit 99.1
The Lamaur Corporation
Pro Forma Condensed Statement of Operations
Twelve Months Ended December 31, 1997
(In thousands)
Historical Adjustments Pro Forma
---------- ----------- ---------
Note 1
<S> <C> <C> <C>
Net Sales $102,104 (17,403) $84,701
Net Sales to Dow Brands 16,371 - 16,371
------ ------- -------
Total Net Sales 118,475 (17,403) 101,072
Cost of Goods Sold 69,626 (9,510) 60,116
------ ------- ------
Gross Margin 48,849 (7,893) 40,956
Selling, General and Administrative Expenses 66,375 (4,841) 61,534
------ ------ ------
Operating Loss (17,526) (3,052) (20,578)
Interest Expense (2,236) - (2,236)
Interest and Other Income 402 - 402
------ ------- -------
Net Loss ($19,360) ($3,052) ($22,412)
======== ======= ========
</TABLE>
Note 1. The adjustment for cost of goods sold and selling, general and
administrative expenses include only expenses directly attributable to the salon
brands sold and does not include overhead costs. The Company will be continuing
to adjust its overhead in recognition of the sale of the salon brands.
<PAGE>
<TABLE>
<CAPTION>
The Lamaur Corporation
Pro Forma Condensed Statement of Operations
Six Months Ended June 30, 1998
(In thousands)
Historical Adjustments Pro Forma
---------- ----------- ---------
Note 1
<S> <C> <C> <C>
Net Sales $42,477 (7,267) $35,210
Cost of Goods Sold 24,467 (3,954) 20,513
------ ------ ------
Gross Margin 18,010 (3,313) 14,697
Selling, General and Administrative 17,745 (1,906) 15,839
Expenses ------ ------- ------
Operating Income (Loss) 265 (1,407) (1,142)
Interest Expense (1,403) - (1,403)
Other Income 44 - 44
------- -------- -------
Net Loss ($1,094) ($1,407) ($2,501)
======= ======= =======
</TABLE>
Note 1
The adjustment for cost of goods sold and selling, general and administrative
expenses include only expenses directly attributable to the salon brands sold
and does not include overhead costs. The Company will be continuing to adjust
its overhead in recognition of the sale of the salon brands.
<PAGE>
<TABLE>
<CAPTION>
THE LAMAUR CORPORATION
PRO FORMA CONDENSED BALANCE SHEET
JUNE 30, 1998
(In thousands, except share and per share data)
(Unaudited)
Historical Adjustments Proforma
------------- --------------- --------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 232 $ - $ 232
Cash escrow account - 500 500
Accounts receivable, net 12,860 (100) 12,760
Inventories 13,372 (3,050) 10,322
Prepaid expenses and other current assets 401 (93) 308
------------- ------------- ---------------
Total current assets 26,865 (2,743) 24,122
Property, Plant and Equipment, Net 18,477 (137) 18,340
Other Assets 51 - 51
------------- ------------- ---------------
Total Assets $ 45,393 $ (2,880) $ 42,513
============= ============= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 12,876 $ - $ 12,876
Accrued expenses 3,120 399 3,519
Accrued salaries, wages and employee-related expenses 1,700 - 1,700
Current portion of long-term debt 1,629 (800) 829
------------- ------------- ---------------
Total current liabilities 19,325 (401) 18,924
Long-Term Debt 15,511 (9,200) 6,311
Stockholders' Equity
Preferred stock, $.01 par value, 4,000,000 shares authorized:
Series A Preferred stock, $.01 par value, 1,000,000 shares issued
and outstanding at June 30, 1998.
($10.0 million liquidation preference) 8,500 - 8,500
Series B Preferred stock, $.01 par value, 763,500 shares issued
and outstanding at June 30, 1998.
($5.0 million liquidation preference) 5,000 - 5,000
Common stock, $.01 par value, 12,000,000 shares authorized,
5,884,468 shares issued and outstanding at June 30, 1998. 59 - 59
Additional paid-in-capital 20,552 - 20,552
Stock subscriptions receivable (50) - (50)
Accumulated deficit (23,504) 6,721 (16,783)
------------- ------------- ---------------
Total stockholders' equity 10,557 6,721 17,278
------------- ------------- ---------------
Total Liabilities and Stockholders' Equity $ 45,393 $ (2,880) $ 42,513
============= ============= ===============
</TABLE>
<PAGE>
Exhibit 99.2
FOR IMMEDIATE RELEASE
For Further Information:
John D. Hellmann
Vice President, Chief Financial Officer
The Lamaur Corporation
(415) 380-8200
THE LAMAUR CORPORATION SELLS ITS PROFESSIONAL SALON
BRANDS TO ZOTOS INTERNATIONAL, INC., A SUBSIDIARY OF SHISEIDO
Mill Valley, CA, July 16, 1998 - The Lamaur Corporation announced today that it
had entered into an asset sale agreement with Zotos International, Inc., a
subsidiary of Shiseido Co., Ltd, Tokyo, Japan for the sale of the Companys
Professional Salon Brands, including goodwill, inventory and other related
assets. The purchase price is anticipated to be $11 million. The transaction is
scheduled to close on or around July 31, 1998 subject to satisfaction of certain
conditions. The proceeds of the sale will be used to pay down a portion of the
Companys bank debt, reduce trade payables and for working capital.
With this sale we will accomplish an important step in our focus on satisfying
creditors by paying down our bank debt and reducing past due obligations to
suppliers, said Don Hoff, chief executive officer. In addition to further
restructuring to lower operating costs, the Company, working together with its
investment bankers, McCabe, Mintz & Company, will continue to pursue its
strategy of selling assets or developing other transactions as necessary to
fully satisfy obligations to creditors and to restructure and redefine the
business with the goal of achieving profitable operations in the future, and
thereby maximizing value for our Preferred and Common Shareholders.
It is too early to make statements regarding the actual path to be pursued as
it is in part dependent upon the steps we take to meet our near term objective
to satisfy our obligations to creditors as well as upon our ability to finance
and sustain operations.
Lamaur very much appreciates the patience and support of our customers and
loyal suppliers as well as the dedication and hard work of employees and
professionals as we work through these complex issues. Said Mr.Hoff.
The foregoing includes certain forward looking statements, including statements
regarding the Companys plans to pursue additional sales of assets or
reorganization of ongoing operations. These statements are subject to a number
of risks and uncertainties, which could cause actual results to vary materially.
These risks and uncertainties include risks that could impede any future asset
sales or other transactions or cause such transactions to be concluded on
unfavorable terms, including third parties interest in the acquisition of
assets of the Company, the price and timing of any potential transactions, and
the Companys ability to successfully negotiate any such transactions while
sustaining the ongoing operations. Additional risks and uncertainties that could
affect the Companys ability to either reorganize or to operate its business
while negotiating significant transactions are described in the Companys
filings with the Securities and Exchange Commission.
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Exhibit 99.3
FOR IMMEDIATE RELEASE
For Further Information:
John D. Hellmann
Vice President, Chief Financial Officer
(415) 380-8200
THE LAMAUR CORPORATION COMPLETES $11 MILLION SALE OF
PROFESSIONAL SALON BRANDS TO SHISEIDO SUBSIDIARY
Mill Valley, CA, August 4, 1998 - The Lamaur Corporation, Lamaur, has
completed its previously announced sale of its Professional Salon brands to
Zotos International, Inc., a subsidiary of Shiseido Co., Ltd., headquartered in
Tokyo, Japan, for $11 million in cash, of which $0.5 million is in escrow. The
proceeds from the sale are being used to pay down a portion of the Companys
bank debt, reduce trade payables and for working capital.
The Lamaur Corporation is a company specializing in the manufacture and sale of
personal hair care products. The Companys brands, WILLOW LAKE, COLOR SOFT,
PERMA SOFT, SALON STYLE, STYLE and STYLE NATURAL REFLECTIONS are distributed
to consumer retail outlets.
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