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: August 29, 1997
J.B. WILLIAMS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-83734 06-1362390
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
Number)
65 Harristown Road, Glen Rock, N.J. 07452
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (201) 251-8100
N/A
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to an Asset Purchase Agreement dated as of August 6,
1997 (the "Asset Purchase Agreement"), on August 29, 1997 (the "Closing
Date"), J.B. Williams Company, Inc., a Delaware corporation (the
"Buyer") and wholly owned subsidiary of J.B. Williams Holdings, Inc.
(the "Registrant"), acquired substantially all of the assets of the San
Francisco Soap Company division of Avalon Natural Cosmetics, Inc., a
California corporation (the "Seller") (such acquired assets constituting
the "Acquired Business"). The assets acquired consisted primarily of
the trademarks "San Fransciso Soap Company" and "Avalon Natural
Cosmetics", the inventory of the Acquired Business, the equipment and
machinery dedicated to the Acquired Business, the intellectual property
relating to the Acquired Business and the goodwill of the Acquired
Business as a going concern. The equipment, machinery and other
physical property so acquired was used by the Seller in the conduct of
the Acquired Business, and will continue to be used by the Buyer in the
conduct of the Acquired Business. As of the date of the Asset Purchase
Agreement, there existed no material relationship between the Buyer and
the Seller and either party's affiliates, nor between any director or
officer of the registrant, or any associate of any such director or
officer. See below for a description of certain non-compete and
consulting agreements entered into between the Buyer and certain
officers and shareholder of the Seller.
The consideration paid to the Seller by the Buyer for the
Acquired Business was $4,000,000 in cash, plus the book value of the
purchased inventory. Of this amount, $2,203,984.68 was deferred until
October 31, 1997. The book value of the purchased inventory was
$5,703,984.68. In addition, the Buyer is required to make five annual
payments during the five years following the Closing equal to 2.5% of
Net Sales during such five year period, with each such annual payment
being in the minimum amount of $250,000. The Buyer also agreed to pay
an additional $2,000,000 to two officers of the Seller (one of whom was
the majority shareholder of the Seller) in return for such persons
entering into five year non-competition agreements in favor of the
Buyer. The Buyer also entered into three year consulting agreements with
these persons, providing for an aggregate annual payment of $300,000.
The source of funds employed in the acquisition of the Acquired
Business was working capital of Holdings. The purchase price paid was
based on the book value of the purchased inventory, with the purchase
price for the remaining assets being the result of arms' length
negotiation between the Buyer and the Seller.
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(c) Exhibits.
Exhibit No. Description
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2.1 Asset Purchase Agreement, dated as of August 6, 1997, by
and between J.B. Williams Company, Inc. and Avalon
Natural Cosmetics, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
J.B. WILLIAMS COMPANY, INC.
Date: October 31, 1997 By: /s/ KEVIN C. HARTNETT
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Kevin C. Hartnett
Chief Financial Officer
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Exhibit Index
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Exhibit No. Description
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2.1 Asset Purchase Agreement, dated as of August 6, 1997, by
and between J.B. Williams Company, Inc. and Avalon
Natural Cosmetics, Inc.
ASSET PURCHASE AGREEMENT
BY AND AMONG
J.B. WILLIAMS COMPANY, INC.
AND
AVALON NATURAL COSMETICS, INC.
AUGUST 6, 1997
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ASSET PURCHASE AGREEMENT
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ASSET PURCHASE AGREEMENT (this "Agreement"), dated August 6,
1997, by and between J.B. WILLIAMS COMPANY, INC., a Delaware corporation
(the "Buyer"), and AVALON NATURAL COSMETICS, INC., a California
corporation (the "Seller").
WHEREAS, the Seller, acting by and through its San Francisco
Soap Company Division (the "SFS Division"), is engaged or has been
engaged in the business of developing, manufacturing and selling the
cosmetic, soap and bath products identified on Exhibit A annexed hereto
and made a part hereof (collectively, the "Products" and individually, a
"Product", such business being hereinafter referred to as the "SFS
Business"); and
WHEREAS, the Buyer desires to purchase from the Seller and the
Seller desires to sell to the Buyer substantially all of the assets
constituting the SFS Business as a going concern; and
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, agreements and
conditions hereinafter set forth, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I.
PURCHASE AND SALE OF ASSETS
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1.1. Purchase and Sale of Assets. At the Closing (as
hereinafter defined), the Seller shall sell, transfer, assign and
deliver to the Buyer, and the Buyer shall purchase, accept, assume and
receive, all of the Seller's right, title and interest in, to and/or
arising from the assets owned, used or held for use by the Seller and/or
the SFS Division, or any affiliate thereof, in the conduct of the SFS
Business including, without limitation, the following assets, but
excluding the Excluded Assets as defined below (all such assets, other
than the Excluded Assets, being the "Purchased Assets"):
(a) All finished goods, work-in-process, packaging
materials and raw materials used or held for use in the conduct of
the SFS Business (the "Inventory");
(b) The trademarks or names "San Francisco Soap Company",
"Avalon Natural Cosmetics", "Spanish Bath", "Body/Body", "Bath &
Body Sense", and all other trademarks, trade dress, trade names,
brand names, service marks, logos, logotypes, and packaging style
and symbols which are or have been used at any time in respect of
the manufacture, marketing, promotion, distribution, sale, or
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commercial exploitation of the Products, together with all goodwill
associated therewith, any registrations associated therewith,
including any applications, renewals, modifications or extensions
(collectively, "Registrations"), and all copyrights and slogans, and
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any Registrations associated therewith, all domain names and web
pages and similar internet properties, in any such case that have
been used by the Seller or any affiliate or predecessor owner, or
are under development, in the manufacture, marketing, promotion,
distribution, sale, or commercial exploitation of the Products;
(c) All equipment, machinery, tools, molds, dies, display
units, trade show booths, replacement parts and all other fixed
assets, including, without limitation, those identified on Schedule
1.1(c) hereto;
(d) All existing files pertaining to the manufacture,
production, promotion, advertising, distribution, sale or commercial
exploitation of the Products in whatever format (written or machine
readable, or in computer data bases or other media), including,
without limitation, research and development files and studies,
market studies (including studies in respect of competitor's
brands), copies of consumer complaint files, sale histories, quality
control histories, files relating to the Manufacturing Know-How (as
hereinafter defined), and any and all other business records
relating to the Products or the SFS Business generally;
(e) All (i) formulae, techniques and technical,
processing and manufacturing knowledge and know-how including,
without limitation, (ii) all new developments, inventions,
processes, techniques and ideas, including as to batch processing,
all trade secrets, technology, know-how, information relating to
shelf life and stability of the Products, patents and Registrations
therefor, and (iii) all papers, documentation, blue prints,
drawings, compositions, diaries, notebooks, schematics,
specifications, designs, methods of manufacture and production
relating to all of the Purchased Assets described in subparagraphs
(i) and (ii) of this Section 1.1(e), in each case which are or have
been owned, used or held for use in the conduct of the SFS Business,
or are under research and development, relating to the manufacture,
promotion, sale or commercial exploitation of the Products or
relating to the SFS Business generally (the "Manufacturing Know-How").
(f) All marketing materials and rights relating to the
promotion, marketing, advertisement or commercial exploitation of
the Products, including slogans, jingles, marketing campaigns,
promotional materials, art, mechanical and artwork for the
production of packaging components, television and radio masters,
film or video clips, sound recordings, photographs and similar
materials, including any Registrations associated therewith, that
have been owned, used or held for use in the conduct of the SFS
Business, or are under development, in the manufacture,
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promotion, sale or commercial exploitation of the Products or relating
to the SFS Business generally including, without limitation, all rights
to UPC codes;
(g) All current and historical lists of customers,
manufacturers, suppliers, vendors and distributors of the SFS
Business, including all pricing information relative to each of the
foregoing;
(h) All claims, causes of action and other rights against
others relating to the Purchased Assets or the SFS Business;
(i) All rights under the trade agreements and the other
agreements, whether oral or in writing, identified on Schedule
1.1(i) of the schedules (the "Disclosure Schedule") annexed hereto
and made a part hereof (the "Assigned Agreements") including,
without limitation, all agreements between the Seller, the SFS
Division or any affiliate thereof with manufacturers, vendors or
suppliers of the Products of the SFS Business or any raw materials
relating thereto (the "Supply Agreements"), each such Supply
Agreement being set forth on Schedule 1.1(j) of the Disclosure
Schedule;
(j) All rights under or pursuant to all warranties,
representations and guaranties made by manufacturers, suppliers or
vendors in connection with the Products, the SFS Business or
relating in any manner to the Purchased Assets (except to the extent
that the Seller is obligated to deal with products covered by such
warranties, representations and guaranties);
(k) All good will of the SFS Business including, without
limitation, all good will attributable to the Products and the other
Purchased Assets;
(l) To the extent assignable, all permits, governmental
licenses, filings, authorizations, approvals and other indicia of
authority (and pending applications for any thereof) used or held
for use in the conduct of the SFS Business;
(m) All prepaid expenses, deferred charges and cash
advanced by customers of the SFS Business and prepayments made to
and rights to volume discounts from manufacturers, suppliers,
distributors and vendors of the SFS Business including, without
limitation, those identified in Section 1.1(m) of the Disclosure
Schedule; and
(n) All other assets set forth in Section 1.1(n) of the
Disclosure Schedule.
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1.2. Excluded Assets. The following assets of the SFS Business are
expressly excluded from the Purchased Assets being acquired by the Buyer
hereunder (collectively, the "Excluded Assets"):
(a) The corporate minute books and stock records of the
Seller;
(b) Any rights which the Seller may have to enforce the
obligations of the Buyer pursuant to this Agreement and the other
documents and agreements contemplated hereby;
(c) The books of account and other records which are
required by law to be kept in the Seller's possession including, but
not limited to, Tax Returns (as hereinafter defined), except that
Buyer shall be given access to such books and records as reasonably
necessary or desirable for the conduct by the Buyer of the SFS
Business and to prepare and make any filings, reports, returns or
other items with any Governmental Authority (as hereinafter defined)
from and after the Closing;
(d) All oral or written contracts, agreements and
arrangements, other than the Assigned Contracts, of the Seller or
the SFS Business, including, without limitation, all agreements or
arrangements, whether oral or written, relating to the present or
former employees, agents, consultants, representatives or other
personnel employed or engaged for or on behalf of the SFS Business;
(e) All land, buildings, leases, licenses or any other
ownership or other interest in real estate used, owned, held for use
or otherwise leased or subleased in the conduct of the SFS Business
or for or on behalf of the SFS Business;
(f) All refunds of Taxes (as hereinafter defined) for all
periods ending on or prior to the Closing Date (as hereinafter
defined);
(g) All accounts receivable relating to transactions
taking place on or before the Closing Date; and
(h) Corporate records relating to accounts payable,
payroll, banking, accounts receivable, and employees of the SFS
Business, in each case for all periods prior to the Closing Date.
1.3. Assumed Liabilities. Except with respect to anything
constituting an Excluded Liability pursuant to Section 1.4, below, at
the Effective Time (as hereinafter defined), Buyer shall assume and
shall be responsible for (a) all obligations of the Seller as set forth
in the Assigned Agreements arising after the Effective Time
(collectively, the
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"Assumed Contracts"), (b) the trade and consumer promotions expressly
identified as being assumed by the Buyer on Section 1.3 of the
Disclosure Schedule (collectively, the "Assumed Liabilities") and (c)
any liabilities or obligations relating to or arising after the Closing
Date from the SFS Business or the conduct thereof including, without
limitation, breach of product warranties, product liability and
liability in tort. Without limiting the generality of the foregoing,
the Buyer shall be solely and exclusively liable for all liabilities or
obligations as a result of any act, omission, or event occurring after
the Effective Time. The Buyer shall, directly or indirectly, discharge
and satisfy in full when due the Assumed Liabilities.
1.4. Excluded Liabilities. Except as set forth in Section
1.3(a) and (b) above, neither the Buyer nor any of its affiliates shall
assume any liabilities or obligations of the Seller, the SFS Division or
any of their respective affiliates or predecessor owners, or any
liabilities or obligations relating to or arising prior to the Closing
from the SFS Business or the conduct thereof including, without
limitation, (a) breach of product warranties, product liability and
liability in tort (including in either case unripened liabilities due to
Products manufactured by or on behalf of Seller, any affiliate or
predecessor owner of the Seller, the SFS Division or the SFS Business or
any other manufacturer, or liabilities from actions or sales occurring
prior to the Effective Time), (b) indebtedness for borrowed money, (c)
Tax liabilities, (d) obligations to present or former employees, agents,
representatives or other personnel, (e) contract or other agreements not
constituting an Assumed Contract, (f) all liabilities relating to the
Excluded Assets, (g) all liabilities for the violation or breach of any
Environmental Laws (as hereinafter defined) and (h) all liabilities for
trade and consumer promotions arising prior to the Effective Time, in
any case whether known or unknown, fixed or contingent, absolute,
conditional or otherwise. Without limiting the generality of the
foregoing, the Seller, the SFS Division or any of their respective
affiliates or predecessor owners, as the case may be, shall remain
solely and exclusively liable for all liabilities or obligations as a
result of any act, omission or event occurring prior to the Effective
Time, whether or not the related cause of action or damage occurred
after the Effective Time. All liabilities and obligations retained by
the Seller, its affiliates or predecessor owners as described in this
Section 1.4, are collectively referred to herein as the "Excluded
Liabilities." After the Effective Time, the Seller shall, directly or
indirectly, discharge and satisfy in full when due the Excluded
Liabilities.
ARTICLE II.
CONSIDERATION FOR TRANSFER
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2.1. Consideration. The aggregate consideration to be paid or
provided for the SFS Business and the Purchased Assets shall be, and
such consideration shall be delivered, as follows:
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(a) On the Closing Date, Buyer shall deliver to Seller
(i) Four Million Dollars ($4,000,000) and (ii) the book value of the
Inventory, as reflected on the Inventory Valuation Statement (as
hereinafter defined), less Two Million Dollars ($2,000,000)
(constituting the Deferred Payment referred to below), in each case
by wire transfer on the Closing Date of immediately available funds
to the account designated by Seller at least two (2) days prior to
the Closing Date (the "Closing Cash Payment");
(b) On or before October 31, 1997, Buyer shall deliver to
Seller Two Million Dollars ($2,000,000), by wire transfer of
immediately available funds to the account designated by Seller
pursuant to Section 2.1(a), together with interest on such amount at
the applicable federal rate of interest pursuant to Code Section
1274 from the Closing Date to the date of payment (the "Deferred
Payment");
(c) After the Effective Time and at the periods specified
in Section 2.3 below, Buyer shall deliver to Seller annual payments
during the five (5) year period following the Closing (the
"Contingent Payment Period"), equal to two and one-half percent
(2.5%) of the annual Net Sales (as hereinafter defined) of the Buyer
from sales of the Products during the Contingent Payment Period (the
"Contingent Payment"). There shall be an annual minimum payment in
respect thereof equal to $250,000 (the "Minimum Annual Payment");
and
(d) The assumption by the Buyer of the Assumed
Liabilities set forth in Section 1.3 hereof.
As used herein, the term "Purchase Price" shall mean the
Closing Cash Payment, plus the Deferred Payment, plus the Contingent
Payment, as the same are determined and adjusted (if applicable) as
provided in this Article II.
In the event that the book value of the Inventory as reflected
on the Inventory Valuation Statement is in excess of Five Million Five
Hundred Thousand Dollars ($5,500,000), then, at the Buyer's option, the
Closing Cash Payment attributable to the Inventory may be reduced by the
amount of the excess, and the Deferred Payment shall be increased by the
account of the excess (together with interest thereof as specified in
Section 2.1 (b)).
2.2. Inventory Valuation.
(a) The Seller shall cause Buchanan, Chiao & Smith, its
auditors ("Seller's Auditors"), to conduct a physical count of the
Inventory one (1) day prior to the Closing. One or more
representatives of Buyer shall be entitled to be present during such
physical count.
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(b) The book value of the Inventory as of the Closing
shall be based on the results of such physical count, and shall be
determined in good faith and in accordance with generally accepted
accounting principles, consistently applied with prior periods to
the extent applicable ("GAAP"), and shall comply with the
representations set forth in Sections 4.5 and 4.7 hereof. Except as
would otherwise be required by GAAP, finished goods in Inventory
will be valued at the standard cost value which shall be determined
in accordance with Section 4.7(c); provided, however, that no value
shall be given to promotional items in excess of $80,000.
(c) At the Closing, the Seller shall deliver to the Buyer
an officer's certificate as to the book value of the Inventory,
which shall include a certification of the Seller that the book
value of the Inventory was determined in accordance with this
Section 2.2 (the "Inventory Valuation Certificate").
(d) The Buyer shall have thirty (30) days following the
Closing to dispute the book value of the Inventory as reflected on
the Inventory Valuation Certificate. Disputes with respect to the
Inventory Valuation Certificate (an "Inventory Valuation Dispute")
shall be dealt with as provided in Section 2.4 of this Agreement.
2.3. Contingent Payments.
(a) For the one (1) year anniversary of the Closing Date
and each of the four anniversaries thereafter (each, a "Contingent
Payment Date"), Buyer shall determine in good faith its Net Sales
from the Products for the twelve (12) month period ending on the
applicable Contingent Payment Date. As used herein, the term "Net
Sales" shall mean sales revenues from completed sales of the
Products during the relevant period, less (i) returns and
adjustments, (ii) performance and buying allowances, (iii) credits
attributable to allocated unsaleables and accounts receivable
disputes, and (iv) customer and other cash discounts.
(b) The Buyer shall deliver to the Seller within five (5)
business days of each Contingent Payment Date the amount of
$250,000, representing the Minimum Annual Payment for such period.
Within thirty (30) days of each Contingent Payment Date, Buyer shall
deliver to Seller an officer's certificate as to the Net Sales of
the Buyer for the relevant period, which shall include a
certification of the Chief Financial Officer of the Buyer that the
Net Sales were determined in accordance with Section 2.3 of this
Agreement (each, a "Net Sales Certificate"). The Buyer shall also
deliver at the same time a copy of its internal sales report as
back-up to the Net Sales Certificate.
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(c) Seller shall have fifteen (15) days following receipt
of each Net Sales Certificate to dispute the Net Sales of Buyer
reflected therein (a "Net Sales Dispute"). If Seller has a Net
Sales Dispute, such dispute shall be dealt with in the manner set
forth in Section 2.4 of this Agreement.
(d) Unless Seller shall have a Net Sales Dispute and
shall have delivered a Dispute Notice (as hereinafter defined) in
respect thereof to Seller in the manner required by Section 2.4
below, then Buyer shall deliver to Seller, by wire transfer of
immediately available funds, to the account designated in writing
from time to time by the Seller, two and one-half percent (2.5%) of
the Net Sales reflected on the applicable Net Sales Certificate
within forty-five (45) days following the relevant Contingent
Payment Date, less $250,000 representing the Minimum Annual Payment
previously made in respect of such Contingent Payment Date.
2.4. Inventory and Net Sales Dispute Resolution.
(a) If the Buyer has an Inventory Valuation Dispute or if
the Seller has a Net Sales Dispute, the Buyer or Seller, as
applicable, shall deliver to the other party written notice (a
"Dispute Notice") (i) within thirty (30) days after (i) Closing (in
the case of a Inventory Valuation Dispute) or (ii) within fifteen
(15) days after receipt of Net Sales Certificate (in the case of a
Net Sales Dispute), in each case setting forth in reasonable detail
a description of the dispute. Within ten (10) days after delivery
of any such Dispute Notice, the Seller and the Buyer shall meet at a
mutually acceptable time and place and thereafter as often as such
parties reasonably deem necessary and shall, in good faith,
cooperate in an attempt to resolve such dispute and agree in writing
upon an appropriate resolution. Without limiting the generality of
the foregoing, in connection with any such dispute, the Seller and
the Buyer, as applicable, and their respective auditors agree to
furnish the other party and its accountants and agents with full
access to all working papers, books, records, financial data and
other documentation used in the calculation of the book value of the
Inventory or Net Sales from Products, as applicable.
(b) If any Inventory Valuation Dispute or Net Sales
Dispute is not finally resolved within twenty (20) business days
after delivery of a Dispute Notice or if the parties shall fail to
meet within ten (10) days after the delivery of a Dispute Notice,
then the dispute shall be referred to KPMG Peat Marwick (the
"Arbitrator") for resolution in accordance with the terms hereof
(the "Arbitration"), and in any event as soon as practicable. The
Buyer and the Seller represent and warrant that such Arbitrator is
an independent entity which has not represented, nor has had any
other business or financial relationship with, such party or any
affiliate thereof within the past ten (10) years.
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(c) In the event that KPMG Peat Marwick is then unwilling
or unable to serve as the Arbitrator, the parties hereto shall
select by mutual written agreement another nationally recognized
certified public accounting firm to serve as the Arbitrator, which
firm is not then rendering (and during the preceding ten (10) year
period has not rendered) services to any party hereto or any
affiliate thereof, nor shall such firm then have or have had during
the past ten (10) years any other business or financial relationship
with such party or affiliate thereof.
(d) The Arbitrator shall hold a hearing within thirty
(30) days of the submission of the Inventory Valuation Dispute or
Net Sales Dispute, as applicable, for arbitration (the "Hearing")
and shall render a decision within thirty (30) days of the
conclusion of such hearing. In preparation for its presentation at
such Hearing, the Buyer and Seller, as applicable, may depose such
directors, officers, employees or agents of the other party and
their respective auditors, as it may deem reasonably necessary for
such preparation. Each party hereto may file with the Arbitrator
such briefs, affidavits and supporting documents as they deem
appropriate. The Buyer or Seller, as applicable, shall afford the
Arbitrator with the access provided to the other party to any
documentation used in the calculation of the book value of the
Inventory or the Net Sales from Products, as applicable. Any
decision made by the Arbitrator within the scope of its authority
shall be final, binding and non-appealable.
(e) The Arbitrator shall only be authorized on any one
issue to decide in favor of and choose the position of either of the
parties hereto or to decide upon a compromise position between the
ranges presented by the parties to such arbitration. The Arbitrator
shall base its decision solely upon the presentations of the parties
hereto at the Hearing and any materials made available under Section
2.4 (d) or (e) hereof and not upon independent review.
(f) The Arbitrator's decision regarding its final
resolution of any Inventory Valuation Dispute or Net Sales Dispute
(the "Arbitrator's Decision") shall be in writing, shall set forth
the calculations made in reaching its decision, shall describe the
manner in which such calculations were made and shall include a
representation that the manner so used was in accordance with this
Agreement and, in the case of an Inventory Valuation Dispute, in
accordance with GAAP.
(g) Any such Arbitration shall take place in such
location reasonably convenient to the principal business location of
Buyer as Buyer shall designate unless the parties shall mutually
agree on another location. The Arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. <section><section> 1 through
16, and judgment upon the award of the Arbitrator may be entered by
any court having jurisdiction thereof.
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(h) In the case of an Inventory Valuation Dispute or Net
Sales Dispute, the fees and expenses of the Arbitrator shall be
borne (A) by the Buyer in the event that the Seller's calculation of
the book value of the Inventory as reflected on the Inventory
Valuation Certificate, or Net Sales for the relevant period, as
applicable, was closer in dollar amounts to the Arbitrator's
determination than was the Buyer's calculation thereof, and (B) by
the Seller in the event that the Buyer's calculation of the book
value of the Inventory or Net Sales for the relevant period as
reflected on the applicable Net Sales Certificate, as applicable,
was closer in dollar amounts to the Arbitrator's determination than
was the Seller's calculation thereof.
(i) Notwithstanding anything to the contrary herein
contained, each of the parties hereto shall bear its own costs and
expenses related to any Arbitration. Upon the request of the
Arbitrator, each party hereto agrees to enter into an arbitration
agreement providing reasonable protection to the Arbitrator, in such
form as may be mutually acceptable to the Arbitrator and the parties
hereto.
(j) In the case of an Inventory Valuation Dispute, if the
Arbitrator determines that the book value of the Inventory as of the
Closing Date was overstated on the Inventory Valuation Certificate,
then the Purchase Price shall be reduced dollar for dollar in
accordance with such determination. The Seller shall refund the
amount thereof to the Buyer by wire transfer of immediately
available funds to an account designated by Buyer within ten (10)
days of receipt of a copy of the Arbitrator's decision.
(k) In the case of a Net Sales Dispute, if the Arbitrator
determines that the Net Sales of the Buyer for the relevant period
was understated in the applicable Net Sales Certificate, two and
one-half percent (2.5%) of such Net Sales, as determined by the
Arbitrator, shall be delivered to the Seller by wire transfer of
immediately available funds to the account designated from time to
time by the Seller within ten (10) days from Buyer's receipt of a
copy of the Arbitrator's Decision.
2.5. Allocation. The consideration for the SFS Business and the
Purchased Assets shall be allocated by the Buyer and the Seller by
mutual agreement as promptly as practicable following the Closing. Such
allocation shall be used for all purposes, including the preparation and
filing of Internal Revenue Service Form 8594 with respect to the
transactions contemplated hereby.
2.6. Non-Competition Payments. The Seller agrees to make the
following payments in respect of the Non-Competition Agreements:
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(a) On the Closing Date, Buyer shall deliver to Mark A. Egide
One Million Dollars ($1,000,000) by wire transfer on such date of
immediately available funds to the account designated by such
person at least two (2) days prior to the Closing Date.
(a) On the Closing Date, Buyer shall deliver to Stacey Egide One
Million Dollars ($1,000,000) by wire transfer on such date of
immediately available funds to the account designated by such
person at least two (2) days prior to the Closing Date.
2.7. Special Agreement Concerning Certain Inventory. The
parties agree that any Inventory that does not meet the representation
specified in Section 4.7(a)(iii) by reason of being in excess of a six-
month supply shall be excepted from the Purchased Assets unless the
Buyer shall agree to include any such Inventory in the Purchased Assets
by written notice to the Seller. Such Inventory that is excepted from
the Purchased Assets may not be sold within the same channels as the
Inventory is normally sold in the ordinary course of business, but may
be sold to other purchasers as mutually agreed by Buyer and Seller.
ARTICLE III.
THE CLOSING AND TRANSFER OF THE PURCHASED ASSETS
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3.1. Conditions to Each Party's Obligations Under this
Agreement. The respective obligations of each party under Article I and
Article II of this Agreement shall be subject to the satisfaction, or
the waiver by such party hereto, at or prior to the Closing, of each of
the following conditions precedent:
(a) Any notice to, approval by, consent of or filing with
any Governmental Authority applicable to the consummation of the
sale and purchase of SFS Business and the Purchased Assets under
applicable law shall have been given, obtained or made, as
applicable, or any waiting period relating to any of the foregoing
shall have expired or been terminated;
(b) The representations and warranties of the other party
contained herein shall be true in all respects on and as of the
Closing Date with the same force and effect as if made on and as of
such date (except as they may specifically relate to another date)
and each of the parties hereto shall have performed in all respects
all obligations and agreements, and complied in all respects with
all covenants, contained in this Agreement, to be performed and
compiled with by such party at or prior to the Closing Date; and
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(c) No injunction, restraining order or other ruling or
order issued by any court of competent jurisdiction or any
Governmental Authority or other law, rule, regulation, legal
restraint or prohibition preventing the purchase and sale of the SFS
Business or the Purchased Assets, and no investigation by any
Governmental Authority, shall be in effect as of or shall have
commenced on or prior to the Closing Date, and no action, suit or
proceeding brought by any Governmental Authority shall be pending or
threatened as of the Closing Date which seeks any injunction,
restraining order or other order which would prohibit the purchase
and sale of the SFS Business or the Purchased Assets or cause the
Buyer to be unable to own the Purchased Assets or to conduct and
operate the SFS Business after the Closing.
3.2. Closing. The transfer of Purchased Assets contemplated by
this Agreement (the "Closing") shall occur at the offices of Cummings &
Lockwood, Four Stamford Plaza, Stamford, Connecticut, at 10:00 a.m.,
Eastern Standard Time, on August 29, 1997, or such other date prior
thereto as the parties shall mutually agree (the "Closing Date"). The
effective time of the Closing shall be 11:59 p.m.. on the Closing Date
(the "Effective Time").
3.3. Deliveries by the Buyer. At the Closing, the Buyer shall
deliver the following, which deliveries shall be a condition to the
Seller's obligation to close:
(a) The Closing Cash Payment required by Section 2.1(a);
(b) A certified copy of resolutions of the Board of
Directors of the Buyer providing authority for the execution,
delivery and performance of this Agreement and the transactions
contemplated hereby;
(c) An instrument of assumption in respect of the Assumed
Liabilities in substantially the form of Exhibit B annexed hereto
and made a part hereof;
(d) A certificate, dated the Closing Date, substantially
in the form of Exhibit C annexed hereto and made a part hereof,
executed on behalf of the Buyer by a duly authorized officer of the
Buyer, to the effect that the Buyer has fulfilled the conditions
specified in Section 3.1(b);
(e) the consideration provided for in Sections 2.6(a) and
2.6(b); and
(f) Such other instruments or documents as may be
reasonably requested by Seller in connection with the transactions
contemplated hereby.
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3.4. Deliveries by the Seller. Except with respect to the delivery
specified in Section 3.4(g), which shall be delivered no later than
October 31, 1997, at or prior to the Closing, the Seller shall deliver
the following, which deliveries shall be a condition to the Buyer's
obligation to close:
(a) Wire transfer instructions of the Seller, Mark A.
Egide and Stacy Egide;
(b) A duly executed amendment to the Article of
Incorporation of the Seller, and all terminations or amendments to
the foreign qualifications, registrations, fictitious name, doing
business and similar filings, registrations or certificates of the
Seller deleting and removing any trademarks referred to in Section
1.1(b) hereof or any variation of such trademarks including, without
limitation, the trademarks "San Francisco Soap Company" and "Avalon
Natural Cosmetics," in each case in a form reasonably acceptable to
Buyer and suitable for filing with each applicable Governmental
Authority;
(c) A bill of sale and assignment for the Purchased
Assets in substantially the form of Exhibit D annexed hereto and
made a part hereof;
(d) The Inventory Valuation Certificate;
(e) Trademark, patent and copyrights assignments
contemplated by this Agreement, in a form appropriate for filing
with the United States Patent and Trademark Office or the United
States Copyright Office, as applicable;
(f) Assignments of the Assumed Contracts and, in the case
of each of the Supply Agreements (if any), each such assignment
shall be countersigned and accepted by the manufacturer, supplier or
vendor providing goods or services to the SFS Business under the
applicable Supply Agreement;
(g) Release letters from all creditors of the Seller
identified on Schedule 3.4(g) for obligations relating to or
effecting the SFS Business or all or any portion of the Purchased
Assets, or other proof of payment reasonably satisfactory to the
Buyer;
(h) A certified copy of resolutions of the Board of
Directors of the Seller and its shareholders providing authority for
the execution, delivery and performance of this Agreement and the
transactions contemplated hereby;
(i) A certified copy of the Certificate of Incorporation
and Bylaws of the Seller, each as amended as of the date of the
Closing;
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(j) An opinion of Anderson, Zeigler, Disharoon, Gallagher
& Gray, counsel to Seller, in substantially the form of Exhibit D-1
hereto;
(k) A certificate, dated the Closing Date, substantially
in the form of Exhibit E annexed hereto and made a part hereof,
executed on behalf of the Seller by a duly authorized officer of the
Seller, to the effect that the Seller has fulfilled the conditions
specified in Section 3.1(b);
(l) UCC-3 termination statements with respect to
financing statements filed against the SFS Business or all or any
portion of the Purchased Assets, together with any consents of
lenders or other third parties required for the consummation of the
transactions contemplated hereby; and
(m) Such other instruments or documents as may be
reasonably requested by Buyer in connection with the transactions
contemplated hereby.
3.5. Closing Agreements. At the Closing, the parties shall, as
a condition to each party's obligations hereunder, execute, acknowledge
and deliver such instruments or documents as may be necessary or
appropriate to carry out the transactions contemplated by this Agreement
and to comply with the terms hereof including, without limitation, the
following:
(a) Non-Competition and Non-Solicitation Agreements, duly
executed by Seller and Mark and Stacey Egide (the "Principals") in
favor of the Buyer, each in substantially the form of Exhibit F
annexed hereto and made a part hereof (the "Non-Competition
Agreements"); and
(b) Consulting Agreements, duly executed by the
Principals and the Buyer, each in substantially the form of Exhibit
G annexed hereto and made a part hereof (the "Consulting
Agreements").
(c) A Transitional Services Agreement in respect of
certain services to be provided by the Seller in substantially the
form attached hereto as Exhibit H.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND THE SUBSIDIARIES
----------------------------------
The Seller represents, warrants and covenants to the Buyer as
follows:
4.1. Organization and Qualification.
(a) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its organization, with all requisite power and authority and legal
right to own, operate and carry on its business as conducted
including, without limitation, the SFS Business. The Seller is duly
qualified to do business and is in good standing in every
jurisdiction where the nature of its businesses require such
qualification, except in such jurisdictions where the failure to so
qualify would not have a material adverse effect on the business,
revenues, financial condition, properties, assets or prospects of
the SFS Business (a "Material Adverse Effect"). Each jurisdiction
where the Seller is so qualified to conduct the SFS Business is
listed in Section 4.1(a) of the Disclosure Schedule.
(b) The Seller has delivered to the Buyer complete and
correct copies of the Seller's Articles of Incorporation and By-
laws, each as amended as of and through the date hereof and as of
and on the Closing Date.
4.2. Authorization. The Seller has full corporate power,
authority and legal right to execute and deliver and to perform its
obligations under this Agreement, the Non-Competition Agreement of the
Seller, and all other agreements, documents, certificates and other
instruments contemplated hereby or required herein to which Seller is a
party or by which Seller's assets or properties are bound (the "Seller
Related Agreements"). The execution and delivery of this Agreement and
the Seller Related Agreements by the Seller and the performance by the
Seller of its obligations hereunder and thereunder have been duly
authorized by all requisite action, including, without limitation, by
its Board of Directors and stockholders. No other action on the part of
the Seller is necessary to authorize the execution and delivery of this
Agreement or the Seller Related Agreements, or the performance of the
Seller's obligations hereunder and thereunder. This Agreement and the
Seller Related Agreements have been or will be duly and validly executed
and delivered by the Seller and constitute or will constitute legal,
valid and binding obligations of the Seller, enforceable against the
Seller in accordance with their respective terms, except to the extent
that such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and remedies
generally.
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4.3. No Violation. Neither the execution and delivery of this
Agreement and the Seller Related Agreements by the Seller nor the
performance by the Seller of its obligations hereunder or thereunder
will:
(a) Violate or result in any breach of any provision of
the Articles of Incorporation and By-laws of the Seller, each as
amended;
(b) Except as reflected on Section 4.3(b) of the
Disclosure Schedule, violate, conflict with or result in a violation
or breach of, or constitute a default (with or without due notice or
lapse of time or both), or permit the termination of, or require the
consent of any other party to, or result in the acceleration of, or
entitle any party to accelerate any obligation, or result in the
loss of any benefit, or give rise to the creation of any options,
pledges, security interests, liens, mortgages, claims, debts,
charges, voting agreements, voting trusts or other encumbrances or
restrictions on transfer of any kind whatsoever (each, an
"Encumbrance") upon any of the Purchased Assets or the SFS Business,
under or pursuant to any contract, agreement or arrangement, whether
oral or in writing, to which the SFS Business, all or any portion of
the Purchased Assets, the Seller or the Seller's assets or
properties is bound; or
(c) Violate any order, writ, judgment, injunction,
decree, statute, law, rule, regulation or ordinance of any court or
Governmental Authority applicable to the SFS Business, the Purchased
Assets, the Seller or the Seller's properties or assets.
4.4. Consents and Approvals. Other than the consents and
approvals of or filings or registrations listed on Section 4.4 of the
Disclosure Schedule, no filing or registration with, no notice to and no
permit, authorization, consent or approval of any Governmental
Authority, or any other person or entity, whether under applicable law,
order, statute, rule or regulation, foreign or domestic, or under any
contract, agreement or arrangement, whether oral or in writing, is
necessary for the execution and delivery of this Agreement and the
Seller Related Agreements, the consummation of the purchase and sale of
the SFS Business and the Purchased Assets, or to enable the Buyer to
continue to conduct the SFS Business and own, use and operate the
Purchased Assets after the Closing in a manner which is consistent with
that in which the SFS Business and the Purchased Assets is presently
conducted, owned, used and operated, as applicable.
4.5. Financial Statements. The Seller has delivered to the Buyer
copies of the audited balance sheet and statements of income,
shareholders equity and cash flows of the Seller as and for the fiscal
years ended March 31, 1997, the three month stub period ended March 31,
1996, and the calendar years ended December 31, 1995 and 1994 (the
"Year-End Financials"), and the unaudited balance sheet of the Seller as
of June 30, 1997
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(the "Interim Balance Sheet" and, together with the Year-End Financials,
the "Financial Statements"). Such Financial Statements, including,
without limitation, the notes thereto, are true and correct in all
respects, and have been prepared in accordance with GAAP consistently
followed throughout the periods indicated. The Seller has delivered to
the Buyer internally generated sales reports for the SFS Business, which
reports have been prepared in the ordinary course of Seller's business
from the Seller's books and records, and represent actual, bona fide
transactions, and accurately reflect the sales of the SFS Business for
the periods indicated.
4.6. Absence of Undisclosed Liabilities. As of the date hereof
and the Closing Date, the SFS Business has no liability (whether
accrued, absolute, contingent or otherwise, and whether then due or to
become due), and no loss contingency, except as reflected on the
Financial Statements, which would be required to be included in any
financial statement in accordance with GAAP, consistently applied with
prior periods, and the Seller has no knowledge of any valid basis for
the assertion of any of the foregoing.
4.7. Inventory.
(a) All finished goods in Inventory and that shall be
reflected on the Inventory Valuation Certificate are (i) of good and
merchantable quality, saleable and usable in the ordinary course of
business (including the packaging thereof) and, without limiting the
generality of the foregoing, are not obsolete, (ii) in conformity
with all applicable warranties and guaranties made by the Seller or
the SFS Business, and (iii) at levels not in excess of more than a
six month supply per SKU based on past practice, and not excessive
in relation to the circumstances of the SFS Business and in
accordance with past inventory stocking practices of the SFS
Business. There will be sufficient finished goods of each category
of Product for the continuation of sales of the Products in the
ordinary course by Buyer for the three (3) month period following
the Closing Date, based on Seller's experience in the past year (and
without interruption other than minor interruptions consistent with
Seller's past experience).
(b) The SFS Business does not have any open orders with
respect to which it has been prepaid, in whole or in part, or has
received deposits or other advances.
(c) The "standard cost value" for a Product is the
anticipated average cost of raw materials for such Product plus
direct labor costs associated with the manufacture of the Product
plus a fixed overhead allocation as shown on Schedule 4.7(c) of the
Disclosure Schedule. Inventory shall be valued based on the
"standard cost value" applicable to said Inventory at the time of
its manufacture
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(e.g., Inventory manufactured in 1995 shall be valued based on
standard cost values in effect in 1995).
4.8. Absence of Certain Changes. Except as disclosed in
Section 4.8 of the Disclosure Schedule, since the date of the Interim
Balance Sheet, the Seller has conducted the SFS Business only in the
ordinary and usual course and, without limiting the generality of the
foregoing, since the date of the Interim Balance Sheet, there has not
been:
(a) Any event, change or condition of any character in or
on the business, properties, assets, financial condition, results of
operations or prospects of the SFS Business or the Seller as a whole
which, individually or in the aggregate, has had or could reasonably
be expected to have a Material Adverse Effect;
(b) Any sale, lease, license, Encumbrance or other
transfer or disposition of any material assets or properties of the
SFS Business (either singly or in the aggregate);
(c) Any entry into any agreement not terminable at will
or having an aggregate value in excess of $50,000 relating to the
SFS Business;
(d) Any material change in the sales practices of the
sales force of the SFS Business, including without limitation,
attempts by the sales force to cause customers to accelerate
purchases;
(e) Any material damage, destruction or loss to the
Purchased Assets, whether or not covered by insurance, which may
have a Material Adverse Effect;
(f) Any material change by the Seller in its financial or
tax accounting principles or methods;
(g) Any amendment or termination of any of the Assumed
Contracts; or
(h) Any failure by the Seller to take all reasonable
efforts, consistent with past practices of the Seller, to preserve
the goodwill of the SFS Business with suppliers, customers and
others with which the SFS Business has business relationships.
4.9. Title to Assets; Condition of Property.
(a) Except as reflected in Section 4.9(a) of the
Disclosure Schedule, the Seller has good and marketable title to all
of the Purchased Assets,
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free and clear of any and all Encumbrances. Except as set forth in
Section 4.9(a) of the Disclosure Schedule, the Purchased Assets
constitute all of the material assets employed in the conduct of the
SFS Business and all of the assets necessary to permit the Buyer to
conduct the SFS Business consistent with prior practices and as
heretofore conducted by the Seller, from and after the Closing.
(b) All of the properties and assets used in the conduct
of the SFS Business are in good operating condition and repair in
accordance with industry practice (subject only to ordinary wear and
tear arising out of the use for which such properties and assets
were designed) and sufficient for the conduct of the normal
operations of the SFS Business as presently conducted.
4.10. Contracts.
(a) Section 1.1(b) and Section 1.1(k) of the Disclosure
Schedule sets forth a list of all of the Assumed Contracts. Except
as disclosed in Section 4.10(a) of the Disclosure Schedule, the
Assumed Contracts, individually or as a group, are all of the oral
or written contracts or agreements material to the conduct of the
SFS Business.
(b) The Seller is not in default with respect to any
obligation to be performed under any of the Assumed Contracts.
(c) The Seller has no knowledge of any default by any
third party under any Assumed Contract, nor is the Seller aware of
any fact, condition or event, including, without limitation, the
execution, delivery and performance of this Agreement, that may
cause a default by any third party or may cause any third party to
terminate any Assumed Contracts. There exists no event, occurrence,
condition or act which, with the giving of notice or the lapse of
time, would become a default by the Seller or, to Seller's
knowledge, any third party under any Assumed Contract, the result of
which could have a Material Adverse Effect.
(d) Except as set forth in Section 4.10(d) of the
Disclosure Schedule, no consent by, notice to or approval from any
third party is required under any of the Assumed Contracts, or under
any other oral or written agreement of the Seller or the SFS
Business, as a result of or in connection with the execution,
delivery or performance of this Agreement and the Seller's Related
Agreements and the consummation of the transactions contemplated
hereby and thereby and such Assumed Contracts shall continue in full
force and effect following the consummation of the transactions
contemplated hereby and thereby.
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4.11. Employee Retirement Income Security Act of 1974 and Other
Employment Matters.
(a) Except as otherwise disclosed on Section 4.11(a) of
the Disclosure Schedule, the Seller has not established, and does
not maintain or contribute to, or has any obligation to contribute
to, or has any liability with respect to, any plan, program,
arrangement, agreement or commitment which is an employment,
consulting or deferred compensation agreement, or an executive
compensation, incentive bonus or other bonus, employee pension,
profit-sharing, savings, retirement, stock option, stock purchase,
severance pay, life, health, disability or accident insurance or
vacation, plan, program, arrangement, agreement or commitment
relating to or affecting (or which may affect) the SFS Business or
the Purchased Assets, including, without limitation, any "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (individually, an
"Employee Plan", and collectively, the "Employee Plans").
(b) All obligations of the Seller, whether arising by
operation of law, by contract or by past custom, for payments to
trusts or other funds or to any Governmental Authority or to any
individual, director, officer, employee or agent (or his or her
heirs, legatees or legal representatives) with respect to
unemployment compensation or Social Security benefits (or similar
benefits under foreign laws, rules and regulations), or for vacation
or holiday pay, overtime, bonuses and other forms of compensation,
relating to or affecting (or which may affect) the SFS Business or
the Purchased Assets, which are payable to its directors, officers,
employees or agents, have been paid when due.
(c) There is no petition, charge, claim or other
complaint against the Seller pending before the National Labor
Relations Board or any comparable organization, domestic or foreign,
including, without limitation, any such claims brought by any
workers' counsel or trade union relating to or affecting (or which
may affect) the SFS Business or the Purchased Assets.
(d) There is no labor strike, formal dispute, formal
grievance, lockout or work stoppage pending or threatened against
the Seller relating to or affecting (or which may affect) the SFS
Business or the Purchased Assets.
4.12. Environmental Matters.
(a) The Seller has not engaged in the generation, use,
manufacture, treatment, transportation, storage (in tanks or
otherwise), or disposal of Hazardous Substances (as hereafter
defined) in connection with the operation of the SFS Business.
Except as disclosed in Section 4.12 of the Disclosure Schedule,
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no Hazardous Substances have been released, emitted or disposed of,
or otherwise deposited, on, in or from any real property used in
connection with the SFS Business. No activity has been undertaken
by Seller on real property used in connection with the SFS Business
that caused or contributed to or could cause or contribute to: (i)
such property being deemed a treatment, storage or disposal facility
within the meaning of the Resource Conservation and Recovery Act
("RCRA") or any similar state law or local ordinance; (ii) a release
or threatened release of any Hazardous Substances; or (iii) the
discharge of Hazardous Substances into any soil, subsurface water or
ground water or into the air, or the dredging or filling of any
waters, that would require a permit or any other approval under the
Federal Water Pollution Control Act, the Clean Air Act, as amended,
or any similar federal or state law or local ordinance.
(b) Except as disclosed in Section 4.12 of the Disclosure
Schedule, the Seller has no notice of any pending or threatened
claims, investigations, administrative proceedings, litigation,
regulatory hearings or requests or demands for remedial or response
actions or for compensation, with respect to any real property used
in connection with the SFS Business alleging noncompliance with or
violation of any Environmental Law or seeking relief under any
Environmental Law, and none of such real property is listed on the
United States Environmental Protection Agency's National Priorities
List of Hazardous Waste Sites, or any other list, schedule, log,
inventory or record of hazardous waste sites maintained by any
federal, state or local agency.
(c) Except as set forth in Section 4.12 of the Disclosure
Schedule, there are no environmental reports, studies, analyses or
similar items regarding any real property used in connection with
the SFS Business.
(d) Except as set forth in Section 4.12 of the Disclosure
Schedule, to the Seller's knowledge, the Seller is, and always has
been, in compliance with all Environmental Laws in connection with
the operation of the SFS Business.
(e) "Environmental Laws" means:
(i) The Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund
Amendments and Reauthorization Act and/or the Solid Waste
Disposal Act, as amended by RCRA and/or the Toxic Substances
Control Act and/or the Federal Insecticide, Fungicide and
Rodenticide Act and/or the Clean Air Act and/or the Federal
Water Pollution Control Act and/or the Safe Drinking Water Act
including any amendments or extensions thereof; and
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(ii) All applicable present statutes, laws,
regulations, rules, ordinances, codes, licenses, permits,
guidelines, standards, orders, requirements, approvals, plans,
authorizations, concessions, franchises, and similar items of
all Governmental Authorities, and all applicable judicial,
administrative, and regulatory decrees, judgments, and orders
relating to pollution and/or the protection of human health
and/or the environment, including, without limitation those
pertaining to reporting, licensing, permitting, investigating,
and remediating emissions, discharges, releases, or threatened
releases of Hazardous Substances, whether solid, liquid, or
gaseous in nature, into the air, surface water, groundwater, or
land, or relating to the manufacture, processing, distribution,
use, generation, treatment, removal, storage, disposal,
transport, or handling of Hazardous Substances, whether solid,
liquid or gaseous in nature.
(f) "Hazardous Substances" shall means: (i) any petroleum
or petroleum products, flammable explosives, radioactive material,
asbestos in any form that is or could reasonably be expected to
become friable, urea formaldehyde foam insulation and transformers
or other equipment that contain dielectric fluid containing levels
of polychlorinated biphenyls; (ii) any chemicals or other materials
or substances which are defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials,"
''extremely hazardous wastes,'' "restricted hazardous wastes,''
toxic substances," "toxic pollutants'' or words of similar import,
under any Environmental Law; and (iii) any other chemical or other
material or substance, exposure to which is prohibited, limited or
regulated by any Environmental Law or Governmental Authority.
4.13. Compliance with Applicable Laws; Permits and Licenses.
(a) Except as set forth in Section 4.13(a) of the
Disclosure Schedule, to the Seller's knowledge, the Seller holds,
and at all relevant times has held, all licenses, franchises,
permits, consents and authorizations necessary for the lawful
conduct of the SFS Business, and the SFS Business is not being and
has not been conducted in violation of any provision of any federal,
state, local or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, concession, grant, franchise, permit,
consent or license or other authorization or approval of any court
or any Governmental Authority.
(b) Except as set forth in Section 4.13(b) of the
Disclosure Schedule, the Seller has no knowledge or notice of any
failure by the Seller to comply with any federal, state, local or
foreign statute, law, ordinance, rule, regulation, judgment, decree,
order, concession, grant, franchise, permit, consent or
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license or other authorization or approval of any court or any
Governmental Authority applicable to the SFS Business.
(c) Section 4.13(c) of the Disclosure Schedule sets forth
all of the licenses, franchises, permits, consents and
authorizations known by Seller to be necessary for the lawful
conduct of the SFS Business.
4.14. Brokers' Fees and Commissions. Except for a fee payable
to Credit Lyonnais, which is the sole responsibility of the Seller,
neither the Seller nor its affiliates nor any of their respective
directors, officers, employees or agents has employed any investment
banker, broker, finder or intermediary, and no fee or other commission
is owed to any third party, in connection with the transactions
contemplated herein.
4.15. Proprietary Rights.
(a) Set forth in Section 4.15(a) of the Disclosure
Schedule is a list of all patents, copyrights, trademarks and trade
names included in the Purchased Assets (hereinafter referred to as
the "Proprietary Rights"), and whether any Registrations have been
obtained or applied for in respect of such Proprietary Rights. All
Registrations of the Proprietary Rights are current and in good
standing, none have lapsed, been terminated, abandoned or forfeited,
and no renewal or expiration of any such Registration is scheduled
to occur at any time within the next six (6) months. The Seller is
the sole and exclusive owner of the Proprietary Rights, and has the
sole and exclusive right to use, license, sublicense, assign or sell
the Proprietary Rights without liability to, or consent of, any
person or entity.
(b) The use of the Proprietary Rights does not infringe
upon the rights of any person or entity, whether or not registered,
patented or copyrighted. The Seller has not received any notice of
a claim of such infringement nor were any such claims the subject of
any action, suit or proceeding involving the Seller.
(c) The Seller has no knowledge of any infringement or
improper use by any person or entity of the Proprietary Rights, nor
has the Seller or any affiliate instituted any action, suit or
proceeding in which an act constituting an infringement of any of
the Proprietary Rights was alleged to have been committed by any
person or entity.
(d) There are no licenses, sublicenses or agreements
relating to (i) the use by any person or entity of the Proprietary
Rights or (ii) the use by the Seller of the Proprietary Rights, and
there is no prior right of any person or entity or other impediment
which would invalidate or adversely affect all or any portion of the
Proprietary Rights in any jurisdiction.
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(e) Set forth in Section 4.15(e) of the Disclosure
Schedule is a true and complete list of the current formulations and
product methodologies for all Products of the SFS Business.
4.16. Computer Software. Section 4.16 of the Disclosure Schedule
identifies (i) all of the software and computer databases (collectively,
the "Computer Systems") that are material to the conduct of the SFS
Business, (ii) whether such Computer Systems are owned or licensed by
the Seller and, (iii) if licensed, the name of such licensor. The
Seller has all legal right to use the Computer Systems as they are
currently being used. The use of the Computer Systems does not infringe
upon the rights of any other person or entity, nor has the Seller
received any notice of a claim of such infringement. Except as set
forth in Section 4.15 of the Disclosure Schedule, there are no licenses,
sublicenses or other agreements relating to the use of the Computer
Systems by the Seller or any other person or entity.
4.17. Regulatory Reports. To the Seller's knowledge, the Seller
has filed all material reports, registrations and statements, together
with any amendments required to be made with respect thereto, that they
were required to file in respect of the SFS Business or any Product of
the SFS Business in the last five (5) year period with any court or
Governmental Authority, and has paid all fees or assessments due and
payable in connection therewith. No court or Governmental Authority has
initiated any proceeding or investigation into the business or
operations of the SFS Business, nor has the Seller initiated any such
proceeding. There is no unresolved violation, criticism or exception by
any court or Governmental Authority with respect to any report or
statement relating to an examination of the SFS Business or any Product
thereof.
4.18. Agreements with Governmental Authorities. Except as set
forth in Section 4.18 of the Disclosure Schedule, the Seller is not
subject to any cease-and-desist or other order issued by, or a party to
any written agreement or memorandum of understanding with, any court or
Governmental Authority relating to or affecting (or which may affect)
the SFS Business or any Product thereof.
4.19. Customers and Suppliers of the Seller; Promotions.
(a) Section 4.19(a) of the Disclosure Schedule contains
an accurate and complete list of the twenty largest customers of the
SFS Business based on sales volume in the twelve-month period ended
March 31, 1997 (the "Key Customers"). Except as set forth in Section
4.19(a) of the Disclosure Schedule, the Seller's relationship with the
Key Customers is good and the Seller is not aware of any fact,
condition or event (including, without limitation, the consummation of
the transactions contemplated hereby) which would adversely affect the
relationship of the Seller with its Customers.
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(b) The Seller has not received any notice from or is
otherwise unaware of any curtailment or intended price increase by any
material supplier, manufacturer or vendor of the SFS Business, or the
curtailment of any material amount of services or supplies or other
proposed action which could have a Material Adverse Affect. The
Seller's relationship with Kappus GmbH & Co. is good and the Seller is
not aware of any fact, condition or event (including, without
limitation, the consummation of the transactions contemplated hereby)
which would adversely affect the relationship of Buyer with such
supplier.
(c) Trade and Consumer Promotions. Set forth on Section
4.19(c) of the Disclosure Schedule is a detailed description of all
trade and consumer promotions that are now in effect or have been in
effect at any time in the past twenty-four months, including, without
limitation, coupons, rebate and similar programs, two-for-one/buy one
get one free and similar offers, and co-op advertising programs.
4.20. Representatives. Section 4.20 identifies the sales
representatives of the SFS Business. All sales representatives of the
SFS Business can be terminated without penalty or liability on thirty
(30) days' notice. Except as set forth on such Section 4.20, the SFS
Business does not and has not engaged any representatives or sales
agents, other than as employees of the SFS Business, authorized to sell
Products or promote services of the SFS Business.
4.21. Products and Product Warranty.
(a) All Products of the SFS Business manufactured,
processed, assembled, distributed, shipped or sold and any services
rendered in the conduct of the SFS Business have been in conformity
with all applicable contractual commitments and all express or
implied warranties. No liability exists, and no liability is
anticipated to arise for damages in connection with such sales or
deliveries. Section 4.21(a) of the Disclosure Schedule sets forth
an accurate, correct and complete statement of all written
warranties and warranty policies of the SFS Business and its
Products. All warranties are in conformity with the labeling and
other requirements of applicable laws. The Product warranty and
return experience of the SFS Business for the three (3) years ended
as of the date hereof is set forth in Section 4.21 of the Disclosure
Schedule.
(b) The Products set forth on Exhibit A annexed hereto
constitute all products of the SFS Business whether now existing,
under development or discontinued at any time within thirty-six
months prior to the date hereof.
4.22. Product Liability. Section 4.22 of the Disclosure Schedule
sets forth an accurate, correct and complete list and summary
description of all existing claims,
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duties, responsibilities, liabilities or obligations arising from or
alleged to arise from any injury to person or property as a result of
the ownership, possession or use of any Product of the SFS Business
manufactured or sold prior to the date hereof and the Closing Date. All
such claims are or will be fully covered by product liability insurance
or otherwise provided for and the Seller shall properly satisfy and
discharge all such claims. There have been no recalls, and none are
threatened or pending, and no report has been filed or is required to
have been filed with respect to any Products of the SFS Business under
any applicable law, rule or regulation. To the knowledge of the Seller,
no circumstances exist affecting the safety of the Products of the SFS
Business which would result in any reporting obligations to any
Governmental Authority or any other person or entity or could result in
a claim against Buyer after the Closing.
4.23. Taxes.
(a) Except as set forth in Section 4.23 of the Disclosure
Schedule, the Seller has:
(i) Timely filed or caused to be filed with each
applicable Governmental Authority all federal, state, local and
foreign returns (the "Tax Returns") for Taxes (as hereinafter
defined) required to be filed by the Seller or the SFS Business
(including, without limitation, estimated Tax Returns,
employer's withholding Tax Returns, other withholding Tax
Returns and Federal Unemployment Tax Returns);
(ii) Made available to the Buyer complete and
accurate copies of such Tax Returns; and
(iii) Paid or caused to be paid, or have made
adequate provision or set up an adequate reserve for the
payment of, all Taxes required to be paid in respect of the
periods for which such Tax Returns are due.
(b) The Seller is not a party to any Action or Proceeding
pending or threatened for the assessment or collection of Taxes in
respect of the SFS Business, nor has any claim or assessment for
collection of any such Taxes been asserted against the Seller or the
SFS Business, and there is no audit examination, deficiency or
refund litigation or matter in controversy with respect to any Taxes
that might result in a determination the effect of which could have
a Material Adverse Effect. No claim by any taxing department or
authority is pending in any jurisdiction where the Seller does not
file Tax Returns to the effect that the Seller's conduct of the SFS
Business is or may be subject to taxation by that jurisdiction.
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(c) For the purposes of this Agreement, the term "Tax" or
"Taxes" shall include all taxes, charges, withholdings, fees,
levies, deficiencies, penalties, fines, additions, interest or other
assessments imposed by federal, state or local, and any foreign or
other taxing Governmental Authority including, but not limited to,
those related to income, franchise, gross receipts, gross income,
sales, use, excise, gains, value added, occupation, unemployment,
withholding, workers' compensation, services, leasing, valuation,
transfer, license or customs duties.
4.24. Insurance. Section 4.24 of the Disclosure Schedule sets
forth an accurate, correct and complete list and summary description
(including the name of the insurer, type of coverage, premium, policy
number, limits of liability for personal injury and property damage and
expiration date) of all binders, policies of insurance, self insurance
programs or fidelity bonds, other than bonds for Taxes (collectively the
"Insurance Policies"), maintained by the Seller with respect to the SFS
Business, the Purchased Assets or in which the SFS Business is a named
insured. All of the Insurance Policies have been issued under valid
policies or binders, and all such Insurance Policies or binders are in
amounts and for risks, casualties and contingencies customarily insured
against by enterprises with operations and assets similar to those of
the SFS Business. All of the Insurance Policies are currently valid,
issued, outstanding and enforceable and each of the Insurance Policies
shall remain in full force and effect at least through the respective
expiration dates set forth in Section 4.24 of the Disclosure Schedule.
If the Seller receives, prior to the Closing Date, any notice of
cancellation or other termination of any such Insurance Policies, the
Seller shall replace or cause to be replaced such Insurance Policies
with policies of insurance providing substantially the same coverage not
later than a date prior to the effective date of any such cancellation
or other termination.
4.25. Powers of Attorney; Guaranties. Except as set forth in
Section 4.25(a) of the Disclosure Schedule, the Seller has no power of
attorney, revocable or irrevocable, which remains outstanding as of the
date hereof or will be outstanding as of the Closing Date, and was given
by the Seller to any person, firm organization, or other entity for any
purpose whatsoever, nor does there exist any obligation or liability on
the part of the Seller, either actual, accrued, accruing or contingent,
as guarantor, surety, co-signer, endorser, co-maker or indemnitor in
respect of the obligation of any person, firm, organization or other
entity. Section 4.25(a) of the Disclosure Schedule contains an accurate
and complete list of the powers of attorney, revocable or irrevocable,
which have been granted to the Seller and which remain effective as of
the date hereof or which will be granted or be effective as of the
Closing Date.
4.26. Litigation. Except as set forth in Section 4.26 of the
Disclosure Schedule, there is no action, proceeding or investigation
pending or threatened against the Seller, its affiliates, the SFS
Business or the Purchased Assets, before any court, arbitrator or
administrative or Governmental Authority, nor is there any judgment,
decree, injunction,
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rule or order of any court, Governmental Authority outstanding against,
and unsatisfied by the Seller relating to the SFS Business or the
Purchased Assets, nor does the Seller know of any fact, event or
condition which could reasonably be expected to serve as a basis for the
assertion of any such action or proceeding.
4.27 Transactions with Insiders. Except with respect to (a)
the ownership by Seller or an Insider (as hereafter defined) of real
property used in connection with the SFS Business, and (b) the Seller's
Tisserand and Beauty Without Cruelty businesses, , no Insider: (i) owns,
directly or indirectly, any debt, equity or other interest or investment
in any corporation, association or other entity which is a competitor,
lessor, lessee, customer, manufacturer, supplier or advertiser of the
SFS Business, or otherwise has a business relationship with the Seller
or its affiliates; (ii) has pending or threatened any action, proceeding
or investigation against or owes any amount to, or is owed any amount
by, the Seller, other than for amounts accrued in the ordinary course of
employment; (iii) has any interest in or owns any property or right used
in the conduct of the SFS Business; (iv) has lent or advanced any money
to, or borrowed any money from, or guaranteed or otherwise become liable
for any indebtedness or other obligations of the Seller, which loans,
debts or guarantees are now outstanding or will be outstanding on the
Closing Date; or (v) is a party to any Assumed Contract. The term
"Insider" shall mean the Seller or any director, officer, or shareholder
of the Seller, or any partner or member of the immediate family of any
of the foregoing.
4.28. Absence of Questionable Payments. Neither the Seller or
its affiliates nor any of their respective directors, officers,
shareholders, or, to Seller's knowledge, their employees or agents or
any other person or entity acting on their behalf (i) has made any
unlawful political contributions, (ii) has received any payments,
services or gratuities which were not legal to receive or which the
Seller or such persons or entities should have known were not legal for
the payor or the provider to make or provide, or (iii) has made any
unlawful payments or given or agreed to give any gift or similar benefit
of more than nominal value to governmental officials in their individual
capacities for the purpose of assisting the Seller in securing or
retaining any business opportunity, contract, permit or license or in
conducting its usual and customary operations or in clearing the
shipment of goods through customs in any country, which in each case,
has affected or may affect the SFS Business or the Purchased Assets.
4.29. Non-Compete Agreements. No agreement, understanding or
arrangement, whether oral or written, restricts the ability of the
Seller to own, possess or use the Purchased Assets or conduct the SFS
Business in any geographic area or region, or to compete against any
person or entity.
4.30. Disclosure. No representation or warranty as to the
Seller, any affiliate of the Seller, the Purchased Assets or the SFS
Business contained in this
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Agreement and no statement contained in the Disclosure Schedule or any
document, instrument or agreement delivered by the Seller pursuant
hereto or in connection herewith contains any untrue statement of a
material fact, or omits to state any material fact necessary, in light
of the circumstances under which it was made, in order to make the
statement herein or therein not misleading.
4.31. Knowledge of the Seller, Etc. To the extent that the Seller
represents and warrants to have had knowledge or belief as to any event,
fact, condition or other matter set forth in this Agreement, "knowledge"
or "belief" (or similar words) shall mean the knowledge or belief of the
directors of the Seller, and the officers of the Seller employed in the
SFS Business.
4.32. Copies of Documents. The Seller has caused to be made
available for inspection and copying by the Buyer and its advisers true,
complete and correct copies of all documents referred to in any Section
of the Disclosure Schedule.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
The Buyer represents, warrants and covenants to the Seller as
follows:
5.1. Organization and Qualification.
(a) The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of its organization,
with all requisite power and authority to own, operate and lease its
properties and assets and to carry on its business as it is now
being conducted, and is qualified or licensed to do business and is
in good standing in each jurisdiction in which the ownership or
leasing of property by it or the conduct of its business requires
such licensing or qualification, except in such jurisdictions
wherein the failure to so qualify would not have a material adverse
effect on the respective business, revenues, financial condition,
properties, assets or prospects of the Buyer and its subsidiaries,
taken as a whole.
(b) The Buyer has delivered to the Seller complete and
correct copies of the Buyer's Certificate of Incorporation and By-
laws, each as amended as of and on the date hereof and as of and on
the Closing Date.
5.2. Authorization. The Buyer has full corporate power,
authority and legal right to execute and deliver and to perform its
obligations under this Agreement and all other agreements, documents,
certificates and other instruments contemplated hereby or required
herein to which Buyer is a party or by which Buyer's assets or
properties are bound (the "Buyer Related Agreements"). The execution
and delivery of this Agreement
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and the Buyer Related Agreements by the Buyer and the performance by the
Buyer of its obligations hereunder and thereunder have been duly
authorized by all requisite action including, without limitation, by its
Board of Directors. No other action on the part of the Buyer is
necessary to authorize the execution and delivery of this Agreement or
the Buyer Related Agreements, or the performance of the Buyer's
obligations hereunder and thereunder. This Agreement and the Buyer
Related Agreements have been or will be duly and validly executed and
delivered by the Buyer and constitute or will constitute legal, valid
and binding obligations of the Buyer, enforceable against the Buyer in
accordance with their respective terms, except to the extent that such
enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights and remedies generally.
5.3. No Violation. Neither the execution and delivery of this
Agreement and the Buyer Related Agreements by the Buyer, nor the
performance by the Buyer of its obligations hereunder and thereunder,
will:
(a) Violate or result in any material breach of any
provision of the Certificate of Incorporation or By-laws of the
Buyer;
(b) Violate any order, writ, judgment, injunction,
decree, statute, rule or regulation of any court or Governmental
Authority applicable to the Buyer or its properties or assets which,
any case, could reasonably be expected to have a material adverse
effect on the business, revenues, financial condition, results of
operations, properties, assets or prospects of the Buyer.
(c) Violate, conflict with or result in a violation or
breach of, or constitute a default (with or without due notice or
lapse of time or both), or permit the termination of, or require the
consent of any other party to, or result in the acceleration of, or
entitle any party to accelerate any obligation, or result in the
loss of any benefit, or give rise to the creation of any options,
pledges, security interests, liens, mortgages, claims, debts,
charges, voting agreements, voting trusts or other encumbrances or
restrictions on transfer of any kind whatsoever, which in any such
case could have a material adverse impact on the ability of the
Purchaser to perform this Agreement, the Non-Competition Agreement
or the Consulting Agreement.
5.4. Consents and Approvals. No filing or registration with,
no notice to and no permit, authorization, consent or approval of any
person or entity or any Governmental Authority is necessary for the
consummation by the Buyer of the transactions contemplated hereby and
under the Buyer Related Agreements.
5.5. Broker's Fees and Commissions. Neither the Buyer nor any
of its shareholders, directors, officers, employees or agents has
employed any investment banker,
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broker, finder or intermediary, and no such fee or other commission is
owed to any third party, in connection with the transactions
contemplated herein.
5.6. Disclosure. No representation or warranty as to the Buyer
contained in this Agreement and no statement made by the Buyer in the
Disclosure Schedule contains any untrue statement of a material fact, or
omits to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statement
herein or therein not misleading.
5.7. Financial Statement. The Buyer has delivered to the
Seller copies of its audited financial statements for the year ended
December 31, 1997 as contained in its Annual Report filed with the
Securities and Exchange Commission. Such financial statements,
including, without limitation, the notes thereto, are true and correct
in all respects, have been prepared in accordance with GAAP consistently
followed throughout the periods indicated.
ARTICLE VI.
COVENANTS OF THE SELLER
-----------------------
The Seller hereby agrees to keep, perform and fully discharge
the following covenants and agreements:
6.1. Interim Conduct of SFS Business. From the date hereof until
the Closing, the Seller shall preserve, protect and maintain the SFS
Business and the Purchased Assets, and shall operate the SFS Business
consistent with prior practice and in the ordinary course of business.
Without limiting the generality of the foregoing, from the date hereof
until the Closing, except for transactions expressly approved in writing
by the Buyer, the Seller shall, with respect to the SFS Business:
(a) Maintain the properties of the SFS Business and
Purchased Assets in good repair, order and condition, reasonable
wear and tear excepted;
(b) Maintain and keep in full force and effect all
insurance on the Purchased Assets, all liability and other casualty
insurance, and all bonds on personnel, presently carried;
(c) Preserve intact the organization and reputation of
the SFS Business and the good will of suppliers, manufacturers,
vendors, customers and others having business relationships with the
SFS Business;
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(d) Not sell, lease or otherwise dispose of or agree to
sell, lease or otherwise dispose of all or any portion of the
Purchased Assets, other than in the ordinary course of business;
(e) Not amend the [certificate of incorporation or
bylaws] of the Seller;
(f) Not waive any rights nor forgive any debts or claims,
other than in the ordinary course of business;
(g) Continue to meet the contractual obligation of, and
to pay obligations relating to, the Purchased Assets and the SFS
Business as they mature in normal course, consistent with past
practice, including accounts payable and all other liabilities and
obligations related to the SFS Business in a manner consistent with
past practices; and
(i) Not take any action that would be required to be
disclosed under the terms of Section 4.8.
The Seller shall promptly notify the Buyer of any material
change in the normal course of business or prospects of the SFS Business
and shall keep the Buyer fully informed of such events.
6.2. Cooperation; Access. From the date hereof through the
Closing Date, the Seller shall cooperate fully in assisting the Buyer in
the planning and implementation of a transitional plan for the transfer
of the SFS Business. Without limiting the foregoing, Seller shall
afford to representatives of the Buyer reasonable access to offices,
plants, properties, books and records of the SFS Business in order that
the Buyer may have full opportunity to make such investigations as it
desires with respect to the SFS Business and the Purchased Assets.
6.3. Use of Name. For a period of eighteen (18) months from
the Closing Date, the Buyer shall permit the Seller to use any
tradename, trademark or logo constituting a part of the Purchased
Assets, and the Seller shall permit the Buyer to use any tradename,
trademark or logo constituting a part of the Excluded Assets, on such
items as packaging materials, invoices, sales brochures, etc.; provided,
however, that neither party shall order any new packaging after the date
hereof which bears any of the other party's tradenames, trademarks or
logos; and provided further that neither party shall acquire any
interest in the other party's logos, tradenames and trademarks. In
addition, nothing herein shall restrict the continued existence in the
wholesale or retail marketplace of products bearing such other logos,
tradenames or trademarks after the expiration of eighteen (18) months
following the Closing Date.
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6.4. Transfer of Inventory. Except with respect to the
Inventory purchased by Buyer in accordance with Section 8.5 hereof,
title to the Purchased Assets shall pass to Buyer effective as of the
Effective Time. Seller will retain custody of the tangible Purchased
Assets as a bailee until delivered to Buyer in accordance herewith.
Buyer agrees to make prompt arrangements for the transfer of physical
possession of tangible assets to Buyer, by arranging for pick up by
common carrier or other agent of the Buyer, FOB point of transfer.
6.5. Confidentiality. After the Closing, the Seller shall not
use, publish or disclose to any person or entity (other than the
Seller's attorneys, accountants, or other financial or tax advisers, who
shall be held to the same confidentiality obligations set forth herein)
any confidential or proprietary information comprising part of the
Purchased Assets or relating to the SFS Business; provided, however,
that the foregoing restrictions shall not apply to information: (i) that
is necessary to enforce its rights under or defend against a claim
asserted under this or any other agreement with the Buyer or any
agreement with a third party, (ii) that is necessary or appropriate to
disclose to any regulatory authority or governmental agency having
jurisdiction over the Seller or as otherwise required by law or (iii)
that becomes generally known other than through a breach of this
Agreement by Seller. The Seller acknowledges that there is not an
adequate remedy at law for the breach of this Section 6.5 and that, in
addition to any other remedies available, injunctive relief may be
granted for any such breach.
6.6. Best Efforts. The Seller shall use its best efforts to
consummate the transactions contemplated by this Agreement.
6.7. Further Assurances. Following the Closing, the Seller shall
take all actions reasonably requested by the Buyer to confirm,
facilitate or perfect the transfer of the Purchased Assets.
ARTICLE VII.
COVENANTS OF THE BUYER
----------------------
The Buyer hereby agrees to keep, perform and fully discharge
the following covenants and agreements:
7.1. Best Efforts. The Buyer shall use its best efforts to
consummate the transactions contemplated by this Agreement.
7.2. Further Assurances. Following the Closing, the Buyer
shall take all actions reasonably requested by the Seller to confirm,
facilitate or perfect the transfer of the Purchased Assets.
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ARTICLE VIII.
MUTUAL COVENANTS
----------------
8.1. Bulk Sales Act. The Seller and the Buyer hereby waive
compliance with any applicable bulk sales act governing the purchase and
sale of the Purchased Assets and the Seller agrees to indemnify the
Buyer against any and all Losses (as hereinafter defined) associated
therewith.
8.2. Trade and Consumer Promotions.
(a) The Seller shall promptly discharge and honor all
commitments and obligations with respect to trade promotions,
refunds and similar promotional campaigns arising out of any sales
of Products of the SFS Business prior to or on the Closing Date as
well as any consumer coupons or similar items that were issued or
distributed by the Seller prior to the Closing Date.
(b) The Buyer shall promptly discharge and honor all
commitments and obligations with respect to trade promotions,
refunds and similar promotional campaigns arising out of any sales
of Products of the SFS Business after the Closing Date as well as
any consumer coupons or similar items that will be issued or
distributed by the Buyer after the Closing Date.
8.3. Trade Returns.
(a) Standard Inventory:
(i) For a period of three (3) months after the Closing
Date, returns of standard inventory (i.e., merchandise other than
the holiday merchandise referred to in 8.3(b), below) to Seller from
the trade will be accepted by Seller in accordance with its usual
trade practices. Seller shall credit such returns against the
related accounts receivable, and shall ship the returned goods to
the Buyer. If, during such three (3) month period, returns from the
trade are made to Buyer, Buyer may accept such returns in accordance
with its usual trade practices. Buyer shall notify Seller of such
returns, and Seller shall credit such returns against the related
accounts receivable.
(ii) In the event that there is no outstanding accounts
receivable against which to credit a return as specified in Sections
8.2(a), then Seller shall promptly pay to the Buyer the dollar
amount represented by the return, and Buyer shall be responsible
thereafter for the refund or credit due to the customer.
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(iii) Buyer agrees that it will purchase from Seller returns
from the trade credited as described in Section 8.2(a)(i), above, at the
1997 standard cost value; provided, however, that Buyer shall have
no obligation to purchase such goods unless (i) in full cases; (ii)
in saleable condition in the ordinary course of business in Buyer's
reasonable judgment; and (iii) not in excess of Buyer's reasonable
trade requirements.
(b) Holiday Merchandise: Returns of 1997 Holiday Gift
Sets (as identified by SKU on the attached Schedule 8.3(b)) received
between January 1, 1998 and March 31, 1998 from the trade will be
accepted by Buyer in accordance with its usual trade practices. The
Seller and the Buyer agree that they will share financial
responsibility for such returns based on their relative sales of
individual SKUs during the period from July 1, 1997 through December
31, 1997 to the customer making the return. By way of examples:
(i) if all shipments of a particular SKU to Customer X occurred
prior to the Closing, Seller shall bear all financial responsibility
for returns of such products and shall either credit that amount to
the related outstanding account receivable or reimburse Buyer that
amount for any credit or reimbursement made by Buyer in respect of
such returns; (ii) if one third of shipments of a particular SKU to
Customer Y occurred prior to the Closing and the balance after the
Closing, Seller shall bear one-third of the financial responsibility
for returns of such products and shall either credit that amount to
the related accounts receivable or reimburse Buyer that amount for
any credit or reimbursement made by Buyer in respect of such
returns; and (iii) if all shipments of a particular SKU to Customer
Z occurred after the Closing, Buyer shall bear all financial
responsibility for such returns. The Seller shall pay any amounts
owing to Buyer hereunder within thirty days of receipt of an
Officer's Certificate from Buyer detailing such returns and sales,
together with reasonable substantiation thereof.
8.4. Consumer Returns. For a period of three (3) months from
the Closing Date, Seller shall promptly respond to any consumer
complaints and reimburse consumers for returns of finished goods, in
accordance with Seller's current policies, and send copies of any
correspondence relating thereto to Buyer. After such period, Seller
shall refer any such complaints or returns to Buyer, and Buyer shall be
responsible for responding thereto. Nothing herein shall cause Buyer to
be liable in respect of such consumer complaints except as specifically
provided herein.
8.5. Interim Sales of Inventory. The parties agree that the
Buyer may place orders with the Seller for purchases of Inventory prior
to the Closing in order that Buyer may continue the Business without
interruption. All such inventory shall be priced at the standard cost
value as though such inventory was part of the Purchased Assets. The
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Seller agrees to promptly ship such orders to such location as shall be
designated by the Buyer. Buyer agrees to be responsible for freight and
insurance in respect of such orders.
ARTICLE IX.
SURVIVAL AND INDEMNIFICATION
----------------------------
9.1. Survival. All representations, warranties, covenants and
agreements contained in this Agreement, and in any certificate,
schedule, document or other writing delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be in all
cases deemed to have been relied upon by the parties hereto, and shall
survive the Closing for a period of three (3) years, except that (i) the
representations and warranties set forth in (ii) Section 4.9(a) (Title
to Assets), Section 4.11 (ERISA), Section 4.12 (Environmental) and
Section 4.23 (Taxes) and (ii) the indemnification obligations in respect
of the Excluded Liabilities, shall survive indefinitely. Additionally,
the parties agree that the indemnification obligations set forth in this
Article IX shall survive with respect to any claims made within the
applicable survival period until finally resolved or judicially
determined, including any appeal thereof. The representations,
warranties, covenants and agreements contained in this Agreement or any
certificate, schedule, document or other writing delivered pursuant
hereto shall not be affected by any investigation, verification or
examination by any party hereto or by any person acting on behalf of any
such party.
9.2. Indemnification of the Buyer. From and after the Closing,
the Seller agrees to indemnify, defend and save the Buyer and its
directors, officers, employees, owners, agents and affiliates and their
successors and assigns or heirs and personal representatives, as the
case may be (each a "Buyer Indemnified Party"), harmless from and
against, and to promptly pay to a Buyer Indemnified Party or reimburse a
Buyer Indemnified Party for any and all losses, damages, expenses
(including, without limitation, court costs, amounts paid in settlement,
judgments, reasonable attorneys' fees or other expenses for
investigating and defending, including, without limitation, those
arising out of the enforcement of this Agreement), suits, actions,
claims, deficiencies, liabilities or obligations (collectively, the
"Losses") sustained or incurred by such Buyer Indemnified Party relating
to, caused by or resulting from:
(a) Any misrepresentation or breach of warranty, or
failure to fulfill or satisfy any covenant or agreement made by the
Seller contained herein or in any certificate, schedule, document or
other writing delivered by the Seller pursuant hereto or any
covenant or agreement made by the Seller herein or in any
certificate, schedule, document or other writing delivered by the
Seller pursuant hereto;
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(b) Any liability of the Buyer for causes of action
arising in connection with the SFS Business, the Purchased Assets or
the Assumed Liabilities based, in whole or in part, upon actions or
omissions which occurred prior to the Closing, or relating to the
period prior to the Closing;
(c) The Excluded Liabilities; and
(d) The non-compliance of Seller with the provisions of
any applicable bulk sales act governing the purchase and sale of the
Purchased Assets.
9.3. Indemnification of the Seller. From and after the
Closing, the Buyer agrees to indemnify, defend and save the Seller and
its directors, officers, employees, owners, agents and affiliates and
their successors and assigns or heirs and personal representatives, as
the case may be (each, a "Seller Indemnified Party") harmless from and
against, and to promptly pay to a Seller Indemnified Party or reimburse
a Seller Indemnified Party for, any and all Losses sustained or incurred
by such Seller Indemnified Party relating to, caused by or resulting
from any misrepresentation or breach of warranty, or failure to fulfill
or satisfy any covenant or agreement made by the Buyer contained herein
or in any certificate, schedule, document or other writing delivered by
the Buyer pursuant hereto, any covenant or agreement made by the Buyer
in any certificate, schedule, document or other writing delivered by the
Buyer pursuant hereto, or any liability of the Seller for causes of
action arising in connection with the SFS Business, the Purchased Assets
or the Assumed Liabilities based upon actions or omissions which
occurred following to the Closing, or relating to the period following
the Closing.
9.4. Indemnification Procedure for Third Party Claims Against
Indemnified Parties.
(a) In the event that subsequent to the Closing any Buyer
Indemnified Party or Seller Indemnified Party (each, an "Indemnified
Party") receives notice of the assertion of any claim or of the
commencement of any action, suit or proceeding by any person or
entity which is not a party to this Agreement (including, without
limitation, any Governmental Authority) (a "Third Party Claim")
against such Indemnified Party, with respect to which the Buyer or
the Seller (the "Indemnifying Party"), as the case may be, are
required to provide indemnification under this Agreement, the
Indemnified Party shall promptly give written notice, together with
a statement of any available information regarding such claim
(collectively, the "Third Party Indemnification Notice"), to the
Indemnifying Party within thirty (30) days after learning of such
claim (or within such shorter time as may be necessary to give the
Indemnifying Party a reasonable opportunity to respond to such
claim). The Indemnifying Party shall have the right, upon
delivering written notice to the Indemnified Party (the "Defense
Notice")
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within thirty (30) days after receipt from an Indemnified Party of a
Third Party Indemnification Notice, to conduct, at the Indemnifying
Party's sole cost and expense, the defense against such Third Party
Claim in the Indemnifying Party's own name, or, if necessary, in the
name of the Indemnified Party; provided, however, that the
Indemnified Party shall have the right to reasonably approve the
defense counsel representing the Indemnifying Party, which approval
shall not be unreasonably withheld, and in the event that the
Indemnifying Party and the Indemnified Party cannot agree upon such
counsel within ten (10) days after the Defense Notice is provided,
then the Indemnifying Party shall propose an alternate defense
counsel, which shall be subject again to the Indemnified Party's
reasonable approval in accordance with the terms hereof.
(b) In the event that the Indemnifying Party shall fail
to give the Defense Notice within the time and as prescribed by
Section 9.4(a) hereof, then in any such event the Indemnified Party
shall have the right to conduct such defense in good faith with
counsel reasonably acceptable to the Indemnifying Party, but the
Indemnified Party shall be prohibited from compromising or settling
any such claim without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld and shall be
deemed given in the absence of providing the Indemnified Party with
a written response within ten (10) days of any request therefor. If
the Indemnified Party fails to diligently defend such claim with
counsel reasonably satisfactory to the Indemnifying Party, or
settles any such claim without the Indemnifying Party's prior
written consent or otherwise breaches this Article IX, the
Indemnified Party will be liable for all costs, expenses, settlement
amounts or other Losses paid or incurred in connection therewith and
the Indemnifying Party shall have no obligation to indemnify the
Indemnified Party with respect to such claim.
(c) In the event that the Indemnifying Party does deliver
a Defense Notice and thereby elects to conduct the defense of the
subject Third Party Claim, the Indemnified Party will cooperate with
and make available to the Indemnifying Party such assistance and
materials as the Indemnifying Party may reasonably request, all at
the sole cost and expense of the Indemnifying Party. Regardless of
which party defends such claim, the other party hereto shall have
the right at its own cost and expense to participate in the defense
assisted by counsel of its own choosing. Without the prior written
consent of the Indemnified Party, which consent shall not be
unreasonably withheld, the Indemnifying Party will not enter into
any settlement of any Third Party Claim if pursuant to or as a
result of such settlement, such settlement would lead to liability
or create any financial or other obligation on the part of the
Indemnified Party for which the Indemnified Party is not entitled to
indemnification hereunder. If a firm decision is made to settle a
Third Party Claim, which offer the Indemnifying Party is permitted
to settle
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under this Section 9.4(c), and the Indemnifying Party desires to
accept and agree to such offer, the Indemnifying Party will give at
least five (5) days' prior written notice to the Indemnified Party
to that effect, setting forth in reasonable detail the terms and
conditions of any such settlement (the "Settlement Notice"). If the
Indemnified Party objects to such firm offer within ten (10)
calendar days after its receipt of such Settlement Notice, the
Indemnified Party may continue to contest or defend such Third Party
Claim and, in such event, the maximum liability of the Indemnifying
Party as to such Third Party Claim will not exceed the amount of
such settlement offer described in the Settlement Notice, plus costs
and expenses paid or incurred by the Indemnified Party up to the
point through the date of such Settlement Notice. If an Indemnified
Party settles any Third Party Claim without the prior written
consent of the Indemnifying Party, the Indemnifying Party shall have
no obligation to indemnify the Indemnified Party under this Article IX
with respect to such Third Party Claim.
(d) Any judgment entered or settlement agreed upon in the
manner provided herein shall be binding upon the Indemnifying Party,
and shall be conclusively deemed to be an obligation with respect to
which the Indemnified Party is entitled to prompt indemnification
hereunder, subject to the Indemnifying Party's right to appeal an
appealable judgment or order. Such indemnification shall be
required to be made no later than the tenth (10th) day following the
expiration of any period in which an appeal may be taken, and shall
be satisfied by payment of the amount thereof in cash.
9.5. Failure to Give Timely Third Party Indemnification Notice.
Any failure by an Indemnified Party to give a timely, complete or
accurate Third Party Indemnification Notice as provided in this Article IX
will not affect the rights or obligations of any party hereunder
except and only to the extent that, as a result of such failure, any
party entitled to receive such Third Party Indemnification Notice was
deprived of its right to recover any payment under its applicable
insurance coverage or was otherwise adversely affected or damaged as a
result of such failure to give a timely, complete and accurate Third
Party Indemnification Notice.
9.6. Notice of Claims. In the case of a claim, other than a
Third Party Claim, for indemnification under Section 9.2 or Section 9.3
hereof, upon determination by a Buyer Indemnified Party or a Seller
Indemnified Party, as the case may be, that it has a claim for
indemnification, the Indemnified Party shall deliver notice of such
claim to the Indemnifying Party, setting forth in reasonable detail the
basis of such claim for indemnification (each, an "Indemnification
Notice"). Upon the Indemnification Notice having been given to the
Indemnifying Party, the Indemnifying Party shall have thirty (30) days
in which to notify the Indemnified Party in writing (the "Dispute
Notice") that the amount of the claim for indemnification is in dispute,
setting forth in reasonable detail the
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basis of such dispute. In the event that a Dispute Notice is not given
to the Indemnified Party within the required thirty (30) day period the
Indemnifying Party shall be obligated to pay to the Indemnified Party
the amount set forth in the Indemnification Notice within sixty (60)
days after the date that the Indemnification Notice had been given to
the Indemnifying Party.
In the event that a Dispute Notice is timely given to an
Indemnified Party, the parties hereto shall have thirty (30) days to
resolve any such dispute. In the event that such dispute is not
resolved by such parties within such period, the parties shall have the
right to pursue all available legal remedies to resolve such dispute.
ARTICLE X.
TERMINATION
-----------
10.1. Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) By written agreement of the Seller and the Buyer at
any time before the Closing;
(b) By the Buyer by written notice to the Seller if the
Closing does not occur on or before August 29, 1997, unless the
failure to close is the result of a breach of this Agreement by the
Buyer seeking termination;
(c) By the Buyer by written notice to the Seller if, the
Buyer during its due diligence investigation of the SFS Business as
contemplated by Section 6.2 of this Agreement, discovers any fact or
series of facts, or any information, regarding the SFS Business that
has or could reasonably have a Material Adverse Effect,
notwithstanding that such discovery does not constitute a breach of
any representation or warranty of the Seller set forth in this
Agreement or any covenant or agreement to be complied with or
performed by the Seller pursuant to this Agreement as provided in
Section 10(d) below;
(d) By the Buyer by written notice to the Seller (i) if
there is a breach of any representation or warranty of the Seller
set forth in this Agreement or any covenant or agreement to be
complied with or performed by the Seller pursuant to this Agreement
which breach has not been cured within thirty (30) days following
the Seller's receipt of written notice of such breach, or (ii) in
the event that all of the Seller's conditions to Closing under this
Agreement have not been satisfied by the Closing Date or waived by
the Buyer;
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(e) By the Seller by written notice to the Buyer (i) if
there is a breach of any representation or warranty of the Buyer set
forth in this Agreement or any covenant or agreement to be complied
with or performed by the Buyer pursuant to this Agreement which
breach has not been cured by the Buyer or waived by the Seller
within thirty (30) days following receipt of written notice of such
breach, or (ii) in the event that all of the Sellers' conditions to
Closing under this Agreement have not been satisfied by the Closing
Date or waived by the Sellers; or
(f) By the Seller or the Buyer by written notice to the
other, at any time before the Closing, in the event that any order
or law becomes effective (and final and non-appealable) restraining,
enjoining, or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this
Agreement.
10.2. Effect of Termination. If this Agreement is validly
terminated pursuant to Section 10.1, this Agreement shall forthwith
become null and void, and there shall be no liability or obligation on
the part of the Seller or the Buyer or any of their respective officers,
directors, employees, agents or other representatives or affiliates,
except that such termination shall not relieve any party hereto of any
liability for any breach of this Agreement or for fraud, and except that
the non-breaching party shall be entitled to reimbursement of its out of
pocket costs incurred in connection with the transaction (including
legal, accounting, travel).
ARTICLE XI.
MISCELLANEOUS PROVISIONS
------------------------
11.1. Waiver; Modification. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by a duly authorized
representative of each of the parties hereto. No waiver by either party
hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time.
11.2. Invalidity. If any provision of this Agreement shall be
determined by any court of competent jurisdiction to be unenforceable or
invalid to any extent, the remainder of this Agreement shall not be
affected thereby, and this Agreement shall be construed to the fullest
extent possible to as to give effect to the intentions of the provision
found unenforceable or invalid.
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11.3. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in
this Agreement, expressed or implied, is intended to confer upon any
other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
11.4. Expenses. Except as otherwise specifically provided for
herein, each party hereto shall bear all expenses incurred by it in
connection with this Agreement including, without limitation, the
charges of its counsel, accountants and other experts.
11.5. Notices. All notices and other communications provided
for hereunder shall be in writing and shall be delivered to each party
hereto by hand or sent by reputable overnight courier, with receipt
verified, or facsimile, with receipt verified, or registered or
certified mail, return receipt requested, addressed as follows:
(a) If to the Buyer:
J.B. Williams Company, Inc.
65 Harristown Road
Glen Rock, New Jersey 07452
Attention: Dario U. Margve
Telephone: (201) 251-8100
Facsimile: (201) 251-8098
With a copy to:
Katherine P. Burgeson, Esq.
Cummings & Lockwood
Four Stamford Plaza
107 Elm Street
Stamford, Connecticut 06904-0120
Facsimile: (203) 351-4499
(b) If to the Seller:
Avalon Natural Cosmetics, Inc.
1129 Industrial Avenue
Petaluma, CA 04952
Telephone: (707) 769-5120
Facsimile: (707) 769-0868
Attention: Mr. Mark A. Egide
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With a copy to:
Kirt F. Zeigler, Esq.
Anderson, Zeigler, Disharoon, Gallagher & Gray
50 Old Courthouse Square
P.O. Box 1498
Santa Rosa, CA 95402
Telephone: (707) 545-4910
Facsimile: (707) 544-0260
or at such other address as either party may specify by notice to the
other party given as aforesaid. Such notices shall be deemed to be
effective when the same shall be deposited, postage prepaid, in the mail
and/or when the same shall have been delivered by hand or overnight
courier, and/or upon facsimile transmission, as the case may be.
11.6. Governing Law; Forum. The validity, interpretation,
construction and performance of this Agreement shall be governed by the
laws of the State of New York without regard to its conflicts of law
principles. The parties hereto do hereby consent and submit to the
venue and jurisdiction of the State or Federal Courts sitting in New
York as the sole and exclusive forum for such matters of dispute, and
further agree that, in the event of any action or suit as to any matters
of dispute between the parties, service of any process may be made upon
the other party by mailing a copy of the summons and/or complaint to the
other party at the address set forth herein and a party's refusal to
accept any such notice shall be equivalent to service.
11.7. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
11.8. Headings. All headings contained in this Agreement are for
reference purposes only and shall not in any way effect the meaning or
interpretation of any provision or provisions of this Agreement.
11.9. Integration. This Agreement, together with the Exhibits
hereto, the Disclosure Schedule, and all other documents to be delivered
in connection herewith, set forth the entire agreement of the parties
hereto in respect of the subject matter contained herein and supersede
all prior and contemporaneous agreements, promises, covenants,
arrangements, understandings, arrangements, communications,
representations or warranties, whether oral or written, by any officer,
employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein
is hereby terminated and cancelled. No agreements or representations,
whether written, oral, express or implied, with respect to the subject
matter hereof have
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been made by either party that are not set forth expressly in this
Agreement and the other documents to be delivered in connection herewith
and therewith.
11.10. Assignment. Neither party may assign its rights hereunder
without the prior written consent of the other party; provided, however,
that the Buyer may assign its rights to any wholly-owned subsidiary of
the Buyer or any successor of the Buyer in connection with the sale of
all or substantially all of the assets of the Buyer, or the merger or
consolidation of the Buyer with another party, provided such affiliate
or successor agrees in writing to be bound to all of the terms and
liabilities of this Agreement to the same extent that the Buyer is
bound. Any assignment in contravention of this Section 11.10 shall be
null and void.
11.11. Publicity. No party shall issue any press release or
public announcement of any kind concerning the transactions contemplated
by this Agreement without the prior written consent of the other parties
hereto, except as may be required by law or by the rules of any stock
exchange, and if so required the parties shall to the extent that it is
reasonably practicable consult with each other prior to such publicity.
The parties agree to issue an announcement following the Closing in form
and content satisfactory to each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
AVALON NATURAL COSMETICS, INC.
By: /s/ MARK A EGIDE
-----------------------------------
Mark A. Egide
President
J.B. WILLIAMS COMPANY, INC.
By: /s/ DARIO U. MARGVE
-----------------------------------
Dario U. Margve
President
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