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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
Date of Report (Date of earliest event reported): January 21, 1999
FRENCH FRAGRANCES, INC.
(Exact name of registrant as specified in its charter)
Florida 1-6370 59-0914138
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
14100 N.W. 60th Avenue
Miami Lakes, Florida 33014
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 818-8000
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(Former name or former address, if changed since last report)
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 21, 1999, French Fragrances, Inc. (the "Company"),
consummated the acquisition (the "PSI Acquisition") of certain assets
of Paul Sebastian, Inc. ("PSI"), a manufacturer, marketer and
distributor of prestige fragrance products, including trademarks or
licenses to manufacture and distribute the fragrance brands PS Fine
Cologne for Men, Design for Women, Design for Men, Casual for Women,
Casual for Men and Cigar Aficionado, inventory, returns, accounts
receivable, books and records, fixed assets (consisting of
manufacturing tools, dyes and molds), claims and goodwill
(collectively, the "Acquired Assets"). The purchase price for the
Acquired Assets consisted of approximately $9.0 million in cash and a
subordinated debenture of $500,000 (the "Debenture"). The purchase
price for the acquisition was based on negotiations between the
Company and PSI. The cash portion of the purchase price was financed
from available cash from operations. The Debenture is non-interest
bearing, with the principal amount being payable in 18 months from the
date of closing of the PSI Acquisition, and is being held by the
Company as security for PSI's indemnification obligations under the
Asset Purchase Agreement. The Company did not assume any facility
leases and intends to use the manufacturing tools, dyes and molds
acquired from PSI for its fragrance operations in the same manner as
PSI used such property.
Included as Exhibit 2.1 is the Asset Purchase Agreement
between the Company and PSI, and as such, the foregoing description is
qualified in its entirety by reference to and incorporation of the
terms and provisions thereof.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of PSI
The financial statements required by this Item will be filed
by amendment not later than 60 days after the date this Form 8-K must
be filed with the Commission.
(b) Pro Forma Financial Information
The financial information required by this Item will be filed
by amendment not later than 60 days after the date this Form 8-K must
be filed with the Commission.
(c) Exhibits
2.1* Asset Purchase Agreement dated as of January 20, 1999,
between the Company and PSI.
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* The exhibits (consisting primarily of conveyance documents and
instruments representing the consideration paid by the Company) and
disclosure schedules to this Agreement setting forth information
relating to the representations, warranties and covenants have been
omitted. The registrant agrees to furnish supplementally copies of
these documents to the Commission upon request.
The foregoing list omits instruments defining the rights of holders
of long term debt of the Company where the total amount of securities
authorized thereunder does not exceed 10% of the total assets of the
Company. The registrant agrees to furnish a copy of such instrument
or agreement to the Commission upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
FRENCH FRAGRANCES, INC.
Date: February 3, 1999 /s/ William J. Mueller
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William J. Mueller
Vice President - Operations and
Chief Financial Officer
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EXHBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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2.1 Asset Purchase Agreement dated as of January 20, 1999,
between the Company and PSI.
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") dated as of
January 20, 1999, is by and between French Fragrances, Inc., a
Florida corporation (the "Buyer"), and Paul Sebastian, Inc., a
New Jersey corporation (the "Seller").
RECITALS
The Seller desires to sell, transfer and assign to the Buyer
and Buyer desires to purchase certain of the assets of Seller's
fragrance manufacturing and distribution business (the
"Business"), as more fully described in Section 1.1, and Buyer
will, as part of the purchase price therefor, assume certain
specific liabilities of the Seller as more fully described in
Section 1.2, all in accordance with the terms and subject to the
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the promises and the
mutual representations, warranties and covenants and subject to
the conditions contained in this Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties, intending to be legally
bound, agree as follows:
ARTICLE I
SALE OF ASSETS
Section 1.1 Subject Assets. The Seller hereby agrees to
sell, assign and deliver to the Buyer at the Closing (as defined
below), free and clear of all liens, mortgages, pledges, options,
claims, security interests, conditional sales contracts, title
defects, encumbrances, charges and other restrictions of every
kind (collectively, the "Liens") all right, title and interest in
and to the assets, properties and rights, together with any
replacements thereof and additions thereto made between the date
hereof and the Closing (as defined in Section 3.1), as hereafter
described in this Section 1.1 and as listed on composite Schedule
1.1 (collectively, the "Subject Assets"), including the
following:
(a) All inventories of the fragrance and cosmetic
brands PS Fine Cologne for Men, Design (for Men and Women),
Casual (for Men and Women), Cigar Aficionado, Nautica (for Men
and Women), Competition, Mark Cross and Jones New York
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(collectively, the "Brands"), including, without limitation,
finished goods and products, packaging, labeling, raw materials,
components, work-in-process, materials, parts, accessories,
supplies, carton, corrugate, shippers, displays, testers,
samples, collateral material and gifts with purchase, all
wherever located and whether now owned or hereafter acquired
(collectively, the "Inventory");
(b) All finished goods, products, materials, samples,
collateral material, accessories and gifts with purchase relating
to the Brands which are returned by customers prior to or
following the Closing Date (as defined in Section 3.1) and which
relate to sales made by the Seller to such customers prior to the
Closing Date and, if returned prior to the Closing Date, are not
part of the Inventory, or resold or destroyed directly by the
Seller (the "Returns");
(c) The tangible assets and properties, wherever
located, relating specifically to the manufacture or assembly of
the fragrance and cosmetic brands PS Fine Cologne for Men, Design
(for Men and Women), Casual (for Men and Women), Cigar
Aficionado, Nautica (for Men and Women) and Competition (the "PSI
Brands"), including, without limitation, existing tools, dies and
molds and other manufacturing equipment or materials as set forth
in Schedule 1.1(c)(the "Fixed Assets");
(d) All of the Seller's accounts and accounts
receivable and related general intangibles relating to its sales
of the Brands (including, without limitation, the Seller's or its
affiliates' lockbox for receipt of funds relating to the accounts
and accounts receivable) (collectively, the "Receivables");
(e) All of the Seller's rights, title and interest in
and to the agreements, purchase orders and commitments that are
listed on Schedule 1.1(e), and any other agreements, purchase
orders or commitments entered between the date hereof and the
Closing Date whose performance extends beyond the Closing Date
and are specifically approved in writing by the Buyer pursuant to
Section 6.2(c) which shall be listed on the Closing Date as an
update to Schedule 1.1(e) (collectively, the "Contracts");
(f) All of the Seller's rights, title and interest in
and to the licenses, permits, approvals and other authorizations
(other than Acquired Intellectual Property which is addressed in
Section 1.1(j) below), issued to it by any governmental
authority, including a court (each, a "Governmental Authority")
which are used in connection with the sale of the Brands or with
respect to the Subject Assets, including those listed on Schedule
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1.1(f), to the extent transferable to the Buyer (the "Regulatory
Licenses");
(g) All proceeds, rights, claims, credits, causes of
action or rights of set-off against third parties relating to the
Subject Assets (other than any claims and causes of actions which
the Seller may have against certain of its shareholders relating
to the Business), including, without limitation, unliquidated
rights under manufacturers' and vendors' warranties other than
Insurance Claims (the "Claims");
(h) All rights and claims pursuant to any policy of
property and casualty insurance underwritten by any person (as
defined in Section 13.15) arising from any casualty loss or
damage (other than those which relate to assets that are not part
of the Subject Assets) to the Subject Assets occurring from the
date hereof through the Closing, whether or not then reported
(the "Insurance Claims");
(i) All books and records pertaining to the Subject
Assets, including, without limitation, books, records and files
relating to customers, manufacturers and suppliers of the Seller,
operating data, business and marketing plans, computer files and
programs, budgets, regulatory filings, warranties, guaranties,
bills of sale, customer and supplier lists, originals of all
documents relating to the Receivables, Inventory, Regulatory
Licenses and the Acquired Intellectual Property, copies of
financial and accounting records, executed Contracts,
correspondence and other similar documents and records used
and/or useful in connection with the Subject Assets
(collectively, the "Records"); and
(j) All patents, patent registrations and
applications, trademarks, trademark registrations and
applications, service marks, service mark registrations and
applications, copyrights, copyright registrations and
applications, trade dress, trade names (whether or not registered
or by whatever name or designation), owned, applied for or used
by, or registered in the name of, the Seller, including, without
limitation, PS, PS (logo), PS Design, PS Design (logo), PS Design
and Design, Design, Design (stylized), Body by Design, Casual,
Casual by Design, Bath and Body Luxuries, Bath and Body Luxuries
(stylized), Flower logo, Chill, Tribecca, Tribecca Body
Sensation, Sensuous Skin, Temeo, V.S.O.P., and Brownstone
(collectively, the "Acquired Intellectual Property"), (ii) all
proprietary data, processes, formulations, technical or
manufacturing know-how or information (and materials embodying
such information), owned by or used by, the Seller in connection
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with the fragrance brands PS Fine Cologne for Men, Design (for
Men and Women), Casual (for Men and Women), Cigar Aficionado,
Nautica (for Men and Women), Competition and any other fragrance
brands previously manufactured by the Seller and all goodwill
relating to the Subject Assets and the Business (collectively
with the Acquired Intellectual Property, the "Intangible
Assets").
Section 1.2 Assumed Liabilities. At the Closing, the
Buyer shall assume and undertake to perform, pay, satisfy or
discharge in accordance with their terms, only the liabilities,
obligations and commitments of the Seller arising or accruing
during the period commencing after the Closing Date under the
Contracts to be assigned to it listed on Schedule 1.1(e) (the
"Assumed Liabilities").
The parties acknowledge and agree that no other liabilities
or obligations of the Seller or its affiliates, whether accrued,
mature, absolute, contingent or otherwise, will be assumed by the
Buyer, including, without limitation, any liability or obligation
with respect to any of the following:
(1) Any product liability or similar claim for injury
to persons or property, regardless of when made or asserted,
which arises out of or is based upon any express or implied
representation, warranty or agreement made by the Seller or its
agents, or which is imposed by operation of law or otherwise, in
connection with any service performed or product manufactured or
sold by or on behalf of the Seller on or prior to the Closing
Date;
(2) Any liability or obligations to any employees,
agents, independent contractors or creditors of the Seller (other
than those set forth in (a) or (b) above in the case of Inventory
purchases) or under any plan or arrangement with respect thereto,
including, without limitation, liabilities and obligations (A)
under any life, health (including COBRA), accident, disability or
any other "employee welfare benefit plan," as such term is
defined in Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), (B) under any
pension, profit sharing, stock bonus, deferred compensation,
retirement, bonus or other "employee pension benefit plan," as
defined in Section 3(2) of ERISA, maintained, or to which
contributions have been made, by the Seller or any predecessor or
any corporation which is a controlled group or corporations of
which the Seller are a member, as defined in Section 414(b) of
the Internal Revenue Code of 1986, as amended (the "Code"), or
any trade or business (whether or not incorporated) under common
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control with the Seller, as defined in Section 414(c) of the
Code, or any affiliated service group aggregated with the Seller
under Section 414(m) of the Code, (C) under the Worker Adjustment
and Retraining Notification Act as amended ("WARN"), and (D) for
wages, salaries, bonuses, commissions, sick pay, vacation or
holiday pay, overtime or other benefits not set forth above;
(3) The Seller's legal, accounting, investment banking
or other fees or expenses arising out of the transactions
contemplated by this Agreement or otherwise incurred by the
Seller or its affiliates;
(4) Any liabilities for any tax, assessment or other
governmental imposition of any type or description, including,
without limitation, any federal income or excess profits taxes or
state or local income, sales, use, excise, ad valorem or
franchise taxes, together with any interest, assessments and
penalties thereon arising out of or attributable to the conduct
of the Seller's operations and the Business prior to the Closing
Date or the Seller's or its shareholders' (the "Shareholders")
federal income or capital gain taxes or state or local income or
franchise taxes arising by virtue of the transactions
contemplated by this Agreement or otherwise;
(5) Any liability (i) the existence of which
constitutes an inaccuracy or breach with respect to any
representation, warranty, covenant or agreement of the Seller
hereunder, (ii) which arises out of or in connection with any
breach or default by the Seller occurring prior to the Closing
under any of the Contracts, (iii) which arises out of or in
connection with any violation by the Seller of any requirement of
law prior to the Closing Date, (iv) of the Seller to any
affiliate of the Seller howsoever arising or created, and (v)
which relates to the Subject Assets (including those arising
under the Contracts) to the extent relating to periods prior to
the Closing Date unless such liabilities are included in the
Assumed Liabilities; and
(6) Any liability arising out of or in connection with
litigation or other legal proceedings, claims or investigations
related to the Seller or the Business and operations, regardless
of when made or asserted, including, without limitation,
contract, tort, crime, fraudulent conveyance, workers'
compensation, product liability or similar claim for injury to
persons or property which arises out of or is based upon any
express or implied warranty, representation or agreement of the
Seller or its employees or agents, or which is imposed by law or
otherwise.
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ARTICLE II
PURCHASE PRICE
Section 2.1 Purchase Price; Inventory and Receivable
Requirements.
(a) Subject to the terms and conditions set forth in
this Agreement, including, without limitation, the adjustments
and any additional consideration set forth in Section 2.2, and in
reliance on the representations, warranties and covenants of the
parties contained herein, the Subject Assets shall be sold by the
Seller and shall be purchased by the Buyer for an aggregate
purchase price in an amount, equal to the sum of Twelve Million
Two Hundred Fifty Thousand Dollars (US$12,250,000.00) in cash
plus the Assumed Liabilities (collectively, the "Purchase
Price"). Subject to the foregoing, the Purchase Price
(other than the Assumed Liabilities) shall be paid by the Buyer
to the Seller on the Closing Date, as follows: (i) Eleven
Million Five Hundred Thousand Dollars (US$11,500,000.00) (the
"Cash Payment") by wire transfer of immediately available funds
to an account designated by the Seller; (ii) Two Hundred Fifty
Thousand Dollars (US$250,000.00) (the "Escrowed Funds") by wire
transfer of immediately available funds to an escrow account
designated in an Escrow Agreement, to be executed on the Closing
Date between the Buyer and the Seller, in the form of Exhibit A
which is attached hereto and made a part hereof (the "Escrow
Agreement"); and (iii) through the issuance by the Buyer to
the Seller of a subordinated debenture in the principal amount of
Five Hundred Thousand Dollars (US$500,000.00) in the form of
Exhibit B which is attached hereto and made a part hereof (the
"Debenture"), subject to offset under Section 11.5.
(b) Schedule 2.1(a) (the "Inventory Listing Report")
sets forth (i) the Inventory which consists of forecasted items
as agreed to by the parties (the "Forecasted Inventory") on the
date of this Agreement based on the Seller's U.S. standard cost
("Standard Cost"), and (ii) the Inventory which consists of items
which are agreed to by the parties as obsolete or slow moving
(the "Special Inventory") and the agreed to value thereof. The
parties agree that the Inventory Listing Report is subject to
verification and that the Purchase Price is subject to adjustment
as set forth in Section 2.2 as a result thereof. Schedule 2.1(b)
(the "Receivables Listing Report") sets forth the Receivables as
of the date of this Agreement, and the allowances for doubtful
accounts and reserves for returns, advertising and commissions
(collectively, the "Reserves") as of December 31, 1998. The
Purchase Price is based on the delivery by the Seller to the
Buyer at the Closing of (A) Seven Million Nine Hundred Ten
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Thousand Dollars (US$7,910,000.00) of Forecasted Inventory at
Standard Cost for the PSI Brands (the "Forecasted Inventory
Minimum") and (B) Five Hundred Thousand Dollars (US$500,000.00)
of Special Inventory (the "Special Inventory Minimum"). In
addition, the Purchase Price is based on a minimum at the Closing
of Two Million Two Hundred Thirty Thousand Dollars
(US$2,230,000.00) of Receivables, net of the Reserves at the
Closing Date (the "Receivables Minimum"). Each of the
calculations of such minimums shall be separate, and each
adjustment shall be cumulative. In the determination of the
Forecasted Inventory Minimum, the parties agree to subtract the
applicable Promotional Items (as defined in Section 2.2(b)) from
the amount of the corresponding Forecasted Inventory to the
extent the Promotional Items are in the Inventory at the Closing
Date.
Section 2.2 Adjustments of Purchase Price.
(a) Within five (5) days following the Closing Date,
the Seller and the Buyer shall make a mutual physical count of
the Inventory at the point of shipment to determine the Inventory
at the Closing (the "Closing Inventory"). In addition, the Buyer
and the Seller shall have until January 31, 1999 to confirm the
gross Receivables and determine the Receivables, net of Reserves
on the Closing Date (the "Closing Receivables"). On the basis of
such Inventory count and confirmation of the Receivables, the
Buyer and the Seller shall determine if the applicable Inventory
Minimums and the Receivables Minimum are satisfied. If the same
are not satisfied and the difference between the applicable
Inventory Minimums and the Closing Inventory or the Receivables
Minimum and the Closing Receivables, as the case may be, is an
amount greater than $25,000, the Purchase Price shall be reduced
by (i) one dollar ($1.00) for each dollar that the value of the
Closing Inventory for Forecasted Inventory is below the
Forecasted Inventory Minimum, (ii) twenty eight cents ($.28) for
each dollar that the value of the Closing Inventory for Special
Inventory is below the Special Inventory Minimum, and (iii) one
dollar ($1.00) for each dollar that the value of the Closing
Receivables is below the Receivables Minimum; and in each case,
the Seller shall promptly remit to the Buyer the difference in
immediately available funds. In addition, if the Receivables at
the Closing Date, net of the agreed to Reserves at the Closing
Date, is greater than (A) the Receivables at the Closing Date,
net of Reserves as of December 31, 1998, plus (B) $25,000, the
Buyer shall promptly remit to the Seller the difference in
immediately available funds.
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(b) The parties also agree that the Buyer shall
reimburse the Seller for the Seller's cost of certain
gift-with-purchase or promotional items which are shipped to the
customer accounts as set forth in Schedule 2.2(b) (the
"Promotional Reimbursements"). The Buyer's reimbursement shall
be made by wire transfer of immediately available funds to an
account designated by the Seller, upon the Buyer's receipt of
supporting documentation from the Seller of its cost for such
items and confirmation that such gift-with-purchase or
promotional items were shipped to such customer accounts.
Section 2.3 Allocation of Purchase Price. Schedule 2.3
hereof sets forth allocations with respect to the Subject Assets
which shall be used by the parties for purposes of reporting to
the Internal Revenue Service (the "IRS") on Form 8594. The Buyer
and the Seller agree to cooperate with each other in connection
with the preparation and filing of any information required to be
furnished to the IRS under Section 1060 of the Internal Revenue
Code of 1986, as amended (the "Code"), and any applicable
regulations thereunder, and shall not take any position in any
income tax return, before any Governmental Authority charged with
the collection of income tax, or in a judicial proceeding
inconsistent with the terms of this subsection.
Section 2.4 Expenses. Any transfer tax or sales tax or
recording or filing fees imposed upon the sale, assignment and
delivery of the Subject Assets, except for those imposed by the
State of Florida or any subdivisions thereof which shall be to
the Buyer's account, shall be paid by the Seller.
Notwithstanding the foregoing, the Buyer agrees to pay (a)
freight and insurance charges on delivery of the Subject Assets
to the Buyer, and (b) filing or recording fees associated with
the recording of assignments for the Acquired Intellectual
Property.
ARTICLE III
CLOSING
Section 3.1 Time and Place of the Closing. The closing
(the "Closing" or "Closing Date") of the transactions
contemplated by this Agreement shall take place on a business day
as soon as practicable after the satisfaction of all conditions
precedent described in Articles VIII and IX hereof. The Closing
shall take place at Andersen, Kill & Olick P.C. 1251 Avenue of
the Americas, 42nd Floor, New York, New York 10020, at 11:00 a.m.
The Closing shall take place on the Closing Date at such time as
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the transactions are complete, but shall be deemed to have
occurred effective as of 11:59 p.m. on the Closing Date (the
"Closing Time") for all purposes.
Section 3.2 Procedure at the Closing. At the Closing, the
parties agree to take the following steps in the order listed
below (provided, however, that upon their completion all of these
steps shall be deemed to have occurred simultaneously):
(a) The Seller shall deliver to the Buyer evidence
reasonably satisfactory to the Buyer that each of the conditions
to the obligations of the Buyer set forth in Article VIII of this
Agreement has been satisfied and a certificate of an officer of
the Seller to such effect;
(b) The Buyer shall deliver to the Seller evidence
reasonably satisfactory to the Seller that each of the conditions
to the obligations of the Seller set forth in Article IX of this
Agreement has been satisfied and a certificate of an officer of
the Buyer to such effect;
(c) Each of the Seller and the Buyer shall deliver to
the other a copy of the resolutions of its Board of Directors
and, as to the Seller, of the requisite number of the
Shareholders, authorizing the transactions contemplated by this
Agreement, certified by their respective Secretary or Assistant
Secretary;
(d) Each of the Seller and the Buyer shall deliver to
the other a good standing certificate of such party (which is
dated not more than 15 days prior to the Closing) and the Seller
shall deliver to the Buyer such bills of sale, endorsements and
assignments in the forms attached hereto as Exhibits C and D, and
other customary instruments and documents and certificates
reasonably satisfactory to the Buyer (including, without
limitation, assignment forms for the Acquired Intellectual
Property) as shall be sufficient to vest in the Buyer good, valid
and marketable title to the Subject Assets, free and clear of all
Liens, except as otherwise specifically permitted by this
Agreement;
(e) The Buyer shall deliver to the Seller instruments
reasonably satisfactory to the Seller and the Seller's counsel
for the Buyer to assume the Assumed Liabilities to the extent not
satisfied as set forth in (j) below;
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(f) The Seller shall deliver to the Buyer possession
of all tangible personal property included within the Subject
Assets, including, without limitation, the Inventory, the Fixed
Assets and the Records, which, to the extent not delivered to the
Buyer's designated location, shall be held in trust for the Buyer
and designated as being the property of the Buyer;
(g) The Buyer shall deliver the Cash Payment and the
Escrowed Funds in accordance with Section 2.1(a);
(h) The Buyer shall deliver the Debenture to the
Seller and the Seller shall re-deliver the Debenture to be held
in accordance with Section 11.5;
(i) The Buyer shall pay an obligation under a
distribution contract in the amount of One Million One Hundred
Thousand Dollars (US$1,100,000.00) by wire transfer of
immediately available funds as set forth in such contract;
(j) Each of the Buyer and the Seller shall execute and
deliver documents acknowledging receipt from the other,
respectively, of the Subject Assets, the Cash Payment (as
adjusted at the Closing) and the Debenture and receive an
acknowledgment relating to the receipt of the Escrowed Funds; and
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
In order to induce the Buyer to enter into this Agreement
and to consummate the transactions contemplated under this
Agreement, the Seller makes the following representations,
warranties and covenants, each of which is relied upon by Buyer
in consummating the transactions contemplated hereby regardless
of any other investigation made or information obtained by the
Buyer:
Section 4.1 Organization, Power and Authority. The
Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey, and is
duly qualified in each other jurisdiction in which the conduct of
its business or the ownership of its assets requires such
qualification, except where the failure to qualify would not have
a material adverse effect on the Subject Assets or the Business.
The Seller has no subsidiaries. The Seller has full corporate
power and authority (a) to own or lease its properties and to
carry on the Business as it is now being conducted, (b) to enter
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into this Agreement and, subject to the Consents (as defined in
Section 4.2) to assign, transfer and deliver the Subject Assets
to the Buyer as provided in this Agreement and to assign and
transfer the Assumed Liabilities, and (c) to execute, deliver and
perform the other transactions and agreements contemplated by
this Agreement (the "Ancillary Agreements").
Section 4.2 Authorization; Binding Obligation: Consents.
The execution, delivery and performance of this Agreement and the
Ancillary Agreements has been duly authorized by all necessary
corporate, shareholder and other requisite action on the part of
the Seller. This Agreement and the Ancillary Agreements have
been duly executed and delivered by the Seller and are legal,
valid and binding obligations of the Seller enforceable against
it in accordance with their terms. The execution and delivery of
this Agreement, and the consummation of the transactions
contemplated hereby by the Seller does not and will not, violate
or result in the breach of any term or provision of (a) the
charter documents or bylaws of the Seller, (b) any law, treaty,
ordinance, rule, regulation, judgment, order, decree or
injunction of a Governmental Authority applicable to the Seller
or the Subject Assets, except where the failure to comply would
not have a material adverse effect on the Seller or the Subject
Assets and provided that nothing herein shall relieve the Seller
from its obligation to convey the Subject Assets to the Buyer
free and clear of all Liens and from its other obligations
hereunder, or (c) any material mortgage, indenture, lease,
license, agreement, instrument, plan, document or understanding,
oral or written, to which the Seller is a party, or any mortgage,
indenture, lease, license, agreement, instrument, plan, document
or understanding, oral or written, to which the Subject Assets
are subject, or give any party with rights thereunder the right
to terminate, accelerate, modify or change the existing rights or
obligations of the Seller. To the Seller's knowledge, except for
the consents set forth in Schedule 4.2 (the "Consents"), no
consent, action, permit, license, approval or authorization of,
or material registration, declaration or filing with, any person
is required or necessary to be obtained by the Seller in
connection with the execution, delivery and performance by them
of this Agreement and the Ancillary Agreements, including the
consummation of the transactions contemplated hereby and thereby.
Section 4.3 Financial Statements. Attached as part of
Schedule 4.3 to this Agreement are the audited financial
statements for the Seller for the fiscal years ended December 31,
1995 and 1996, the unaudited financial statements for the fiscal
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year ended December 31, 1997 (the audited form of these (the
"Audited 1997 Statements") to be provided as soon as practicable
after the Closing but in no event later than January 29, 1999)
and the three, six and nine months ended September 30, 1998 and
the most recent unaudited monthly and year to date financial
statements of the Seller for the period ending November 30, 1998
(the "1998 Interim Statements"), together with the related notes
and schedules attached to those financial statements
(collectively, but excluding the Audited 1997 Statements, the
"Financial Statements"). To the Seller's knowledge, the
Financial Statements are, and the Audited 1997 Statements will
be, true, correct and complete, are in accordance with the books
and records of the Seller, were prepared, or, with respect to the
Audited 1997 Statements, will be prepared, in accordance with
generally accepted accounting principles applied on a consistent
basis and fairly present, or, with respect to the Audited 1997
Statements, will fairly present, the financial condition and
results of operation and other information presented for the
periods so indicated. Except as provided in the Financial
Statements, or as fully disclosed in Schedule 4.3, the Seller
knows of no liabilities or obligations (whether accrued,
absolute, contingent, whether due or to become due or otherwise)
which might be or become a charge or Lien against the Subject
Assets or be asserted against the Buyer after the Closing,
including any "loss contingencies" considered "probable" or
"reasonably possible" within the meaning of the Financial
Accounting Standard Board's Statement of Financial Accounting
Standards No. 5.
Section 4.4 Good Title to and Condition of the Subject
Assets; Fixed Assets. The Seller has good and marketable title
to the Subject Assets, free and clear of all Liens, except those
set forth in Schedule 4.4(a). There are no unpaid taxes or other
tax matters which are or could become a Lien on the Subject
Assets other than as set forth in Schedule 4.4(a), all of which
taxes or other tax matters will be satisfied, or provision made
for the payment thereof, prior to the Closing. All of the Fixed
Assets are in operating condition, normal wear and tear excepted,
and are available for immediate use in the business to which the
Subject Assets relate. Schedule 4.4(b) sets forth a list of all
of the physical locations of the Fixed Assets, including a street
address for each such location. Except for the representations
and warranties set forth in this Agreement, the Seller makes no
representations concerning any tangible personal property
relating to the Business or the Subject Assets, including,
without limitation, any implied warranty of merchantability or
fitness for intended purpose.
<PAGE>
Section 4.5 Acquired Intellectual Property.
(a) Schedule 4.5(a) sets forth a list of all of the
Acquired Intellectual Property specifying as to each, as
applicable: (i) the nature of such Acquired Intellectual
Property; (ii) the record owner of any such Acquired Intellectual
Property which is registered, applied for or pending; (iii) the
jurisdictions in which such Acquired Intellectual Property has
been registered or in which an application for registration is
pending including the respective registration or application
numbers; (iv) any licenses, sublicenses and other agreements to
which the Seller is a party, either as a licensor or licensee,
with respect to the Acquired Intellectual Property; and (v) the
status and due dates during 1999 for any filing or action
required to maintain or secure the registered Acquired
Intellectual Property. All required annuities, renewal fees,
maintenance taxes or fees, royalty payments, amendments,
affidavits, declarations and/or other filings or payments which
are required to be paid by the Seller as of the Closing Date and
are necessary to preserve and maintain the Acquired Intellectual
Property in full force and effect have been filed and/or will be
made through the Closing Date. To the Seller's knowledge and the
knowledge of its intellectual property counsel, there are no
intellectual property rights associated with the fragrance brands
PS Fine Cologne for Men, Design (for Men and Women) and Casual
(for Men and Women) which are owned by any person other than the
Seller.
(b) Except as set forth in Schedule 4.5(b), during the
two (2) years preceding the date of this Agreement, (i) no
lawsuit has been filed and served or, to the knowledge of the
Seller and its intellectual property counsel, no claim has been
asserted or threatened against the Seller to the effect that the
operation of the Business or the use or registration of the
Acquired Intellectual Property or licenses for the PSI Brands in
connection therewith infringes upon or conflicts with the rights
of any person in any country or is otherwise void and
unenforceable, (ii) no claim has been asserted or notice of
infringement given, by the Seller against any person in any
country such that such person has infringed any of the Acquired
Intellectual Property or licenses for the PSI Brands, and (iii)
to the knowledge of the Seller and its intellectual property
counsel, no restrictions exist relating to the use of the
Acquired Intellectual Property or licenses for the PSI Brands in
connection with their use for the manufacture, marketing and
distribution of fragrance products in the United States.
<PAGE>
(c) The Seller is the sole and exclusive record owner
of all of the registered Acquired Intellectual Property and, to
the extent such registered Acquired Intellectual Property is in
use, the beneficial owner of all of the registered Acquired
Intellectual Property or Acquired Intellectual Property for which
registration is presently pending. All of the registered
Acquired Intellectual Property is owned free and clear of any
Liens or joint ownership rights and is fully assignable to the
Buyer, without conditions, limitations or restrictions of any
kind and, except as set forth in Schedule 4.5(c), without the
obligation to pay any license fee, royalty or similar charge or
consideration, and the Seller has the exclusive right to use the
registered Acquired Intellectual Property as and to the extent
currently used in the Business. The Seller has received no
notice that the Seller does not own the non-registered
Acquired Intellectual Property free and clear of any Liens or
joint ownership rights or that the non-registered Acquired
Intellectual Property is not assignable to the Buyer without
conditions, limitations or restrictions of any kind and without
the obligation to pay any license fee, royalty or similar charge
or consideration or that the Seller does not have the exclusive
right to use the non-registered Acquired Intellectual Property as
and to the extent currently used in the Business.
Section 4.6 Compliance With Law. The Seller has complied
with all applicable foreign, federal, state and local statutes,
regulations and orders of any Governmental Authority in respect
of the Subject Assets and the conduct of the Business, in each
instance where the failure to comply would result in any material
adverse effect on the Subject Assets, including, without
limitation, those relating to the packaging, manufacturing,
distribution, labeling, advertising and marketing of the Brands
and those relating to foreign, federal, state and local
environmental laws, regulations, orders and restrictions,
including, without limitation, providing the requisite WARN
notice to its employees and other appropriate persons and
complying with the other WARN requirements; provided that nothing
herein shall relieve the Seller from its obligation to convey the
Subject Assets free and clear of all Liens and from its other
obligations hereunder. To the knowledge of the Seller, no event
has occurred, and no condition or circumstance exists, that might
(with or without notice or lapse of time, or both) reasonably
constitute or result, directly or indirectly, in a violation by
the Seller of, or a failure on the part of the Seller to comply
with, any of the above legal requirements. For all purposes of
this Agreement, the term "material adverse effect" when used with
<PAGE>
respect to the Seller, the Subject Assets or the Business, shall
include an effect reasonably likely to affect the Seller, Subject
Assets or the Business, as the case may be, to the extent of
$50,000 for any single item.
Section 4.7 Litigation. Except as set forth on Schedule
4.7 and other than with respect to outstanding accounts payables,
including vendor payables, there is no (i) action, arbitration,
mediation, suit, claim, proceeding or investigation pending and,
to the knowledge of the Seller, threatened against or affecting
the Seller or the Subject Assets, or to the knowledge of the
Seller, there are no unasserted claims or assessments that are
considered to be probable of assertion (within the meaning of
Financial Accounting Standard Board's Statement of Financial
Accounting Standards No. 5); or (ii) action, suit, claim,
proceeding or inquiry of a Governmental Authority pending or, to
the Seller's knowledge, threatened relating to or involving the
transactions contemplated by this Agreement. Except as described
in Schedule 4.7, all the actions, suits, proceedings or
investigations described in such schedule are being diligently
prosecuted and are covered by insurance. Except as described in
Schedule 4.7, there are no outstanding orders, decrees or
stipulations issued by a Governmental Authority in any proceeding
related to the Business or the Subject Assets.
Section 4.8 No Adverse Changes. Other than as described
on Schedule 4.8, since December 31, 1997, there has not been
(except as otherwise contemplated or permitted by this
Agreement):
(a) any sale, lease or other disposition of any of the
Subject Assets, other than the sale of inventory in the ordinary
course of business;
(b) any damage, destruction or loss (whether or not
insured) materially and adversely affecting the Subject Assets or
operation of the Business;
(c) any loans or advances or charges which in any way
create Liens on the Subject Assets other than loans or advances
made by the Seller's senior secured lender;
(d) change in the accounting methods relating to the
Subject Assets followed by the Seller or in the methods of
preparing Receivables or Inventory reports;
<PAGE>
(e) (i) a decrease in, or (ii) any material change in
any assumptions underlying, or methods of calculating, any bad
debt, contingency or other reserve against its Receivables; or
(f) agreement or commitment, whether or not in
writing, to do any of the foregoing by or on behalf of the
Seller.
Section 4.9 Books and Records. Except for the items set
forth in the report described in Schedule 4.9 and as adjusted for
the notes to the 1998 Interim Statements, the Records of the
Seller relating to the Subject Assets, all of which have been
made available to the Buyer, are complete and correct and have
been maintained in accordance with sound business practices and
generally accepted accounting principles; provided that this
representation shall be made solely to the knowledge of the
Seller for those Records created prior to January 1998, and
provided further that the Seller makes no representation as to
the maintenance of an adequate system of internal controls for
the periods prior to January 1998.
Section 4.10 Material Agreements.
(a) Set forth in the respective schedules described
below is a list of each agreement, obligation and commitment of
the Seller in relation to the Brands to which the Seller is a
party or by which it or the Subject Assets may be bound and that:
(i) provide for the sale, marketing or distribution of products
or services relating to the Brands which provides for payments in
excess of $50,000 per annum, including, without limitation,
advertising agreements, and a description of agreements with
retail accounts, fulfillment houses, third party beauty advisors
and other third parties relating to other advertising,
merchandising and promotions entered in the ordinary course of
business as set forth in Schedule 4.10(a)(i); (ii) relate to the
acquisition or manufacturing of the Inventory and, where
accomplished by means of purchase order, a listing of such
outstanding purchase orders as set forth in Schedule
4.10(a)(ii), and the Seller represents and warrants that (A)
other than as set forth in Schedule 4.10(a)(ii), no person has
any right to manufacture any of the Brands except at the
direction and for the account of the Seller; (iii) are
license or sublicense agreements as set forth in Schedule
4.10(a)(iii); (iv) otherwise obligate or may obligate the Seller
to pay more than $100,000, whether in a lump sum or in
installments, in connection with the Brands in any calendar year
<PAGE>
or entitle or may entitle the Seller to receive more than
$100,000, whether lump sum or installments, in connection with
the Brands in any calendar year, as set forth in Schedule
4.10(a)(iv); or (v) are otherwise material to the Business or the
Subject Assets as set forth in Schedule 4.10(a)(v).
(b) The Seller has delivered to the Buyer true and
complete copies of the written Contracts described in Schedule
l.l(e) and, prior to the Closing will deliver, all amendments,
addendums and supplements thereto. Except for the Consents
listed on Schedule 4.2, the Seller has full legal power and
authority to assign its rights under the Contracts and such
assignment will not affect the validity and enforceability of any
of such Contracts. Except as set forth in Schedule 4.10(b), the
Contracts are valid obligations enforceable in accordance with
their respective terms and are in full force and effect, and the
Seller is not in breach or in default of a Contract in any regard
that would enable or permit any party thereto to terminate its
obligations thereunder or to accelerate the obligations of the
Seller (or the Buyer, as assignee thereof) thereunder, and there
does not exist, and the consummation of the transactions
contemplated by this Agreement will not create, any event that,
with the giving of notice or lapse of time or otherwise, would
constitute such a breach thereof or default thereunder.
Section 4.11 Governmental Filings. Any and all filings
required to be made pursuant to any local, state or federal law,
regulation or ordinance due as of or before the Closing Date and
which may be due as a result of the Closing or for periods ending
prior to the Closing Time has or will be timely filed by the
Seller, except where the failure to make such filing would not
have a material adverse effect on the Seller or have an adverse
effect on the Subject Assets.
Section 4.12 Labor Relations; Independent Contractors.
The Seller is not a party to or bound by any collective
bargaining agreement or any other agreement with a labor union
relating to the employees of the Business, and, to the knowledge
of the Seller, there has been no effort by any labor union during
the 16 months prior to the date of this Agreement to organize any
employees of the Business into one or more collective bargaining
units. Except as set forth in Schedule 4.12(a), to the
knowledge of the Seller, the Seller is in compliance with all
federal, state and local laws regarding employment and employment
practices, conditions of employment, wages and hours with respect
to the Business, except where the failure to comply would not
<PAGE>
have a material adverse effect on the Seller or the Subject
Assets. Except as set forth on Schedule 4.12(b), the Seller has
no arrangements with independent contractors (including, but not
limited to, agreements or arrangements with any person that could
create a basis for the payment of any commission, fee or other
amount in connection with the sale of the Brands); all such
arrangements with independent contractors are terminable at will
by the Seller without penalty or other liability within 30 days.
Section 4.13 Employee Benefits. Except as described in
Schedule 4.13, the Seller does not maintain or contribute to:
(a) any non-qualified deferred compensation or retirement plans
or arrangements; (b) any qualified defined contribution
retirement plans or arrangements; (c) any qualified defined
benefit pension plan; (d) any other plan, program, agreement or
arrangement under which former employees of the Seller or its
beneficiaries are entitled, or current employees of the Seller
will be entitled following termination of employment, to medical,
health or life insurance or other benefits other than pursuant to
benefit continuation rights granted by state or federal law; or
(e) any other employee benefit, health, welfare, medical,
disability, life insurance, stock, stock purchase or stock option
plan, program, agreement, arrangement or policy, and, as to each
of (a) through (e), the Buyer is assuming no obligation or
liability.
Section 4.14 Inventory. The Inventory Listing Report is
true, complete and correct and prepared in a manner disclosed to
the Buyer. All Inventory consists of a quality and quantity
which is saleable and merchantable, except for obsolete items and
items of below-standard quality, all of which have been written
off or written down to net realizable value. Schedule 4.14(a)
sets forth a list of all of the physical locations of the
Inventory, including a street address for each such location.
Schedule 4.14(b) sets forth a list of all of the Seller's
customers who have returned finished goods and products relating
to the Brands for 1997 and 1998, the current returns policies of
the Seller with respect to its customers and their approximate
rate of returns for 1997 and 1998. All of the product returns
from customers relating to the Brands received by the Seller on
or before the date hereof, and on or before the Closing Date,
have been returned in the ordinary course of business and are
from sales made to customers for which the Seller accepts returns
in the ordinary course of business. From and after Closing, and
subject to the terms of any applicable Contract which relates to
the distribution or license of the Brands, the Buyer will be
<PAGE>
entitled to sell the Inventory without violating any applicable
law, order, judgment, agreement or understanding that is binding
on the Seller or the Subject Assets prior to the transfer thereof
to the Buyer.
Section 4.15 Report of Orders by Customer and by Item.
Schedule 4.15 sets forth report of orders by customer and by item
for 1997 and 1998 (the "Gross Sales Report"). The Gross Sales
Report is true, complete and correct in all material respects.
Section 4.16 Accounts Receivable. The Receivables Listing
Report is true, complete and correct in all material respects and
has been prepared in accordance with the books and records of the
Seller and in a manner disclosed to the Buyer. All Receivables
as reflected on the Receivables Listing Report and arising
subsequent to the date thereof, (i) represent, valid, to the
Seller's knowledge, bona fide obligations due to the Seller,
enforceable in accordance with their respective terms and
collectible in the ordinary course of business, (ii) to the
Seller's knowledge, are not subject to any dispute, defense,
offset or counterclaim, and (iii) are subject only to allowances
or reserves for bad debts, returns, advertising or commissions
all of which are separately identified and computed in a manner
consistent with past practice and which have been disclosed to
the Buyer.
Section 4.17 Payables. Attached as Schedule 4.17 is a
true, complete and correct list of the accounts payable (by
account) of the Seller, which schedule shall separately identify
the accounts payables relating to the trade, and which shall be a
true, complete and correct listing thereof.
Section 4.18 Promotional Obligations. Schedule 4.18
contains a true, complete and correct listing of any commitments
with respect to promotional activities relating to the Brands to
occur after the Closing Date (the "Promotional Obligations"),
and identifies the amount of such activities.
Section 4.19 Finders or Brokers. Except for Houlihan
Lokey Howard & Zukin Capital ("HLHZ"), with respect to which the
Seller is solely responsible, the Seller has not retained any
investment banker, broker, finder or intermediary in connection
with the transactions contemplated hereby who might be entitled
to a fee or commission in connection with this Agreement or the
transactions contemplated hereby.
<PAGE>
Section 4.20 Accuracy of Information. No representation,
statement or information made or furnished by the Seller or their
respective representatives to the Buyer contained in this
Agreement and the various schedules attached to this Agreement
and furnished by the Seller or its representatives to the Buyer
pursuant to this Agreement, contains or shall contain any untrue
statement of a material fact or omits or shall omit any material
fact necessary to make the information contained in this
Agreement and the schedules not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants that:
Section 5.1 Organization. The Buyer is a corporation
duly organized and validly existing in good standing under the
laws of Florida and has the corporate power and authority to
carry on its business as presently conducted.
Section 5.2 Corporate Authority. The execution, delivery
and performance by the Buyer of this Agreement and the Ancillary
Agreements to which the Buyer is or will be a party and the
consummation by the Buyer of the transactions contemplated hereby
and thereby are within the corporate powers of and have been duly
authorized by all necessary corporate action on the part of
the Buyer. This Agreement constitutes and, when executed and
delivered, such Ancillary Agreements will constitute, valid and
binding agreements of the Buyer enforceable against the Buyer
in accordance with their respective terms. The execution and
delivery of this Agreement, and the consummation of the
transactions contemplated hereby by the Buyer does not and will
not, violate or result in the breach of any term or provision of
(a) the charter documents or bylaws of the Buyer, (b) any
existing law, treaty, ordinance, rule, regulation. judgment,
order, decree or injunction of a Governmental Authority
applicable to the Buyer or its acquisition of the Subject Assets
or its assumption of the Assumed Liabilities, or (c) any
mortgage, indenture, lease, license, agreement, contract,
instrument, plan, document or understanding, oral or written, to
which the Buyer is a party, which breach has not been waived or
consented to by the necessary parties.
Section 5.3 Consents; No Violation. To the knowledge of
the Buyer, except as set forth in Schedule 5.3, no consent,
action, permit, license, approval or authorization of, or
<PAGE>
material registration, declaration or filing with, any person or
a governmental authority is required or necessary to be obtained
by the Buyer in connection with the execution, delivery and
performance by the Buyer of this Agreement, including the
consummation of the transactions contemplated hereby. The Buyer
is not in default under the terms of the Senior Indebtedness (as
defined in the Debenture). The Buyer has adequate financing to
pay the Purchase Price.
Section 5.4 Finders or Brokers. Except for Donaldson
Lufkin & Jenrette, with respect to which the Buyer is solely
responsible, the Buyer has not retained any investment banker,
broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to a fee
or commission in connection with this Agreement or upon
consummation of the transactions contemplated hereby.
Section 5.5 Litigation. There is no action, suit,
investigation or proceeding pending against, or to the knowledge
of the Buyer, threatened before any governmental authority which
in any manner challenges or seeks to prevent or enjoin the
transactions contemplated hereby, or which, if adversely
determined, would aversely affect the Buyer's ability to
consummate the transactions contemplated hereby.
ARTICLE VI
ADDITIONAL COVENANTS OF THE SELLER
Section 6.1 Employees. From and after the Closing Date,
the Seller agrees to pay and be liable for, and shall assume, and
subject to Article 11, indemnify, defend and hold harmless the
Buyer from and against and in respect of, any Buyer Indemnified
Liabilities (as defined in Section 11.1) incurred by or assessed
against the Buyer that pertain to any of the employees or former
employees of the Seller, including, but not limited to, those
that arise under (a) Sections 4980B and 5000 of the Code and with
respect to any failure to comply by the Seller with the
continuation health care coverage requirements of Section 4980B
of the Code and Sections 601 through 608 of ERISA, which failure
occurs with respect to any person who is or was a current or
former employee of the Seller or any qualified beneficiary of
such employee (as defined in Section 4980B(g)(1) of the Code),
and (b) WARN. For purposes of this Section, references to the
Code and ERISA shall include references to any provision of such
statutes as they may be amended from time-to-time. The Seller
acknowledges and agrees that the Buyer may, at its sole
<PAGE>
discretion and on terms satisfactory to the Buyer, employ or
engage certain of the Seller's employees following the Closing
Date, and that notwithstanding the Buyer's employment or
retention of any such persons, the Buyer shall not assume any
obligation for salaries or benefits or otherwise arising out of
the employee's employment or relationship with the Seller.
Section 6.2 Conduct of Business Pending the Closing. After
the execution and delivery of this Agreement and until the
Closing, except as otherwise permitted by this Agreement or as
provided by the prior written consent of the Buyer:
(a) The Business will be conducted and the Subject
Assets operated only in the ordinary course of business
consistent with current practices, which shall include, without
limitation, operating in compliance with all applicable laws,
regulations and administrative orders of Governmental
Authorities, the maintenance in force of all insurance policies
currently in force and effect and the maintenance of the Subject
Assets in merchantable and saleable and operating condition and
repair.
(b) Subject to Section 6.2 (f), the Seller shall use
reasonable efforts to maintain the goodwill of the customers,
suppliers, manufacturers, licensors and others having business
relationships with the Seller in connection with the Brands.
(c) Subject to Section 6.2(f), the Seller will not
enter into any contract or commitment affecting the Subject
Assets or the Assumed Liabilities, or amend terminate or violate
the terms of any such contract or commitment (or waive any right
thereunder) without the prior written consent of the Buyer in
each instance.
(d) The Seller will not create, assume or suffer to
exist any Liens on the Subject Assets (other than a Lien
satisfied at or prior to the Closing), except with the prior
written consent of the Buyer.
(e) The Seller will conduct the affairs of the
Business in such a manner so that the representations and
warranties contained in Article IV shall continue to be true and
correct on and as of the Closing Date as if made on and as of the
Closing Date.
<PAGE>
(f) The Seller shall not lease, sell, transfer or
otherwise dispose of any of the Subject Assets other than sales
of Inventory and collection of Receivables in the ordinary course
of business or with the consent of the Buyer; provided that any
sale of fragrance products to competitors of the Buyer shall
require the written consent of the Buyer, which consent shall not
be unreasonably withheld.
(g) The Seller shall not commit, orally or in writing,
to do any of the foregoing.
Section 6.3 Inspection. Between the date hereof and the
Closing Date, the Buyer and its representatives shall have full
and complete access, during normal business hours and upon
reasonable oral notice, to the books, records and properties of
the Seller and to the officers, accountants and attorneys of the
Seller relating to the Business and the Subject Assets and may
make such reasonable inspections of such books, records and
properties as they may deem reasonably necessary or advisable to
evaluate the Subject Assets and the Business, and the Seller
hereby agrees to cooperate fully with Buyer to facilitate such
inspections and investigations, provided that the Buyer shall not
unreasonably interfere with the operations of the Seller or the
Business. The Buyer shall also have reasonable access to the
Seller's employees, accountants, attorneys and customers with
respect to the Business, provided that any contact with a
customer will be done together with the Seller. The availability
or actual delivery to the Buyer of information concerning the
Business and its investigation thereof shall not affect the
covenants, representations, warranties, and indemnities of the
Seller contained in this Agreement nor the Buyer's right to rely
thereon.
Section 6.4 Consents. The Seller shall use its best
efforts to obtain so as not to delay the Closing all consents,
approvals and authorizations necessary to effectuate the
transactions contemplated by this Agreement, including the
Consents and the necessary consents from the applicable auditors
of the Seller for the Buyer's filing of the audited Financial
Statements in Buyer's filings with the Securities and Exchange
Commission (the "SEC").
Section 6.5 Risk of Loss. The risk of any loss or damage
to the Subject Assets resulting from fire, theft or any other
casualty (except reasonable wear and tear) shall be borne by the
Seller at all times prior to Closing Time. If any such loss or
damage shall be in excess of One Million Dollars (US$1,000,000.00)
(a "Material Loss"), the Seller shall immediately notify the Buyer
in writing thereof. The Buyer, at any time within ten (10) days
after receipt of such notice, may elect by written notice to the
Seller to either (a) waive such defect and proceed toward
consummation of the transaction in accordance with terms of this
Agreement, or (b) terminate this Agreement by delivering a written
notice to such effect to Seller. If the Buyer elects to consummate
the transactions contemplated hereby notwithstanding a Material Loss
and does so, or if there occurs any loss or damage to the Subject
Assets that is not a Material Loss, all insurance proceeds relating
to the Subject Assets shall be delivered by the Seller to the Buyer,
and the rights thereto shall be assigned by the Seller to the Buyer,
and the Seller shall hold all such proceeds in trust for the Buyer
until so delivered.
Section 6.6 Inconsistent Actions. Prior to the Closing,
the Seller will not (a) take any action inconsistent with its
obligations under this Agreement or which would hinder or delay
consummation of the transactions contemplated hereby, or (b)
enter into or conduct any discussions or encourage, solicit,
initiate or participate in discussions or negotiations with, or
provide information to, any other party concerning the
transactions contemplated by this Agreement or otherwise with
respect to the Subject Assets or the Business and shall promptly
advise the Buyer of any solicitations with respect to such
matters.
Section 6.7 [Intentionally omitted].
Section 6.8 Confidentiality. The Seller agrees that it
will, and will cause its officers, other personnel and authorized
representatives to, hold in strict confidence all information
obtained from the Buyer or which relates to this Agreement and
the negotiations thereof (other than information which is a
matter of public knowledge or which has heretofore been or is
hereafter published in any publication for public distribution or
filed as public information with any Governmental Authority other
than a result of a breach of this covenant) and will not, and
will ensure that such other persons do not, disclose such
information to others without the prior written consent of the
Buyer, provided that the Seller may provide such data and
information: (a) in connection with obtaining any of the
consents necessary to consummate the transactions contemplated by
this Agreement; (b) in any filing required of the Seller with a
regulatory authority; and (c) in response to legal process or
applicable government regulations, but only that portion of the
data and information which, in the written opinion of the
Seller's counsel, is legally required to be furnished and further
<PAGE>
provided that the Seller notifies the Buyer of its obligation to
provide such confidential information and fully cooperates with
the Buyer to protect the confidentiality of such data and
information pursuant to the applicable provisions of the Freedom
of Information Act. If this Agreement is terminated for any
reason, the Seller and such other persons shall not use Buyer's
information and shall promptly return to the Buyer or destroy all
tangible evidence thereof, including copies, which have been
furnished to the Seller or such other persons.
Section 6.9 Acquired Intellectual Property. The Seller
agrees to execute on the Closing Date all necessary documents
with respect to the assignment of all Acquired Intellectual
Property owned by the Seller to Buyer (including, without
limitation, registrations thereof). The Seller agrees that at
any time from and after the Closing Date, upon the written
request of the Buyer, its successors, legal representatives or
assigns it will use commercially reasonable efforts to
communicate with the Buyer, its successors, legal representatives
and assigns all information known to the Seller relating to the
Acquired Intellectual Property in the United States and
worldwide, and that the Seller will execute and deliver any
papers, make rightful oaths, testify in any legal proceedings,
and perform all other lawful acts reasonably deemed necessary or
desirable by the Buyer, its successors, legal representatives or
assigns, to convey or perfect the Buyer's rights to the Acquired
Intellectual Property and to enforce or defend the Buyer's and
its assigns' rights in and to the Acquired Intellectual Property
in the United States and worldwide or assist the Buyer, its
successors, legal representatives or assigns in obtaining or
enforcing their rights to the Acquired Intellectual Property.
The Seller also agrees that, at any time from and after the
Closing Date, it will, or cause its intellectual property counsel
to, promptly forward to the Buyer Acquired Intellectual Property
notices of renewal and all other correspondence related to such
registrations or applications received by the Seller. In
addition, after the Closing Date, until the date existing stocks
are exhausted or reprinted, the Buyer shall have the right,
subject to the terms of any existing license or distribution
agreement or consent to which the Buyer assumes or is a party, to
sell existing Inventory and to use existing packaging, labeling,
containers, supplies, advertising and promotional materials,
technical data sheets and any similar materials which have
trademarks, trade names, logos, designs, service marks or other
trade dress used by the Seller which are not part of the Acquired
Intellectual Property. Following the Closing, the Seller will
cease using the Intangible Assets.
<PAGE>
ARTICLE VII
ADDITIONAL COVENANTS OF THE BUYER
Section 7.1 Consents. The Buyer shall use its best efforts
to obtain so as not to delay the Closing all consents, approvals
and authorizations necessary to effectuate the transactions
contemplated by this Agreement.
Section 7.2 Confidentiality. The Buyer agrees that it
will, and will cause its officers, other personnel and authorized
representatives to, hold in strict confidence all data and
information obtained from the Seller, including information
obtained under that certain Confidentiality Agreement dated as of
July 9, 1998 between the Buyer and HLHZ, (other than information
which is a matter of public knowledge or which has heretofore
been or is hereafter published in any publication for public
distribution or filed as public information with any Governmental
Authority other than a result of a breach of this covenant) and
will not, and will ensure that such other persons do not,
disclose such information to others without the prior written
consent of the Seller, provided that the Buyer may provide such
data and information: (a) to any financial or banking
institution providing financing or contemplating providing
financing to the Buyer for the purposes hereof or to any person
providing services for the Buyer with respect to its assessment
of the Business or the Subject Assets; (b) in connection with
obtaining any of the consents necessary to consummate the
transactions contemplated by this Agreement; (c) in any filing
required of the Buyer with the SEC or other regulatory authority;
and (d) in response to legal process or applicable government
regulations, but only that portion of the data and information
which, in the written opinion of the Buyer, is legally required
to be furnished and further provided that the Buyer notifies the
Seller of its obligation to provide such confidential information
and fully cooperates with the Seller to protect the
confidentiality of such data and information pursuant to the
applicable provisions of the Freedom of Information Act. If this
Agreement is terminated for any reason, the Buyer and such other
persons shall not use Seller information and shall promptly
return to the Seller or destroy all tangible evidence thereof,
including copies, which have been furnished to the Buyer or such
other persons.
<PAGE>
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE BUYER
The obligation of the Buyer to consummate the transactions
contemplated by this Agreement shall be subject to the
fulfillment at or prior to the Closing of each of the following
conditions:
Section 8.1 Accuracy of Representations and Warranties and
Compliance with Obligations. The representations and warranties
of the Seller in this Agreement shall be true and correct in all
respects on the date of this Agreement and on the Closing Date as
if made on and as of such date. The Seller shall have performed
and complied with all of its obligations required by this
Agreement to be performed or complied with at or prior to the
Closing.
Section 8.2 Certified Resolutions. The Seller shall have
delivered to the Buyer copies of resolutions adopted by the board
of directors of the Seller and of the requisite number of the
Shareholders authorizing the transactions contemplated by this
Agreement, certified as of the Closing by a Secretary or
Assistant Secretary of the Seller.
Section 8.3 Receipt of Necessary Consents. All consents,
waivers, estoppel letters, authorizations or approvals of third
parties and governmental entities with respect to any of the
transactions contemplated by this Agreement, including, without
limitation, consent to assi gnment of the Contracts where
required shall have been obtained and confirmed by written
evidence reasonably satisfactory to the Buyer. In the event any
necessary consent is not obtained prior to the Closing and the
Buyer elects to close this transaction, the same shall not
constitute a waiver of the Buyer's rights and the Seller will
nonetheless (a) continue to use its best efforts to obtain the
necessary consents, and (b) cooperate with the Buyer in any
interim arrangement necessary to obtain for the Buyer the
practical benefits of the contract or matter or other arrangement
for which the consent has not been obtained.
Section 8.4 No Adverse Action. There shall not be pending
or threatened any action or proceeding by or before any court or
other Governmental Authority which shall seek to restrain,
prohibit or invalidate the assignment, transfer or delivery of
the Subject Assets to the Buyer or any other transaction
contemplated by this Agreement, or which might materially
<PAGE>
adversely affect the right of the Buyer to own or operate in
their entirety the Subject Assets. The Subject Assets shall
not have been materially and adversely affected by any event or
circumstance after the date of this Agreement.
Section 8.5 Lien Searches. The Seller shall have delivered
to the Buyer at least 5 days prior to the Closing Date the
results of fixture, lien (including tax liens) and judgment
searches dated no earlier than 30 days prior to the date of
delivery thereof to the Buyer with respect to the Subject Assets
performed by the Seller at the office of the Secretary of State
of the State of New Jersey, and the appropriate offices in each
county therein in which any of the Subject Assets are located.
Section 8.6 UCC Statements. The Seller shall have
delivered to the Buyer UCC-3 termination statements from all
secured parties, releasing the Subject Assets from all financing
statements and security agreements and including releases of
security interests related to the Acquired Intellectual Property
from Chemical Bank and the Seller's senior secured lender.
Section 8.7 Acquired Intellectual Property. The Seller
shall have assisted the Buyer and its representatives and
executed the assignment forms for the assignment of the Acquired
Intellectual Property.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF THE SELLER
The obligations of the Seller to consummate the transactions
contemplated by this Agreement shall be subject to the
fulfillment at or prior to the Closing Time of each of the
following conditions:
Section 9.1 Accuracy of Representations and Warranties and
Compliance with Obligations. The representations and warranties
of the Buyer contained in this Agreement shall be true and
correct in all respects at the date of this Agreement and on the
Closing Date as if made on and as of such date. The Buyer shall
have performed and complied with all of its obligations required
by this Agreement to be performed or complied with at or prior to
the Closing.
Section 9.2 No Adverse Litigation. There shall not be
pending or threatened any action or proceeding by or before any
court or other governmental body which shall seek to restrain,
prohibit or invalidate the transactions contemplated hereby.
<PAGE>
Section 9.3 Certified Resolutions. The Buyer shall have
delivered to the Seller copies of resolutions adopted by the
board of directors of the Buyer authorizing the transactions
contemplated by this Agreement, certified as of the Closing by a
Secretary or Assistant Secretary of the Buyer.
ARTICLE X
CERTAIN ACTIONS AFTER THE CLOSING
Section 10.1 Further Assurances. After the Closing, upon
the reasonable request of the other, each party shall execute and
deliver all further documents and instruments and shall take such
other steps as may be reasonably necessary to effectuate the
transactions contemplated hereby, including, without limitation,
(a) promptly delivering the Audited 1997 Statements and the
necessary consent from the auditors of such statements for the
Company's filings with the SEC, (b) providing access to the Buyer
to any originals of the Records kept by the Seller, and (c)
cooperating with respect to any claims asserted against the Buyer
relating to the Business prior to the Closing.
Section 10.2 Litigation. It is recognized by the parties
to this Agreement that litigation or claims may arise at some
time in the future relating to the Seller, the Buyer, the Subject
Assets or the Assumed Liabilities which may be related directly
or indirectly to the period prior to the Closing or the period
subsequent to the Closing, or both. Each of the parties to this
Agreement agrees, therefore, that to the extent reasonable under
the circumstances, it will, at the expense of the requesting
party, fully cooperate with and provide information, records,
documents and assistance of employees to the other parties with
respect to any litigation or potential litigation in which the
other party is or may be involved; provided that such cooperation
shall be at the expense of the Seller to the extent it constitutes
part of the Subject Assets (including, without limitation, the
Records) and was not provided to the Buyer pursuant to this
Agreement. Nothing herein is intended to modify the obligations
of the parties relating to indemnification under Article 11.
Section 10.3 Misdirected Funds. If, after the Closing, the
Seller shall receive any payment on account of the Receivables or
other of the Subject Assets, it shall hold such funds in trust
for the Buyer and shall promptly endorse over and remit such
payments promptly to the Buyer.
<PAGE>
Section 10.4 Returns. The Returns are part of the Subject
Assets. If the Seller receives any Returns after the Closing
Date the Seller shall hold the Returns in trust for the Buyer and
promptly notify the Buyer of its receipt of Returns. The Seller
shall deliver the Returns to the Buyer following receipt of the
Buyer's instructions, with the Buyer paying for any freight,
insurance and storage costs (to the extent Buyer requests storage
of the Returns by the Seller in a facility which is not owned or
leased by the Seller).
Section 10.5 Transition Services. To the extent the Buyer
requires the assistance of the Seller after the Closing Date for
the transfer of the Subject Assets or the customer accounts,
Seller shall provide certain services as set forth in Schedule
10.5.
ARTICLE XI
INDEMNIFICATION
Section 11.1 Indemnity by the Seller. The Seller agrees to
indemnify and hold the Buyer and its affiliates and their
respective officers, directors, employees and agents and
(collectively, the "Buyer Indemnitees") harmless from all Buyer
Indemnified Liabilities incurred or suffered by any of the Buyer
Indemnitees. For this purpose, "Buyer Indemnified Liabilities"
shall mean all suits, proceedings, claims, expenses, losses,
costs, liabilities, judgments, deficiencies, assessments,
actions, investigations, penalties, fines, settlements, interest
and damages (including reasonable attorneys' fees and expenses),
whether suit is instituted or not and, if instituted, whether at
any trial or appellate level, and whether raised by the parties
hereto or a third party, incurred or suffered by the Buyer
Indemnitees or any of them arising from, in connection with or as
a result of (a) any false or inaccurate representation or
warranty made by or on behalf of the Seller in or pursuant to
this Agreement; (b) any default or breach in the performance of
any of the covenants or agreements made by the Seller in or
pursuant to this Agreement; (c) the operation of the Subject
Assets and the Business prior to the Closing Time; (d) any
obligation or liability of the Seller which is not an Assumed
Liability; and (e) any breach of the Contracts prior to the
Closing Time.
Section 11.2 Indemnity by the Buyer. The Buyer agrees that
it will indemnify and hold the Seller harmless from all Seller
Indemnified Liabilities incurred or suffered by the Seller. For
<PAGE>
this purpose, "Seller Indemnified Liabilities" shall mean all
suits, proceedings, claims, expenses, losses, costs, liabilities,
judgments, deficiencies, assessments, actions, investigations,
penalties, fines, settlements, interest and damages (including
reasonable attorneys' fees and expenses), whether suit is
instituted or not and, if instituted, whether at any trial or
appellate level, and whether raised by the parties hereto or a
third party, incurred or suffered by the Seller, arising from, in
connection with or as a result of (a) any false or inaccurate
representation or warranty made by or on behalf of the Buyer in
or pursuant to this Agreement; (b) any default or breach in the
performance of any of the covenants or agreements made by the
Buyer in this Agreement; or (c) the operation of the Business or
the Subject Assets after the Closing Time by the Buyer.
Section 11.3 Procedure for Indemnification
(a) In the event any person or entity not a party to
this Agreement shall make any demand or claim or file or threaten
to file or continue any lawsuit, which demand, claim or lawsuit
may result in Buyer Indemnified Liabilities or Seller Indemnified
Liabilities, as the case may be, the indemnified party shall give
written notice to such effect to the indemnifying party promptly
upon becoming aware thereof. In such event, within 20 days after
written notice by the indemnified party (the "Notice") of such
demand, claim or lawsuit, the indemnifying party shall have the
right, at its sole cost and expense, to take and assume full
control of the defense thereof and to hire counsel (which counsel
shall be reasonably satisfactory to the indemnified party) to
defend any such demand, claim or lawsuit (provided, however, that
the failure to give such Notice shall not relieve the indemnifying
party of its obligations hereunder unless, and only to the extent
that, such failure caused the damages for which the indemnifying
party is obligated to be greater than they would otherwise have
been had the indemnified party given prompt notice hereunder).
Thereafter, the indemnified party shall be permitted to participate
in such defense at its sole cost and expense, provided that, if the
named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified
party or if the indemnifying party proposes that the same counsel
represent both the indemnified party and the indemnifying party
and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them, then the indemnified party shall have the right to retain its
own counsel at the cost and expense of the indemnifying party. In
the event that the indemnifying party shall fail to respond within
<PAGE>
20 days after receipt of the Notice from the indemnified party of
any such demand, claim or lawsuit, then the indemnified party may
retain counsel and conduct the defense of such demand, claim or
lawsuit, as it may in its sole discretion deem proper, at the
sole cost and expense of the indemnifying party.
(b) With regard to claims of third parties for which
indemnification is payable hereunder, such indemnification shall
be paid in advance of settlement or final adjudication thereof
on a current basis within 30 days of receipt from the indemnified
party of such supporting documentation as the indemnifying party
may reasonably request.
Section 11.4 Limitations; Survival. The representations,
warranties and covenants of the parties shall survive the Closing
for a period of 18 months from the Closing Date, in each such
case notwithstanding any investigation made by or on behalf of
the Buyer, provided that the representations and warranties as to
Tax Claims (as hereinafter defined) shall survive for a period
of six years from the Closing Date. For purposes hereof, Tax
Claims means any claim based upon, arising out of, or otherwise
in respect of, any inaccuracy in or breach of any representation,
warranty, covenant or agreement of the Seller contained in this
Agreement relating to taxes. Notwithstanding anything to the
contrary contained in this Agreement, these limited survival
periods shall not apply to a fraudulent act or omission. No
action or proceeding may be brought with respect to any of the
representations and warranties unless written notice thereof
shall have been delivered to the Buyer or the Seller, as the case
may be, prior to the expiration of such applicable survival
period.
Section 11.5 Offset; Security Interest. As security for
the indemnification obligations of the Seller, whether presently
existing or hereafter created or incurred, the Seller hereby
grants the Buyer the right of offset against the Debenture and
assigns and grants to the Buyer a continuing security interest in
the Debenture together with all sums due and to become due
thereunder, and agrees that, in order to perfect its security
interest therein, the Buyer shall hold the Debenture in
accordance with the terms and conditions of this Section 11.5.
In the event of any Buyer Indemnified Liabilities arising under
Section 11.1, the Buyer shall be entitled, at any time and from
time to time, to offset such Buyer Indemnified Liabilities, in
whole or in part, against any amount due or coming due under the
<PAGE>
Debenture upon written notice (the "Offset Notice") to the Seller
specifying in reasonable detail the basis for such offset, and
the amount of such offset. Nothing herein shall be construed to
limit the Seller's obligation to indemnify the Buyer for such
Buyer Indemnified Liabilities. The exercise of such right of
offset by the Buyer in good faith, whether or not ultimately
determined to be justified, shall not constitute an event of
default under this Agreement or the Debenture. Neither the
exercise of, nor the failure to exercise, such right of offset
shall constitute an election of remedies or limit the Buyer in
any manner in the enforcement of any other remedies available to
it. Without limiting the foregoing, and in addition to any other
rights and remedies it may have, the Buyer shall have all of the
rights of a "secured party" under the Uniform Commercial Code as
in effect in the State of Florida. The Buyer agrees to pay any
portion of the Debenture which is due the Seller in accordance
with the terms thereof and which is not necessary to cover any
pending offset or claims for Buyer Indemnified Liabilities by the
Buyer. In the event that, upon resolution of any claim for which
the Buyer has offset or held back against amounts under the
Debenture, the amount due and owing to the Buyer or any third
party (plus reasonable attorneys' fees and disbursements or other
amounts incurred by the Buyer relating thereto) is less than the
amount offset or held back, then the Buyer shall promptly deliver
to the Seller a check for the excess amount. The Debenture will
be non-negotiable and will be legended to reflect the right of
offset.
ARTICLE XII
TERMINATION
Section 12.1 Termination. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned, but
not later than the Closing Date:
(a) by mutual written consent of the Buyer and the Seller;
(b) by the Buyer, in its sole discretion, if any of the
representations or warranties of the Seller contained herein are
not in all respects true, accurate and complete or if the Seller
breaches or fails to comply with any covenant or agreement
contained herein;
(c) by the Seller, in its sole discretion, if any of the
representations or warranties of the Buyer contained herein are
not in all respects true, accurate and complete or if the Buyer
<PAGE>
breaches or fails comply with any covenant or agreement contained
herein;
(d) by the Buyer, as provided in Section 6.5; or
(e) by either party upon written notice to the other in the
event that the Closing has not occurred by January 29, 1999, for
any reason other than the failure of the party seeking to
terminate this agreement to perform its obligations hereunder or
a breach of a representation or warranty by such party herein.
Section 12.2 Effect of Termination. In the event of a
termination of this Agreement pursuant to Section 12.1, written
notice thereof shall promptly be given to the other party hereto
and this Agreement shall terminate and the transactions
contemplated hereby shall be abandoned without further action by
the other party hereto. Notwithstanding such termination, each
party shall have the right to seek damages in the event of a
breach by the other party of its obligations under this
Agreement.
Section 12.3 Survival of Certain Provisions.
Notwithstanding anything to the contrary contained herein, the
respective obligations of the parties pursuant to Sections 6.8
and 7.2 and Article XIII hereof shall survive the termination of
this Agreement.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Amendment and Modification. This Agreement
may only be amended by written instrument signed by the parties
hereto.
Section 13.2 Binding Effect. This Agreement shall be
binding upon and inure to the benefit of the parties and their
respective successors, assigns, heirs, beneficiaries, estate,
executor and personal representatives.
Section 13.3 Entire Agreement. This Agreement and the
schedules and exhibits attached hereto constitute the entire
agreement of the parties with respect to the sale of the Subject
Assets and the other transactions contemplated in this Agreement,
and supersede all prior understandings, agreements and oral
representations and warranties of the parties with respect to the
subject matter of this Agreement. Any reference in this
Agreement shall be deemed to include the schedules and exhibits
hereto.
<PAGE>
Section 13.4 Headings. The descriptive headings in this
Agreement are inserted for convenience only and do not constitute
a part of this Agreement.
Section 13.5 Execution in Counterparts. This Agreement may
be executed in any number of counterparts, each of which shall be
deemed an original. Delivery of executed signature pages hereof
by facsimile transmission shall constitute effective and binding
execution and delivery hereof.
Section 13.6 Notices. Any notice, request, information or
other document to be given hereunder to any of the parties by any
other party which is not set forth as being an oral notice shall
be in writing (including telex and telegraphic communication) and
shall be (as elected by the person giving such notice) hand
delivered by messenger or courier service, telecommunicated, or
mailed by registered or certified mail (postage prepaid), return
receipt requested, addressed to:
If to Buyer
addressed to: French Fragrances, Inc.
14100 N.W. 60th Avenue
Miami Lakes, Florida 33014
Attention: E. Scott Beattie and
Oscar E. Marina
Facsimile: (305) 818-8020
If to the Seller
addressed to: Paul Sebastian, Inc.
1540 West Park Avenue
Ocean, New Jersey 07712
Attention: President
Facsimile: (732) 493-1840
With copy to: Ken Rosen, Esq.
Ravin, Sarasohn, Cook, Baumgarten,
Fisch & Rosen, P.C.
103 Eisenhower Parkway
Roseland, New Jersey 07068
Facsimile: (973) 228-6088
Any such notice shall be deemed delivered (a) on the date
delivered if by personal delivery, (b) on the date
telecommunicated if by telegraph or telecopy, (c) on the date of
transmission with confirmed answer back if by telex, and (d) on
the date upon which the return receipt is signed or delivery is
<PAGE>
refused or the notice is designated by the postal authorities as
not deliverable, as the case may be, if mailed. Any party may
change the address to which notices under this Agreement are to
be sent to it by giving written notice of a change of address in
the manner provided in this Agreement for giving notice.
Section 13.7 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Florida applicable to contracts made and to be performed
in Florida, without regard to conflicts of law principles
thereunder.
Section 13.8 Expenses. Except as otherwise provided in
this Agreement, all legal, accounting and other costs and
expenses incurred in connection with this Agreement and
transactions contemplated by this Agreement shall be paid by the
party incurring the expenses.
Section 13.9 Waiver. Any party to this Agreement may
extend the time for or waive the performance of any of the
obligations of the other, waive any inaccuracies in the
representations or warranties by the other, or waive compliance
by the other with any of the covenants or conditions contained in
this Agreement. Any such extension or waiver shall be in writing
and signed by an officer of the waiving party. No such waiver
shall operate or be construed as a waiver of any subsequent act
or omission of the parties.
Section 13.10 Severability. If at any time subsequent to
the date of this Agreement, any provision of this Agreement shall
be held by any court of competent jurisdiction to be illegal,
void or unenforceable, such provision shall be of no force and
effect, but the illegality or unenforceability of such provision
shall have no effect upon and shall not impair the enforceability
of any other provision of this Agreement.
Section 13.11 Publicity. Except as otherwise required by
law or regulation, no press release or other public announcement
related to this Agreement or the transactions contemplated by
this Agreement will be issued by either party without the prior
written approval of the other party.
Section 13.12 Assignment. No party shall assign its rights
or delegate its duties hereunder without the prior written
consent of the other party, provided that the Buyer may assign
the Acquired Intellectual Property to an affiliate.
<PAGE>
Section 13.13 No Third Party Rights. The provisions of
this Agreement are for the exclusive benefit of the parties
hereto and no other party (including, without limitation, any
creditor of any of the parties) shall have any right or claim
against the parties by reason of those provisions or be entitled
to enforce any of those provisions against the parties.
Section 13.14 Post-Closing Survival. Subject to the
limitations on survival set forth in Section 12.4, as applicable,
all covenants and agreements which by their respective terms are
intended to survive the consummation of the transactions
contemplated by this Agreement, including, without limitation,
Articles IV, V, VI, VII, X, XI, and XIII, shall survive such
consummation.
Section 13.15 Definitions. For purposes of this Agreement,
the following terms shall have the meanings ascribed below:
(a) "affiliate" of any person or entity shall mean any
person, entity or group (currently existing or hereafter created)
controlling, controlled by or under common control with, the
specified person or entity, and "control" of a person or entity
(including, with correlative meaning, the terms "control by" and
"under common control with") means the power to direct or cause
the direction of the management, policies or affairs of the
controlled person, whether through ownership of securities or
partnership or other ownership interests, by contract or
otherwise.
(b) "knowledge" shall mean the actual knowledge with
respect to a matter (after inquiry from any persons currently
retained by the company to provide services with respect to such
matter) of (i) an individual who is currently serving as an
executive officer or, (ii) if not an executive officer, a person
currently managing the accounting, credit, purchasing and sales
areas.
(c) "ordinary course of business" shall mean an action
taken by a person if:
(i) such action is recurring in nature, is
consistent with the past practices of such
person and is taken in the ordinary course of the
normal day-to-day operations of such person;
<PAGE>
(ii) such action is not required to be authorized by
the Board of Directors or such person and does
not require any special or separate authorization
of any nature; and
(iii) such action is similar in nature and magnitude to
actions customarily taken, without any special or
separate authorization, in the ordinary course of
the day-to-day operations of other persons that
are in the same line of business as the person in
question.
(c) "person" shall mean any individual, corporation
(including, without limitation, any non-profit corporation),
general partnership, limited partnership, joint venture, estate,
trust, cooperative, foundation, union, syndicate, league,
consortium, coalition, committee, society, firm, company or other
enterprise, association, organization or Governmental Authority.
(d) "threatened" - a claim, proceeding, investigation,
dispute, action or other matter shall be deemed to have been
"threatened" if any demand, statement or notice shall have been
made or given, verbally or in writing, that might lead a prudent
person to conclude that there is a reasonable probability that
such a claim, proceedings, investigation, dispute, action or
other matter might be asserted, commenced, taken or otherwise
pursued in the future.
Section 13.16 Prevailing Party. If either the Buyer, on
the one hand, or the Seller or the Shareholder, on the other
hand, commences an action against the other to interpret or
enforce any of the terms of this Agreement or exhibits hereto or
as a result of a breach by the other party of any terms hereof or
of the exhibits, the nonprevailing party shall pay to the
prevailing party reasonable attorneys' fees, costs and expenses
incurred in connection with the prosecution or defense of such
action (including at any appellate level).
Section 13.17 Subrogation of the Buyer. In the event that
the Buyer shall subsequent to the Closing Date become liable for
or suffer any damage with respect to any matter which was covered
by insurance maintained by the Seller on the Subject Assets at or
prior to the Closing, the Seller agrees that the Buyer shall be
subrogated to any rights of the Seller under the insurance
coverage and indemnified by the Seller, and, in addition, the
Seller agrees to promptly remit to the Buyer any insurance
proceeds which either of them may receive on account of any such
liability or damage.
<PAGE>
Section 13.18 Arbitration. In the event of a dispute
between the Buyer and the Seller under this Agreement, the
parties hereby agree to submit such dispute to binding
arbitration pursuant to the Rules of the American Arbitration
Association for Commercial Disputes (the "Arbitration Rules").
Arbitration shall be administered by the American Arbitration
Association (the "AAA"). The situs of arbitration shall be
Miami, Florida. All arbitrators shall be unrelated, directly or
indirectly, so far as employment or services is concerned to
either of the parties or to any affiliate or to any person
directly or indirectly related to the parties or their
affiliates. The arbitrators shall have substantial knowledge and
experience in accounting. Either party may institute arbitration
proceedings by delivering written notice to the other party.
Within 30 days after receipt of a request to arbitrate a dispute,
each party shall appoint one arbitrator, and within 15 days
thereafter the two appointed arbitrators shall select a third
arbitrator. If either party shall fail to make such appointment
within the 30-day period, the other party shall be authorized to
appoint the second arbitrator. If the two appointed arbitrators
fail to select a third arbitrator within the 15-day period, the
AAA shall select the third arbitrator. The three arbitrators
shall render a written decision upon the matter presented to them
by majority vote within 90 days after the date upon which the
last arbitrator is appointed, and that decision shall be final
and binding on the parties, and enforceable in any court of
competent jurisdiction. Judgment upon the decision rendered in
such arbitration may be entered by any court having jurisdiction
thereof. The provisions of Section 13.18 shall apply in such
arbitration.
Section 13.19 Selection of Forum; Venue; Service of
Process. In the event a claim is not subject to resolution by
arbitration because a party does not respond to a request for
arbitration or the relief sought can only be granted by a court,
the parties hereby irrevocably submit in any suit, action or
proceeding arising out of or relating to this Agreement or any
transactions contemplated hereby to the exclusive jurisdiction of
the United States District Court for the Southern District of
Florida or if jurisdiction is not available therein the
jurisdiction of any state court in Miami-Dade County, State of
Florida, and waive any and all objections to such jurisdiction or
venue that they may have under the laws of any state or country,
including, without limitation, any argument that jurisdiction,
situs and/or venue are inconvenient or otherwise improper. Each
<PAGE>
party further agrees that process may be served upon such party
in any manner authorized under the laws of the United States or
Florida, and waives any objections that such party may otherwise
have to such process.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
FRENCH FRAGRANCES, INC.
By: /s/ OSCAR E. MARINA
-------------------
Name: Oscar E. Marina
Title: Vice President
PAUL SEBASTIAN, INC.
By: /s/RONALD L. ROLLESTON
----------------------
Name: Ronald L. Rolleston
Title: President
<PAGE>
EXHIBITS
Exhibit A - Escrow Agreement
Exhibit B - Debenture
Exhibit C - General Conveyance, Bill of Sale and Assignment
Exhibit D - Assignment
SCHEDULES
Schedule 1.1 Subject Assets
1.1(c) Fixed Assets
1.1(e) Contracts
1.1(f) Regulatory Licenses
Schedule 2.1(a) Inventory Listing Report
Schedule 2.1(b) Receivables Listing Report
Schedule 2.2(b) Promotional Reimbursements
Schedule 2.3 Allocation of Purchase Price
Schedule 4.2 Consents
Schedule 4.3 Seller's Financial Statements
Schedule 4.4(a) Liens on Subject Assets
Schedule 4.4(b) Locations of Fixed Assets
Schedule 4.5(a) Acquired Intellectual Property
Schedule 4.5(b) Claims and Restrictions Relating to
Acquired Intellectual Property or Licenses
Schedule 4.5(c) Restrictions on Registered Acquired
Intellectual Property
Schedule 4.7 Litigation
Schedule 4.8 Description of Adverse Changes
Schedule 4.9 Excluded Report
Schedule 4.10(a)(i) Material Agreements for Sale, Marketing
and Distribution of the Brands
Schedule 4.10(a)(ii) Agreements for the Acquisition or
Manufacturing of Inventory
Schedule 4.10(a)(iii) License Agreements
Schedule 4.10(a)(iv) Agreements Creating Material Rights and
Obligations
Schedule 4.10(a)(v) Other Material Agreements
Schedule 4.12(a) Labor Law Noncompliance Description
Schedule 4.12(b) Independent Contractor Agreements
Schedule 4.13 ERISA Plans
Schedule 4.14(a) Inventory Locations
Schedule 4.14(b) Returns
Schedule 4.15 Gross Sales Report
Schedule 4.17 Payables
Schedule 4.18 Promotional Obligations
Schedule 5.3 Consents
Schedule 10.5 Transition Services
<PAGE>
