Exhibit 2.05
CLOSING MEMORANDUM
Asset Purchase Agreement
dated as of March 10, 1999
by and between
Inholtra Investment Holdings and Trading, N.V. ("Holdings")
Inholtra, Inc. ("Inc.")
Inholtra Natural, Ltd. ("INL")
for itself and on behalf of
▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇")
(the "Sellers")
and
▇▇▇▇▇ Naturals/4Health, Inc.
("Buyer")
The signing of the Asset Purchase Agreement and the closing
thereunder occurred simultaneously on March 10, 1999 at 1:00 p.m. at the
offices of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP, located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇. Upon execution of all documents, Buyer delivered the Note
and paid the purchase price to INL, on behalf of the Sellers. The following
documents were delivered at the closing, in each case signed by the parties
indicated.
AGREEMENTS
1. Asset Purchase Agreement (Buyer; Sellers)
2. Promissory Note (Buyer)
3. Transitional Services Agreement (Buyer; INL)
4. Non-Compete Agreement (Buyer; Sellers)
5. Indemnity Escrow Agreement (Buyer; INL; Escrow Agent)
6. Consulting Agreement (Buyer; ▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇)
7. Security Escrow Agreement (Buyer; INL; Escrow Agent)
ASSIGNMENTS
8. Assignment and Assumption Agreement (Buyer; Sellers)
9. General Assignment of Intangibles (Sellers)
10. U.S. Trademark Assignment - encumbered (Buyer; Inc.)
11. Trademark Assignment-Swiss - encumbered (Buyer; Holdings)
12. Community Trademark Assignment - encumbered (Buyer; Holdings)
13. Patent Assignment - encumbered (Buyer; Inc.)
14. Patent Assignment - encumbered (Buyer; Holdings)
15. Patent Assignment - encumbered (Buyer; ▇▇▇▇)
SECURITY ESCROW DOCUMENTS
16. U.S. Trademark Assignment (Buyer; Inc.)
17. Trademark Assignment-Swiss (Buyer; Holdings)
18. Community Trademark Assignment (Buyer; Holdings)
19. General Reassignment of Intangibles (Buyer)
20. U.S. Trademark Reassignment (Buyer; Holdings)
21. Trademark Reassignment (Buyer; Holdings)
22. Community Trademark Reassignment (Buyer; Holdings)
23. Patent Reassignment (Buyer; ▇▇▇▇)
24. Patent Reassignment (Buyer; Holdings)
25. Patent Reassignment (Buyer; Holdings)
26. U.S. Patent Assignment (Buyer; Holdings)
27. PCT Patent Assignment (Buyer; Inc.; ▇▇▇▇)
28. EPO Patent Assignment (Buyer; Inc.; ▇▇▇▇)
29. Australian Patent Assignment (Buyer; Inc.)
30. Canadian Patent Assignment (Buyer; ▇▇▇▇)
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OTHER CLOSING DOCUMENTS
31. Opinion of Seller's counsel (Faro & Associates)
32. ▇▇▇▇ of Sale and Assignment (Sellers)
33. Resolutions of INL
34. Powers of Attorney
A. ▇▇▇▇
▇. Holdings
35. Director's Certificates
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ASSET PURCHASE AGREEMENT
BY
AND
BETWEEN
▇▇▇▇▇ NATURALS/4HEALTH, INC.
AND
INHOLTRA INVESTMENT HOLDINGS AND TRADING, N.V.,
INHOLTRA, INC.,
AND
INHOLTRA NATURAL, LTD.,
FOR ITSELF AND AS ATTORNEY-IN-FACT ON BEHALF OF
▇▇▇▇ ▇. ▇▇▇▇▇▇
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Dated: March 10, 1999
TABLE OF CONTENTS
PAGE
1. PURCHASE AND SALE AGREEMENT . . . . . . . . . . . . . . . . . . . . 1
1.1 AGREEMENT OF PURCHASED AND SALE . . . . . . . . . . . . . . . 1
1.2 PURCHASED ASSETS . . . . . . . . . . . . . . . . . . . . . . 2
1.3 ADDITIONAL PURCHASED ASSETS . . . . . . . . . . . . . . . . . 4
1.4 ASSUMED LIABILITIES . . . . . . . . . . . . . . . . . . . . . 4
1.5 PURCHASE PRICE, NOTE AND SECURITY ESCROW. . . . . . . . . . . 6
2. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 CLOSING DATE. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 ACTION BY BUYER . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 ACTION BY SELLER. . . . . . . . . . . . . . . . . . . . . . . 7
3. ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 FURTHER ASSURANCES/COOPERATION. . . . . . . . . . . . . . . . 8
3.2 NON-ASSIGNABLE CONTRACTS. . . . . . . . . . . . . . . . . . . 8
3.3 PAYMENT OF TAXES AND CHARGES UPON TRANSFER OF
PURCHASED ASSETS . . . . . . . . . . . . . . . . . . . . . . 9
3.4 RETAINED LIABILITIES. . . . . . . . . . . . . . . . . . . . . 9
3.5 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . 9
3.6 PREPARATION OF FINANCIAL INFORMATION. . . . . . . . . . . . . 10
3.7 TRANSITIONAL SERVICES AGREEMENT . . . . . . . . . . . . . . . 10
3.8 CONSULTING AGREEMENT. . . . . . . . . . . . . . . . . . . . . 10
3.9 EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.10 WAIVER OF COMPLIANCE WITH BULK TRANSFER LAWS. . . . . . . . . 10
3.11 NON-COMPETE AGREEMENT . . . . . . . . . . . . . . . . . . . . 11
3.12 REIMBURSEMENT OF BUYER . . . . . . . . . . . . . . . . . . . 11
3.13 NOTICE OF CERTAIN MATTERS . . . . . . . . . . . . . . . . . . 11
3.14 CHANGE OF NAME. . . . . . . . . . . . . . . . . . . . . . . . 11
3.15 OTHER AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 11
4. REPRESENTATIONS AND WARRANTIES AS TO SELLER . . . . . . . . . . . . 12
4.1 ORGANIZATION, STANDING AND POWER. . . . . . . . . . . . . . . 12
4.2 INTEREST IN OTHER ENTITIES. . . . . . . . . . . . . . . . . . 12
4.3 AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4 NONCONTRAVENTION. . . . . . . . . . . . . . . . . . . . . . . 13
4.5 PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.6 INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.7 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . 14
4.8 ABSENCE OF CHANGES. . . . . . . . . . . . . . . . . . . . . . 16
4.9 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 17
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4.10 NO VIOLATION OF LAW . . . . . . . . . . . . . . . . . . . . . 18
4.11 GOVERNMENT AND THIRD-PARTY CONSENTS/ APPROVALS. . . . . . . . 18
4.12 PRODUCTS LIABILITY. . . . . . . . . . . . . . . . . . . . . . 18
4.13 MATERIAL AND OTHER CONTRACTS. . . . . . . . . . . . . . . . . 19
4.14 BUSINESS FINANCIAL STATEMENTS; 1998 REVENUES. . . . . . . . . 20
4.15 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . 20
4.16 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.17 INFORMATION AS TO SELLER. . . . . . . . . . . . . . . . . . . 21
5. REPRESENTATIONS AND WARRANTIES AS TO BUYER. . . . . . . . . . . . . 21
5.1 ORGANIZATION, STANDING AND POWER. . . . . . . . . . . . . . . 21
5.2 AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.3 NONCONTRAVENTION. . . . . . . . . . . . . . . . . . . . . . . 21
5.4 INFORMATION AS TO BUYER . . . . . . . . . . . . . . . . . . . 22
6. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1 INDEMNIFICATION BY SELLER . . . . . . . . . . . . . . . . . . 22
6.2 INDEMNIFICATION BY BUYER. . . . . . . . . . . . . . . . . . . 23
6.3 THIRD PARTY CLAIMS. . . . . . . . . . . . . . . . . . . . . . 23
6.4 PENDING LITIGATIONS . . . . . . . . . . . . . . . . . . . . . 24
7. NONDISCLOSURE/ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . . . 25
7.1 NONDISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 NO DISPARAGEMENT . . . . . . . . . . . . . . . . . . . . . . 25
7.3 INJUNCTIVE RELIEF, ETC. . . . . . . . . . . . . . . . . . . . 25
7.4 SCOPE OF RESTRICTION. . . . . . . . . . . . . . . . . . . . . 25
7.5 ADDITIONAL UNDERTAKINGS . . . . . . . . . . . . . . . . . . . 25
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . 26
9. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 26
9.1 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.3 APPLICABLE LAW. . . . . . . . . . . . . . . . . . . . . . . . 27
9.4 WAIVER, ETC . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.5 ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.6 BINDING EFFECT; BENEFITS . . . . . . . . . . . . . . . . . . 28
9.7 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.8 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . 28
9.9 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 28
9.10 SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.11 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.12 EXECUTION IN COUNTERPARTS . . . . . . . . . . . . . . . . . . 28
9.13 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . 29
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SCHEDULES
1.2(iii) Assumed Contracts
1.3 Other Excluded Assets
3.2 Non-Assignable Contracts
4.7 Intellectual Property
4.9 Litigation
4.12 Product Liability Claims
4.13(a) Material Contracts
4.13(b) Other Agreements
4.14 Financials
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EXHIBITS
1 ▇▇▇▇ of Sale and Assignment
2 Transitional Services Agreement
3 Non-Compete Agreement
4 Indemnity Escrow Agreement
5 Seller's Opinion of Counsel
6 Promissory Note
7 Consulting Agreement
8 Security Escrow Agreement
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ASSET PURCHASE AGREEMENT
AGREEMENT (this "Agreement"), dated as of the 10th day of March 1999, by and
between Inholtra Natural, Ltd., a Maine corporation ("INL"), for itself and
as attorney-in-fact on behalf of ▇▇▇▇ ▇. ▇▇▇▇▇▇, a resident of Florida
("Vito's"), and Inholtra, Inc., a Florida corporation ("Inc.") and Inholtra
Investment Holdings and Trading, N.V., a Netherlands Antilles company
("Holdings"; INL, Vito's, Inc., and Holdings being sometimes referred to
herein individually and collectively as "Seller"), and ▇▇▇▇▇ Naturals/4Health,
Inc. ("Buyer"), a Utah corporation.
W I T N E S S E T H:
WHEREAS, Seller is engaged in the business of manufacturing,
marketing, distributing and selling certain nutritional supplements and
related products throughout the United States and in certain other countries
(the "Business") and owns or has rights to use, among other assets, certain
data bases, licenses, inventory, tradenames and goodwill relating thereto,
all as more particularly set forth in this Agreement; and
WHEREAS, Seller wishes to sell to Buyer, and Buyer wishes to purchase
from Seller, as a going concern, the Business and all of the assets and
rights relating thereto, subject to the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of and in reliance upon the
covenants, conditions, representations and warranties herein contained, the
parties hereto hereby agree as follows:
1. PURCHASE AND SALE AGREEMENT.
1.1 AGREEMENT OF PURCHASE AND SALE. Subject to the terms
and conditions set forth in this Agreement and in reliance upon the
representations, warranties, covenants are conditions herein contained, on
the Closing Date (as defined in Section 2.1 hereof) Seller shall sell,
convey, assign, transfer and deliver to Buyer, and Buyer shall purchase from
Seller, the Purchased Assets (as defined in Section 1.2 hereof), free and
clear of any and all liens, pledges, security interests, claims, charges or
encumbrances of any nature whatsoever.
1.2 PURCHASED ASSETS. As used in this Agreement the term
"Purchased Assets" means all rights, interest and title to the properties and
assets owned by Seller and otherwise employed, used or available for use in
the Business, real and personal, tangible and intangible, of every kind and
nature, wherever located, as the same shall exist on the Closing Date,
including, without limitation:
(i) the Intellectual Property Rights (as defined in
Section 4.7 hereof), including, without limitation the
"INHOLTRA", "QUICKSORB" and "ALGONOT" marks, and all goodwill
associated therewith and with the Business;
(ii) the Inventory (so defined in Section 4.6 hereof);
(iii) all contracts, licenses, arrangements, leases,
agreements and commitments, written or oral, that are listed
on SCHEDULE 1.2(iii) (the "Assumed Contracts");
(iv) all brochures, sales literature, catalogues,
price lists, mailing lists, distribution lists, photographs,
advertising materials, media materials and plates, art work
and copy files (for all media), promotional and other selling
material used in the Business, and masters thereof, wherever
situated, in hard copy and electronic format, including, but
not limited to, all web sites owned or developed by Seller,
together with all elements thereof, including, without
limitation, domain names, text, audio, video and graphics,
and all intellectual property rights related thereto (all
such items being hereinafter collectively referred to as the
"Promotional Materials");
(v) all papers, documents (including information
stored in electronic forms such as computer disks, CD Rom,
computer tape, computer hard drive and the like),
instruments, books and records, correspondence, files, books
of account, data and laboratory books, and other records by
which any of the Purchased Assets might be
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identified or rights with respect thereto enforced, or
otherwise pertaining to the Purchased Assets or the Business
that are located at the Seller's offices or other locations
used in connection with the Business (including without
limitation, customer invoices, customer lists, vendor and
supplier lists, drafts and other documents and materials
relating to customer transactions);
(vi) all analytical and testing reports, files and
production data relating to the Business, in hard copy and
electronic format;
(vii) all back order files and collections files
relating to the Business;
(viii) all credits, prepaid expenses, deferred charges,
advance payments, security charges, and other prepaid items,
deposits and advances (including royalty advances as set
forth in SCHEDULE 4.7) relating to the Business;
(ix) all rights of Seller to the computer software
programs (including source and object codes to the extent
Seller owns the rights, data and related documentation) and
the licenses or other agreements conferring rights related
thereto used in connection with the Business;
(x) all office supplies and equipment used in
connection with the Business;
(xi) all rights to receive payment, including
promissory notes and all balances, credits, deposits,
accounts or monies of Seller held by third parties (other
than accounts receivable generated by the Business prior to
the Closing Date); and
(xii) all other assets and properties of Seller that
are used in connection with the Business other than Excluded
Assets.
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1.3 ADDITIONAL PURCHASED ASSETS. In the event that Buyer
shall establish and notify Seller at any time or from time to time following
the Closing Date that any of the Schedules describing the Purchased Assets
failed to include assets or properties of Seller used by Seller in the
Business (other than Excluded Assets), then: (a) with respect to any such
assets or properties used in the Business, Seller shall, at its own expense,
promptly convey, transfer, assign and deliver to Buyer or other such person
as may be designated by Buyer, and Buyer or such designee shall acquire from
Seller, without additional consideration, all such assets and properties,
which shall be deemed for all purposes to be included in the definition of
Purchased Assets hereunder as provided in Section 1.2 hereof and (b) with
respect to any such assets or properties used primarily, but not exclusively,
in the Business, Seller shall grant to Buyer an irrevocable, royalty-free
license or otherwise convey to Buyer the unlimited right to use any such
assets or property, without additional consideration. Excluded Assets shall
mean (a) accounts receivable and other receivables related to merchandise
shipped prior to the Closing Date, (b) contracts, agreements or commitments
which are not Assumed Contracts, and (c) those assets listed on SCHEDULE 1.3.
1.4 ASSUMED LIABILITIES.
(a) Subject to the terms and conditions set forth in this
Agreement and in reliance upon the representations, warranties, covenants and
conditions herein contained, on the Closing Date Buyer shall assume, and
shall only assume Seller's executory obligations under the Assumed Contracts
(but not any obligations thereunder arising from any breach or alleged breach
by Seller thereof), in each case only to the extent that the foregoing
represent obligations which are by their stated terms to be performed, in the
ordinary course, subsequent to the Closing Date ("Assumed Liabilities").
(b) Anything herein contained to the contrary
notwithstanding, the following liabilities of Seller are specifically
excluded from the Assumed Liabilities and shall constitute "Retained
Liabilities":
(i) any and all income, franchise, sales, use,
property, payroll, employment, transfer and any other taxes, charges,
fees, levies, imports, duties, licenses or other assessments,
together with
4
interest, penalties and any other additions to tax or additional
amounts imposed by any governmental or taxing authority, or liability
for such amounts as a result of Seller being a member of an
affiliated, consolidated, combined or unitary group or being a party
to any agreement or arrangement whereby Seller may be liable for
taxes or any other person for any period prior to (or up to and
including) the close of business on the day prior to the Closing Date;
(ii) any and all liabilities to any employees of
Seller for services performed for Seller, or for any severance or
other benefits, and any and all employment or consulting
arrangements, executive compensation plans, collective bargaining
agreements, bonus plans, guaranteed bonus agreements, deferred
compensation agreements, employee pension plans or retirement plans,
employee profit sharing plans, employee stock purchase and stock
option plans, group life insurance, hospitalization insurance or
other plans or arrangements providing for benefits to employees of
Seller;
(iii) any liabilities and obligations of Seller, the
existence of which constitutes a breach of any of the
representations, warranties or covenants made by Seller in this
Agreement or in any document delivered by it pursuant hereto;
(iv) any liabilities and obligations arising out of
or in connection with any defect in any product manufactured or sold
by Seller prior to the Closing Date, or any litigation, investigation
or proceeding to which Seller is a party, or which is based upon
events occurring or circumstances existing prior to the Closing Date;
(v) any accounts payable of the Business;
(vi) any liabilities and obligations of Seller for
any breach or violation, prior to the Closing Date, of any of the
Assumed Contracts; and
5
(vii) any other liability or obligation which is not
an Assumed Liability.
(c) For purposes of clarification, notwithstanding the
assignment of any contract or other rights included in the Purchased Assets,
except as otherwise provided herein Seller has not assigned and Buyer has not
assumed and Seller retains its rights and obligations, including all rights
and remedies of enforcement, with respect to receivables or other amounts
owed or obligations to or from Seller on sales made prior to the Closing
Date.
1.5 PURCHASE PRICE, NOTE AND SECURITY ESCROW. The purchase
price for the Purchased Assets shall be $13,250,000.00 (the "Purchase
Price"), of which $250,000.00 has been paid to Seller in cash as a
non-refundable down payment, the sum of $3,000,000.00 shall be paid in cash
to Seller at the Closing (the "Cash Purchase Price"), and the balance of
which shall be paid by a promissory note of Buyer issued to Seller at the
Closing, in the form annexed hereto as EXHIBIT 6 (the "Note"). It is
acknowledged and agreed that upon maturity of the Note, and as provided
therein, $1,000,000.00 of the principal amount due thereunder shall be paid
to ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP, as escrow agent (the "Indemnity
Escrow Agent") pursuant to the terms and conditions of the Indemnity Escrow
Agreement (the "Indemnity Escrow Agreement") to be executed and delivered at
the Closing pursuant to Section 3.15 below. As security for Buyer's
obligations under the Note, the parties agree that the Reassignments (as
defined herein) shall be deposited in escrow (the "Security Escrow") pending
the payment in full of the Note, and the Clean Assignments thereof (as
defined in the Note) of the Intellectual Property Rights shall also be
deposited in the Security Escrow Agreement to be delivered to Buyer for
recording upon payment in full of the Note, all as provided in the Security
Escrow Agreement to be entered into by the parties at the Closing in
substantially the form attached hereto as EXHIBIT 8 (the "Security Escrow
Agreement"). As a further inducement to Buyer to enter into this Agreement,
Seller has agreed to enter into the Non-Compete Agreement and the
Transitional Services Agreement, and has caused ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ to enter
into the Consulting Agreement (as such terms are defined in Section 3). The
Purchase Price shall be allocated as determined by Buyer, in its discretion
(Seller hereby agreeing to report the transaction for tax purposes on a basis
consistent therewith).
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2. CLOSING.
2.1 CLOSING DATE. The closing of the sale and purchase
provided for herein (the "Closing") shall take place at 10:00 A.M., New York
time, at the offices of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ on March 10, 1999 or at such other place, time and
date as may hereafter be mutually agreed upon by the parties (such time and
date of Closing being hereinafter called the "Closing Date").
2.2 ACTION BY BUYER. Subject to the terms and conditions
herein contained, on the Closing Date, Buyer shall pay to Seller the Cash
Purchase Price and shall execute and deliver to Seller this Agreement, the
Note, the Indemnity Escrow Agreement, the Consulting Agreement, the
Non-Compete Agreement, the Security Escrow Agreement, the Transitional
Services Agreement and the other agreements contemplated hereby, and shall
execute and deliver to ▇▇▇▇ ▇. ▇▇▇▇, Esq., as escrow agent (the "Security
Escrow Agent"), the Reassignments.
2.3 ACTION BY SELLER. Subject to the terms and conditions
herein contained, on the Closing Date, Seller shall execute and deliver to
Buyer this Agreement, the Indemnity Escrow Agreement, the Non-Compete
Agreement, the Transitional Service Agreement, the Security Escrow Agreement,
and the other agreements contemplated hereby, shall cause ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
to execute and deliver the Consulting Agreement, and shall also execute and
deliver to Buyer the following:
(a) a duly executed ▇▇▇▇ of Sale and Assignment in
substantially the form of EXHIBIT 1 attached hereto and made a part
hereof;
(b) assignments with respect to the Intellectual
Property Rights (in forms suitable for recording in the United States
Patent and Trademark Office and in the comparable offices of all
relevant foreign jurisdictions) other instruments of transfer,
including without limitation any assignments with respect to all
Assumed Contracts including License Agreements;
(c) all third-party consents and governmental and
administrative approvals, as shall be,
7
in the opinion of Buyer, necessary or appropriate in order to convey,
transfer and assign to and vest in Buyer good and marketable right,
title and interest in and to the Purchased Assets, free and clear of
all liens, pledges, security interests, claims, charges and
encumbrances of any nature whatsoever;
(d) an opinion of ▇▇▇▇ ▇. ▇▇▇▇, Esq., counsel for
Seller, dated the Closing Date, in substantially the form of
EXHIBIT 5 attached hereto and made a part hereof; and
(e) duly executed powers of attorney, in form and
substance satisfactory to Buyer, authorizing the parties named
therein to act on behalf of Vito's, Inc. and Holdings, as the case
may be, in all capacities and in respect of all actions contemplated
hereunder and under any document contemplated hereby.
3. ADDITIONAL COVENANTS.
3.1 FURTHER ASSURANCES/COOPERATION.
(a) Seller hereby agrees that it shall from time to time
after the Closing Date, at its sole cost and expense, take any and all
actions, and execute, acknowledge, deliver, file and/or record any and all
documents and instruments, as Buyer may reasonably request in order to more
fully perfect the rights which are intended to be granted to Buyer hereunder.
(b) Each of the parties hereto hereby agrees to fully
cooperate with the other parties hereto in preparing and filing any notices,
applications, reports and other instruments and documents which are required
by, or which are desirable in the opinion of any of the parties hereto in
respect of, any statute, rule, regulation or order of any governmental or
administrative body in connection with the transactions contemplated hereby.
3.1 NON-ASSIGNABLE CONTRACTS. Anything in this Agreement
contained to the contrary notwithstanding, nothing in this Agreement shall
be construed as an attempt to assign (a) any contract or agreement that is
at law non-assignable without the
8
consent of the other party thereto and as to which such consent shall not
have been given, or (b) any contract or agreement as to which all the
remedies for the enforcement thereof and the rights thereunder enjoyed by
Seller would not, as a matter of law, pass to Buyer as an incident of the
assignments provided for by this Agreement. Attached hereto as SCHEDULE 3.2
is a list of all such non-assignable contracts. In order, however, that the
full value of every contract and agreement of the character described in
clauses (a) and (b) of the immediately preceding sentence and all claims and
demands relating to such contracts and agreements may be realized, Seller
hereby agrees with Buyer that it will, at its sole cost and expense, at the
request and under the direction of Buyer, in the name of Seller or otherwise,
as Buyer shall specify and as shall be permitted by law, take all such action
and do or cause to be done all such things as shall be, in the opinion of
Buyer, necessary or desirable (1) in order that the rights and benefits of
Seller under such contracts and agreements shall be preserved and (2) for,
and to facilitate, the collection of the monies due and payable, and to
become due and payable, to Seller in and under every such contract and
agreement, and Seller will hold the same for the benefit of and will pay the
same, when received, to Buyer.
3.3 PAYMENT OF TAXES AND CHARGES UPON TRANSFER OF PURCHASED
ASSETS. Seller shall be responsible for, and shall pay, any and all filing,
recording, registration and similar fees, arising out of the transactions
contemplated by this Agreement. Buyer shall be responsible for, and shall
pay, any and all sales, use, purchase, transfer and similar taxes arising
therefrom.
3.4 RETAINED LIABILITIES. Subsequent to the Closing Date,
Seller shall pay, discharge and perform the Retained Liabilities as and when
due.
3.5 BOOKS AND RECORDS. Seller shall, for a period of at
least four (4) years following the Closing Date, maintain and make available
to Buyer and its representatives for inspection and reproduction, during
regular business hours, all books and records relating to the Purchased
Assets, the Business or the Assumed Liabilities which are not included among
the Purchased Assets. Buyer shall, for a period of at least four (4) years
following the Closing Date, maintain and make available to seller and its
representatives for inspection and reproduction, during regular business
hours, all books and records relating to
9
the Purchased Assets, the Business or the Assumed Liabilities which are
included among the Purchased Assets, but only insofar as said books and
records relate to periods ending on or prior to the Closing Date.
3.6 PREPARATION OF FINANCIAL INFORMATION.
(a) In contemplation of and in order to comply with the
rules and regulations of the Securities and Exchange Commission, Buyer shall
cause its independent accountants to prepare, as promptly as possible after
the Closing Date, audited financial statements for the Business for the years
ended December 31, 1997 and December 31, 1998 (collectively, the "Financial
Statements") and to Seller shall provide all necessary assistance with respect
thereto, it being understood and agreed by Seller that such assistance shall
include, without limitation, (i) providing Buyer and its representatives with
all necessary financial information and data relating to the Business for
such periods, (ii) making available to Buyer all employees or any of its
affiliates deemed necessary by Buyer to assist in the preparation of such
financial statements, and (iii) if requested by Buyer, delivering a
management representation letter.
(b) The fees and expenses of such accountants in preparing
Financial Statements for the Business as provided in this Section shall be
borne equally by Buyer and Seller; provided that Seller's share thereof shall
not exceed $25,000.00 in the aggregate.
3.7 TRANSITIONAL SERVICES AGREEMENT. At the Closing, Buyer
shall enter into a transitional services agreement, in the form attached
hereto as EXHIBIT 2 (the "Transitional Services Agreement").
3.8 CONSULTING AGREEMENT. At the Closing, Buyer shall enter
into a consulting agreement with ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ in the form attached
hereto as EXHIBIT 7 (the "Consulting Agreement").
3.9 EMPLOYEES. Buyer shall have no obligation to employ any
employees of Seller.
3.10 WAIVER OF COMPLIANCE WITH BULK TRANSFER LAWS. Subject to
the provisions of Section 6.1, with respect to the transactions contemplated
by this Agreement, Buyer hereby
10
waives compliance with any applicable provisions of the bulk transfer laws
(Section 6 of the Uniform Commercial Code).
3.11 NON-COMPETE AGREEMENT. At the Closing, the Seller shall
enter into a non-compete agreement, in the form attached hereto as EXHIBIT 3
(the "Non-Compete Agreement").
3.12 REIMBURSEMENT OF BUYER. Seller shall, no later than
June 10, 1999, reimburse Buyer for any refunds, credits, returns,
replacements, repairs and warranty costs and expenses made by Buyer with
respect to sales of merchandise by Seller prior to the Closing.
3.13 NOTICE OF CERTAIN MATTERS. Each of the parties hereto
shall give written notice to the other party promptly upon becoming aware of
(i) the occurrence of a material adverse change in the condition of the
Purchased Assets or the Business, (ii) any occurrence, or failure to occur,
of any event, which occurrence or failure to occur has caused or could
reasonably be expected to cause any representation or warranty in this
Agreement to be untrue or inaccurate in any material respect at any time after
the date hereof and prior to the Closing Date or (iii) any material failure on
the part of either party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such party hereunder; provided
that the delivery of any notice pursuant to this Section 3.18 shall not limit
or otherwise affect the remedies available hereunder to the party receiving
such notice.
3.14 CHANGE OF NAME. Effective from and after the Closing
Date, each of Seller, Inc., Vito's and Holdings shall (and shall cause each of
their respective subsidiaries and affiliates to) change its name to a name
not containing the words "Inholtra" or "▇▇▇▇" or any combination, permutation
or derivative thereof (except for Vito's with respect to the name ▇▇▇▇ ▇.
▇▇▇▇▇▇) and shall within 15 days after the Closing Date furnish Buyer with
certificates or other written evidence satisfactory to Buyer from the
appropriate regulatory authorities confirming that such changes of name have
been effected.
3.15 OTHER AGREEMENTS. At the Closing, the Buyer and Seller
shall enter into the Indemnity Escrow Agreement, in the form attached hereto
as EXHIBIT 4, and the Security Escrow Agreement, in the form attached hereto
as EXHIBIT 8, pursuant to which Buyer shall deliver to the Security Escrow
Agent
11
reassignments to Seller, Vito's, Inc., or Holdings, as the case may be, of
all rights assigned to Buyer under Section 2.3(b) hereof, as security for
repayment of the Note (the "Reassignments").
4. REPRESENTATIONS AND WARRANTIES AS TO SELLER. Seller hereby,
represents and warrants to Buyer as follows:
4.1 ORGANIZATION, STANDING AND POWER. Each of INL, Inc. and
Holdings is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation shown in the
introductory paragraph of this Agreement, with full corporate power and
authority to own, lease and operate its properties and to carry on the
Business as presently conducted by it. There are no states or jurisdictions
in which the character and location of any of the properties owned or leased
by Seller, or the conduct of its business, makes it necessary for it to
qualify to do business as a foreign corporation.
4.2 INTERESTS IN OTHER ENTITIES. Seller does not (i) own,
directly or indirectly, of record or beneficially, any shares of voting stock
or other equity securities of any other corporation engaged in the same or
similar business to the Business; (ii) have any ownership interest, direct or
indirect of record or beneficially, in any unincorporated entity engaged in
the same or similar business to the Business; or (iii) have any obligation,
direct or indirect, present or contingent, (A) to purchase or subscribe for
any interest in, advance or loan monies to, or in any way make investments
in, any other person or entity engaged in the same or similar business to the
Business, or (B) to share any profits or capital investments or both from a
entity engaged in the same or similar business to the Business.
4.3 AUTHORITY. The execution and delivery by of this
Agreement and of all of the agreements to be executed and delivered by them
pursuant hereto, the performance by them of their respective obligations
hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
necessary corporate action on the part of each such party and each such
party has all necessary power with respect thereto. This Agreement is, and
when executed and delivered by the parties thereto, each of the other
agreements to be delivered pursuant hereto will be, the valid and binding
obligation of them, Vito's, Inc. and Holdings enforceable
12
against each such party in accordance with its terms, except as the same may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting the rights of creditors generally and subject to the rules of
law governing (and all limitations on) specific performance, injunctive
relief, and other equitable remedies.
4.4 NONCONTRAVENTION. Neither the execution and delivery of
this Agreement or of any agreement to be executed and delivered pursuant
hereto, nor the consummation of any transactions contemplated hereby or
thereby, nor the performance by INL, Vito's, Inc. and Holdings of its
obligations hereunder or thereunder, will (nor with the giving of notice or
the lapse of time or both would) (A) conflict with or result in a breach of
any provision of the Certificate of Incorporation or By-laws of any of such
parties or (B) give rise to a default or any right of termination,
cancellation or acceleration, or otherwise be in conflict with or result in a
loss of contractual benefits to Seller, under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which it is a party or by which Seller or
any of the Purchased Assets may be bound, or require any consent, approval or
notice under the terms of any such document or instrument, or (C) violate any
order, writ, injunction, decree, law, statute, rule or regulation of any
Court or governmental authority which is applicable to Seller or any of the
Purchased Assets, or (D) result in the creation or imposition of any lien,
claim, restriction, charge or encumbrance upon any of the Purchased Assets,
or (E) interfere with or otherwise adversely affect the ability of Buyer to
carry on the Business after the Closing Date on substantially the same basis
as is now conducted by Seller.
4.5 PROPERTIES. Except for the Excluded Assets, the
Purchased Assets comprise all of the properties and assets which are
necessary in order for Buyer to carry on the Business on and after the
Closing Date on substantially the same basis as is now conducted by Seller.
INL, Vito's, Inc. and Holdings have good and valid title to all of the
Purchased Assets, free and clear of all liens, pledges, security interests,
claims, charges or encumbrances of any nature whatsoever.
4.6 INVENTORY. The inventory of the Seller consists of all
finished goods (including packaging), wherever located, related to the
business (all such items being
13
hereinafter collectively referred to as the Inventory"), all of which is
merchantable and fit for the purpose of which it was procured or
manufactured, and none of which is damaged, defective or obsolete. No single
SKU of product included in the Inventory exceeds in volume the amount of such
SKU that is necessary for the conduct of the Business, based upon historical
sales, by Seller of such SKU. Seller has, and on the Closing Date will have,
on hand sufficient quantities of each SKU of Inventory, based upon historical
sales by Seller of such SKU, or binding commitments from suppliers,
third-party manufacturers and packers and fulfillment houses to supply
sufficient quantities thereof, to enable Buyer to satisfy all commitments to
customers for at least an eight (8) week period after the Closing Date.
4.7 INTELLECTUAL PROPERTY.
(a) SCHEDULE 4.7 is a complete and correct list of all (i)
United States and foreign patents, trademark and trade name registrations,
trademarks and trade names, brandmarks and brand name registrations,
servicemarks and servicemark registrations, assumed names and copyrights and
copyright registrations, owned in whole or in part and used by INL, Vito's,
Inc. or Holdings with respect to the Business as presently conducted by
Seller, and all applications therefor, including without limitation, the
"INHOLTRA" name, in each case indicating the party owning such rights, (ii)
inventions, discoveries, improvement's, processes, formulae, proprietary
rights and trade secrets relating to the Business as presently conducted by
Seller (including customer and supplier lists, pricing and cost information,
and business and marketing plans and proposals), (iii) domain name,
fictitious and d.b.a. name, proprietary "800" and "888" prefix telephone
numbers, Internet URL's, web site text, audio, video and graphics, and other
identifier and proprietary rights owned or used by INL, Vito's, Inc. or
Holdings in connection with the Business as presently conducted by Seller
(and with respect to such "800" and "888" prefix telephone numbers, Seller
will use commercially reasonable efforts to obtain from its long distance
carrier consent to the assignment and transfer of all such telephone numbers
and related rights), and (iv) licenses, sublicenses and similar agreements
(active or pending) between INL, Vito's, Inc. or Holdings and the respective
copyright owners of all labels currently distributed by the Business as
presently conducted by Seller (the "License Agreements") (all such items
listed in (i) through (iv) above being hereinafter referred to as
"Intellectual Property Rights").
14
SCHEDULE 4.7 also identifies, with respect to the License Agreements, the
copyright owners and the royalty rate, the advance and the amount of the
advance, if any, which has not been recouped.
(b) Except as expressly set forth in said SCHEDULE 4.7 or
in SCHEDULE 4.9, (i) INL, Vito's, Inc. and Holdings own or have the right to
use all of the Intellectual Property Rights; (ii) no proceedings have been
instituted, are pending, or, to the best of the knowledge of INL, Vito's, Inc.
and Holdings are threatened, which challenge the rights of INL, Vito's, Inc.
and Holdings in respect thereto or the validity thereof and, to the best
knowledge of INL, Vito's, Inc. and Holdings there is no valid basis for any
such proceedings; (iii) none of the aforesaid violates any laws, statutes,
ordinances or regulations, or has at any time infringed upon or violated any
rights of others, or is being infringed by others; and (iv) none of the
aforesaid is subject to any outstanding order, decree, judgment, stipulation
or charge.
(c) The Intellectual Property Rights include all patents,
trademarks, servicemarks, brandmarks, trade names, copyrights and similar
rights that are used in or are necessary for the operation of the Business as
presently conducted by Seller.
(d) All patents, trademarks, servicemarks and brandmarks
that are included in the Intellectual Property Rights have been duly
registered in or issued by the United States Patent and Trademark Office, the
United States Register of Copyrights and the appropriate offices of the other
countries shown on SCHEDULE 4.7, have been renewed in accordance with all
applicable provisions of law and administrative regulations in the United
States and in each such country, are valid, enforceable and subsisting, and
all necessary actions have been taken to maintain the same. All patent
applications and applications for registration of trademarks, servicemarks or
brandmarks listed on SCHEDULE 4.7 have been duly filed with the United States
Patent and Trademark Office, the United States Register of Copyrights and the
appropriate offices of the other countries identified therein, and are
pending, except as otherwise shown in SCHEDULE 4.7.
(e) All licenses or other agreements included in the
Intellectual Property Rights are in full force and effect,
15
there is no default by INL, Vito's, Inc. or Holdings or any other party
thereto, and all rights of each such party thereunder are freely assignable
to Buyer. The licensors under such licenses and other agreements have and
had all requisite power and authority to grant the rights purported to be
conferred thereby. True and complete copies of all such licenses and other
agreements have been provided to Buyer.
(f) All licenses or other agreements under which Seller has
granted rights to others in any of the Intellectual Property Rights are
listed in SCHEDULE 4.7. All of such licenses and other agreements are in full
force and effect, there is no default by Seller or any other party thereto,
and all of Seller's rights thereunder are freely assignable to Buyer. True
and complete copies of all such licenses and other agreements have been
provided to Buyer.
4.8 ABSENCE OF CHANGES. Since November 30, 1998, (a) Seller
has conducted the Business (and during the transition period contemplated by
the Transitional Services Agreement will conduct the Business) only in the
ordinary course of business and in a manner consistent with existing policies
and practices, with a view toward maximizing sales and profits, and in
compliance with applicable law; and Seller has used (and, during such
transition period, shall use) its best efforts to preserve intact the
Business, to maintain and preserve the Purchased Assets, to keep available
the services of key management personnel and to preserve the present goodwill
of Seller and its relationships with customers, suppliers and other persons
with whom it has business relations; (b) there has not been (i) any material
adverse change in the condition (financial or otherwise), assets,
liabilities, business, prospects, or results of operations of the Business
(including, without limitation, any such adverse change resulting from
damage, destruction or other casualty, loss, whether or not covered by
insurance), (ii) any waiver by Seller of any right, or cancellation of any
debt or claim, related to the Business, or (iii) any change in the accounting
principles or methods which are utilized by Seller; and (c) Seller has not
(i) agreed or undertaken to sell, lease, license,
mortgage or otherwise encumber or subject to any lien or otherwise dispose of
any of the Purchased Assets, except the sale of the Inventory in the ordinary
course of business;
16
(ii) agreed or undertaken to sell, assign or transfer
any patents, trademarks, trade names, copyrights, licenses or other
intangible assets related to the Business or the Purchased Assets;
(iii) caused Seller to suffer any event or condition of
any character that has or could materially and adversely affect the Business
or the Purchased Assets;
(iv) altered the price lists relating to the
Business, other than in the ordinary course of business;
(v) waived or accelerated any rights of value or
entered into any transactions with respect to the Business not in the
ordinary course of business;
(vi) maintained the books of account and records
relating to the Purchased Assets in the usual, regular and ordinary manner,
on a basis consistent with past practice, and complied with all material laws
applicable to the conduct of the Business with respect to the Purchased
Assets and performed its material obligations relating to the Business with
respect to the Purchased Assets without default;
(vii) not authorized or permitted its officers,
directors or employees or any investment banker, financial advisor, attorney,
accountant or other representative to sell, agree to sell or enter into any
arrangements or negotiations or authorized any third party to enter into
negotiations or solicit offers of any type or to provide information,
cooperate in any way or assist, facilitate or encourage acquisitions relating
to the transfer or other disposition of any of the Purchased Assets or the
Business (including any merger or consolidation involving the Seller or any
other similar transaction); or
(viii) authorized any of, or committed or agreed to
take, any of the foregoing actions.
4.9 LITIGATION. Except as set forth in SCHEDULE 4.9, there
are no claims, suits, actions, arbitrations, investigations, inquiries or
other proceedings before any governmental agency, court or tribunal, domestic
or foreign, or before any private arbitration tribunal, pending or, to the
best of the knowledge of Seller, threatened, against or relating to
17
Seller, the Business or any of the Purchased Assets; nor, is there any basis
for any such claim, suit, action, arbitration, investigation, inquiry or
other proceeding. There are no judgments, orders, stipulations, injunctions,
decrees or awards in effect which relate to Seller, the Business or any of
the Purchased Assets, the effect of which is (a) to limit, restrict,
regulate, enjoin or prohibit any business practice in any area, or the
acquisition of any properties, assets or businesses, or (b) otherwise
materially adverse to the Business or any of the Purchased Assets.
4.10 NO VIOLATION OF LAW. Seller is not engaging in any
activity or omitting to take any action as a result of which (a) it is in
violation of any law, rule, regulation, zoning or other ordinance, statute,
order, injunction or decree, or any other requirement of any court or
governmental or administrative, body or agency, applicable to Seller, the
Business or any of the Purchased Assets, including, but not limited to, those
relating to truth-in-advertising, occupational safety and health, consumer
health and safety, environmental and ecological protection, business
practices and operations, labor practices, and employee benefits, and
(b) Seller, the Business and/or any of the Purchased Assets have been or may
be materially and adversely affected.
4.11 GOVERNMENT AND THIRD-PARTY CONSENTS/APPROVALS. No
approval, authorization, consent or order or action of, or filing with, any
third party or court, administrative agency or governmental authority (a) is
required for the execution and delivery by INL, for itself and on behalf of
Vito's, Inc. and Holdings, of this Agreement and of all of the agreements to
be executed and delivered by Seller pursuant hereto, or the consummation by
Seller of the transactions contemplated hereby or thereby or (b) is necessary
in order that the Business may be conducted immediately following the Closing
Date substantially in the same manner as heretofore conducted.
4.12 PRODUCTS LIABILITY. SCHEDULE 4.12 lists all product
liability claims made or to the knowledge of Seller threatened in Seller's
last three (3) fiscal years with respect to the Business.
18
4.13 MATERIAL AND OTHER CONTRACTS.
(a) SCHEDULE 4.13(a) lists all pending or executory
contracts, agreements or commitments relating to the Business, including,
without limitation license agreement, product supplier agreements,
distribution agreements, marketing agreements, non-competition agreements,
confidentiality agreements and vendor agreements, and other agreements
relating to the Intellectual Property Rights (all such items being
hereinafter collectively referred to as the "Material Agreements"). True and
complete copies of all such documents and complete descriptions of all oral
contracts (if any) referred to in SCHEDULE 4.13(a) have been provided or made
available to Buyer and its counsel. Each of the Assumed Contracts is (i) in
full force and effect, no person or entity which is a party thereto or
otherwise bound thereby is in default thereunder, and, to the best of the
knowledge of Seller, no event, occurrence, condition or act exists which does
(or which with the giving of notice or the lapse of time or both would) give
rise to a default or right of cancellation, acceleration or loss of
contractual benefits thereunder; (ii) there has been no threatened
cancellations thereof, and there are no outstanding disputes thereunder; and
(iii) none of them is materially burdensome to Seller.
(b) SCHEDULE 4.13(b) contains a complete and correct list
of all contract, commitments, obligations and understandings which are not set
forth in any other Schedule delivered hereunder and to which Seller is party
or otherwise bound, and which relate to the Business, except for each of
those which (i) was made in the ordinary course of business, and (ii) either
(A) is terminable by Seller (and will be terminable by Buyer) without
liability, expense or other obligation on thirty (30) days' notice or less, or
(B) may be anticipated to involve aggregate payments to or by Seller of
$5,000 (or the equivalent) or less calculated over the full term thereof, and
(iii) is not otherwise material to the Business or any of the Purchased
Assets. Complete and correct copies of all contracts, commitments,
obligations and undertakings set forth on any of the Schedules delivered
pursuant to this Agreement have been furnished by Seller to Buyer, and except
as expressly stated on the Schedule on which they are set forth, (x) each of
them is in full force and effect, no person or entity which is a party
thereto or otherwise bound thereby is in default thereunder, and, to the best
of the knowledge of Seller, no event, occurrence,
19
condition or act exists which does (or which with the giving of notice or the
lapse of time or both would) give rise to a default or right of cancellation,
acceleration or loss of contractual benefits thereunder; (y) there has been
no threatened cancellations thereof, and there are no outstanding disputes
thereunder; and (z) none of them is materially burdensome to Seller.
4.14 BUSINESS FINANCIAL STATEMENTS; 1998 REVENUES. SCHEDULE
4.14 is a true and correct copy of the balance sheet with respect to the
Business as at October 31 and November 30, 1998 and the related statements of
operations for the periods then ended (collectively, the "Business
Financials"). The Business Financials have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may otherwise be indicated
therein) and each presents fairly, in all material respects, the financial
position of the Business as at the date thereof and the results of its
operations and cash flow position for the period indicated. Seller represents
and warrants that the revenues of Seller (net of refunds, credits, returns,
replacements, repairs, warranty costs and expenses and bad debt expenses) for
the year ended December 31, 1998 is no less than $5,000,000.00.
4.15 BOOKS AND RECORDS. The books and records of Seller are
complete and correct, have been maintained in accordance with good business
practices, and accurately reflect the basis for the financial condition,
results of operations and cash flow of Seller as set forth in the Business
Financials.
4.16 TAXES. Seller has filed all tax returns that it was
required to file. All such tax returns were correct and complete in all
material respects. All taxes owed by Seller (whether or not shown on any tax
return) have been paid or adequate provision for the payment thereof has been
made by Seller. Seller currently is not the beneficiary of, or subject to,
any extension of time within which to file any tax return. Seller has
reported and duly paid state and local sales and use taxes in all states in
which it is required to report and pay such taxes, including sales and/or use
taxes on sales of merchandise and on promotional materials. There is no
material dispute or claim concerning any tax liability of Seller either
formally asserted or raised, or, to the knowledge of Seller, threatened by
any governmental or administrative entity.
20
4.17 INFORMATION AS TO SELLER. None of the representations
or warranties made by INL, Vito's, Inc. or Holdings, in this Agreement or in
any agreement executed and delivered by it pursuant hereto are false or
misleading with respect to any material fact, or omit to state any material
fact necessary in order to make the statements therein contained not
misleading.
5. REPRESENTATIONS AND WARRANTIES AS TO BUYER. Buyer hereby
represents and warrants to Seller as follows:
5.1 ORGANIZATION, STANDING AND POWER. Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Utah, with full corporate power and authority to own,
lease and operate its properties and to carry on its business as presently
conducted by it.
5.2 AUTHORITY. The execution and delivery by Buyer of this
Agreement and of each agreement to be executed and delivered by it pursuant
hereto, the compliance by Buyer with the provisions hereof and thereof, the
consummation of the transactions contemplated hereby and thereby, have been
duly and validly authorized by all necessary corporate action on the part of
Buyer, and Buyer has all necessary corporate power with respect thereto. This
Agreement is, and when executed and delivered by Buyer each other agreement
to be executed and delivered by it pursuant hereto will be, the valid and
binding obligation of Buyer enforceable against Buyer in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the rights of creditors
generally and subject to the rules of law governing (and all limitations on)
specific performance, injunctive relief, and other equitable remedies.
5.3 NONCONTRAVENTION. Neither the execution and delivery by
Buyer of this Agreement or of any of the aforementioned other agreements, nor
the consummation of the transactions contemplated hereby or thereby, nor the
compliance by Buyer with the provisions hereof and thereof, will (nor with
the giving of notice or the lapse of time or both, would) conflict with or
result in a violation of any provision of the Certificate of Incorporation or
By-laws of Buyer, or in the breach of any material agreement to which Buyer
is a party or otherwise bound.
21
5.4 INFORMATION AS TO BUYER. None of the representations or
warranties made by Buyer in this Agreement or in any agreement executed and
delivered by or on behalf of it pursuant hereto are false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements therein contained not misleading.
6. INDEMNIFICATION.
6.1 INDEMNIFICATION BY SELLER. Seller shall indemnify and
hold Buyer harmless from and against any and all losses, obligations,
deficiencies, liabilities, claims, damages, costs and expenses including,
without limitation, the amount of any settlement entered into pursuant
hereto, and all reasonable legal and other expenses incurred in connection
with the investigation, prosecution or defense of any matter indemnified
pursuant hereto (a "Loss") which Loss Buyer may sustain, suffer or incur and
which arises out of, is caused by, relates to, or results or occurs from or
in connection with (a) liabilities (other than the Assumed Liabilities)
arising in connection with the Business, this Agreement or the transactions
contemplated hereby, (b) the noncompliance with any applicable bulk transfer
laws of any jurisdiction, (c) the breach by Seller of any representation,
warranty or covenant by it in this Agreement or in any agreement or
instrument executed and delivered pursuant hereto, (d) the operation of the
Business by Seller prior to the Closing Date (regardless of whether any claim
is brought prior to or subsequent to the Closing), (e) any willful misconduct
or negligence by Seller which interferes with the transactions contemplated
by this Agreement, (f) any refunds, credits or replacements issued or made
after the Closing Date relating to sales made by Seller prior to the Closing
Date, or (g) liabilities relating to any fees, brokerage commissions, or
other like payments owed to any agent, broker, person or firm acting on
behalf of Seller, or under its authority, in connection with any of the
transactions contemplated hereby. Furthermore, Seller will indemnify and hold
Buyer harmless against all liabilities, loss, expense, cost or obligations of
any nature, known or unknown, fixed or contingent, matured or unmatured, to
any party which Buyer might incur relating to the transactions contemplated
hereunder and the transfer of the Business to Buyer regardless of whether
said claim is instituted prior to or subsequent to the Closing and regardless
of whether the transactions contemplated hereby are consummated. Seller will
indemnify Buyer for any
22
willful or negligent act by Seller interfering with the intent and/or terms
of this Agreement and the transactions contemplated hereunder. This
indemnification obligation shall also apply to claims directly by Buyer
against the Seller as well as to third party claims. In addition to any other
rights and remedies to which Buyer may be entitled hereunder or under
applicable law, upon notice to Seller specifying in reasonable detail the
basis for a set-off, Buyer may set-off any amount to which it may be entitled
under this Article 6 against amounts otherwise payable by it under the Note.
Notwithstanding the foregoing, Seller's obligations to indemnify Buyer
hereunder, insofar as they relate to Losses arising out of any litigation
described in SCHEDULE 4.9 hereto, shall not exceed One Million Dollars
($1,000,000.00) in the aggregate.
6.2 INDEMNIFICATION BY BUYER. Buyer indemnifies and holds
Seller harmless from and against any Loss, which Loss Seller may sustain,
suffer or incur and which arise out of, are caused by, relate to, or result
or occur from or in connection with (a) the Assumed Liabilities, (b) the
breach by Buyer of any representation, warranty or covenant made by it in
this Agreement or in any agreement or instrument executed and delivered
pursuant hereto, (c) liabilities relating to the merchandise sold by Buyer
(other than claims caused by a breach of a representation or warranty by
Seller or negligent acts or omissions of Seller), or the operation of the
Business by Buyer after the Closing Date, or (d) liabilities relating to any
fees, brokerage commissions, or other like payments owed to any agent,
broker, person or firm acting on behalf of Buyer, or under its authority, in
connection with any of the transactions contemplated hereby. This
indemnification obligation shall also apply to claims directly by Seller
against Buyer as well as to third party claims.
6.3 THIRD PARTY CLAIMS. If a claim by a third party is made
against any party or parties hereto and the party or parties against whom
said claim is made intends to seek indemnification with respect thereto under
this Section 6, the party or parties seeking such indemnification shall
promptly notify the indemnifying party or parties, in writing, of such claim;
provided, however, that the failure to give such notice shall not affect the
rights of the indemnified party or parties hereunder unless such failure
materially and adversely affects the indemnifying party or parties. The
indemnifying party or parties shall have ten (10) days after said notice is
given to
23
elect, by written notice given to the indemnified party or parties, to
undertake, conduct and control, through counsel of their own choosing (subject
to the consent of the indemnified party or parties, such consent not to be
unreasonably withheld) and at their sole risk and expense, the good faith
settlement or defense of such claim, and the indemnified party or parties
shall cooperate with the indemnifying parties in connection therewith;
provided: (i) in the case of Seller as the indemnifying party, it shall not
thereby permit to exist any lien, encumbrance or other adverse change upon
any of the Purchased Assets, Buyer or the Business, and (ii) the indemnified
party or parties shall be entitled to participate in such settlement or
defense through counsel chosen by the indemnified party or parties, provided
that the fees and expenses of such counsel shall be borne by the indemnified
party or parties. So long as the indemnifying party or parties are contesting
any such claim in good faith, the indemnified party or parties shall not pay
or settle any such claim; provided, however, that notwithstanding the
foregoing, the indemnified party or parties shall have the right to pay or
settle any such claim at any time, provided that in such event they shall
waive any right of indemnification therefor by the indemnifying party or
parties. If the indemnifying parties do not make a timely election to
undertake the good faith defense or settlement of the claim as aforesaid, or
if the indemnifying parties fail to proceed with the good faith defense or
settlement of the matter after making such election, then, in either such
event, the indemnified party or parties shall have the right to contest,
settle or compromise the claim at their exclusive discretion, at the risk and
expense of the indemnifying parties to the full extent set forth in Sections
6.1 or 6.2 hereof, as the case may be.
6.4 PENDING LITIGATIONS. The parties agree that Buyer shall
have the rights of an indemnified party under Section 6.3 above with respect
to each of the pending litigations described on SCHEDULE 4.9, provided that
with respect to the NUTRIMAX/REXALL action described therein, any award
received by Buyer or Seller thereunder shall first be applied to the payment
or reimbursement of Seller's reasonable legal fees and expenses incurred in
such action prior to the Closing, then to the payment or reimbursement of
Seller's and Buyer's reasonable legal fees and expenses incurred in such
action after the Closing, and the balance shall be divided equally between
Buyer and Seller.
24
7. NONDISCLOSURE/ANNOUNCEMENTS.
7.1 NONDISCLOSURE. Following the Closing, the parties shall
mutually agree on and issue a press release regarding the relationship
contemplated in this Agreement, provided that under no circumstances shall
the Purchase Price or any other financial terms of this Agreement be
disclosed except as otherwise required by law.
7.2 NO DISPARAGEMENT. At no time during the period
commencing on the date hereof and continuing for five (5) years after the
Closing Date shall INL, or any subsidiary or affiliate thereof, including,
without limitation, Vito's, Inc. or Holdings, disparage the commercial,
business or financial reputation of Buyer or any of its officers, directors,
employees, agents or affiliates.
7.3 INJUNCTIVE RELIEF, ETC. The parties hereto hereby
acknowledge and agree that (i) Buyer would be irreparably injured in the
event of a breach by INL, Vito's, Inc. or Holdings of any of their respective
obligations under this Section 7, (ii) monetary damages would not be an
adequate remedy for any such breach, and (iii) Buyer shall be entitled to
injunctive relief, in addition to any other remedy which it may have, in the
event of any such breach. It is hereby also agreed that the existence of any
claims which Seller may have against Buyer, whether under this Agreement or
otherwise, shall not be a defense to the enforcement by Buyer of any of its
rights under this Section 7.
7.4 SCOPE OF RESTRICTION. It is the intent of the parties
hereto that the covenants contained in this Section 7 shall be enforced to
the fullest extent permissible under the laws of and public policies of each
jurisdiction in which enforcement is sought (Seller hereby acknowledging that
said restrictions are reasonably necessary for the protection of Buyer).
Accordingly, it is hereby agreed that if any one or more of the provisions of
this Section 7 shall be adjudicated to be invalid or unenforceable for any
reason whatsoever, said provision shall be (only with respect to the
operation thereof in the particular jurisdiction in which such adjudication
is made) construed by limiting and reducing it so as to be enforceable to the
extent permissible.
7.5 ADDITIONAL UNDERTAKINGS. The provisions of this Section
7 shall be in addition to, and not in lieu of, any
25
other obligations with respect to the subject matter hereof, whether arising
as a matter of contract, by law or otherwise, including, but not limited to,
any obligations which may be contained in any employment or consulting
agreements to which Buyer is a party.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Each of the parties hereto hereby agrees that all
representations and warranties made by or on behalf of it in this Agreement
or in any document or instrument delivered pursuant hereto shall survive the
Closing Date and the consummation of the transactions contemplated hereby.
9. MISCELLANEOUS PROVISIONS.
9.1 EXPENSES. Except as otherwise provided in this
Agreement, each of the parties hereto shall pay his or its own costs and
expenses in connection with this Agreement and the transactions contemplated
hereby.
9.2 NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given or made as of the date delivered, if delivered personally, or one
(1) business day after having been deposited with courier, if sent by
overnight courier or having been sent by telecopy, if sent by telecopy
(receipt confirmed), or three (3) business days after having been mailed, if
mailed by registered or certified mail, postage prepaid, return receipt
requested, as follows:
If to Buyer, to: ▇▇▇▇▇ Naturals/4Health, Inc.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇
Copy to: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
26
If to INL,
Vito's, Inc. or
Holdings, to: Inholtra Natural, Ltd.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
President and CEO
Copy to: Faro & Associates
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇
or to such other address as any party shall have designated by like notice to
the other parties hereto (except that a notice of change of address shall only
be effective upon receipt).
9.3 APPLICABLE LAW. This Agreement shall be governed by,
and construed in accordance with, the law of the State of Utah without regard
to its choice of law principles.
9.4 WAIVER, ETC. The failure of any of the parties hereto
to at any time enforce any of the provisions of this Agreement shall not be
deemed or construed to be a waiver of any such provision, nor to in any way
affect the validity of this Agreement or any provision hereof or the right of
any of the parties hereto to thereafter enforce each and every provision of
this Agreement. No waiver of any breach of any of the provisions Agreement
shall be effective unless set forth in a instrument executed by the party or
parties against whom enforcement of such waiver is sought; and no waiver of
breach shall be construed or deemed to be a waiver of or subsequent breach.
9.5 ASSIGNMENT. Prior to the Closing Date, neither this
Agreement nor any rights, interests or obligations hereunder may be assigned
(by operation of law or otherwise) by any party hereto without the prior
written consent of all of the parties hereto, except that Buyer may (a)
assign any and all of its rights and remedies and delegate any and all of its
obligations under this Agreement to any affiliate, subsidiary or any entity
owned or controlled by, it, provided such affiliate, subsidiary or entity
agrees in writing to be bound by the terms thereof, and (b) grant a security
interest in its rights under this Agreement to Buyer's lender, as
administrative agent (the
27
"Agent"), in connection with the financing of the transactions contemplated
by this Agreement.
9.6 BINDING EFFECT; BENEFITS. This Agreement shall inure to
the benefit of, and shall be binding upon, the parties hereto and their
respective successors and permitted assigns. Nothing herein contained,
express or implied, is intended to confer upon any person other than the
parties hereto and their respective successors and permitted assigns, any
rights or remedies under or by reason of this Agreement.
9.7 AMENDMENT. This Agreement may only be amended by a
written instrument executed by each of the parties hereto.
9.8 SEVERABILITY. Any provision of this Agreement which is
held by a court of competent jurisdiction to be prohibited or unenforceable
in any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to
the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
9.9 ENTIRE AGREEMENT. This Agreement (together with the
other agreements and documents being delivered pursuant to or in connection
with this Agreement) and the Confidentiality Agreement constitute the entire
agreement of the parties hereto with respect to the subject matter hereof,
and supersede all prior agreements and understandings of the parties, oral
and written, with respect to the subject matter hereof.
9.10 SCHEDULES. The Schedules delivered pursuant to this
Agreement are an integral part hereof. Each such Schedule shall be in
writing, shall indicate the Section pursuant to which it is being
delivered, and shall be initialed by the delivering party.
9.11 HEADINGS. The headings contained herein are for the
sole purpose of convenience of reference, and shall not in any way limit or
affect the meaning or interpretation of any of the terms or provisions of
this Agreement.
9.12 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which shall be
28
deemed to be an original but all of which taken together shall constitute one
and the same agreement, and shall become effective when one or more
counterparts has been signed by each of the parties hereto and delivered to
each of the other parties hereto.
9.13 ARBITRATION. All disputes under this Agreement shall
be resolved by binding arbitration in the City of New York, NY, before a
single arbitrator in accordance with the rules of the American Arbitration
Association.
29
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto as of the date first above written.
Attest: ▇▇▇▇▇ NATURALS/4HEALTH, INC.
/s/ [Illegible] By: /s/ ▇▇▇▇ ▇▇▇▇▇
----------------------------- -------------------------------------
Secretary Name: ▇▇▇▇ ▇▇▇▇▇
Title: CHIEF EXECUTIVE OFFICER
Attest: INHOLTRA NATURAL, LTD.
By: /s/ ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
----------------------------- -------------------------------------
Secretary Name: ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
Title: President
Attest: ▇▇▇▇ ▇. ▇▇▇▇▇▇
by Inholtra Natural, Ltd., as
attorney-in-fact
By: /s/ ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
----------------------------- -------------------------------------
Secretary Name: ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
Title: President
Attest: INHOLTRA INVESTMENT HOLDINGS AND
TRADING, N.V.,
by Herm Jan van Asselt, as
attorney-in-fact
By:
----------------------------- -------------------------------------
Secretary Name:
Title: President
Attest: INHOLTRA, INC.
By:
----------------------------- -------------------------------------
Secretary Name:
Title: President
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto as of the date first above written.
Attest: ▇▇▇▇▇ NATURALS/4HEALTH, INC.
By:
----------------------------- -------------------------------------
Secretary Name:
Title: President
Attest: INHOLTRA NATURAL, LTD.
By:
----------------------------- -------------------------------------
Secretary Name:
Title: President
Attest: ▇▇▇▇ ▇. ▇▇▇▇▇▇
by Inholtra Natural, Ltd., as
attorney-in-fact
By:
----------------------------- -------------------------------------
Secretary Name:
Title: President
Attest: INHOLTRA INVESTMENT HOLDINGS AND
TRADING, N.V.,
by Herm Jan van Asselt, as
attorney-in-fact
/s/ [Illegible] By: /s/ [Illegible]
----------------------------- -------------------------------------
Secretary Name:
Title: President
Attest: INHOLTRA, INC.
/s/ [Illegible] By: /s/ [Illegible]
----------------------------- -------------------------------------
Secretary Name:
Title: President
[SEAL]
Schedule 1.2 (iii)
------------------
ASSUMED CONTRACTS
1. Unfilled purchase order from GNC for 32,000 bottles of INHOLTRA
Natural Pain Relief Formula
2. Letter Agreement between Inholtra Natural, Ltd. and PDS Worldwide
dated August 3, 1998 (copy attached)
3. Letter Agreement between Inholtra Natural, Ltd. and Bottomline
Marketing Services dated February 10, 1999 (copy attached)
4. Post-Closing Promotional Commitments to ▇▇▇▇ ▇▇▇▇▇, Active TV and ▇▇▇
▇▇▇▇▇ in a total amount up to $46,000.00 in the aggregate
5. Co-Op Advertising Commitments and Charge Back obligations in the
total amount of up to $7,500.00 in the aggregate
[LOGO]
[LETTERHEAD]
Proposal To:
INHOLTRA Natural, Ltd.
Attention: ▇▇. ▇▇▇ ▇▇▇▇▇▇
By: PDS Worldwide
August 3, 1998
DESCRIPTION OF PROJECT:
PDS will accept customer calls to order product, make medical inquires or
request literature; warehouse product and collateral material and ship same on
demand; and provide all necessary activity and financial reports.
Additionally PDS, based on your marketing decisions, will provide ALL of the
following services:
- Outgoing telemarketing
- Direct mail solicitation
- Website construction/interface for internet sales
FULFILLMENT PRICING:
1. INITIAL SET-UP - $200.00....includes:
a) Loading up to 20 SKU's into order processing database:
i) Item code, wholesale cost (2 price levels) retail cost (2 price
levels)
ii) Short item description
b) Prepare warehouse pick locations with separate locations for
wholesale, retail and collateral material orders.
c) Establish order handling and shipment procedures.
d) Initial receipt of inventory.
2. ORDER PROCESSING - (Product) Approx. 800/month
a) $2.25 per order./ 3/1/99 $10.00
i) Covers computer entry for inventory control, printing label and
packing slip, picking product, packing item(s) for shipment.
ii) Fee covers shipment to ONE location.
4. SHIPPING CARTONS/ENVELOPES -
a) NO CHARGE for orders shipped via USPS Priority Mail (provided in
selected sizes only).
b) BOXES -
i) [ILLEGIBLE] $0.53 per box
ii) 11 L X 5 2/3 H x 8 3/4 W - $0.38 per box
c) Via other delivery methods, $0.25 - $0.75 depending on order size
5. FREIGHT/POSTAGE - Fulfillment shipping is billed as published rates, with
no markup above this published rate. For bulk shipments, PDS will use its
strategic freight partners according to the needs of each shipment. PDS
charges a surcharge on freight for these services. Freight charges to our
client will be comparable to published rates for said carriers.
6. STORAGE - $18.00 per pallet per month in CLIMATE CONTROLLED (perfect for
food supplements) warehouse.
7. RETURNS - Cost is the same as processing an order.
8. REPORTING -
a) Standard Reports - $25.00 each includes inventory, low levels,
backorders, and product profit.
b) Custom Report - $75.00 per hour for development, $40.00 per report.
9. RECEIVING OF INVENTORY- Receiving, counting, adding to stock - $12.00 per
pallet, less than a pallet - $6.00 per delivery
10. ACCOUNT MANAGEMENT -
a) Billed for time devoted to provide overall administrative services
such as program start-up, changes, database management and customer
service coordination. Based on current understanding of program, one
(1) hour of account management per week should be the norm.... $35.00
per hour.
TELEMARKETING PRICING:
1. PROJECT SET-UP - $1,500.00....Includes:
a) Customized scripts, operators screens, initial programming for
maximum of eight (8) screens.
b) Deposit of $1,000.00 required.
2. SHARED INBOUND TELEMARKETING AGENTS - $1.10 per minute.... Includes:
a) Phone ▇▇▇▇
b) Telephone agents
c) Supervision
d) Calls billed at 30 seconds initially and in six (6) second
increments after that...
3. DEDICATED OUTBOUND TELEMARKETING AGENTS - $35.00 per hour
Set-up $600.00...Includes:
a) Phone ▇▇▇▇
b) Telephone agents
c) Up to EIGHT (8) HOURS of specialized training.
4. STANDARD REPORTING SET-UP - $125.00....Includes:
a) Standard and customized reports on a regular schedule and faxed or
down-loaded to a single destination.
5. 800 NUMBER MAINTENANCE - $50.00
6. MONTHLY MINIMUM - $1,000.00 (Three month minimum)
7. CREDIT CARD SET-UP - $325.00
8. CREDIT CARD VERIFICATION PROGRAM - $150.00
a) $0.35 per transaction (100.00 monthly minimum).
9. CHECK/MONEY ORDER - Set-up - $25.00
a) $0.35 per transaction ($100.00 monthly minimum)
BOTTOMLINE
MARKETING SERVICES
FULFILLMENT
PROMOTION
TELEMARKETING
e-COMMERCE
▇▇▇ ▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇
▇▇▇▇▇
PHONE:
954/▇▇▇-▇▇▇▇
FAX:
954/▇▇▇-▇▇▇▇
February 10, 1999
▇▇. ▇▇▇ ▇▇▇▇▇▇
INHOLTRA Natural, Ltd.
Subject: Amendment to contract dated August 3, 1998
Re: TELEMARKETING SERVICE
BMS will provide 24-hour telemarketing services DIRECTLY as soon as possible
(3/1/99) with the following cost ramifications:
I. COST PER ORDER - $10.00 flat fee,
a. NO CHARGES based on minutes consumed per order, customer service
calls, hang ups, etc.
b. Reports will mirror credit card transaction reports, shipping
reports.
II. CREDIT CARD TRANSACTIONS - $0.35 each
a. Cost to I.C. Verify, process, report.
b. INHOLTRA to provide Merchant ID Number.
c. Set up charge - (To be determined) (not to exceed $100)R
III. TELEMARKETING SET UP CHARGE - $300.00
a. Training of operators, initial programming, script adjustments.
b. Deposit - $250.00 (There is a $1,000 - deposit with lease)
All aspects of fulfillment project (including pricing) remain in place.
Submitted By: Accepted By:
/s/ ▇▇▇ ▇▇▇▇▇▇, Pres.
-------------------------------- ------------------------------
Date: Date: 2/9/99
-------------------------- ------------------------
TERMS:
INHOLTRA Natural, Ltd. will be invoiced one a month. Terms are net 10 days,
subject to PDS Worldwide credit application. Also subject to PDS Worldwide
Standard Terms and Conditions. Advance payment is expected at the inception
of the agreement. The advance includes the estimated freight for the first
period of activity, based on client's projection.
Note: This quotation is based on the above specifications. Any changes to
these specifications may alter the price. It does not include postage,
customer changes, courier expense, outbound freight, cartons/packaging
materials (unless otherwise specified) or skids provided by PDS Worldwide.
Submitted By: Accepted By:
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ------------------------------------
INHOLTRA Natural, Ltd.
Date: August 3, 1998 Date: 8/10/98
-------------------------------
Read and agree to Terms & Conditions
/s/ ▇. ▇▇▇▇▇▇
------------------------------------
INHOLTRA Natural, Ltd.
Date: 8/10/98
-------------------------------
[LOGO]
SCHEDULE 1.3
OTHER EXCLUDED ASSETS
1. The family crest of ▇▇ ▇▇▇ ▇▇▇▇▇▇ (which appears on Inholtra's stationary
and certain promotional items).
2. A certain life insurance policy (#[_______________]) owned by Inholtra
Natural, Ltd. on the life of ▇▇ ▇▇▇ ▇▇▇▇▇▇.
3. All furnishings, fixtures and equipment currently in the home office located
at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ maintained by ▇▇▇▇▇▇ ▇▇▇▇▇▇ for
conducting the Inholtra business.
SCHEDULE 3.2
NON-ASSIGNABLE CONTRACTS
None
SCHEDULE 4.7
(i) United States and foreign patents, trademark and trade name
registrations, trademarks and trade names, brandmarks and brand name
registrations, servicemarks and servicemark registrations, owned in whole or
in part and used by Seller with respect to the Business, as presently
conducted by Seller, and all applications therefor, including without
limitation, the "INHOLTRA" name, and more specifically,
1. all right, title, and interest in and to U.S. Trademark INHOLTRA,
and all goodwill associated therewith in connection with Seller's
business, as presently conducted by Seller, and registration thereof
in the U.S. under registration number 2,135,818,
2. all right, title, and interest in and to European Trademark
INHOLTRA, and all goodwill associated therewith in connection with
Seller's business, as presently conducted by Seller, and application
for registration and registration thereof with the Office for
Harmonization in the Internal Market under Community Trademark
application number CTM 000598870,
3. all right, title, and interest in and to Switzerland Trademark
INHOLTRA, and all goodwill associated therewith in connection with
Seller's business, as presently conducted by Seller, and
registration thereof with the Swiss Trademark Office under
registration number 451,523,
4. all right, title, and interest in and to any and all inventions and
improvements which are disclosed in or associated with the U.S.
patent number 5,840,715, issued November 24, 1998 and entitled:
Dietary Regimen of Nutritional Supplements for Relief of Symptoms of
Arthritis,
5. all right, title, and interest in and to any and all inventions and
improvements which are disclosed in or associated with the U.S. patent
application serial number 09/193,474, filed November 18, 1998 as a
continuation from U.S. application serial number 952,272, and
entitled: Dietary Regimen of Nutritional Supplements for Relief of
Symptoms of Arthritis,
6. all right, title, and interest in and to any and all inventions and
improvements which are disclosed in or associated with the Canadian
patent number CA 2,240,165, Filed June 10, 1998, and entitled: Dietary
Regimen of Nutritional Supplements for Relief of Symptoms of
Arthritis,
SCHEDULE 4.7
Page 2
7. all right, title, and interest in and to any and all inventions and
improvements which are disclosed in or associated with the Australian
patent number AU 9,726,237, Filed July 3, 1997, and entitled:
Dietary Regimen of Nutritional Supplements for Relief of Symptoms of
Arthritis,
8. all right, title, and interest in and to any and all inventions and
improvements which are disclosed in or associated with the Patent
Cooperation Treaty patent application number WO 9721434, Filed
December 11, 1995, from PCT/95US/16722, and entitled: Dietary Regimen
of Nutritional Supplements for Relief of Symptoms of Arthritis,
9. all right, title, and interest in and to any and all inventions and
improvements which are disclosed in or associated with the European
patent number EP 855,908, Filed November 28, 1997, and entitled:
Dietary Regimen of Nutritional Supplements for Relief of Symptoms of
Arthritis;
(ii) inventions, discoveries, improvements, processes, formulae,
proprietary rights and trade secrets relating to the Business, as presently
conducted by Seller (including customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals);
(iii) domain name, fictitious and d.b.a. name, proprietary "800" and "888"
prefix telephone numbers, Internet URLs, web site text, audio, video and
graphics, and other identifier and proprietary rights owned or used by Seller
in connection with the Business, as presently conducted by Seller (and with
respect to such "800" and "888" prefix telephone numbers, Seller will use
commercially reasonable efforts to obtain from its long distance carrier
consent to the assignment and transfer of all such telephone numbers and
related rights), and
(iv) licenses, sublicenses and similar agreements (active or pending)
between Seller and the respective copyright owners of all labels currently
distributed by the Business, as presently conducted by Seller (the "license
Agreements")
(all such items listed in (i) through (iv) above being hereinafter referred
to as "Intellectual Property Rights").
Schedule 4.9
------------
LITIGATION
Nutramax Laboratories, Inc. v. Twin Laboratories, Inc., et al., CVB-97-1010,
pending in the Federal District Court for the District of Maryland.
Inholtra Natural, Ltd. and Inholtra, Inc. v. NBTY, Inc., et al., CV 98-6366
(LDW), pending in Federal District Court for the Eastern District of New York.
Vitamin World, Inc. and Puritan Pride, Inc. v. Inholtra Natural, Ltd. and
Inholtra, Inc., CV 980871 (LDW), pending in Federal District Court for the
Eastern District of New York.
Inholtra Natural, Ltd. v. Rexall/Sundown, Inc., et al., Case No. 97-7443 CIV
▇▇▇▇▇, pending in the Federal District Court for the Southern District of
Florida
▇▇▇▇▇▇▇▇ v. Inholtra Natural Ltd. v. Traco Labs and SoftGel Technologies,
Case No. pending in Federal District Court for the Eastern District of New
York.
SCHEDULE 4.12
-------------
PRODUCT LIABILITY CLAIMS
None
Schedule 4.13 (a)
-----------------
MATERIAL CONTRACTS
None
SCHEDULE 4.13 (b)
-----------------
OTHER AGREEMENTS
None
SCHEDULE 4.14
-------------
FINANCIALS
INHOLTRA NATURAL, LTD
FINANCIAL STATEMENTS
NOVEMBER 30, 1998
THAW, GOPMAN
& ASSOCIATES, P.A.
---------------
CERTIFIED PUBLIC ACCOUNTANTS
▇▇▇▇▇▇ ▇. ▇▇▇▇, C.P.A.
▇▇▇▇ ▇. ▇▇▇▇, C.P.A., C.V.A.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, C.P.A.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, C.P.A.
ACCOUNTANTS' COMPILATION REPORT
The Board of Directors
Inholtra Natural, Ltd
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
We have compiled the accompanying statement of assets and liabilities -
income tax basis of Inholtra Natural, Ltd (S Corporation) as of November 30,
1998, and the related statement of revenues and expenses income tax basis,
for the one month and eleven days then ended, and the accompanying
supplementary schedules - income tax basis, which are presented only for
supplementary analysis purposes, in accordance with Statements on Standards
for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. The financial statements and accompanying
supplementary schedules have been prepared on the accounting basis used by
the Company for income tax purposes, which is a comprehensive basis of
accounting other than generally accepted accounting principles.
Compilation is limited to presenting in the form of financial statements and
supplementary schedules information that is the representation of management.
We have not audited or reviewed the accompanying financial statements and
supplementary schedules and, accordingly, do not express an opinion or any
other form of assurance on them.
The Company, with the consent of its shareholders, has elected under the
Internal Revenue Code to be an S corporation. In lieu of corporation income
taxes, the shareholders of an S corporation are taxed on their proportionate
share of the Company's taxable income. Before, no provision or liability for
federal income taxes has been included in these financial statements.
Management has elected to omit substantially all of the disclosures
ordinarily included in financial statements prepared on the income tax basis
of accounting. If the omitted disclosures were included in the financial
statements, they might influence the user's conclusions about the Company's
assets, liabilities, equity, revenues and expenses. Accordingly, these
financial statements are not designed for those who are not informed about
such matters.
Thaw, Gopman & Associates, P.A.
Certified Public Accountants
December 30, 1998
Direct all correspondence to: Thaw Gopman & Associates,
▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ / Dade: (▇▇▇) ▇▇▇-▇▇▇▇ /
Outside Dade: 903-3020
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ / E-mail: ▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
Inholtra Natural, Ltd
(S Corporation)
Supporting Schedule of Revenues and Expenses -
Income Tax Basis
For the Periods Ending November 30, 1998
Current Month Eleven Months
Amount Percent Amount Percent
Schedule of Cost of Sales $ 0.00 0.00 % $ 12,687.05 0.26 %
Freight-In 0.00 0.00 9,175.00 0.19
Purchases 55,821.25 (350.18) 2,408,708.40 49.93
Royalties 113,000.00 (146.61) 978,367.64 20.28
------------- -------- -------------- --------
Total Cost of Sales $ 168,821.25 (496.79)% $ 3,408,938.09 70.66 %
------------- -------- -------------- --------
------------- -------- -------------- --------
Schedule of Selling Expenses
Advertising & Promotion $ 27,741.37 (119.45) $ 213,804.08 4.43 %
Commissions 20,776.04 (829.73) 99,471.41 2.06
Delivery 28,731.10 (444.81) 39,411.63 0.82
------------- -------- -------------- --------
Total Selling Expenses $ 77,248.51 (393.99)% $ 352,687.12 7.31 %
------------- -------- -------------- --------
------------- -------- -------------- --------
Schedule of Administrative Expenses
Accounting and Legal $ 14,712.91 (836.59)% $ 116,468.57 2.41 %
Automotive Expense 479.96 (157.78) 5,318.94 0.11
Bad Debt Expense 42,910.00 (105.85) 42,910.00 0.89
Bank Charges 4,796.65 (576.81) 5,021.50 0.10
Consulting Fees 1,924.85 (632.76) 17,004.62 0.35
Donations 0.00 0.00 180.00 0.00
Dues & Subscriptions 0.00 0.00 2,355.10 0.05
Insurance - Group 0.00 0.00 1,132.80 0.02
Insurace - Other (1,483.10) 487.54 14,156.47 0.29
Interest 0.00 0.00 290.28 0.01
Licenses 0.00 0.00 60.00 0.00
Office Expense 1,643.50 (540.27) 13,206.05 0.27
Postage 64.00 (21.04) 3,398.00 0.07
Rent 0.00 0.00 9,000.00 0.19
Repairs and Maintenance 0.00 0.00 610.50 0.01
Salaries - Officer 5,000.00 (643.66) 55,000.00 1.14
Taxes - General 0.00 0.00 57.35 0.00
Taxes - Payroll 382.50 (125.74) 4,529.50 0.09
Telephone 367.45 (120.79) 23,445.75 0.49
Travel 2,795.85 (919.08) 103,450.78 2.14
------------- -------- -------------- --------
Total Administrative Expenses $ 73,594.57 (192.82)% $ 417,596.21 8.66 %
------------- -------- -------------- --------
------------- -------- -------------- --------
See Accountant's Report
Inholtra Natural, Ltd
(S Corporation)
Statement of Assets and Liabilities-
Income Tax Basis
November 30, 1998
ASSETS
Current Assets
Cash in Bank $ 368,216.98
Accounts Receivable-Trade 1,385,492.58
Less: Allowance for Doubtful Account (42,910.00)
---------------
Total Current Assets $ 1,710,799.56
Property and Equipment
Office Furniture 8,500.00
Computer Equipment 2,943.97
Less: Accumulated Depreciation (8,443.97)
---------------
Net Property and Equipment 3,000.00
Other Assets
License Costs 35,000.00
[Illegible] License Costs (1,166.67)
Organization Costs 500.00
[Illegible] Organization Costs (99.96)
---------------
Total Other Assets 34,233.37
--------------
Total Assets $ 1,748,032.93
--------------
--------------
See Accountants' Report
Inholtra Natural, Ltd
(S Corporation)
Statement of Assets and Liabilities-
Income Tax Basis
November 30, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 1,239,261.41
---------------
Total Current Liabilities $ 1,239,261.41
Noncurrent Liabilities _______________
Total Noncurrent Liabilities ______________
Total Liabilities 1,239,261.41
Stockholders' Equity
Capital Stock 100.00
Dividend Distributions (143,367.73)
Current Year Income (Loss) 652,039.25
---------------
Total Stockholders' Equity 508,771.52
--------------
Total Liabilities and
Stockholders' Equity $ 1,758,032.93
--------------
--------------
See Accountants' Report
Inholtra Natural, Ltd
(S Corporation)
Statement of Revenues and Expenses-
Income Tax Basis
For the Periods Ending November 30, 1998
Current Month Eleven Months
Amount Percent Amount Percent
[Illegible] Sales $ (304.20) 100.00% $ 4,824,560.77 100.00%
[Illegible] of Sales 168,821.25 (496.79) 3,408,938.09 70.66
--------------- ------- --------------- ------
Gross Profit (169,125.45) 596.79 1,415,622.68 29.34
Selling & Administrative Expenses
Selling - See Schedule 77,248.51 (393.99) 352,687.12 7.31
Administrative - See Schedule 73,594.57 (192.82) 417,596.21 8.66
--------------- ------- --------------- ------
Total Selling & Administrative 150,843.08 (586.81) 770,283.33 15.97
--------------- ------- --------------- ------
Income From Operations (319,968.53) 183.61 645,339.35 13.38
[Illegible] Revenues (Expenses)
Interest Income 1,391.39 (457.39) 6,699.90 0.14
--------------- ------- --------------- ------
Total Other Revenues (Expenses) 1,391.39 (457.39) 6,699.90 0.14
--------------- ------- --------------- ------
Income Before Tax Provision (318,577.14) 726.21 652,039.25 13.51
--------------- ------- --------------- ------
Net Income (Loss) $ (318,577.14) 726.21% $ 652,039.25 13.51%
--------------- ------- --------------- ------
--------------- ------- --------------- ------
See Accountants' Report
INHOLTRA NATURAL, LTD
FINANCIAL STATEMENTS
OCTOBER 31, 1998
THAW, GOPMAN
& ASSOCIATES, P.A.
---------------
CERTIFIED PUBLIC ACCOUNTANTS
▇▇▇▇▇▇ ▇. ▇▇▇▇, C.P.A.
▇▇▇▇ ▇. ▇▇▇▇, C.P.A., C.V.A.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, C.P.A.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, C.P.A.
ACCOUNTANTS' COMPILATION REPORT
The Board of Directors
Inholtra Natural, Ltd
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
I have compiled the accompanying statement of assets and
liabilities - income tax basis of Inholtra Natural, Ltd (S
Corporation) as of October 31, 1998, and the related statement of
revenues and expenses income tax basis, for the one month and ten
months then ended, and the accompanying supplementary schedules -
income tax basis, which are presented only for supplementary
analysis purposes, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of
Certified Public Accountants. The financial statements and
accompanying supplementary schedules have been prepared on the
accounting basis used by the Company for income tax purposes, which
on a comprehensive basis of accounting other than generally accepted
accounting principles.
Compilation is limited to presenting in the form of financial statements and
supplementary schedules information that is the represenation of management.
We have not audited or reviewed the accompanying financial statements and
supplementary schedules and, assurance on them.
The Company, with the consent of its shareholders, has elected under the
Internal Revenue Code to be an S corporation. In lieu of Corporation income
taxes, the shareholders of an S corporation are taxed on their proportionate
share of the Company's taxable income. Therefore, no provision or liability
for federal income taxes has been included in these financial statements.
Management has elected to omit substantially all of the disclosures
ordinarily included in financial statements prepared on the income tax basis
of accounting. If the omitted disclosures were included in the financial
statements, they might influence the user's conclusions about the Company's
assets, liabilities, equity, revenues and exenses. Accordingly, these
financial statements are not designed for those who are not informed about
such matters.
Thaw, Gopman & Associates, P.A.
Certified Public Accountants
December 16, 1998
Inholtra Natural, Ltd.
(S Corporation)
Statement of Assets and Liabilities -
Income Tax Basis
October 31, 1998
ASSETS
Current Assets
Cash in Bank $ 405,740.56
Accounts Receivable - Trade 1,920,800.22
---------------
Total Current Assets $ 2,326,540.78
Property and Equipment
Office Furniture 8,500.00
Computer Equipment 2,943.97
Less: Accumulated Depreciation (8,443.97)
---------------
Net Property and Equipment 3,000.00
Other Assets
License Costs 35,000.00
A/A - License Costs (1,166.67)
Organization Costs 500.00
A/A - Organization Costs (99.96)
---------------
Total Other Assets 34,233.37
------------
Total Assets $ 2,363,774.15
------------
------------
Inholtra Natural, Ltd
(S Corporation)
Statement of Assets and Liabilities -
Income Tax Basis
October 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Amounts Payable $1,010,194.58
-------------
Total Current Liabilities $1,010,194.58
Noncurrent Liabilities
-------------
Total Noncurrent Liabilities
-------------
Total Liabilities 1,010,194.58
Stockholder's Equity
Capital Stock 100.00
Dividend Distributions (123,367.73)
Current Year Income (Loss) 1,476,847.30
-------------
Total Stockholders' Equity 1,353,579.57
-------------
Total Liabilities and
Stockholders' Equity $2,363,774.15
-------------
-------------
See Accountant's Report
Inholtra Natural, Ltd
(S Corporation)
Statement of Revenues and Expenses -
Income Tax Basis
For the Periods Ending October 31, 1998
Current Month Ten Months
Amount Percent Amount Percent
Gross Sales $1,817,067.67 100.00% $4,881,095.88 100.00%
Cost of Sales 745,818.94 41.05 2,790,116.84 57.16
------------- ------ ------------- ------
Gross Profit 1,071,248.73 58.95 2,090,979.04 42.84
Selling & Administrative Expense
Selling - See Schedule 28,919.03 1.59 275,438.61 5.64
Administrative - See Schedule 46,536.95 2.56 344,001.64 7.05
------------- ------ ------------- ------
Total Selling & Administrative 75,455.98 4.15 619,440.25 12.69
------------- ------ ------------- ------
Income From Operations 995,792.75 54.80 1,471,538.79 30.15
Other Revenues (Expenses)
Interest Income 238.52 0.01 5,308.51 0.11
------------- ------ ------------- ------
Total Other Revenues (Expenses) 238.52 0.01 5,308.51 0.11
------------- ------ ------------- ------
Income Before Tax Provision 996,031.27 54.82 1,476,847.30 30.26
------------- ------ ------------- ------
Net Income (Loss) $ 996,031.27 54.82% $1,476,847.30 30.26%
------------- ------ ------------- ------
------------- ------ ------------- ------
See Accountant's Report
INHOLTRA NATURAL, LTD
(S CORPORATION)
SUPPORTING SCHEDULE OF REVENUES AND EXPENSES
INCOME TAX BASIS
FOR THE PERIODS ENDING OCTOBER 31, 1998
Current Month Ten Months
------------------------ ------------------------
Amount Percent Amount Percent
----------- ------- ------------- -------
Schedule of Cost of Sales
Freight-In $ 0.00 0.00% $ 12,687.05 0.26%
Labeling 0.00 0.00 9,175.00 0.19
Purchases 629,651.20 34.65 1,902,887.15 39.98
Royalties 116,167.74 6.39 865,367.64 17.73
----------- ------- ------------- -------
Total Cost of Sales $745,818.94 41.05% $2,790,116.84 57.16%
----------- ------- ------------- -------
----------- ------- ------------- -------
Schedule of Selling Expenses
Advertising & Promotion $ 4,805.86 0.26% $ 186,062.71 3.81%
Commissions 13,432.64 0.74 78,695.37 1.61
Delivery 10,680.53 0.59 10,680.53 0.22
----------- ------- ------------- -------
Total Selling Expenses $ 28,919.03 1.59% 275,438.61 5.64%
----------- ------- ------------- -------
----------- ------- ------------- -------
Schedule of Administrative Expenses
Accounting and Legal $ 23,697.10 1.30% $ 101,755.66 2.08
Automotive Expense 479.96 0.03 4,838.98 0.10
Bank Charges 15.75 0.00 224.85 0.00
Consulting Fees 0.00 0.00 15,079.77 0.31
Donations 130.00 0.01 180.00 0.00
Dues & Subscriptions 0.00 0.00 2,355.10 0.05
Insurance - Group 0.00 0.00 1,132.80 0.02
Insurance - Other 5,981.90 0.33 15,639.57 0.32
Interest 0.00 0.00 290.28 0.01
Licenses 0.00 0.00 60.00 0.00
Office Expense 2,149.34 0.12 11,562.55 0.24
Postage 264.45 0.01 3,334.00 0.07
Rent 0.00 0.00 9,000.00 0.18
Repairs and Maintenance 0.00 0.00 610.50 0.01
Salaries - Officer 5,000.00 0.28 50,000.00 1.02
Taxes - General 0.00 0.00 57.35 0.00
Taxes - Payroll 382.50 0.02 4,147.00 0.08
Telephone 3,989.60 0.22 23,078.30 0.47
Travel 4,446.35 0.24 100,654.93 2.06
----------- ------- ------------- -------
Total Administrative Expenses $ 46,536.95 2.56% $ 344,001.64 7.05%
----------- ------- ------------- -------
----------- ------- ------------- -------
See Accountant's Report
INHOLTRA NATURAL, LTD
(S CORPORATION)
SUPPORTING SCHEDULE OF ASSETS AND LIABILITIES
INCOME TAX BASIS
OCTOBER 31, 1998
Schedule of Cash in Bank $
Cash in Operating Account 238.52
Cash in Operating Account 305,702.44
Cash in Investment Account 54,296.74
Cash in Money Market Account 45,502.86
-----------
Total Cash in Bank $405,740.56
-----------
-----------
Schedule of Notes Payable
-----------
Total Notes Payable 0.00
-----------
Noncurrent Portion of Notes Payable $ 0.00
-----------
-----------
See Accountants' Report
EXHIBIT 1
▇▇▇▇ OF SALE AND ASSIGNMENT
▇▇▇▇ OF SALE AND ASSIGNMENT dated this __ day of March, 1999 (the "▇▇▇▇
of Sale") from Inholtra Natural, Ltd., a Maine corporation ("INL"), ▇▇▇▇ ▇.
▇▇▇▇▇▇, a resident of Florida ("Vito's"), Inholtra, Inc., a Florida
corporation ("Inc."), Inholtra Investment Holdings and Trading, N.V., a
Netherlands Antilles company ("Holdings"; INL, Vito's, Inc. and Holdings
being referred to herein individually and collectively as "Seller"), to ▇▇▇▇▇
Naturals/4Health, Inc. ("Buyer"), a Utah corporation.
This ▇▇▇▇ of Sale is delivered by Seller to Buyer pursuant to the Asset
Purchase Agreement, dated as of March __, 1999 (the "Purchase Agreement"), by
and between Seller and Buyer. Capitalized terms used but not otherwise
defined herein shall have the meanings given to them in the Purchase
Agreement.
NOW, THEREFORE, for and in consideration of the consideration set forth
in the Purchase Agreement, the receipt and sufficiency of which are hereby
acknowledged, on the terms and conditions contained in the Purchase
Agreement, Seller does hereby sell, convey, assign, transfer and deliver to
Buyer all of its right, title and interest in and to the business of
manufacturing, marketing, distributing and selling nutritional supplements
and related products throughout the United States and in certain other
countries (the "Business") and all rights, interest and title to the
properties and assets owned by Seller and otherwise employed, used or
available for use in the Business, real and personal, tangible and
intangible, of every kind and nature, wherever located, as the same shall
exist on the Closing Date (but excluding all Excluded Assets, as defined
below) (the "Purchased Assets"), including without limitation, the following:
(A) the Intellectual Property Rights;
(B) the Inventory;
(C) the Assumed Contracts;
1
(D) the Promotional Materials;
(E) all papers, documents (including information stored in electronic
forms such as computer disks, CD Rom, computer tape, computer hard drive and
the like), instruments, books and records, correspondence, files, books of
account, data and laboratory books, and other records by which any of the
Purchased Assets might be identified or rights with respect thereto enforced,
or otherwise pertaining to the Purchased Assets or the Business that are
located in the Seller's offices or other locations used in connection with
the Business (including without limitation, customer invoices, customer
lists, vendor and supplier lists, drafts and other documents and materials
relating to customer transactions);
(F) all analytical and testing reports, files and production data
relating to the Business, in hard copy and electronic format;
(G) all back order files and collections files relating to the Business;
(H) all credits, prepaid expenses, deferred charges, advance payments,
security charges, and other prepaid items, deposits and advances (including
royalty advances as set forth in SCHEDULE 4.7 to the Purchase Agreement)
relating to the Business;
(I) all rights of Seller to the computer software programs (including
source and object codes to the extent Seller owns the rights, data and
related documentation) and the licenses or other agreements conferring rights
related thereto used in connection with the Business;
(J) all office supplies and equipment used in connection with the
Business;
(K) all rights to receive payment, including promissory notes and all
balances, credits, deposits, accounts or monies of Seller held by third
parties (other than accounts receivable generated by the Business prior to
the Closing Date); and
2
(L) all other assets and properties of Seller that are used in connection
with the Business other than Excluded Assets.
To have and to hold the Purchased Assets hereby sold, conveyed, assigned
and transferred by Seller to Buyer forever upon the terms and subject to the
conditions of the Purchase Agreement.
Anything herein to the contrary notwithstanding, there shall be excluded
from the Purchased Assets, properties, rights and business to be transferred
to Buyer hereunder (a) accounts receivable and other receivables related to
merchandise shipped prior to the Closing Date, (b) contracts, agreements or
commitments which are not Assumed Contracts and (c) those assets listed on
SCHEDULE 1.3 to the Purchase Agreement.
Notwithstanding the foregoing, Buyer hereby assumes Seller's executory
obligations under the Assumed Contracts (but not any obligations thereunder
arising from any breach or alleged breach by Seller thereof), in each case
only to the extent that the foregoing represent obligations which are by
their stated terms to be performed, in the ordinary course, subsequent to the
Closing Date.
Except as specifically set forth to the contrary in the preceding
sentence, the Seller shall be responsible for all liabilities and obligations
not hereby expressly assumed by Buyer.
3
IN WITNESS WHEREOF, Seller has executed this ▇▇▇▇ of Sale as of the day
and year first above written.
INHOLTRA NATURAL, LTD.
By:
------------------------------------
Name:
Title: President
▇▇▇▇ ▇. ▇▇▇▇▇▇,
by Inholtra Natural, Ltd.
as attorney-in-fact
By:
------------------------------------
Name:
Title: President
INHOLTRA INVESTMENT HOLDINGS AND
TRADING, N.V.
by Herm Jan Van Asselt,
as attorney-in-fact
---------------------------------------
INHOLTRA, INC.
By:
------------------------------------
Name:
Title:
4
EXHIBIT 2
TRANSITIONAL SERVICES AGREEMENT
This Transitional Services Agreement dated as of March [illegible],
1999 is made by and between Inholtra Natural, Ltd., a Maine Corporation
("Seller") and ▇▇▇▇▇ Naturals/4Health, Inc. ("Buyer"), a Utah corporation.
The parties hereto agree that the Seller will provide to Buyer during a
transition period as defined in Section illegible thereof (the "Transition
Period"), the Following services in connection with Buyer's purchase of
Seller's business of manufacturing, marketing, distributing and selling
nutritional supplements and related products pursuant to the Asset Purchase
Agreement dated as of March , 1999, by and between Seller and Buyer (the
"Purchase Agreement"; capitalization terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Purchase Agreement).
Subject to the terms and conditions herein set forth,
Seller will perform the following services under this Agreement in
a manner that is customary, commercially reasonable and based on
Seller's past business practice:
1. SALES AND MARKETING
1.1 Seller will continue to receive orders for the
Products identified in EXHIBIT 1 hereto (the "Products") during the
Transition Period. Seller will separate all commingled orders so
as to designate the Products with a form code indicating that the
sale is on behalf of Buyer.
1.2 Seller will invoice customers based upon Seller's
terms and conditions in effect at time of closing uder the
Purchase Agreement ("Closing"). Each invoice will contain only
those Products included in the sale and will reflect a notation to
the effect that such sale is "on behalf of ▇▇▇▇▇ Naturals/4Health,
Inc."
1.3 Seller will act as collection agent for Buyer for
those sales invoiced during the transition Period. It is
understood that all risk of loss on such sales is for the account
of Buyer.
1.4 Buyer shall promptly following the termination of
the Transition Period notify all customers of the Business in
writing of the consummation of the transactions contemplated by the
Purchase Agreement and request that all such customers change their
respective billing and invoicing codes as appropriate to reflect
the change in ownership of the Business, and Seller shall cooperate
in a reasonable manner with Buyer regarding such notifications to
such customers.
1.5 To the extent not otherwise provided for in the
Assumed Contracts (including co-packing agreements), Seller shall
during the Transition Period arrange for and supervise the
manufacture and packaging of Products to meet Buyer's requirements,
warehousing finished Products, supplies and materials, receiving
and unloading supplies and materials, inspecting incoming supplies
and materials for quality, and loading and shipping Products.
1.6 Seller shall arrange for all legal and related
services required for the diligent prosecution of all registrations
illegible the Intellectual Property Rights (as difined in the Purchase
Agreement) during the Transition Period.
1.7 Seller shall provide all necessary labor,
administrative, quality control, maintenance and supervisory staff
necessary to fulfill the commitments it has made herein.
2. CONSUMER SERVICES
2.1 Seller will continue to handle and record consumer
contracts relevant to the Products in accordance with existing
practices of the Seller.
3. TERM
3.1 The Transition Period will be the ninety (90) day
period commencing on the first business day after the date first
illegible written and will be automatically renewed at the end of such
initial ninety (90) day period for an additional ninety (90) day
period unless either party advises the other, in writing at least
ten (10) days prior to expiration, of its intention not to renew
another such term.
-2-
3.2 Notwithstanding the foregoing, Buyer may, on ten (10) days
prior written notice to Seller, terminate any or all of the Seller's services
hereunder. Such termination shall not relieve Buyer from its obligation to
make the payments required under Section 4.1.
3.3 Promptly following the termination of this Agreement, Seller
shall deliver to Buyer all of its records relating to the Products produced
during the Transition Period, provided that Seller shall have the same right
of access to such records for a period of three (3) years from the date
hereof as it has with respect to its other books and records delivered to
Buyer under the Purchase Agreement.
4. COMPENSATION FOR SERVICES PROVIDED
4.1 Buyer shall pay Seller a fee of $45,000.00 for its services
hereunder payable in three (3) monthly installments of $15,000.00 each on
April 2, May 3 and June 28, 1999. In addition, buyer shall reimburse Seller
for its reasonable and customary out-of-pocket expenses incurred by it in the
performance of its duties hereunder. All payments shall be made in United
States Dollars at the address shown therefor in the Purchase Agreement.
5. INDEMNIFICATION
5.1 Seller hereby agrees to indemnify and hold Buyer harmless at
all times after the date of this Agreement against any and all damages,
losses, obligations, liabilities of any nature (whether accrued, absolute,
contingent, matured or unmatured, known or unknown, or otherwise), judgments,
penalties, interest, encumbrances and reasonable costs and expenses
(including, without limitation, reasonable attorneys' fees and disbursements)
(collectively, "Losses") suffered, sustained, incurred or required to be paid
because of the untruth, inaccuracy or breach of any representation, warranty,
covenant or agreement of Seller contained in or made in this Agreement.
5.2 Buyer hereby agrees to indemnify and hold Seller harmless at
all times after the date of this Agreement, against any and all Losses
suffered, sustained, incurred or required to be paid because of the untruth,
inaccuracy or breach of any representation, warranty, covenant or agreement
of Buyer contained in or made in this Agreement.
3
6. MISCELLANEOUS
6.1 For a period of thirty (30) days after termination or
expiration of the Transition Period, in the event of customer returns of
Products to Seller facilities, Seller shall accept such returns for Buyer's
account and, in each case will promptly notify Buyer as to the amount of
Products so returned. Buyer shall issue any credit associated with such
returns. All Product returns received by Seller within such thirty (30) day
period shall be disposed of by Seller at Buyer's sole expense, in accordance
with Buyer's written instructions, or in the absence of such instructions, at
Seller's reasonable discretion.
6.2 This Agreement shall not apply to or otherwise effect in any
way any settlements for contract manufacturing services (co-packing
agreements) or inventory or equipment valuation issues under the Purchase
Agreement.
6.3 The terms and conditions of this Agreement shall be construed
and shall be enforceable in accordance with the laws of the State of New York.
6.4 This Agreement sets forth the complete understanding between
the parties hereto relating to the subject matter hereof and neither party is
relying on any statement or representation of the other party not
specifically contained herein. Amendments to this Agreement will not be
effective unless agreed to in writing and signed by authorized
representatives of both parties.
6.5 No waiver by either party of any breach of this Agreement will
operate to relieve the other party of responsibility for any prior or
subsequent breach thereof.
6.6 If any provision of this Agreement shall contravene or be held
invalid under any State or Federal law or municipal ordinance, such
contravention or invalidity shall not affect the remainder of this Agreement,
which thereafter shall be construed as not containing the particular term or
provisions held to be invalid, and the rights and obligations of the parties
hereto shall be construed and enforced accordingly.
4
6.7 All notices, disclosures and communications provided for
hereunder will be sent by certified mail, return receipt requested, to the
following addresses or such other addresses as may be specified in writing:
If to Buyer, to: ▇▇▇▇▇ Naturals/4Health, Inc.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇
Copy to: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
If to Seller, to: Inholtra Natural, Ltd.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
President and CEO
with a copy to: Faro & Associates
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
6.8 All disputes arising under this Agreement shall be resolved by
binding arbitration in the City of New York, NY, before a single arbitrator
in accordance with the rules of the American Arbitration Association.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized representatives as of the
date first written above.
▇▇▇▇▇ NATURALS/4HEALTH, INC.
By:_________________________________
Name:
Title: President
INHOLTRA NATURAL, LTD.
By:_________________________________
Name:
Title: President
5
EXHIBIT 1
LIST OF PRODUCTS
1. Inholtra Natural Pain Relief Formula (the "Formula")
2. Proposed juvenile dosage of the Formula
3. Proposed veterinary dosage of the Formula
EXHIBIT 3
NON-COMPETE AGREEMENT
NON-COMPETE AGREEMENT (this "Agreement"), dated as of March __, 1999,
by and between ▇▇▇▇▇ NATURALS/4HEALTH, INC., a Utah corporation ("Buyer"),
and INHOLTRA NATURAL, LTD., a Maine corporation, ▇▇▇▇ ▇. ▇▇▇▇▇▇, a resident
of Florida, INHOLTRA, INC., a Florida corporation and INHOLTRA INVESTMENT
HOLDINGS AND TRADING, N.V., a Netherlands Antilles company (each
individually, a "Seller" and collectively, the "Sellers").
W I T N E S S E T H:
WHEREAS, Buyer and Sellers have entered into an Asset Purchase
Agreement, dated as of March ___, 1999 (the "Asset Purchase Agreement"),
pursuant to which Buyer is acquiring certain assets used by Seller in its
business of manufacturing, marketing, distribution, and selling nutritional
supplements and related products (including, without limitation, arthritis
pain relief products) throughout the United States and in certain other
countries (the "Business"); and
WHEREAS, Seller has heretofore operated the Business and possesses
intimate knowledge of the Business, its policies, procedures, customers,
sources of products, methods, personnel and operations; and
WHEREAS, Seller recognizes that the application of Seller's
experience, expertise and services in a manner competitive with the Business
would cause irreparable damage to Buyer; and
WHEREAS, in order to induce Buyer to enter into the Asset Purchase
Agreement and to consummate the transactions contemplated thereby, Seller is
willing to agree, on the terms and conditions hereinafter set forth, to
refrain from engaging in certain activities specified herein; and
WHEREAS, the parties hereto agree that the consideration for Seller's
performance of its obligations hereunder is included in the Purchase Price to
be paid by Buyer under the Asset Purchase Agreement; and
WHEREAS, the execution and delivery of this Agreement by Seller is a
condition to the obligations of Buyer under the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and in the Asset Purchase Agreement, the parties
hereto hereby agree as follows:
1. INCORPORATION OF RECITALS/REFERENCES.
(a) The above recitals are incorporated herein and are an
integral part of this Agreement.
(b) Capitalized terms used and not defined herein shall have
the meanings assigned to such terms in the Asset Purchase Agreement.
2. SELLER NON-COMPETE. During the term hereof, neither Seller nor
its officers, directors, related parties, affiliates and subsidiaries (other
than ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇, who is bound by the terms of that certain Consulting
Agreement dated the date hereof between ▇▇. ▇▇▇▇▇▇ and the Buyer), shall,
directly or indirectly (as an owner, manager, licensor, licensee, lender,
partner, stockholder, joint venturer, operator, consultant (other than for
Buyer), independent contractor, advisor or otherwise):
(a) engage in, or own any interest in any business that
engages in, the manufacturing, marketing, distribution or sale of arthritis,
joint or other pain relief products (collectively, "Competitive Products")
anywhere in the United States or in any of the countries listed on SCHEDULE
4.7 to the Asset Purchase Agreement; or
(b) provide any person, other than Buyer, with the names of
Seller's customers, or any other information concerning Seller's Business for
use in the manufacturing, marketing, distribution or selling of Competitive
Products.
In connection with the foregoing provisions of this Section 2,
Seller represents that the limitations set forth herein are reasonable and
properly required for the adequate protection of the Business acquired by
Buyer pursuant to the Asset Purchase Agreement.
2
3. CONFIDENTIAL INFORMATION. Seller shall protect, guard and keep secret
and confidential all Confidential Information of Buyer that has come or, in
the future, may come into its possession. Confidential Information shall mean
any confidential or proprietary information, methods, processes or trade
secrets of Buyer, except for any such information that is or becomes publicly
available or readily ascertainable through no breach of this Agreement.
4. REMEDIES. (a) The parties agree and acknowledge that the rights and
obligations set forth under this Agreement are of a unique and special nature
and that a party hereto may be, therefore, without an adequate legal remedy
in the event of any violation of the covenants set forth in this Agreement by
the other parties hereto. Accordingly, if any party hereto breaches its or
their obligations under this Agreement, the other party shall be entitled to
seek enforcement of its remedies by an injunction, a restraining order, or a
decree of specific performance requiring the breaching party to fulfill its
obligations under this Agreement, in addition to all other rights and
remedies, at law or in equity, that may be available to such party under this
Agreement. Moreover, to facilitate the foregoing, each of the parties hereby
expressly waives any requirement for the posting of a bond or similar security
in connection with seeking of equitable remedies.
(b) Notwithstanding the foregoing, no right, power or remedy herein
conferred upon or reserved to any party hereto is intended to be exclusive of
any other right, power or remedy or remedies, and each and every right, power
and remedy of such party pursuant to this Agreement or now or hereafter
existing at law or in equity or by statute or otherwise shall, to the extent
permitted by law, be cumulative and concurrent and shall be in addition to
every other right, power or remedy pursuant to this Agreement or now or
hereafter existing at law or in equity or by statute or otherwise) and the
exercise by such party of any one or more of such rights, powers or remedies
shall not preclude the simultaneous or later exercise by such party of any or
all such other rights, powers or remedies.
(c) All disputes arising under this Agreement shall be resolved by
binding arbitration in the City of New York, NY,
3
before a single arbitrator in accordance with the rules of the American
Arbitration Association.
5. TERM. The term of this Agreement shall be the period from the Closing
Date through the fifth (5th) anniversary of the Closing Date.
6. ENTIRE AGREEMENT; MODIFICATION. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements among them concerning such subject matter
and may be modified only by a written instrument duly executed by each party
hereto.
7. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made as of the date delivered, if delivered personally, or one (1) business
day after having been deposited with courier, if set by overnight courier or
having been sent by telecopy, if sent by telecopy (receipt confirmed), or
three (3) business days after having been mailed, if mailed by registered or
certified mail, postage prepaid, return receipt requested, as follows:
If to Seller: Inholtra Natural, Ltd.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
President and CEO
with a copy to: Faro & Associates
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to Buyer: ▇▇▇▇▇ Naturals/4Health, Inc.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, CEO
with a copy to: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
4
or to such other address as any party shall have designated by like notice to
the other parties hereto (except that a notice of change of address shall
only be effective upon receipt).
8. WAIVER. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Agreement or any provision hereof or the right of any of
the parties hereto to thereafter enforce each and every provision of this
Agreement. No waiver of any breach of any of the provisions of this Agreement
shall be effective unless set forth in a written instrument executed by the
party or parties against whom or which enforcement of such waiver is sought;
and no waiver of any such breach shall be construed or deemed to be a waiver
of any other or subsequent breach.
9. BINDING EFFECT; ASSIGNMENT. (a) Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned (by
operation of law or otherwise) by either of the parties hereto without the
prior written consent of the other party, except Buyer may assign any and all
of its rights and remedies and delegate any and all of its obligations under
this Agreement to an affiliate, subsidiary or any entity owned or controlled
by it provided such affiliate, subsidiary or entity agrees in writing to be
bound by the terms hereof.
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their permitted successors and assigns.
10. SEVERABILITY. If any provisions of this Agreement is invalid, illegal
or unenforceable, such provision shall be ineffective to the extent, but only
to the extent of, such invalidity, illegality or unenforceability, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement, unless such a construction would be unreasonable.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and shall become
effective when one or more
5
counterparts has been signed by each of the parties hereto and delivered to
each of the other parties hereto.
12. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to its
choice of law principles.
13. HEADINGS. The headings contained herein are for the sole purpose or
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
▇▇▇▇▇ NATURALS/4HEALTH, INC.
By:
--------------------------------
Name:
Title: President
INHOLTRA NATURAL, LTD.
By:
--------------------------------
Name:
Title: President
▇▇▇▇ ▇. ▇▇▇▇▇▇,
by Inholtra Natural, Ltd., as
attorney-in-fact
By:
--------------------------------
Name:
Title: President
INHOLTRA INVESTMENT HOLDINGS AND
TRADING, N.V.,
by Herm Jan Van Asselt, as
attorney-in-fact
By:
--------------------------------
Name:
Title: President
6
INHOLTRA, INC.
By:
--------------------------------
Name:
Title: President
7
EXHIBIT 4
INDEMNITY ESCROW AGREEMENT
THIS INDEMNITY ESCROW AGREEMENT (the "Agreement"), made this ____ day of
March 1999 by and among Inholtra Natural, Ltd., a Maine corporation
("Seller"), ▇▇▇▇▇ Naturals/4Health, Inc. ("Buyer"), a Utah corporation, and
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, Seller and Buyer have entered into an Asset Purchase Agreement
dated as of March __, 1999 (the "Purchase Agreement") pursuant to which
Seller has agreed (on its own behalf and on behalf of certain of its
affiliates as therein provided) to sell and Buyer has agreed to acquire
certain assets owned and used by Seller in its business of manufacturing,
marketing, distributing and selling nutritional supplements and related
products, as more particularly provided in the Purchase Agreement (terms
used herein and not defined having the meanings ascribed to them in the
Purchase Agreement); and
WHEREAS, the Purchase Agreement requires, among other things, the
deposit by Buyer with an escrow agent of One Million Dollars ($1,000,000.00)
from the proceeds of the repayment of the Note, such deposit to be held as an
indemnity escrow to fund the payment of any obligations of Seller to Buyer
arising under the Agreement; and
WHEREAS, Seller and Buyer desire that the Escrow Agent serve as escrowee
under this Agreement and the Escrow Agent is willing to do so, all upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, it is hereby agreed as follows:
SECTION 1. ESCROW
1.1 Upon maturity of the Note, Buyer shall deliver to the Escrow
Agent a sum of One Million Dollars ($1,000,000.00), which sum the Escrow
Agent hereby agrees to accept and to hold as
escrow agent in accordance with the terms of this Agreement. Such amount is
referred to herein as the "Escrow Deposit".
1.2 The Escrow Agent shall hold and maintain the Escrow Deposit in
direct obligations of the United States Government, commercial paper
obligations rated "A-1" by Standard & Poors or "P-1" by ▇▇▇▇▇'▇ Investor
Services (provided that such obligations mature within one(1) month after
purchase by the Escrow Agent and in any event prior to the Termination Date),
money market instruments, or certificates of deposit or variable rate notes
issued by any federally insured bank, all as Seller shall direct in writing
to the Escrow Agent.
1.3 The Escrow Agent shall hold and maintain the Escrow Deposit
through the period ending on the ninetieth (90th) day after the date when the
Escrow Deposit is established pursuant to Section 1.1 above (the "Termination
Date"). Upon the expiration of such period, the Escrow Agent shall pay over
to Seller, from the Escrow Deposit, an amount equal to the principal amount
of the Escrow Deposit, as of such date, plus accrued interest thereon, minus
the aggregate amount of compensatory money damages claimed in all Indemnity
Escrow Claims (as defined below) commenced prior to such date, as certified
to the Escrow Agent in writing signed by Buyer as of such date.
1.4 From time to time on or before the Termination Date, Buyer may
give notice (a "Notice") to Seller and to the Escrow Agent specifying in
reasonable detail the nature and dollar amount of any claim (an "Indemnity
Escrow Claim") it may have under Section 6.1 of the Purchase Agreement. Buyer
may make more than one Indemnity Escrow Claim with respect to any underlying
circumstance or series of events.
(a) If, within thirty (30) days following receipt by the Escrow
Agent of a Notice regarding an Indemnity Escrow Claim, Seller gives notice to
Buyer and the Escrow Agent disputing such Indemnity Escrow Claim (a
"Counternotice"), such Indemnity Escrow Claim shall be resolved as provided
in paragraph (b) below. If no such Counternotice is received by the Escrow
Agent within such thirty-day period, then the dollar amount of damages
claimed by Buyer as set forth in its Notice shall be deemed fixed for
purposes of this Agreement and the Purchase Agreement and, within three (3)
days after expiration of such thirty-day period, the Escrow Agent
2
shall pay to Buyer in good funds out of the Escrow Deposit an amount equal
the amount claimed in the Notice. The Escrow Agent shall not inquire into or
consider whether an Indemnity Escrow claim complies with the requirements of
the Purchase Agreement.
(b) If a Counternotice is given with respect to an Indemnity
Escrow Claim, the Escrow Agent shall make a distribution from the Escrow
Deposit with respect thereto only in accordance with (i) joint written
instructions of Buyer and Seller, or (ii) final non-appealable order of an
arbitral tribunal of competent jurisdiction. The Escrow Agent shall act on
such arbitral tribunal order without further question.
1.5 Notwithstanding anything in this Section 1 to the contrary,
the Escrow Agent shall make or withhold disbursements from the Escrow Deposit
in accordance with any written instructions signed by both the Seller and
Buyer.
Section 2. GENERAL PROVISIONS.
2.1 This Agreement shall become effective as of the date hereof
and shall continue in force until the final distribution of all amounts held
by the Escrow Agent hereunder, or until terminated by order of an arbitral
tribunal of competent jurisdiction.
2.2 Buyer and Seller agree to reimburse the Escrow Agent for all
reasonable expenses, disbursements and advances incurred or made by the
Escrow Agent in performance of its duties hereunder including reasonable
fees, expenses and disbursements of its counsel). Any fees or expenses of the
Escrow Agent or its counsel which are not paid as provided for herein may be
taken from any property held by the Escrow Agent hereunder.
2.3 The obligations of the Escrow Agent under this Agreement are
subject to the following terms and conditions:
(a) The Escrow Agent shall not be under any duty to give the
Escrow Deposit held by it hereunder any greater degree of care than it gives
its own similar property and shall not be required to invest any funds held
hereunder except as directed in or pursuant to this Agreement. Uninvested
funds held hereunder shall not earn or accrue interest.
3
(b) This Agreement expressly sets forth all the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Agreement against the Escrow
Agent. The Escrow Agent shall not be bound by the provisions of any agreement
between the Buyer and the Seller except this Agreement.
(c) The Escrow Agent shall not be liable, except for its own
gross negligence or willful misconduct and, except with respect to claims
based upon such gross negligence or willful misconduct that are successfully
asserted against the Escrow Agent, the Buyer and the Seller shall jointly and
severally indemnify and hold harmless the Escrow Agent (and any successor
escrow agent) from and against any and all losses, liabilities, claims,
actions, damages and expenses, including reasonable attorneys' fees and
disbursements, arising out of and in connection with this Agreement. Without
limiting the foregoing, the Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash held by it
hereunder in good faith, in accordance with the terms hereof, including
without limitation any liability for any delays (not resulting from its gross
negligence or willful misconduct) in the investment or reinvestment of the
Escrow Deposit, or any loss of interest incident to any such delays.
(d) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the proprietary
or validity or the service thereof. The Escrow Agent may act in reliance upon
any instrument or signature believed by it to be genuine and may assume that
any person purporting to give receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so.
(e) [RESERVED]
(f) The Escrow Agent does not have any interest in the Escrow
Deposit deposited hereunder but is serving as escrow holder only and having
only possession thereof. Any payments of income from this Escrow Deposit
shall be subject to withholding regulations then in force with respect to
United States taxes. The
4
parties hereto will provide the Escrow Agent with appropriate W-9 forms for
tax I.D., number certifications, or W-8 forms for non-resident alien
certifications. It is understood that the Escrow Agent shall be responsible
for income reporting only with respect to income earned on investment of
funds which are a part of the Escrow Deposit and is not responsible for any
other reporting. This paragraph and paragraph (c) shall survive not
withstanding any termination of this Agreement or the resignation of the
Escrow Agent.
(g) The Escrow Agent makes no representation as to the validity, value,
genuineness or the collectibility of any security or other document or
instrument held by or delivered to it.
(h) The Escrow Agent shall not be called upon to advise any party as to
the wisdom in selling or retaining or taking or refraining from any action
with respect to any securities or other property deposited hereunder.
(i) The Escrow Agent (and any successor escrow agent) may at any time
resign as such by delivering the Escrow Deposit to any successor escrow agent
jointly designated by the Buyer and the Seller in writing, or to any court of
competent jurisdiction, whereupon the Escrow Agent shall be discharged of and
from any and all further obligations arising in connection with this
Agreement. The resignation of the Escrow Agent will take effect on the
earlier of (a) the appointment of a successor (including a court of competent
jurisdiction) or (b) the day which is 30 days after the date of delivery of
its written notice of resignation to the Buyer and the Seller. If at that
time, the Escrow Agent has not received a designation of a successor escrow
agent, the Escrow Agent's sole responsibility after that time shall be to
safekeep the Escrow Deposit until receipt of a designation of a successor
escrow agent or a joint written disposition instruction by the Buyer and the
Seller or a final order of an arbitral tribunal of competent jurisdiction.
(j) The Escrow Agent shall have no responsibility for the contents of any
writing of the arbitrators or any third party contemplated herein as a means
to resolve disputes and may rely without any liability upon the contents
thereof.
5
(k) Except in the event of an Indemnity Escrow Claim, in the event of any
disagreement between the Buyer and the Seller resulting in adverse claims or
demands being made in connection with the Escrow Deposit, or in the event
that the Escrow Agent in good faith is in doubt as to what action it should
take hereunder, the Escrow Agent shall be entitled to retain the Escrow
Deposit until the Escrow Agent shall have received (i) a final non-appealable
order of an arbitral tribunal of competent jurisdiction directing delivery of
the Escrow Deposit or (ii) a written agreement executed by the Buyer and the
Seller directing delivery of the Escrow Deposit, in which event the Escrow
Agent shall disburse the Escrow Deposit in accordance with such order or
agreement. The Escrow Agent shall act on such arbitral tribunal order without
further question.
2.4 The Escrow Agent agrees that Seller and Buyer may, by mutual agreement
at any time, remove the Escrow Agent as escrow agent hereunder, and
substitute another person or entity or escrow agent hereunder. In such event
the Escrow Agent shall, upon receipt of written notice of such removal,
account for and deliver to such substituted escrow agent all amounts then
constituting the Escrow Deposit, less any amounts then due and unpaid to it
for fees as herein provided for, and the Escrow Agent shall thereafter be
discharged of all liability hereunder.
2.5 Any notice, authorization, request or demand required or permitted
to be given hereunder shall be in writing, shall refer specifically to this
Agreement and shall be deemed to have been duly given when mailed by
registered or certified mail, postage prepaid, addressed as follows:
If to Buyer, to: ▇▇▇▇▇ Naturals/4Health, Inc.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇
Copy to: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
6
If to Seller, to: Inholtra Natural, Ltd.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
President and CEO
Copy to: Faro & Associates
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇
To the Escrow Agent: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Any party hereto may change the address to which notices are to be
delivered to it by giving prior written notice thereof as provided herein to
the other parties hereto.
2.6 All disputes arising under this Agreement shall be resolved by
binding arbitration in the City of New York, NY, before a single arbitrator
in accordance with the rules of the American Arbitration Association.
2.7 No printed or other matter in any language (including without
limitation prospectuses, notices, reports and promotional material) which
mentions the Escrow Agent's name or the rights, powers, or duties of the
Escrow Agent shall be issued by the Buyer or the Seller or on such parties'
behalf unless the Escrow Agent shall first have given its specific written
consent thereto.
2.8 This Agreement shall be binding upon and inure solely to the benefit
of the Buyer and the Seller and their respective successors and assigns,
heirs, administrators and representatives and shall not be enforceable by or
inure to the benefit of any third party except as provided in Section 2.3(i)
with respect to a resignation by the Escrow Agent. No party may assign any of
its rights or obligations under this Agreement without the written consent of
the other parties. This Agreement shall be construed in accordance with and
governed by the internal law of the State of New York (without reference to
its rule as to
7
conflicts of law). To the best knowledge of the principals to this
transactions, neither the underlying transaction/purpose nor the Agreement
violate any law or regulation.
2.9 This Agreement may only be modified by a writing signed by all of
the parties hereto, and no waiver hereunder shall be effective unless in a
writing signed by the party to be charged.
2.10 The Buyer and the Seller authorize the Escrow Agent, for any
securities held hereunder, to use the services of any United States central
securities depository it deems appropriate, including, but not limited to,
the Depositary Trust Company and the Federal Reserve Book Entry System.
2.11 This Agreement may be executed in one or more counterparts, each of
which shall be considered an original and all of which taken together shall
be considered one and the same instrument binding on all of the parties.
WITNESS the due execution hereof as of the date set forth in the first
paragraph.
Attest: ▇▇▇▇▇ NATURALS/4HEALTH, INC.
By:
---------------------- ------------------------------------------
Secretary Name:
Title: President
Attest: INHOLTRA NATURAL, LTD.
By:
---------------------- ------------------------------------------
Secretary Name:
Title: President
Attest: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP,
as Escrow Agent
By:
---------------------- ------------------------------------------
Secretary Name:
Title:
8
EXHIBIT 5
March __, 1999
▇▇▇▇▇ Naturals/4Health, Inc.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇
Re: ACQUISITION BY ▇▇▇▇▇ NATURALS/4HEALTH, INC. OF INHOLTRA
Ladies and Gentlemen:
We have acted as counsel for Inholtra Natural, Ltd., a Maine corporation
("INL"), ▇▇▇▇ ▇. ▇▇▇▇▇▇, a resident of Florida, ("Vito's"), Inholtra, Inc., a
Florida corporation ("Inc.") and Inholtra Investment Holdings and Trading,
N.V., a Netherlands Antilles company ("Holdings"; INL, Vito's, Inc., and
Holdings being sometimes referred to herein individually and collectively as
"Seller"), with respect to the negotiation and execution of the Asset
Purchase Agreement, dated as of March __, 1999 (the "Agreement"), between
Seller and ▇▇▇▇▇ Naturals/4Health, Inc. ("Buyer"), a Utah corporation. This
opinion is rendered pursuant to Section 2.3(d) of the Agreement. Capitalized
terms used herein but not defined shall have the meanings ascribed thereto in
the Agreement.
In this regard, we have examined originals or copies of, and the other
documents contemplated by, the Agreement, the Indemnity Escrow Agreement, the
Non-Compete Agreement, the Transitional Services Agreement, the Security
Escrow Agreement, the Consulting Agreement, ▇▇▇▇ of Sale and Assignment, the
assignments with respect to the Intellectual Property Rights delivered
pursuant to Section 2.3(b) of the Agreement and all other instruments of
transfer in connection therewith, the assignments with respect to all Assumed
Contracts, and the powers of attorney authorizing the parties named therein
to act on behalf of INL, Vito's, Inc. and Holdings, as the case may be (the
"Powers of Attorney"). The foregoing agreements and documents are
collectively referred to herein as the "Purchase Documents". We have also
examined such other documents and certificates of public officials and
representatives of Seller as we have deemed necessary as a basis for the
opinions expressed herein.
It is our opinion that:
1. Each of INL, Vito's, Inc. and Holdings is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation shown in the introductory paragraph of the Agreement, with
full corporate power and
▇▇▇▇▇ Naturals/4Health, Inc. Page 2
March __, 1999
authority to own, lease and operate its properties and to carry on the
Business as presently conducted by it. There are no states or
jurisdictions in which the character and location of any of the
properties owned or leased by Seller, or the conduct of its business,
makes it necessary for it to qualify to do business as a foreign
corporation.
2. The execution and delivery by each of INL, Vito's, Inc. and Holdings of
the Purchase Documents to which it is a party, the performance by it of
its obligations thereunder, and the consummation of the transactions
contemplated thereby, have been duly and validly authorized by all
necessary corporate action on the part of such party and such party
has all necessary power with respect thereto. The Powers of Attorney
have been duly executed and delivered by each of the parties thereto,
have not been revoked, and duly and validly authorize the parties named
therein to act for and on behalf of INL, Vito's, Inc. and Holdings, as
the case may be in all capacities and in respect of all transactions
contemplated under the Purchase Documents.
3. Neither the execution and delivery by INL, Vito's, Inc. or Holdings of
the Purchase Documents to which it is a party, nor the consummation of
any transactions contemplated thereby, nor the performance by it or its
obligations thereunder, will (nor with the giving of notice or the lapse
of time or both would) (A) conflict with or result in a breach of any
provision of the Certificate of Incorporation or By-laws of INL, Inc. or
Holdings or (B) give rise to a default or any right of termination,
cancellation or acceleration, or otherwise be in conflict with or result
in a loss of contractual benefits to Seller, under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
license, agreement or other instrument or obligation to which it is a
party or by which Seller or any of the Purchased Assets may be bound, or
require any consent, approval or notice under the terms of any such
document or instrument, except as disclosed in the Agreement or the
Schedules thereto, or (C) violate any order, writ, injunction, decree,
law, statute, rule or regulation of any Court or governmental authority
which is applicable to Seller or any of the Purchased Assets, or (D)
result in the creation or imposition of any lien, claim, restriction,
charge or encumbrance upon any of the Purchased Assets, or (E) interfere
with or otherwise adversely affect the ability of Buyer to carry on the
Business after the Closing Date on substantially the same basis as is
now conducted by Seller.
▇▇▇▇▇ Naturals/4Health, Inc. Page 3
March __, 1999
4. Each of the Purchase Documents to which INL, Vito's, Inc. or Holdings is
a party constitutes valid and legally binding obligations of INL,
Vito's, Inc. or Holdings, as the case may be, enforceable against it in
accordance with its respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
5. Except as expressly set forth in Schedules 4.7 and 4.9 of the Agreement,
(i) Seller owns or has the right to use all of the Intellectual Property
Rights; (ii) we know of no proceedings that have been instituted, or are
pending or threatened, which challenge the rights of Seller in respect
thereto or the validity thereof and we know of no valid basis for any
such proceedings; (iii) none of the aforesaid violates any laws,
statutes, ordinances or regulations, or has at any time infringed upon
or violated any rights of others, or is being infringed by others; and
(iv) none of the aforesaid is subject to any outstanding order, decree,
judgment, stipulation or charge.
6. All patents, trademarks, servicemarks and brandmarks that are included
in the Intellectual Property Rights have been duly registered in or
issued by the United States Patent and Trademark Office, the United
States Register of Copyrights and the appropriate offices of the other
countries shown on Schedule 4.7 to the Agreement, are valid, enforceable
and subsisting, and all necessary actions have been taken to maintain
the same. All patent applications and applications for registration of
trademarks, servicemarks or brandmarks listed on Schedule 4.7 to the
Agreement have been duly filed with the United States Patent and
Trademark Office, the United States Register of Copyrights and the
appropriate offices of the other countries identified therein, and are
pending.
7. All licenses or other agreements included in the Intellectual Property
Rights are in full force and effect, we know of no default by Seller or
any other party thereto, and all of Seller's rights thereunder are
freely assignable to Buyer. To the best of our knowledge, the licensors
under such licenses and other agreements have and had all requisite
power and authority to grant the rights purported to be conferred
thereby.
▇▇▇▇▇ Naturals/4Health, Inc. Page 4
March __, 1999
8. Except as set forth in Schedules 4.7 and 4.9 to the Agreement, we know
of no claims, suits, actions, arbitrations, investigations, inquiries or
other proceedings before any governmental agency, court or tribunal,
domestic or foreign, or before any private arbitration tribunal, pending
or threatened, against or relating to Seller, the Business or any of the
Purchased Assets; nor, do we know of any basis for any such claim, suit,
action, arbitration, investigation, inquiry or other proceeding. We know
of no judgments, orders, stipulations, injunctions, decrees or awards
in effect which relate to Seller, the Business or any of the Purchased
Assets, the effect of which is (a) to limit, restrict, regulate, enjoin
or prohibit any business practice in any area, or the acquisition of any
properties, assets or businesses, or (b) otherwise materially adverse to
the Business or any of the Purchased Assets.
9. No approval, authorization, consent or order or action of, or filing
with, any third party or court, administrative agency or governmental
authority (a) is required for the execution and delivery by INL, Vito's,
Inc. or Holdings or any of the Purchase Documents to which it is a
party, or the consummation by any such party of the transactions
contemplated thereby or (b) is necessary in order that the Business may
be conducted immediately following the Closing Date substantially in the
same manner as heretofore conducted.
Very truly yours,
EXHIBIT 6
NON-RECOURSE PROMISSORY NOTE
$10,000,000.00 March 10, 1999
FOR VALUE RECEIVED, the undersigned ▇▇▇▇▇ Naturals/4Health, Inc., a Utah
corporation (the "Debtor"), with its principal place of business located at
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, hereby promises to pay
to Inholtra Natural, Ltd., a Maine corporation (the "Creditor"), at ▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or at such other place as the Creditor
shall designate to the Debtor in writing, the principal amount of Ten Million
Dollars ($10,000,000.00) lawful money of the United States of America, with
interest thereon at the rate of eight percent (8%) per annum calculated on
the basis of 365-day year and the number of days elapsed.
This Promissory Note evidences the obligation of the Debtor, subject to
the terms and conditions set forth below, to pay a portion of the balance of
the purchase price (the "Purchase Price") for certain assets purchased by it
from the Creditor pursuant to that certain Asset Purchase Agreement between
the Debtor, the Creditor and certain other parties dated as of March 10, 1999
(the "Agreement").
1. The principal amount hereof shall be payable on or before the close
of business on June 10, 1999 (the "Maturity Date") and shall be repaid by
Debtor as follows:
(i) the principal amount of One Million Dollars ($1,000,000.00)
shall be paid to the Indemnity Escrow Agent (as defined in Section 1.5 of
the Agreement) to be held by it pursuant to the terms of the Indemnity
Escrow Agreement (as also defined in Section 1.5 of the Agreement); and
(ii) the remaining principal balance hereof, together with all
accrued interest as herein provided, shall be paid to Creditor.
2. In addition to its other rights hereunder and under the Agreement,
Debtor shall have the right upon notice to Creditor specifying in reasonable
detail the basis for a set-off hereunder, to set-off and apply against its
obligations to Creditor hereunder any and all amounts to which it may be
entitled from Creditor under the Agreement and the other documents executed
in connection with the transactions contemplated thereby. The exercise of
such right of set-off by Debtor in good faith shall not constitute default
hereunder.
3. The principal amount of this Note may be prepaid, in whole or in
part, along with accrued interest without premium or penalty.
4. Upon notice to the Debtor of the loss, theft, destruction or
mutilation of this Note, and in the case of any such mutilation upon surrender
and cancellation of the mutilated document, and in the case of such loss,
theft or destruction, upon delivery by the Creditor of an indemnity agreement
satisfactory to the Debtor, the Debtor will execute and deliver to the
Creditor a new Note of like tenor in lieu of such lost, stolen, destroyed or
mutilated Note.
5. Except as otherwise expressly provided herein, the terms of this Note
may be amended only by a written instrument executed by the Debtor and the
Creditor. No course of dealing with the Debtor and the Creditor nor any delay
in executing any rights hereof shall operate as a waiver of any rights of
the Creditor.
6. All notices, requests, demands and other communications which are
required to be given hereunder shall be deemed to have been duly given only if
in writing and delivered by first class mail, return receipt requested, to
the other party at its address appearing on the first page hereof or to such
other address as such party shall have specified by notice in writing to the
other party.
7. The rights and obligations of the parties hereunder shall be construed
and interpreted in accordance with the local laws of the State of New York
without regard to the principles of conflicts of law thereof.
8. If (a) Debtor shall fail to pay any amount due under this Note when
due; or (b) Debtor shall commit any other material breach or event of default
under the Agreement which shall continue
2
uncured for a period of ten (10) days after notice thereof to Debtor; or (c)
Debtor shall be dissolved or become insolvent, or shall merge with or into
another entity; or (d) there shall be an assignment for the benefit of
creditors of Debtor or appointment of a receiver or similar official for
Debtor or its assets, or Debtor shall apply for, or be the subject of any
voluntary or involuntary application or petition for protection or relief
under any Federal, state or foreign bankruptcy, insolvency, receivership or
similar law; or (e) Debtor shall take any action for the purpose of effecting
any of the foregoing; then and in any such event, all amounts of unpaid
principal and all other amounts due to Creditor hereunder shall upon demand
be due and payable in full.
9. Except as otherwise set forth herein, the Debtor hereby waives
presentment, demand for payment, notice of dishonor, notice of protest and
protest, and all other notices or demands in connection with the delivery,
acceptance, performance, default, endorsement or guarantee of this instrument.
10. This is a nonrecourse note and, anything herein to the contrary
notwithstanding, Creditor agrees for itself, its representatives, successor,
endorsees, and assigns that (a) neither Debtor nor its representatives,
successors or assignees shall be personally liable on this Note, it being
intended that Debtor's obligation to pay the principal of this Note with
interest thereon is included for the sole purpose of establishing the
existence of the indebtedness represented hereby and (b) in the event of
default, Creditor (and any such representative, successor, endorsee, or
assign) shall look for payment solely to the Reassignments (as defined in the
Agreement) and the rights and remedies set forth in the Security Escrow
Agreement (as defined in the Agreement) and will not make any claim or
institute any action or proceeding against Debtor (or any representative,
successor or assign of Debtor) for payment of this Note (or for any
deficiency remaining after application of the property which is the subject
of the Reassignments); provided, however, that nothing herein contained shall
be construed to release or impair the indebtedness evidence by this Note, or
of the lien upon the property securing it, or preclude the application of
said property to the payment hereof in accordance with the terms of the
Security Escrow Agreement.
11. All disputes arising hereunder shall be resolved by binding
arbitration in the City of New York, New York before a
3
single arbitrator in accordance with the rules of the American Arbitration
Association.
IN WITNESS WHEREOF, this Note has been signed by the Debtor on the date
first above written.
▇▇▇▇▇ NATURALS/4HEALTH, INC.
By:
----------------------------------------
▇▇▇▇ ▇▇▇▇▇,
Chief Executive Officer
4
EXHIBIT 7
CONSULTING AGREEMENT
CONSULTING AGREEMENT made this ___ day of March 1999, between ▇▇▇▇▇
NATURALS/4HEALTH, INC., a Utah corporation with offices at ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Company"), and ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇, an individual residing at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ("Consultant").
W I T N E S S E T H:
WHEREAS, under an Asset Purchase Agreement dated March __, 1999 (the
"Purchase Agreement"), the Company is purchasing certain assets of Inholtra
Natural, Ltd., a Maine corporation ("Inholtra") and its affiliates, ▇▇▇▇ ▇.
▇▇▇▇▇▇ (an individual) and Inholtra Investment Holdings and Trading, N.V., a
Netherlands Antilles company (Inholtra and such affiliates being collectively
referred to herein as ("Inholtra") that is operated and managed by
Consultant; and
WHEREAS, in connection with the Purchase Agreement, Consultant has
agreed to be retained by the Company in order to assist the Company in
becoming familiar with the operations of the Business (as defined in the
Purchase Agreement) and to assist the Company in developing good working
relationships with Inholtra's customers and suppliers.
NOW THEREFORE, the parties agree as follows:
1. RETENTION AND TERM. The Company hereby retains Consultant for the
period of one year from the date hereof, at which time this Agreement shall
be automatically renewed for an additional one (1) year period unless either
party shall have advised the other in writing thirty (30) days before
expiration of the current term, of his or its intention not to renew.
2. DUTIES. Consultant shall provide advice and consultation to
officers of the Company with respect to the operations of the Business,
including business development, marketing, customers and financial matters.
Consultant may be required to take business trips from time to time as
requested by
the Company. Consultant shall provide such number of days of consulting
service as he and the Company shall reasonably determine to be appropriate
for the smooth transition of the Business from Inholtra to the Company and the
maximization of the Business' earnings and growth during such transition
period, but in no event shall Consultant be required to provide more than
fifteen (15) days of consulting service hereunder during any calendar month.
3. CONFIDENTIALITY; NON-COMPETITION. (a) Consultant agrees that he
will not at any time, either during the term of this agreement or thereafter,
divulge to any person, firm or corporation any confidential information
received by him during the course of his consulting, or prior to the date
hereof, with regard to the financial, business or other affairs of the
Company or the Business, and all such information shall be kept confidential
and shall not, in any manner, be revealed to anyone, except as may be
otherwise required by law; PROVIDED THAT nothing herein shall be construed to
prohibit Consultant from divulging information in the ordinary course of the
business of the Company or information which has become or hereafter becomes
generally available to the public other than because it was divulged by
Consultant in violation of this Agreement.
(b) During the term hereof, and for a period of five (5)
years thereafter, Consultant shall not, directly or indirectly (as an owner,
manager, licensor, licensee, lender, partner, stockholder, joint venturer,
operator, consultant (other than for the Company), independent contractor,
advisor or otherwise):
(1) engage in, or own any interest in any business
that engages in, the manufacturing, marketing, distribution or sale of any
arthritis pain relief products, including, without limitation, products
containing glucosamine and chondratin or any derivatives thereof
(collectively, "Competitive Products") anywhere in the United States or in
any of the countries listed on Schedule 4.7 to the Purchase Agreement; or
(2) provide any person, other than the Company, with
the names of Inholtra's customers, or any other information concerning
Inholtra's business for use in the manufacturing, marketing, distribution or
selling of Competitive Products.
2
(c) In connection with the foregoing provisions of this
Section 3, Consultant represents that the limitations set forth herein are
reasonable and properly required for the adequate protection of the business
acquired by the Company pursuant to the Purchase Agreement.
4. COMPENSATION. The Company shall pay Consultant for his services
hereunder a retainer of SIXTY THOUSAND DOLLARS ($60,000.00) per year payable
in twelve (12) equal monthly installments of $5,000,000 each. Payment of the
retainer shall be made on the 5th day of each month for services performed in
the prior month. In addition, Consultant shall be entitled to receive a bonus
in an amount equal to Five Percent (5%) of all cash collections (net of
shipping charges and returns) from sales generated by Consultant from new
customers introduced to the Business by Consultant during the term hereof,
such bonus to be payable on the 5th day of June, September, December and
March for collections received by the Company during the three pervious
calendar months.
5. EXPENSES. The Consultant shall be entitled to be reimbursed by
the Company for all ordinary and necessary business expenditures made by him
in connection with or in furtherance of the performance of his services
hereunder (other than automobile expenses, which are included in the retainer
amount described in paragraph 4), up to an aggregate amount of not to exceed
audited expenses for the twelve (12) months preceding the Closing, upon
presentation and approval of expense statements or vouchers and such other
supporting information as may from time to time be requested by the Company.
6. EXPIRATION, DEATH. In the event of the Consultant's death during
the term of this Agreement, this Agreement shall terminate and no further
amounts shall be payable hereunder by the Company.
7. AMENDMENT AND MODIFICATION. This Agreement may not be amended,
modified or changed except in a writing signed by the party against whom such
amendment, modification or the like is sought to be enforced.
3
EXHIBIT 8
SECURITY ESCROW AGREEMENT
THIS SECURITY ESCROW AGREEMENT ( the "Agreement"), made this ____ day of
March 1999 by and among Inholtra Natural, Ltd., a Maine corporation
("Seller"), ▇▇▇▇▇ Naturals/4Health, Inc. ("Buyer"), a Utah corporation, and
▇▇▇▇ ▇. ▇▇▇▇, Esq. (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, Seller and Buyer have entered into an Asset Purchase Agreement
dated as of March __, 1999 (the "Purchase Agreement") pursuant to which
Seller has agreed (on its behalf and the behalf of certain of its affiliates,
as therein provided) to sell and Buyer has agreed to acquire certain assets
owned and used by Seller in its business of manufacturing, marketing,
distributing and selling nutritional supplements and related products, as
more particularly provided in the Purchase Agreement (terms used herein and
not defined having the meaning ascribed to them in the Purchase Agreement);
and
WHEREAS, Buyer has delivered to Seller a Note in partial payment of the
purchase price under the Purchase Agreement; and
WHEREAS, the Purchased Assets include the assignment of all Intellectual
Property Rights to Buyer pursuant to Section 113(b) of the Purchase Agreement
(the "Assignments"); and
WHEREAS, to secure its obligations under the Note, Buyer has agreed to
execute reassignments of the Intellectual Property Rights to Seller (the
"Reassignments" and "Deposits") and to deposit the Reassignments with the
Escrow Agent pending payment in full of the Note, such deposit to be
maintained pursuant to the terms and conditions of this Agreement; and
WHEREAS, the Assignments are by their terms subject to the foregoing
security interest in favor of the Seller in the Intellectual Property
Rights, and Seller has agreed to execute and deliver to the Escrow Agent
hereunder clean assignments of the Intellectual Property Rights, with no
reference to any security interest therein, in favor of Seller ("Clean
Assignments") such
Clean Assignments also to be held by the Escrow Agent hereunder providing
payment in full of the Note; and
WHEREAS, Seller and buyer desire that the Escrow Agent serve as escrowee
under this Agreement and the Escrow Agent is willing to do so, all upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, it is hereby agreed as follows:
SECTION 1. ESCROW
1.1 Simultaneously with the execution hereof, Buyer has delivered to
the Escrow Agent the Reassignments fully executed by Buyer, and Seller has
delivered to the Escrow Agent the Clean Assignments fully executed by Seller,
and receipt of such assignments and Clean Assignments is hereby acknowledged
by the Escrow Agent. The Escrow Agent hereby agrees to accept and to hold the
Reassignments and Clean Assignments as escrow agent in accordance with the
terms of this Agreement. The Reassignments (to the extent that they relate to
recordable patent or trademark interests) and Clean Assignments shall be in
form acceptable for recording with the U.S. Patent and Trademark Office.
1.2 The Escrow Agent shall hold and maintain the Reassignments and
Clean Assignments in escrow hereunder until the first to occur of the
following:
(a) Receipt by the Escrow Agent either of written notice signed by
Seller that the Note has been paid in full (a "Payment Notice"),
or a copy of the Note marked "Paid-in-Full" and signed by Seller;
or
(b) the expiration of thirty (30) days after receipt by the Escrow
Agent of written notice (a "Default Notice") signed by Seller to
the effect that the Buyer has defaulted in payment of the Note
as and when due, that such default is continuing, and requesting
the delivery of the Reassignments to Seller.
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If any of the events described in clause (a) above is the first to
occur, the Escrow Agent shall deliver the Reassignments and Clean Assignments
to Buyer forthwith. If the event described in clause (b) shall be the first
to occur, the Escrow agent shall, within three (3) days thereafter, furnish a
copy of the Default Notice to Buyer. If, within ten (10) days after Buyer's
receipt of the Default Notice, the Escrow Agent shall receive notice from
Buyer either disputing the Default Notice or alleging an event of default or
breach by Seller or its affiliates under the terms and conditions of the
Purchase Agreement, the Escrow Agreement shall release the Reassignments and
Clean Assignments only in accordance with Section 2.3(g) hereof. If no such
notice from the Buyer is received by the Escrow Agent within such ten (10)
day period, however, the Escrow Agent shall deliver the Reassignments and
Clean Assignments to Seller forthwith.
1.3 Notwithstanding anything in this Section 1 to the contrary, the
Escrow Agent shall make or withhold delivery of the Reassignments and Clean
Assignments in accordance with any written instructions signed by both the
Seller and the Buyer.
1.4 In the event of the delivery of the Reassignments by the Escrow
Agent to the Seller hereunder, the Escrow Agent shall first date such
Reassignments to be effective as of the date of their delivery to Seller.
SECTION 2. GENERAL PROVISIONS.
2.1 This Agreement shall become effective as of the date hereof and
shall continue in force until the final distribution of the Reassignments and
Clean Assignments held by the Escrow Agent hereunder, or until terminated by
order of a court or arbitral tribunal of competent jurisdiction.
2.2 Seller shall reimburse the Escrow Agent for all reasonable
expenses, disbursements and advances incurred or made by the Escrow Agent in
performance of its duties hereunder (including reasonable fees, expenses and
disbursements of its counsel).
2.3 The obligations of the Escrow Agent under this Agreement are
subject to the following terms and conditions:
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(a) The Escrow Agent shall not be under any duty to give the
Reassignments and Clean Assignments held by it hereunder any greater
degree of care than it gives its own similar property.
(b) This Agreement expressly sets forth all the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. No
implied duties or obligations shall be read into this Agreement against
the Escrow Agent. The Escrow Agent shall not be bound by the provisions
of any agreement between the Buyer and the Seller except this Agreement.
(c) The Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct and, except with respect to claims
based upon such gross negligence or willful misconduct that are
successfully asserted against the Escrow Agent, the Buyer and the Seller
shall jointly and severally indemnify and hold harmless the Escrow Agent
(and any successor escrow agent) from and against any and all losses,
liabilities, claims, actions, damages and expenses, including reasonable
attorneys' fees and disbursements, arising out of and in connection with
this Agreement.
(d) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the
propriety or validity or the service thereof. The Escrow Agent may act
in reliance upon any instrument or signature reasonably believed by it
to be genuine and may assume that any person purporting to give receipt
or advice or make any statement or execute any document in connection
with the provisions hereof has been duly authorized to do so.
(e) [RESERVED]
(f) The Escrow Agent (and any successor escrow agent) may at any
time resign as such by delivering the Deposits to any successor escrow
agent jointly designated
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by the Buyer and the Seller in writing, or to any court or arbitral
tribunal of competent jurisdiction, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in
connection with this Agreement. The resignation of the Escrow Agent will
take effect on the earlier of (a) the appointment of a successor
(including by an arbitral tribunal) or (b) the day which is 30 days
after the date of delivery of its written notice of resignation to the
Buyer and the Seller. If at that time, the Escrow Agent has not received
a designation of a successor escrow agent, the Escrow Agent's sole
responsibility after that time shall be to safekeep the Deposits until
receipt of a designation of a successor escrow agent or a joint written
disposition instruction by the Buyer and the Seller or a final order of
an arbitral tribunal of competent jurisdiction.
(g) In the event of any disagreement between the Buyer and the
Seller resulting in adverse claims or demands being made in connection
with the Reassignments and Clean Assignments, or in the event that the
Escrow Agent in good faith is in doubt as to what action it should take
hereunder, the Escrow Agent shall retain the Reassignments and Clean
Assignments until the Escrow Agent shall have received (i) a final
non-appealable order of an arbitral tribunal of competent jurisdiction
directing delivery of the Reassignments and Clean Assignments or (ii) a
written agreement executed by the Buyer and the Seller directing
delivery of the Reassignments and Clean Assignments in accordance with
such order or agreement. The Escrow Agent shall act on such arbitral
tribunal order without further question.
2.4 The Escrow Agent agrees that Seller and Buyer may, by mutual
agreement at any time, remove the Escrow Agent as escrow agent hereunder, and
substitute another person or entity or escrow agent hereunder. In such event
the Escrow Agent shall, upon receipt of written notice of such removal,
account for and deliver to such substituted escrow agent the Reassignments
and Clean
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Assignments and the Escrow Agent shall thereafter be discharged of all
liability hereunder.
2.5 Any notice, authorization, request or demand required or permitted
to be given hereunder shall be in writing, shall refer specifically to this
Agreement and shall be deemed to have been duly given when mailed by
registered or certified mail, postage prepaid, addressed as follows:
If to Buyer, to: ▇▇▇▇▇ Naturals/4Health, Inc.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇
If to Seller, to: Inholtra Natural, Ltd.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
President and CEO
To the Escrow
Agent: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Any party hereto may change the address to which notices are to be
delivered to it by giving prior written notice thereof as provided herein to
the other parties hereto.
2.6 This Agreement shall be binding upon and inure solely to the
benefit of the Buyer and the Seller and their respective successors and
assigns, heirs, administrators and representatives and shall not be
enforceable by or inure to the benefit of any third party except as provided
in Section 2.3(g) in respect to a resignation by the Escrow Agent. No party
may assign any of its rights or obligations under this Agreement without the
written consent of the other parties. This Agreement shall be construed in
accordance with and governed by the internal law of the State of Florida
(without reference to its rule as to conflicts of law).
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2.7 This Agreement may only be modified by a writing by all
of the parties hereto, and no waiver hereunder shall be effective
unless in a writing signed by the party to be charged.
2.8 This Agreement may be executed in one or more counterparts, each of
which shall be considered an original and all of which taken together shall
be considered one and the same instrument binding on all of the parties.
2.9 All disputes arising under this Agreement shall be resolved by
binding arbitration in the City of Miami, Florida before a single arbitrator
in accordance with the rules of the American Arbitration Association.
2.10 Upon any delivery of the Reassignments and Clean Assignments to
Seller in accordance with Section 1.2 hereof, Buyer agrees to cease and
desist using or exploiting the Intellectual Property Rights underlying such
Reassignments and Clean Assignments.
WITNESS the due execution hereof as of the date set forth in the first
paragraph.
Attest: ▇▇▇▇▇ NATURALS/4HEALTH, INC.
________________________ By: ________________________________
Secretary Name:
Title: President
Attest: INHOLTRA NATURAL, LTD.
________________________ By: ________________________________
Secretary Name:
Title: President
▇▇▇▇ ▇. ▇▇▇▇, Esq., as Escrow Agent
Attest:
________________________ ____________________________________
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