ASSET PURCHASE AGREEMENT
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AGREEMENT made as of the 24th day of November 1998 by and between
NATURAL HEALTH TRENDS CORP., a Florida corporation (the "NHTC"), NHTC
ACQUISITION, CORP., a Delaware corporation and a wholly-owned subsidiary of NHTC
(the "Buyer") and KAIRE INTERNATIONAL, INC., a Delaware corporation (the
"Seller").
W I T N E S S E T H :
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WHEREAS, Seller is in the business (the "Business") of developing and
distributing through a network of independent associates a variety of natural
health products including nutritional supplements and personal care products;
and
WHEREAS, Buyer desires to purchase from Seller and Seller desires to
sell to Buyer, all of the assets, property, business and goodwill of Seller,
subject to the transfer to and assumption by Buyer of certain of Seller's
liabilities relating to the ownership and operation of the Business, all on and
subject to the terms and conditions hereinafter set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby unconditionally acknowledged, the parties hereto do hereby agree as
follows:
1. PURCHASE OF ASSETS. Subject to the terms and conditions of this
Agreement:
1.1 Seller agrees to sell, transfer and assign to Buyer at the
Closing (hereinafter defined), free and clear of all liens, claims and
encumbrances whatsoever, except as otherwise specifically set forth on Exhibit A
to this Agreement, and Buyer agrees to purchase from Seller thereon:
(a) All of the assets of Seller set forth on Exhibit B
hereto, including, without limitation, all cash on hand and in banks, accounts
receivable, notes receivable, tax refunds and/or credits, insurance policies and
proceeds receivable, contractual rights and product formulations to any and all
products of the Company, machinery, equipment, furniture, fixtures, leasehold
security deposits and improvements, vehicles, licenses, product inventory,
computers, computer systems, on-site and off-site computer records and computer
software, including, but not limited to, all codes, improvements and
modifications to any such software, customer lists, associate lists, telephone
lists and telephone numbers including the Seller's "800" and other "toll-free"
telephone numbers, product supply contracts, including, but not limited to, all
rights to Enzogenol pursuant to the Manufacturing and Distributing Agreement
dated as of August 14, 1998 by and between Seller and Enzo Nutraceutricals, Ltd.
(the "Enzogenol Contract"), independent associate lists, all shares of capital
stock owned by the Company in each of its wholly-owned and/or partially owned
subsidiaries including, but not limited to, Kaire New Zealand Ltd., Kaire
Australia Pty Ltd., Kaire Trinidad, Ltd. and Kaire Europe Ltd.
(collectively, the "Subsidiaries"), but excluding Kaire Korea Ltd., and all
other personal property owned or leased by Seller; and
(b) All real property which Seller owns or to which it has
title and all real property or leasehold estates in real property of which
Seller is a lessor or lessee, all of which is also set forth on Exhibit C
hereto; and
(c) All other tangible and intangible assets of Seller
(except any pension or profit sharing plan), including, but not limited to, all
of Seller's rights to the name "Kaire International, Inc.," and "Kaire" and any
and all derivatives thereof and any other product name and all other registered
or unregistered trademarks, tradenames, service marks, patents, logos, and
copyrights of Seller, as well as all of Seller's financial and other books and
records, including, but not limited to, its regulatory and compliance records,
sales information, product information and sales material relating to the
operation of the Business, all of which also are included on Exhibit B, tax
returns as well as any other documents Buyer will need in order to be able to
file a Current Report on Form 8-K following the purchase of the Assets and all
future SEC filings including, but not limited to, all required audited and
unaudited financial statements of the Business (the items referred to in
subparagraphs (a) through (c) hereof hereinafter collectively, the "Assets");
and
(d) Seller will deliver to Buyer at the Closing a ▇▇▇▇ of
sale to the Assets in the form annexed hereto as Exhibit D (the "▇▇▇▇ of Sale")
and an agreement of assignment and assumption in the form annexed hereto as
Exhibit E (the "Assumption Agreement") or such other appropriate document of
assignment and/or conveyance as may be approved by counsel to the Buyer.
1.2 Seller will assign to Buyer and Buyer will assume at the Closing
only those liabilities of Seller set forth on Exhibit F hereto (hereinafter, the
"Liabilities"). On the Closing Date (hereinafter defined), Buyer will execute
the Assumption Agreement, assuming only the Liabilities. Buyer will not be
liable for any obligations or liabilities of Seller of any kind or nature which
either arose or are based upon any act or omission of Seller prior to the
Closing Date which are not set forth on Exhibit F.
2. PURCHASE PRICE.
2.1 The purchase price (the "Purchase "Price") for the Assets
shall be paid at Closing as follows:
PURCHASE PRICE.
(i) NHTC will issue to the Seller (a) an aggregate of $2,800,000
stated value of shares of its 6% Series E Preferred Stock (the "Series
E Preferred"), par value $.01 per share, $1,000 stated value per share,
of which each outstanding
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share of Series E Preferred shall pay dividends at the annual rate of 6%
of the stated value payable in cash or shares of Common Stock at the
option of the Company, be redeemable at its stated value at any time by
NHTC and shall be convertible into such number of shares of common
stock, par value $.001 per share (the "Common Stock") of NHTC, as
determined by dividing the stated value of each share of Series E
Preferred being converted by 95% of the average closing bid price of the
Common Stock for the three (3) trading days prior to the date of
conversion of any share of Series E Preferred Stock (the Series E
Preferred also shall contain such other terms, rights, limitations and
preferences as set forth on Exhibit G hereto, to be prepared and filed
with the Secretary of State of the State of Delaware no later than the
Closing Date), and (ii) five (5) year warrants (the "Acquisition
Warrants"), to purchase 200,000 shares of Common Stock at an exercise
price of 110% of the closing bid price of the Common Stock on the date
prior to the Closing Date (which exercise price can be paid, at the
option of the holder, in cash or on a cashless basis by delivering
shares of Common Stock). The form of Acquisition Warrant shall be
annexed hereto as Exhibit H no later than the Closing Date. The shares
of Common Stock issuable upon conversion of the Series E Preferred Stock
and exercise of the Acquisition Warrants shall be subject to certain two
(2) year "lock-ups" with the Company, which shall prevent the sale of
the underlying Common Stock for a period of two (2) years from the
Closing Date;
(ii) Buyer shall pay to Seller each year for a period of five (5)
years ("Buyer Net Income Payments") commencing with the year ending
December 31, 1999, 25% of the Net Income of Buyer (as determined based
upon the year end audited financial statements of Buyer prepared in
accordance with GAAP consistently applied), if the Net Sales of Buyer
(as determined based upon the year-end audited financial statements of
Buyer prepared in accordance with GAAP consistently applied), in any
such year is between $1.00 and $10,000,000; 33% of Buyer's Net Income
if its Net Sales are between $10,000,000 and $15,000,000; 40% of
Buyer's Net Income if its Net Sales are between $15,000,000 and
$40,000,000; and 50% of Buyer's Net Income if its Net Sales are in
excess of $40,000,000; provided, however, notwithstanding anything to
the contrary provided herein or elsewhere, any Buyer Net Income
Payments to be made pursuant to this Section 1.1(a)(ii) shall be
reduced on a dollar-for-dollar basis to the extent of (A) all
indebtedness of the Seller to (1) MW International, Inc., and (B)
Manhattan Drug Company assumed by Buyer pursuant to the Assumption
Agreement; (C) all other direct and/or indirect liabilities, costs or
expenses assumed and/or otherwise incurred by the Buyer and/or NHTC of,
or resulting from, the Seller, including but not limited to, litigation
costs, including, but not limited to, reasonable attorneys' fees,
payments of sales or other taxes, expenses of officers of the Seller,
and other payments or expenses resulting directly and/or indirectly
from the transactions contemplated by this Agreement;
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and (D) any reasonable inter-company obligations of the Buyer to NHTC
resulting from third party payments made by NHTC on behalf of (or
allocable proportionately to the Buyer by NHTC) that resulted from the
transactions contemplated by this Agreement; provided, further, that
all amounts set-off against Buyer Net Income Payments are cumulative
and shall if not set-off in the year they are paid (or incurred)
because the Buyer did not have a sufficient amount of Net Income to
set off such payments against (or for any other reason), shall accrue
and be used as a set-off in the earliest possible year or years
thereafter; and
(iii) On the Closing Date NHTC will issue shares of its 6% Series
F Preferred Stock (the "Series F Preferred), par value $.01 per share,
stated value $1,000 per share in exchange for the cancellation of
certain indebtedness of the Buyer as follows: (i) approximately
$150,000 of secured indebtedness owed by Seller to ▇▇▇▇▇▇
Rehabilitation Associates, Inc. "▇▇▇▇▇▇"), and (ii) approximately
$200,000 of secured indebtedness owed to Magco, Inc. "Magco"). NHTC
will issue to each such entity such number of shares of the Series E
Preferred Stock as shall equal the quotient determined by dividing such
person's aggregate indebtedness to the Seller being cancelled as set
forth above, or as otherwise agreed to by the parties hereto, by the
stated value of the Series F Preferred. The Series F Preferred shall
have the same general terms as the Series E Preferred including, but
not limited to, conversion formula, redemption rights and dividends,
except the underlying shares of Common Stock shall not be subject to
any lock-up agreement and shall have piggy-back registration rights
(provided that if all of the holders of such underlying shares elect to
have such shares registered earlier, and such holders agree to pay all
costs and expenses associated with registering such shares including,
but not limited to, fees and expenses of the NHTC's counsel and filing
fees, then such holders shall have the right commencing thirty (30)
days following the Closing Date to demand registration of such
underlying shares by the Company on a registration statement on Form
S-3). The terms, preferences, rights and limitations of the Series F
Preferred shall be more fully set forth in the Series F Preferred Stock
Certificate of Designation annexed hereto as Exhibit I (to be attached
hereto and filed with the Secretary of State of the State of Delaware
no later than the Closing Date). Such shares of Series F Preferred
stock shall be issued pursuant to debt conversion agreements with each
of ▇▇▇▇▇▇ and Magco the form of which is annexed hereto as Exhibit J
(the "Debt Conversion Agreements").
2.2 With respect to the receipt of any shares of Preferred E
Stock, Series F Preferred Stock, the Acquisition Warrants and the Common Stock
issuable upon conversion or exercise thereof, as the case may be, Seller hereby
represents and warrants (and each subsequent assignor prior to receiving any
such shares will represent and warrant in writing to NHTC) as follows:
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(a) Such stock is being acquired for such Seller's own
account, with no present intention of transferring such securities or
any participation or interest therein (other than the transfer,
pursuant to a valid exemption from registration under the Securities
Act of 1933, as amended), as set forth in Section 2.1(ii) and without
a view to the distribution of any portion thereof, except in
accordance with the Act;
(b) Seller has been given the opportunity to ask questions
of, and receive answers from, NHTC concerning NHTC and the NHTC Stock
and to obtain such additional information, to the extent NHTC
possesses such information or can acquire it without unreasonable
effort or expense, necessary to verify the accuracy of same as the
Purchasers reasonably desire in order to evaluate NHTC and the NHTC
Stock, and the Seller has had the opportunity to discuss any questions
regarding NHTC or the NHTC Stock with its counsel or other advisor;
and
(c) Seller acknowledges and understands that all shares of
the Series E Preferred Stock, Series F Preferred the Acquisition
Warrants and all shares of Common Stock issuable upon conversion or
exercise thereof shall contain a restrictive legend substantially as
follows:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF AGREES FOR
THE BENEFIT OF NATURAL HEALTH TRENDS CORP. (THE "COMPANY") THAT THIS
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO
THE COMPANY (UPON CONVERSION, EXCHANGE OR REDEMPTION THEREOF OR
OTHERWISE), (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION IN
ACCORDANCE WITH RULE 144 (IF AVAILABLE) UNDER THE SECURITIES ACT, OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES."
2.3 The Purchase Price shall be allocated for foreign, federal,
state and local tax purposes by each party among the Assets sold, transferred
and assigned hereunder as determined by the Buyer and presented to the Seller,
in accordance with Section 1060 of the Internal Revenue Code, not later than
ninety (90) days from the Closing Date but in any event not later than fifteen
(15) days prior to the date any party is obligated to file its original tax
return indicating such allocation, not including any extensions of time with
respect thereto. For all pertinent tax purposes each party hereto shall report
the purchase and sale provided for, and with the characterization given these
transactions in this Agreement, to taxing authorities on a basis consistent with
such allocation, and each party agrees not to take a position inconsistent
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with such allocation. The Buyer and Seller each shall timely file after the
Closing Form 8594 with the Internal Revenue Service detailing this allocation.
In the event that the Buyer determines, in its sole discretion, that any
adjustments to such allocation are necessary, the Seller shall make such
modifications as are necessary in Seller's Form 8594 or any tax report or return
filed or to be filed by the Seller in order to conform to the Buyer's allocation
as adjusted.
3. Termination of Agreement.
3.1 Buyer shall be entitled to terminate this Agreement prior to
or on the Closing Date or as a result of any uncured breach or default of any of
Seller's representations, warranties, covenants or obligations under this
Agreement, or the failure of any condition to Buyer's obligations provided for
in Paragraph 8 of this Agreement.
3.2 Seller shall be entitled to terminate this Agreement on the
Closing Date, as a result of any uncured breach or default of any of Buyer's
representations, warranties, covenants or obligations under this Agreement or
the failure of Paragraph 9 of this Agreement.
3.3 In the event that Buyer or Seller shall claim a breach or
default of any representation, warranty, covenant or obligation of the other of
them under this Agreement, Buyer or Seller shall be required to provide notice
thereof to the breaching party. The breaching party shall have ten (10) days
from such notice to cure any such breach or default. If required hereunder, the
Closing Date shall be extended for a period of up to the remainder of such ten
(10) day cure period, in the event the cure period has not expired on the
Closing Date.
3.4 The termination of this Agreement by Buyer or Seller under
this Paragraph 3 in accordance with the provisions of Paragraphs 3.1 or 3.2
hereof, shall be Buyer's or Seller's, as the case may be, sole and exclusive
remedy against the other for any such breach or default of this Agreement and
thereafter, Buyer and/or Seller shall have no further rights or obligations
under this Agreement, unless any such termination is solely the result of a
willful refusal to consummate this Agreement.
3.5 Notwithstanding any provision in this Agreement to the
contrary, in the event of Buyer's or Seller's willful refusal to consummate this
Agreement, Buyer and Seller hereby agree and acknowledge that any such willful
default may cause irreparable harm and damage to Buyer or Seller, as the case
may be, and may not be remediable by an action at law for damages and the Buyer
or Seller, as the case may be, shall, therefore, be entitled to seek all
equitable remedies therefor, including, without limitation, declaratory
judgment, temporary or permanent injunction, or specific performance of the
provisions of this Agreement, without the necessity of posting a bond therefor,
showing any actual damages, or that monetary damages would not provide an
adequate remedy at law. Such equitable remedies shall not be exclusive remedies
for any such willful default and Buyer and Seller may also avail themselves of
any other remedies available to them.
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4. Representations and Warranties of Seller. In order to induce Buyer
to enter into and consummate this Agreement, Seller represents and warrants to
Buyer as follows:
4.1 Seller (and each of the subsidiaries (the "Subsidiaries"), in
their respective place of incorporation) is a corporation, duly organized,
validly existing, and in good standing under the laws of the State of Delaware
and has all requisite power and authority to own or lease its properties and
carry on its business as now conducted. Seller (and each of the Subsidiaries) is
duly qualified to transact business and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on the
operations of the Business or the Assets.
4.2 Except for the delivery of the requisite consents of Seller's
shareholders and Board of Directors at the Closing as hereinafter provided, all
action on the part of the Subsidiaries, Seller and its Board of Directors and
shareholders necessary for the authorization, execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, has been properly taken and obtained in compliance with the
terms of the Subsidiaries and the Seller's Certificate of Incorporation and
By-Laws, as amended and applicable law, and this Agreement constitutes a valid
and legally binding obligation of Seller, enforceable in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium, or other laws affecting generally the enforcement of
creditors' rights and by general principles of equity.
4.3 Other than as set forth on Exhibit K hereto, no consent,
approval, order, authorization, registration, qualification, license, permit,
designation or declaration of, or other filing with or notification to, any
foreign and/or domestic federal, state or local governmental or adhered or
agency (the "Approvals") is required in connection with the authorization,
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby. All Approvals are now, or as of the closing
Date will be, in full force and effect and are not now, or will not be on the
Closing Date, in default or subject to any notice of default, modification or
limitation, or threat thereof and will be delivered by Seller to Buyer at the
Closing.
4.4 Except as set forth on Exhibit L annexed hereto, there is no
action, suit, proceeding, or investigation pending, or to the knowledge of
Seller, threatened against the Business, any Subsidiary, the Seller and/or their
respective officers, directors and/or shareholders (the "Kaire Affiliates") by
any third party relating to the Business, the Subsidiaries and/or the Assets or
any action, suit, proceeding, or investigation pending, or the knowledge of
Seller, threatened against any Subsidiary, Seller and/or the Kaire Affiliates in
any way relating to the validity of this Agreement or the right of Seller to
enter into or consummate this Agreement and the transactions contemplated
hereby, or that might result, individually or in the aggregate, in any material
adverse change in the Assets of Seller or any of the agreements constituting
part of the Assets, or the condition, affairs, prospects or operations of
Seller, any Subsidiary, or the Business, financially or otherwise, nor is Seller
aware that there is any basis
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for any of the foregoing. Seller is not a party or subject to the provisions of
any order, writ, injunction, judgment, or decree of any court or governmental
body, agency or authority. There is no action, suit, proceeding, or
investigation by Seller currently pending or which Seller intends to initiate.
4.5 Seller (nor any Subsidiary with respect to any of the
following of any Subsidiary) is not in violation or default of any provision of
its Certificate of Incorporation, By-Laws (each as amended), or of any
instrument, finance, credit and/or loan agreement, debenture, not, judgment,
order, writ, decree, or agreement to which it is a party or by which it is bound
or, to its knowledge, of any provision of federal, state, or local law, rule or
regulation applicable to any Subsidiary, Seller, the Business or the Seller's
Assets. The authorization, execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not result in
any violation or be in conflict with or constitute, with or without the passage
of time or giving of notice, either a default under any such provision,
instrument, finance, credit and/or loan agreement, debenture, note, judgment,
order, writ, decree, agreement, law, rule or regulation, or an event which will
result in the creation of any lien, claim, charge or encumbrance upon the
Business or any of the Assets.
4.6 The Assets listed on Exhibit B attached hereto represent all
of Seller's Assets (except for any pension or profit sharing plan). Seller owns
the Assets and has, sole and marketable right, title and interest to all of the
Assets and will convey the same to Buyer on the Closing Date, free and clear of
all liens, claims, and encumbrances whatsoever (except as set forth on Exhibit A
hereto) and in full compliance with all applicable "Bulk Sales" and similar
laws.
4.7 Seller will deliver an updated Exhibit F to Buyer on the
Closing Date. There will be no material increase in the individual or aggregate
amounts of the Liabilities set forth on such updated Exhibit F from those
Liabilities set forth on Exhibit F attached hereto as of the date hereof.
Exhibit M annexed hereto is a list of all debts, liabilities and obligations of
Seller (the "Non-Assumed Liabilities") which are not being assumed by Buyer or
converted on or prior to the Closing Date (which Exhibit M will provide the
specifics of all such Non-Assumed Liability).
4.8 All machinery and equipment transferred to Buyer at the
Closing as part of the Assets will be in good operating order and condition,
free of all material defects, will have been properly maintained in accordance
with all service and maintenance agreements relating thereto and will be fit for
operation in the ordinary course of business.
4.9 (a) Seller's financial books and records, including, but not
limited to, the Audited Financial Statements (as defined below), relating to its
ownership and operation of the Business are accurate and complete and truthfully
set forth all revenues, expenses, assets, liabilities and other matters
pertaining to the financial condition and operation of the Business.
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(b) The Seller has delivered to the Buyer by the delivery of
Amendment No. 2 to the Registration Statement on Form S-1 (File No.
333-46085) of Kaire International, Inc. dated October 23, 1998
("Amendment No. 2"), balance sheets of the Seller as at December 31,
1997, 1996 and 1995, respectively, and the related statements of
income for the fiscal years then ended, together with the reports of
BDO ▇▇▇▇▇▇▇ & Co. (hereinafter referred to as the "Accountant") with
respect thereto (hereinafter referred to as the "Audited Financial
Statements"). The Audited Financial Statements are true and correct in
all material respects and comply with Regulation S-X of the Securities
Act of 1933, as amended and have been prepared in conformity with
generally accepted accounting principles consistently applied
throughout the periods to which such financial statements relate,
except as otherwise indicated therein or in the reports of the
Accountant with respect thereto. The Audited Financial Statements
fully and fairly present in conformity with such principles as so
applied, the financial position and results of operations of the
Seller, and the changes in its cash flows, at the dates shown and for
the periods therein specified. The balance sheets constituting a part
of the Audited Financial Statements fully and fairly present all
liabilities of Seller of the types normally reflected in balance
sheets as at the dates thereof. All adjustments necessary consistently
to present fully and fairly the financial position and results of
operations of Seller, and the changes in its cash flows, for such
periods have been included in the Audited Financial Statements.
(c) The Seller has also delivered to the Buyer the balance
sheets of the Corporation as and at September 30, 1998 and 1997, and
the related statements of income for the nine (9) months then ended
(hereinafter referred to as the "Interim Financial Statements," and,
together with the Audited Financial Statements, - the "Historical
Financial Statements"). The Interim Financial Statements have been
prepared in conformity with generally accepted accounting principles
consistently applied throughout the periods to which such financial
statements relate. The Interim Financial Statements fully and fairly
present, in conformity with such principles as so utilized, the
financial position and results of operations of the Seller, and the
changes in its cash flows, at the dates shown and for the periods
therein specified. The balance sheets constituting a part of the
Interim Financial statements fully and fairly present all liabilities
of the Seller of the types normally reflected in balance sheets as a
basis comparable to past practice, all adjustments necessary to
presently fully and fairly the financial position and results of
operations of the Seller, and the changes in its cash flows, for such
periods have been included in the Interim Financial Statements.
4.10 Except to the extent set forth in or provided for in the
Historical Financial Statements, this Agreement, or the schedules hereto, Seller
has no liabilities, whether accrued, absolute, contingent, or otherwise, whether
due or to become due and whether the amount thereof is readily ascertainable or
not, and no unrealized or anticipated losses from any unfavorable commitments or
sales of products which, individually or in the aggregate, might have a material
adverse effect on the Business or the Assets.
4.11 Subsequent to September 30, 1998, neither the Seller nor any
subsidiary has, and prior to Closing will not:
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(a) directly and/or indirectly incurred any liability or
obligation or otherwise become liable through a guarantee, assumption
or otherwise under agreements or otherwise, except current liabilities
entered into or incurred in the ordinary course of business consistent
with past practice; issued any notes or other corporate debt
securities or paid or discharged any outstanding indebtedness, except
in the ordinary course of business consistent with past practice; or
waived any of its rights;
(b) directly and/or indirectly mortgaged, pledged or
subjected to any lien or other encumbrance of any kind the Assets;
entered into any lease of real property or buildings; or, except in
the ordinary course of business consistent with past practice, entered
into any lease of machinery or equipment or sold or transferred any
tangible or intangible asset or property;
(c) effected any increase in salary, wages, or other
compensation of any kind, whether current or deferred, to any officer,
employee, consultant, or agent of the Seller, other than routine
increases in the ordinary course of business consistent with past
practice or as was required from time to time by governmental
legislation affecting wages (provided, however, that in no event was
any such increase in compensation made with respect to any of the
officers, employees, consultants or agents of the Seller earning in
excess of $30,000 per annum); made any bonus, pension, profit sharing,
or like payment to any officer, employee, consultant or agency of the
Seller rendering services to Seller;
(d) entered into any salary, wage, severance, or other
compensation agreement with a term of one year or longer with any
officer, employee, consultant or agent of the Seller rendering
services to the Seller or made any contribution to any trust or plan
for the benefit of any such person, except as required by the terms of
plans or arrangements existing prior to such date; and neither the
Seller nor any Subsidiary is a party to any such agreement;
(e) entered into any transaction with respect to the Business
or the Assets other than in the ordinary course of business consistent
with past practice, except in connection with the execution and
performance of this Agreement and the transactions contemplated
hereby; or withdrawn any free cash from any bank account or used any
cash for items other than consistent with past business practices as
reflected in the Seller's books and records;
(f) suffered any damage, destruction, or loss to any of the
Assets (whether or not covered by insurance); or
(g) suffered any change in the Business or Assets which,
individually or in the aggregate, might have a material adverse effect
on the Business and/or the Assets; and, since September 30, 1998,
there has been no occurrence, circumstance or combination thereof
which might be expected to result in any such material adverse effect.
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4.12 The Seller has filed or caused to be filed all federal,
state, municipal and other tax returns, reports and declarations required to be
filed by it on or before the date hereof so as to prevent any valid lien, charge
or encumbrance of any nature on the Assets or impairment of the Business. The
Internal Revenue Service has not examined the federal tax returns of the Seller
for any period subsequent to December 31, ______. Only periods subsequent to
December 31, ______ remain open for assessment of additional federal taxes. All
assessments and charges (including penalties and interest, if any) related to
periods ended on or before December 31, ______ have been paid by the Seller,
including any necessary adjustments with state and local tax authorities, and no
deficiency of payment of any taxes for any period has been asserted by any
taxing authority which remains unsettled at the date hereof. Adequate provision
has been made in the Historical Financial Statements for the payment of all then
accrued and unpaid federal and other taxes, whether or not yet due and payable
and whether or not disputed by the Seller. The Seller has not agreed to the
extension of the statute of limitations with respect to any tax return.
4.13 The Seller does not own any real property utilized in the
Business. Set forth on Exhibit N hereto is a brief description of every lease or
agreement (including, in each case, the annual rental payable and the expiration
date, the cost and depreciation reserve of any leasehold improvements and a
brief description of the property covered) under which the Seller is lessee of,
or holds or operates, any real estate owned by any third party and used in
connection with the Business, and the amounts owed under such leases. Each of
such leases and agreements is in full force and effect and constitutes a legal,
valid and binding obligation of the respective parties thereto. The Seller is
not in default under any such lease or agreement, nor, to the best of the
knowledge of the Seller, is any other party to any such lease or agreement in
default thereunder; and no event has occurred, or is alleged to have occurred,
which constitutes, or with lapse of time or giving or notice or both would
constitute, a default by any other party to any such lease or agreement or a
basis for a class of force majeure or other claim of excusable delay or
non-performance thereunder. There is no condition, whether occurring naturally
or from any cause whatsoever, which would prevent any of the real properties
leased by the Seller and used in connection with the business from having
sufficient subjacent or lateral support in any material respect to support
adequately any structure, nor is any part of the real properties leased by the
Seller in a flood plain area, or affected by any adverse environmental
conditions, including, but not limited to, chemicals or hazardous or
non-hazardous waste which are violative of any environmental laws.
4.14 The Seller does not maintain or sponsor and is not required
to make contributions to any pension, profit-sharing, bonus, incentive, welfare,
or other employee benefit plan covering any employee utilized in the Business.
All pension, profit-sharing, bonus, incentive, welfare, or other employee
benefit plans within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended (hereinafter referred to as "ERISA"), in
which the employees of the Seller utilized in the Business participate (such
plans and related trusts, insurance, and annuity contracts, funding media, and
related agreements and arrangements, other than any "multiemployer plan" (within
the meaning of Section 3(37) of
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ERISA) being hereinafter referred to as the "Benefit Plans," and such
multiemployer plans being hereinafter referred to as the "Multiemployer Plans")
comply in all material respects with all requirements of the Department of Labor
and the Internal Revenue Service promulgated under ERISA and with all other
applicable law. The Seller has not taken or failed to take any action with
respect to either the Benefit Plans or the Multiemployer Plans which might
create any liability on the part of the Seller or the Buyer. Each "fiduciary"
(within the meaning of Section 3(21)(A) of ERISA) as to each Benefit Plan and as
to each Multiemployer Plan has complied in all material respects with the
requirements of ERISA and all other applicable law in respect to each such Plan.
The Seller has furnished to the Buyer copies of all Benefit Plans and of all
documents relating thereto requested by the Buyer, including, without
limitation, financial statements with respect to such Benefit Plans for all
periods in the last three years during which the Seller was a participant in or
was required to make contributions to such Benefit Plans. Such financial
statements are true and correct in all material respects, and none of the
actuarial assumptions underlying such statements have changed since the
respective dates thereof. In addition, as of the date hereof:
(i) No Benefit Plan which is a "defined benefit plan" (within
the meaning of Section 3(35) of ERISA) (hereinafter referred to as the
"Defined Benefit Plans") or Multiemployer Plan has incurred an
"accumulated funding deficiency" (within the meaning of Section 412(a)
of the Internal Revenue Code of 1986, as amended [hereinafter referred
to as the "Code"]), whether or not waived;
(ii) No "reportable event" (within the meaning of Section
4043 of ERISA) has occurred with respect to any Defined Benefit Plan
or any Multiemployer Plan; there have been no terminations of any
Defined Benefit Plan or any Multiemployer Plan or any related trust;
no such termination of any of the foregoing reasonably can be expected
to occur, whether as a consequence of the execution and delivery of
this Agreement, the consummation of the transactions contemplated
herein or therein, or otherwise;
(iii) The Seller has not withdrawn (partially or totally
within the meaning of ERISA) from any Benefit Plan or any
Multiemployer Plan; and neither the execution and delivery of this
Agreement or the consummation of the transactions contemplated herein
or therein will result in the withdrawal (partial or total within the
meaning of ERISA) from any Benefit Plan or Multiemployer Plan, or in
any withdrawal or other liability of any nature to the Seller or the
Buyer under any Benefit Plan or any Multiemployer Plan;
(iv) No "prohibited transaction" (within the meaning of
Section 406 of ERISA or Section 4975(c) of the Code) has occurred with
respect to any Benefit Plan or Multiemployer Plan;
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(v) There is no excess of the aggregate present value of
accrued benefits over the aggregate value of the assets of the Defined
Benefit Plans, and no withdrawal liability of the Seller with respect
to the Multiemployer Plans;
(vi) There are no contributions which are, or hereafter will
be required to have been made to trusts in connection with "defined
contribution plans" (within the meaning of Section 3(34) of ERISA)
with respect to services rendered by employees of the Seller utilized
in the Business prior to the date hereof; and
(vii) Other than claims in the ordinary course for benefits
with respect to the Benefit Plans or the Multiemployer Plans, there
are no actions, suits, or claims pending with respect to any Benefit
Plan or any Multiemployer Plan or any circumstances which might give
rise to any such action, suit, or claims.
4.15 Set forth in Exhibit O attached hereto is a list and
description of all of the Seller's patents, logos, registered and common law
trademarks and tradenames, copyrights, licenses and other similar rights and
applications for each of the foregoing, in each case in any manner utilized in
connection with the Business. The Seller owns all right, title and interest in
and to all such proprietary rights, free and clear of all liens and other
encumbrances of any kind. Such proprietary rights are all of the proprietary
rights of the Seller. No adverse claims have been made, and no dispute has
arisen with respect to any of the said proprietary rights; and the operations of
the Seller and the use by it of its proprietary rights do not involve
infringement or claimed infringement of any patent, trademark, servicemark,
tradename, copyright, license or similar right. To the best of the knowledge of
the Seller, the Seller has not suffered or allowed any of its trade secrets,
know-how or other intellectual or intangible property rights to enter into the
public domain. No other persons or businesses have received from the Seller the
right to use, nor are there any persons or businesses using, any trademark,
service ▇▇▇▇, tradename set forth in Schedule O, or any variant thereof, singly
or in combination with any other term, and no persons or businesses otherwise
using any such tradename, or any variant thereof, singly or in combination with
any other term, have ever attempted to restrain the Seller from using such name
or any variant thereof, singly or in combination with any other term.
4.16 The Seller has had no material problem in obtaining, in a
timely manner and at market prices, any and all materials, supplies, equipment,
and service used in connection with the Business including from Horphas Research
Ltd., MW International, Inc. and Manhattan Drug Company, and the Seller has no
reason to believe that the Business may have problems with respect to the
availability of such materials, supplies, equipment, and services.
4.17 Neither the sale by the Seller to Buyer of the Assets nor the
transfer by the Seller to Buyer of the Liabilities as contemplated in this
Agreement, singly, constitutes a "bulk sale" (as that term is defined by the
Uniform Commercial Code) and the completion of the transactions contemplated in
this Agreement, singly or in combination, shall not subject the
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Buyer to any claims relating to or liabilities resulting from the operations or
obligations of the Seller other than those included within the Liabilities.
4.18 The Seller has provided to the Buyer a complete and correct
copy of Amendment No. 2 dated October 23, 1998 (the "Amendment No. 2"), to its
Registration Statement (File No. 333-46085). The Amendment No. 2 is correct and
does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements herein or therein not misleading.
4.19 There are no labor problems or unrest existing or, to the
best of Seller's knowledge, threatened against Seller which could adversely
effect the operation of the Business and/or use of the Assets after the Closing
and Seller is not a party to any collectively bargaining agreement.
4.20 Set forth on Exhibit P is a schedule of all insurance
currently in force with respect to the operation of Seller's Business. To
Seller's best knowledge, the insurance set forth on Exhibit M is adequate for
risks normally insured against by companies similarly situated to Seller and
provides coverage for all claims made by any third party against Seller (and its
stockholders, officers, directors, agents, and employees) and Buyer for any
product liability or other risks rendered by or on behalf of Seller prior to the
Closing Date, without any limitation or restriction except as set forth on
Exhibit P. All of such insurance is in full force and effect.
4.21 The use by Seller and each of its Subsidiaries of the
properties and premises used by each of them and any structures situated on any
real property leased by Seller and/or the Subsidiaries is not in violation of
any zoning, environmental, health, safety, fire or other codes or regulations of
any federal, state or local government authority, and Seller and/or the
Subsidiaries has legal and valid occupancy permits, if required, and all other
required licenses, permits or governmental approvals for each of the foregoing
properties and premises. No improvement, fixture or equipment in the properties
or premises owned, leased, used or occupied by Seller and/or the Subsidiaries,
nor the leasehold or occupation with respect thereto, is in violation of any
zoning or building laws. Neither the Seller nor any of the Subsidiaries has
received any notice of violation of any building, fire, health, safety,
environmental or zoning codes or any law, ordinance or regulation of any kind
relating to or affecting Seller's and/or the Subsidiaries properties and
premises, and all such properties and premises are zoned for the purposes for
which such properties and premises are currently being used. Furthermore,
neither the Seller nor any of the Subsidiaries has received formal or informal
notices or notifications of any outstanding requirements or recommendations by
the insurance companies which have issued the insurance policies covering the
property and premises leased by Seller and/or the Subsidiaries or by any board
of fire underwriters or other body exercising similar functions, including,
without limitation, any notice requiring or recommending any repairs or work to
be done on or to any such property or premises.
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4.22 The Seller (and/or its Subsidiaries, as the case may be), has
all domestic and international franchises, licenses, permits and other
governmental and non-governmental approvals necessary to enable it to carry on
the Business as currently conducted (including, without limitation, those
franchises, licenses, permits, and other approvals required by the United States
Food and Drug Administration, the United States Federal Trade Commission, the
Consumer Product Safety Commission, the United States Department of Agriculture,
the United States Postal Service and the United States Environmental Protection
Agency including the "Dietary Supplement Health and Education Act of 1984" and
the "Door-to-Door sale Act" of South Korea and the employees and agents of the
Seller assigned to or otherwise involved in the Business also have all such
franchises, licenses, permits and other governmental and non-governmental
approvals required of them in carrying out their duties on behalf of the Seller.
All such franchises, licenses, permits and other governmental and
non-governmental approvals are in full force and effect, there has been no
default or breach thereunder, and there is no pending or, to the best of the
knowledge of the Seller, threatened proceeding under which any may be revoked,
terminated or suspended. Without limiting the generality of the foregoing, the
Seller is not party to any management contract, collateral agreement or similar
arrangement requiring the approval of any of such organization or any submission
to any of such organization or any background investigation by any of such
organization. The execution and delivery of this Agreement, and the consummation
of the transactions contemplated hereby, will not adversely effect or otherwise
impair the ability of the Buyer as the sole owner of the Assets fully to enjoy
the benefits of any of such franchises, licenses, permits or other governmental
approvals. Set forth on Exhibit Q annexed hereto is a list of the Seller's
ownership interest in each of its Subsidiaries. The Seller has not violated, and
is not alleged to have violated, any law, rule, regulation, judgment,
stipulation, injunction, decree, determination, award or other order of any
government, or governmental agency or instrumentality, domestic or foreign, or
of any Indian Tribe or instrumentality thereof, binding upon the Seller.
(a) Without limiting the generality of the foregoing, neither
the consummation of the transactions contemplated by this Agreement
nor any real property utilized by the Seller in the Business nor any
condition thereon violates any Environmental Law (as hereinafter
defined) and no provision of any such Environmental Laws in any way
affects the consummation of the transactions contemplated by this
Agreement. Neither the Seller, nor any owner of any property utilized
by the Seller in connection with the Business; (i) has filed any
notice under any federal, state or local law, or regulation,
indicating past or present treatment, storage or disposal of a
hazardous or toxic waste or reporting a spill or release of a
hazardous or toxic waste, substance or constituent, or other substance
into the environment, or (ii) has any liability, contingent or
otherwise, under any such law or regulation in connection with any
release of any hazardous or toxic waste, substance or constituent, or
other substance on any such property. No hazardous materials and no
hazardous substances have been generated, treated, stored or disposed
of or placed in violation of any applicable law or regulation on any
such property or, from any such property, on or into any waste
disposal site owned or operated by a third party. All underground
tanks on such properties have been properly registered with or
reported to the appropriate governmental agency or agencies, and none
of such tanks leak.
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(b) For purposes hereof, "Environmental Laws" shall mean any
and all federal, state or local laws, statutes, ordinances, rules,
regulations, order or determinations of any federal, state or local
governmental authority pertaining to the environment, including,
without limitation, the federal Clean Air Act, as amended,
Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended, Water Pollution Control Act, as amended,
Superfund Amendments and Reauthorization Act of 1986, as amended,
Hazardous Materials Transportation Act, as amended, National
Environmental Policy Act and all other environmental, conservation or
protection laws.
4.23 Listed and described on Exhibit R attached hereto are all
contracts other than real property leases (the "Contracts"), of the Company. All
of such Contracts are in full force and effect and the Seller has obtained
consents from the parties thereto (other than the Seller), to the assignment of
the particular contracts also listed on Schedule B hereto that Buyer desires to
acquire.
4.24 All of the foregoing representations and warranties of Seller
shall be true and correct as of the Closing Date and Seller will certify same to
Buyer as being true and correct at the Closing as hereinafter provided. All of
the foregoing representations and warranties of Seller will survive the Closing
of the transactions provided for hereunder and shall not be merged therein for a
period of twenty-four (24) months following the Closing Date.
5. Representations and Warranties of Buyer. In order to induce Seller
to enter into and consummate this Agreement, Buyer represents and warrants to
Seller as follows:
5.1 Buyer is a corporation, duly organization, validly existing,
and in good standing under the laws of the State of Delaware and has all
requisite power and authority to own or lease its properties and carry on its
business as now conducted.
5.2 All action on the part of Buyer necessary for the
authorization, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, has been (or prior to the
Closing will be) taken and obtained and at Closing this Agreement constitutes a
valid and legally binding obligation of Buyer, enforceable in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium, or other laws affecting generally the enforcement of
creditors' rights and by general principles of equity.
5.3 The authorization, execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any violation or be in conflict with or constitute, with or without
the passage of time and giving of notice, a default under any provision of
Buyer's Certificate of Incorporation or its By-Laws or any instrument, judgment,
order, writ, decree or agreement to which it is a party or by which its assets
or properties are bound.
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5.4 There is no action, suit, proceeding, or investigation
pending, or to the knowledge of Buyer, currently threatened against Buyer, in
any way relating to the validity of this Agreement or the right of Buyer to
enter into or to consummate this Agreement and the transactions contemplated
hereby.
5.5 All of the foregoing representations and warranties of Buyer
shall be true and correct as of the Closing Date and Buyer will certify same to
Seller as being true and correct at the Closing as hereinafter provided. All of
the foregoing representations and warranties of Buyer will survive the Closing
for a period of twenty-four (24) months of the transactions provided for
hereunder and shall not be merged therein.
6. The Closing. The closing of the sale transaction which is the
subject of this Agreement (the "Closing") shall take place at 10:00 a.m. at the
offices of Gusrae, ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
upon the earlier to occur of (i) all of the conditions of the Buyer and Seller
as set forth in Sections 9 and 10, respectively, of this Agreement being
fulfilled or waived, or (ii) March 30, 1998 (the "Closing Date"), or on such
earlier or later date on which Buyer and Seller may mutually agree.
7. Conduct of Seller's Business Prior to Closing. During the period
from the date hereof to the Closing Date, Seller will operate the Business only
in the regular and ordinary course of its business, will preserve its present
relationships with its key employees, customers, suppliers, banks, government
officials and other third parties doing business with Seller and during such
period, it will not, without the consent of Buyer, engage in any conduct or
enter into any transaction which is not in the regular and ordinary course of
its business of operating the Business, including, without limitation, the
following:
(a) Create or incur any mortgage, security interest, lien,
charge, claim or encumbrance of any kind on the Assets, revenues, or
cash flow from the operation of the Business.
(b) Make or become a party to any employment, license,
management agreement (or renew, extend, amend, or modify any of such
agreements) or any other agreement or commitment in any way affecting
the operation of the Business (or renew, extend, amend or modify any
such other agreement or commitment), except in the regular and
ordinary course of Seller's business as to such other agreements or
commitments.
(c) Other than pursuant to employee salaries, consistent with
past payments as reflected on the Seller's books and records for the
prior 12 months, pay or distribute any cash of Seller to any employee,
stockholder, officer, director, principal or affiliate of any such
person or any person or entity owned or controlled, directly or
indirectly, by Seller, or any such person, partner or principal, for
any purpose.
(d) Waive or release any right of substantial value.
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8. Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the transactions provided for under this Agreement are subject to and
conditioned upon the fulfillment, on and as of the Closing Date, of each of the
following conditions. If any of such conditions are not satisfied on and as of
the Closing Date (or earlier, with respect to the condition set forth in
subparagraph (a) hereof), Buyer may terminate this Agreement upon notice to
Seller:
(a) The representations, warranties, covenants and agreements
of Seller in this Agreement shall be true, accurate and complete both
on the date of this Agreement and on the Closing Date and Seller shall
have performed and complied with all agreements, covenants and
conditions required by this Agreement to be performed or complied with
by it prior to or on the Closing Date, and Buyer shall have been
furnished with a certificate of the officers of Seller, dated as of
the Closing Date, certifying to the fulfillment of the foregoing
conditions.
(b) There shall not be any material adverse change in the
financial condition, business or future prospects of Seller (or any of
its Subsidiaries) and there shall be no federal, state or local law,
rule or regulation proposed or enacted (whether domestically or
abroad), or other event or condition of any character, which Buyer
determines may adversely effect the operations of the Business after
the Closing.
(c) Seller shall have received and will deliver to Buyer on
the Closing Date, copies of the requisite consents of its Directors
and shareholders to the transaction contemplated by this Agreement (in
accordance with the Delaware General Corporation Law and any other
applicable law), and Seller shall have distributed in a timely manner
and in required form as required by the Delaware General Corporate Law
all notices to the shareholders of the Seller regarding the
transactions contemplated hereby.
(d) From and after the date hereof and until the Closing
Date, Seller shall have operated the Business diligently and in good
faith and only in the historical regular and ordinary course.
(e) Seller will own all right, title and interest in and to
the Assets on the Closing Date and will sell, transfer and assign the
same to Buyer on the Closing Date, free and clear of all liens,
claims, equities or encumbrances whatsoever, except as set forth on
Exhibit A hereto.
(f) The indemnification agreements (the "Indemnification
Agreements"), the form of which will be annexed hereto on later than
the Closing Date as Exhibit S regarding the Buyer indemnifying certain
officers of the Seller relating to sales tax of Seller have been
agreed to the satisfaction of the Buyer.
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(g) All of the inventory, machinery and equipment comprising
a part of the Assets and/or leased by Seller, will be in good
operating order and condition on the Closing Date, free of all
material defects.
(h) Buyer shall have received, on or prior to the Closing
Date, all Approvals or an opinion of Seller's counsel satisfactory to
Buyer that no such Approvals are so required (including but not
limited to the Enzogenol Agreement).
(i) There will be no pending or threatened action or
proceeding against the Seller or the Business in any way affecting or
challenging the transactions contemplated hereby, except as set forth
on Exhibit L.
(j) Seller will have delivered to Buyer on the Closing Date
all of the documents and other information required by Paragraph 11
hereof.
(k) NHTC, Buyer and its agents shall have completed their due
diligence of the Business and the Assets to their full satisfaction.
(l) NASDAQ shall not have objected directly and/or indirectly
to the closing of the Acquisition and the completion of the
transactions as contemplated in this Agreement (nor shall there be a
delisting possibility).
(m) All requirements of any applicable Bulk Sales laws have
been complied with (or waived by Buyer), to the satisfaction of the
Buyer and its counsel.
(n) NHTC shall, if necessary or required by NASDAQ to avoid
delisting, have obtained shareholder approval at a shareholders'
meeting and distributed proxies and a proxy statement in accordance
with Section 14 of the Securities Exchange Act of 1934, as amended,
and complied with all state and federal rules, regulations and laws.
(o) The required parties shall have entered into the Debt
Conversion Agreements annexed hereto as Exhibit J.
(p) All Exhibits to this Agreement shall have been delivered
and shall be satisfactory to the Buyer.
9. CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations of Seller
to consummate the transactions provided for under this Agreement are subject to
and conditioned upon the fulfillment, on and as of the Closing Date, of each of
the following conditions. If any of such conditions are not satisfied on and as
of the Closing Date, Seller may terminate this Agreement upon notice to Buyer:
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(a) The representations, warranties, covenants and agreements
of Buyer in this Agreement shall be true, accurate and complete both
on the date of this Agreement and on the Closing Date and Buyer shall
have performed and complied with all agreements, covenants and
conditions required by this Agreement to be performed or complied with
by it prior to or on the Closing Date, and Seller shall have been
furnished with a certificate of the President of Buyer, dated as of
the Closing Date, certifying to the fulfillment of the foregoing
conditions.
(b) Buyer shall have paid the Purchase Price to Seller.
(c) The Indemnification Agreements shall have been entered
into.
(d) The Certificate of Designation for the Series E Preferred
and the Certificate of Designation for the Series F Preferred
(collectively, the Certificate of Designations), shall no later than
the Closing Date have been filed with the Secretary of State of the
State of Delaware.
(e) Buyer will have delivered to Seller on the Closing Date
all of the documents and other information required by Paragraph 10
hereof.
10. Documents to be Delivered by Buyer at Closing. Buyer (or NHTC, if
applicable) will deliver the following documents to Seller at the Closing:
(a) The Certificate signed by the President of Buyer required
by Paragraph 10(a) hereof.
(b) The Assumption Agreement relating to certain liabilities
being assigned and assumed by Buyer, shall have been duly executed by
Buyer.
(c) Stock Certificates representing the Series E Preferred
stock and the Series F Preferred stock NHTC Stock (as provided in
section 2 of this Agreement).
(d) The executed Debt Conversion Agreement.
(e) The Indemnification Agreements.
(f) The Certificate of Designations.
(g) The executed Acquisition Warrant.
(h) Such other documents consistent with the provisions of
this Agreement as counsel for Seller may reasonably request.
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11. Documents to be Delivered by Seller at Closing. Seller will
deliver the following documents to Buyer at the Closing:
(a) An Officers' Certificate signed by the President of the
Seller in form and substance satisfactory to the Buyer.
(b) Copies of the requisite consents of Seller's shareholders
and directors.
(c) The ▇▇▇▇ of Sale, duly executed by Seller.
(d) The originals of all of the agreements constituting part
of the Assets and duly executed assignments to Buyer thereof by
delivery of duly executed Assumption Agreements.
(e) General releases of all claims against the Seller, NHTC,
the Buyer and the Assets duly executed by (i) all holders of the
promissory notes (the "Notes") sold to investors in private placements
conducted by May ▇▇▇▇▇ & Co. totaling approximately $1,908,000 in the
aggregate as of September 30, 1998 (as well as documents evidencing
such person's cancellation of their Notes) and proof of filing of
U.C.C.-3s releasing such person's security interests in the Assets;
and (ii) from ▇▇▇▇▇▇ and Magco.
(f) The original executed consent to the assignment of any
contract, duly executed or, in lieu thereof, a new agreement or a
continuation or modification of any existing agreements between Buyer
and any third party (including, but not limited to, the Enzogenol
Agreement).
(g) The original executed consent of Seller's landlords to
the assignment of the leases (set forth on Exhibit M), together with
an estoppel certificate from such landlords.
(h) A certificate or other written confirmation from Seller's
insurance carrier(s) or their authorized agents that all of the
insurance set forth on Exhibit P has been transferred to Buyer and is
in full force and effect as of the Closing Date.
(i) Updated judgment and lien searches on the Assets as of
the most recent practical date prior to the Closing Date, which must
show no liens, encumbrances, judgments or other clouds of title on the
Assets.
(j) Seller shall deliver to Buyer at the Closing, all books,
records and other documents relating to the Assets and operation of
the Business.
(k) Updated Exhibit F as of the Closing Date.
(l) A Secretary's Certificate and Incumbency Certificate.
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(m) Such other documents consistent with the provisions of
this Agreement as counsel for Buyer may reasonably request.
12. No Shop. In order to induce NHTC and the Buyer to expend the
out-of-pocket costs necessary to conduct its due diligence investigation of
Seller and the Assets and prepare the appropriate documentation for the
transactions contemplated hereby, Seller and each of its principals shall, and
shall cause Seller and its employees, representatives and agents to, immediately
cease discussions or negotiations with any other persons or entities with
respect to any sale, acquisition, merger, joint venture or financing proposals
involving the Assets or capital stock of Seller, and likewise, neither such
principals, Seller nor any of Seller's employees, representatives and agents
shall, during the 120 day period immediately following the date of this
Agreement shall solicit, or entertain unsolicited interests concerning any such
sales, joint ventures, acquisition or financing proposal or similar transaction
involving Kaire or its stockholders.
13. Public Statements. Neither NHTC, Buyer nor Seller shall release
any information concerning this Agreement or the transactions contemplated
hereby which is intended for or may result in the public dissemination thereof,
without first furnishing copies of all documents or scripts of proposed oral
statements to the other party for comment and for the other party's written
consent prior to the release thereof. Buyer and Seller agree not to disclose any
such information to any person except on a "need to know" basis to persons who
are advised of the confidential nature of the information and the potential
penalties for use or disclosure of non-public information. Nothing contained in
this Paragraph 14 shall prohibit either Buyer or Seller from releasing any
information to any governmental authority if required to do so by law.
14. Brokers. Other than as set forth on Exhibit T annexed hereto, the
parties hereto each agree and represent and warrant to the other that no broker
or finder was in any way instrumental or had any part in bring about this
transaction. Each of the parties hereto hereby agrees to defend, indemnify and
hold the other harmless from and against any loss, liability, claim, cost or
expense (including reasonable counsel fees) resulting from any claim that may be
made against the other by any broker, finder or other person or entity claiming
a commission, fee, or other compensation by reason of this transaction based
upon such indemnifying party's acts or omissions. All investment banking,
brokerage and similar fees, if any, set forth on Exhibit T, shall be the sole
responsibility of the party owing such fees.
15. Insurance; Risk of Loss. Seller shall maintain in effect, at its
cost, without modification, all insurance policies currently in effect covering
the Assets and the business from the date hereof through the Closing. Seller
hereby assumes all risk of loss, injury or destruction of the Assets from the
date hereof through the Closing Date. In the event of any loss, injury or
destruction of the Assets prior to the Closing that Buyer determines
substantially impairs the value of the Assets or the Business, or if the
operations of the Business are terminated or interrupted prior to the Closing
other than in the regular and ordinary course of business, Buyer shall have the
right to terminate this Agreement on or before the Closing.
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16. Miscellaneous.
19.1 This Agreement, including the exhibits hereto, constitutes
the sole and entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements, representations,
warranties, statements, promises, information, arrangements and understandings,
whether oral or written, express or implied between the parties hereto with
respect to the subject matter hereof and may not be changed or modified except
by an instrument in writing signed by the party to be bound thereby.
19.2 All notices, consents, requests, demands and other
communications required or permitted to be given under this Agreement shall be
in writing and delivered personally, receipt acknowledged, or mailed by
registered or certified mail, return receipt requested, postage prepaid,
addressed to the parties hereto as follows (or to such other address as either
of the parties hereto shall specify by notice given in accordance with this
provision) or sent by facsimile transmission (with a copy mailed by first class
mail to the address set forth below (or to such other facsimile number as either
of the parties hereto shall specify by notice given in accordance with this
provision):
If to Buyer:
Natural Health Trends Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇▇ ▇▇▇▇▇)
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Seller:
Kaire International, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices, consents, requests, demands and other communications
shall be deemed given when personally delivered as aforesaid, or, if mailed as
aforesaid, on the third business day after the mailing thereof or on the day
actually received, if earlier, except for a notice sent by facsimile
transmission, or a notice of a change of address which shall be effective only
upon receipt.
19.3 Neither party hereto may assign this Agreement or their
respective rights, benefits or obligations hereunder without the written consent
of the other party hereto. This
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Agreement shall be binding upon and inure to the benefit of the parties hereto,
and their successors and permitted assigns. Nothing contained herein is intended
to confer upon any person or entity, other than the parties hereto, or their
respective successors or permitted assigns, any rights, benefits, obligations,
remedies or liabilities under or by reason of this Agreement.
19.4 No waiver of any provision of this Agreement or of any breach
thereof shall be effective unless in writing and signed by the party to be bound
thereby. The waiver by either party hereto of a breach of any provision of this
Agreement or of any representation, warranty, or covenant in this Agreement by
the other party hereto, shall not be construed as a waiver of any subsequent
breach or of any other provision, representation, warranty, or covenant of such
other party, unless the instrument of waiver expressly so provides.
19.5 This Agreement shall be governed by and construed in
accordance with the laws of the State of New York with respect to contracts made
and to be fully performed therein, without regard to the conflicts of laws
principles thereof, except as to applicable federal and state securities laws or
as may otherwise be expressly provided for in any exhibit to this Agreement. The
parties hereto hereby agree that any suit or proceeding arising under this
Agreement or the consummation of the transactions contemplated hereby, shall be
brought solely in a federal or state court located in the City, County and State
of New York, except for any suit or proceeding seeking an equitable remedy
hereunder which may be brought in any court of competent jurisdiction. By its
execution hereof, Seller hereby covenants and irrevocably submitted to the in
personam jurisdiction of the federal and state courts located in the City,
County and State of New York and agrees that any process in any such action may
be served upon it personally, or by certified mail or registered mail upon
Seller or such agent, return receipt requested, with the same full force and
effect as if personally served upon Seller in New York City. The parties hereto
each waive any claim that any such jurisdiction is not a convenient forum for
any such suit or proceeding and any defense or lack of in personam jurisdiction
with respect thereto. In the event of any such action or proceeding, the party
prevailing therein shall be entitled to payment from the other party hereto of
its reasonable counsel fees and disbursements in an amount judicially
determined.
19.6 The parties hereto hereby agree that, at any time and from
time to time after the date hereof and through and after the Closing Date, upon
the reasonable request of either party hereto, they shall do, execute,
acknowledge and deliver, or cause to be done, executed, acknowledged and
delivered, such further acts, deeds, assignments, transfers, conveyances, and
assurances as may be reasonably required to more effectively consummate this
Agreement and the transactions contemplated thereby or to confirm or otherwise
effectuate the provisions of this Agreement.
19.7 Except as expressly provided for by the provisions of this
Agreement or applicable law, each of the parties hereto shall bear all of its
respective costs and expenses incurred in connection with the negotiation,
preparation, execution, consummation, performance
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and/or enforcement of this Agreement, including, without limitation, the fees
and disbursements of their respective counsel, financial advisors and
accountants, it being understood and agreed that all of such costs and expenses
of the Seller shall be paid out of the Purchase Price and not out of the Assets
of the Seller.
19.8 This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which when together, shall
constitute one and the same instrument.
19.9 The Paragraph headings used in this Agreement have been used
for convenience of reference only and are not to be considered in construing or
interpreting this Agreement.
19.10 If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Agreement and the balance of this Agreement shall remain in full force and
effect.
17. Due Diligence and Requested Information.
(a) The Seller shall afford the Buyer and its officers,
employees, accountants, counsel, investment bankers (and their
counsel) and other authorized representatives reasonable access,
during ordinary business hours, to its properties, books and records,
and shall cause its representatives to furnish to the Buyer such
additional financial and operating data and other information as to
the Business and the Assets as the Buyer may from time to time
reasonably request. The Seller shall hold itself and its employees
available to consult with the Buyer with respect to the Business in
such manner as the Buyer shall from time to time reasonably request in
order for the Buyer fully to investigate the Assets and the Business;
it being understood and agreed that the reasonable expenses of travel
by any such employees required by the Buyer shall be borne by the
Buyer.
(b) In addition to its due diligence obligations set forth
above, Seller will provide to Buyer upon Buyer's request, all
information on a daily basis requested informally to the extent
available regarding sales, available cash, returns and chargebacks,
inventory and similar information.
18. Notification of Certain Matters. Between the date hereof and the
Closing Date, the Seller shall give prompt notice in writing to the Buyer of:
(i) the occurrence, or failure to occur, of any event known to the Seller, which
occurrence or failure would be likely to cause any representation or warranty of
the Seller, contained in this Agreement to be untrue or inaccurate in any
material respect from the date hereof to the Closing, (ii) any notice or other
communication received by the Seller, from any person alleging that the consent
of such person is or may be required in connection with the transactions
contemplated by this Agreement, (iii) any notice or other communication received
by the Seller, from any governmental or
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regulatory agency or authority in connection with the transactions contemplated
by this Agreement, (iv) any actions, suits, claims, investigations or
proceedings known to the Seller, commenced or, to the best of its knowledge,
threatened against the Seller, or relating to or involving the Seller affecting
the Seller or which relate to the Assets and/or consummation of the transactions
contemplated by this Agreement, and (v) any material failure known to the Seller
or any officer, director, employee or agent thereto to comply with or satisfy
any covenants, condition or agreement to be complied with or satisfied by it
hereunder.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals as of the day and year first above written.
ATTEST: NATURAL HEALTH TRENDS CORP.
_____________________________ By:_______________________________
Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
ATTEST: NHTC ACQUISITION CORP.
_____________________________ By:_______________________________
Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
ATTEST: KAIRE INTERNATIONAL, INC.
_____________________________ By:_______________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Chief Executive Officer
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EXHIBITS TABLE
--------------
EXHIBIT TITLE SECTION
------- ----- -------
A Permitted Liens 1.1
B Assets 1.1(a)
C Real Property 1.1(b)
D Form of ▇▇▇▇ of Sale 1.1(d)
E Form of Assumption Agreement 1.1(d)
F Seller's Liabilities 1.2
G Form of Certificate of Designation
(to be attached as the Closing Date) 2.1(i)
H Form of Acquisition Warrant
(to be attached at the Closing Date) 2.1(i)
I Form of Certificate of Designation
for the Series F Preferred Stock
(to be attached at the Closing Date) 2.1(iii)
J Form of Debt Conversion Agreement
(to be attached at the Closing Date) 2.1(iii)
K Consents, Approvals, Orders, etc. 4.3
L Actions, Suits, Proceedings and Investigations 4.4
M Non-Assumed Liabilities 4.8
N Leases 4.13
O Intellectual Property 4.15
P Insurance 4.20
Q Domestic and International Subsidiaries,
Licenses, Permits and Other Approvals 4.22
R Contracts 4.23
S Form of Indemnification Agreement 8(f)
T Investment Banking, Brokers, Etc. Fees 14