EXHIBIT 1
ASSET PURCHASE AGREEMENT
DATED AS OF MARCH 18, 2004
BY AND AMONG
PLANET POLYMER TECHNOLOGIES, INC.
AND
ALLERGY FREE, LLC
================================================================================
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of March 18, 2004, (this
"Agreement"), by and between Planet Polymer Technologies, Inc., a California
corporation ("Purchaser"), and Allergy Free, LLC, a California limited liability
company ("Seller").
R E C I T A L S
WHEREAS, Seller is engaged in the business of designing, manufacturing,
selling and distributing consumer products for use by allergy sensitive persons,
including, without limitation, air filters, bedding and similar products (the
"Seller Business");
WHEREAS, Purchaser is engaged in the business of developing and licensing
unique hydrosoluable polymer and biodegradable materials in the fields of
agricultural and industrial manufacturing (the "Purchaser Business");
WHEREAS, Seller desires to sell, and Purchaser desires to purchase, all of
the assets, properties and rights relating to the Seller Business, other than
the Excluded Assets (as defined below), pursuant to this Agreement.
A G R E E M E N T
NOW, THEREFORE, in reliance on the representations and warranties and
agreements and subject to the terms and conditions hereinafter set forth, the
parties hereby agree as follows:
1. DEFINITIONS. The following terms, as used herein, have the following
meanings:
"Accounts Receivable" shall mean the Seller Accounts Receivable or the
Purchaser Accounts Receivable as the context requires, consistent with the
meaning ascribed to such term in Section 2(i).
"Acquisition" shall mean the transaction contemplated by this Agreement.
"Acquisition Date" will have the meaning ascribed to such term in Section
4(d).
"Affiliate" means, with respect to any Person, a Person directly or
indirectly controlling, controlled by or under common control with the Person,
through the ownership of all or part of the Person.
"Agreement" will have the meaning ascribed to such term in the Preamble.
"Applicable Law" means any domestic or foreign, federal, state or local
statute, law, common law, ordinance, policy, guidance, rule, administrative
interpretation,
regulation, order, writ, injunction, directive, judgment, decree, permit or
other requirement of any Governmental Authority.
"Arbitrator" will have the meaning ascribed to such term in Section 5(b).
"Assets" shall mean the Seller Assets or the Purchaser Assets as the
context requires, consistent with the meaning ascribed to such term in
Section 2.
"Assumed Liabilities" will have the meaning ascribed to such term in
Section 3.
"best knowledge" or "to the best of knowledge" a Person will be deemed to
have knowledge of a particular fact or other matter if: (i) that Person is
actually aware of that fact or matter; or (ii) a prudent Person could be
expected to discover or otherwise become aware of that fact or matter in the
course of conducting an investigation regarding the accuracy of any
representation or warranty contained in this Agreement.
"Business" shall mean the Seller Business or the Purchaser Business as the
context requires.
"Business Day" means a day of the week (but not a Saturday, Sunday, or
holiday) on which banking institutions in San Diego are open. All references to
"days" in this Agreement will be to calendar days unless specifically referenced
as a Business Day.
"Change of Control" means (i) the acquisition, directly or indirectly, by
any person, entity or group (within the meaning of Section 13(d)(3) of the
Exchange Act) of the beneficial ownership of securities or more than fifty
percent (50%) of the total combined voting power of all outstanding securities
of Purchaser; (ii) a merger or consolidation in which Purchaser is not the
surviving entity, except for a transaction in which the shareholders immediately
prior to such merger or consolidation hold, in the aggregate, securities
possessing more than fifty percent (50%) of the total combined voting power of
all outstanding voting securities of the surviving entity immediately after such
merger or consolidation; (iii) a reverse merger in which Purchaser is the
surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of all outstanding voting securities of
Purchaser are transferred to or acquired by a Person different from the
shareholders of Purchaser immediately prior to such merger; or (iv) the sale,
license, transfer and/or other disposition (in one transaction or a series of
related transactions) of all or substantially all of the assets of Purchaser.
"Closing" will have the meaning ascribed to such term in Section 4(d).
"Closing Balance Sheet" shall mean a balance sheet of Seller as of the
Acquisition Date prepared in accordance with GAAP (other than normal year-end
adjustments) delivered by Seller to Purchaser.
"Code" means the Internal Revenue Code of 1986 as amended, and the
Treasury Regulations promulgated thereunder.
"Confidential Information" means all nonpublic information respecting
Purchaser or its Affiliate's business including, but not limited to, the
Business and the products, research and development, processes, customer lists,
marketing plans and strategies of Purchaser or its Affiliates, whether or not
relating to the Business. Confidential Information does not include information
that is, or becomes, available to the public unless such availability occurs
through an unauthorized act on either Member's part.
"Consideration Allocation" will have the meaning ascribed to such term in
Section 4(c).
"Contracts" shall mean the Seller Contracts or the Purchaser Contracts as
the context requires, consistent with the meaning ascribed to such term in
Section 2(h).
"Copyrights" means all of the following: (i) all copyrights, all
registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications in the
United States Copyright Office or in any similar office or agency of the United
States, any State or territory thereof, or any other country or any political
subdivision thereof, and (ii) all reissues, extensions or renewals thereof.
"Damages" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities, judgments, awards,
fines, sanctions, penalties, charges and amounts paid in settlement, including
(i) interest on cash disbursements in respect of any of the foregoing at a rate
of five percent (5%) per annum from the date each such cash disbursement is made
until the Person incurring the same is indemnified in respect thereof, and (ii)
reasonable costs, fees and expenses of attorneys, accountants and other agents
of the Person.
"directly or indirectly" means as an individual, general partner, limited
partner, shareholder, member, officer, director, principal, agent, employee,
consultant, advisor or in any other relationship or capacity.
"Environmental Laws" will have the meaning ascribed to such term in
Section 6(r)(i).
"Equipment" means all machinery and equipment, including processing
equipment, conveyors, machine tools, tools, tooling, data processing and
computer equipment, including embedded software and peripheral equipment and all
engineering, processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, attachments, accessories,
automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, together with all
additions and accessions thereto, replacements therefor, all parts therefor, all
substitutes for any of the foregoing, fuel therefor, and all manuals, drawings,
instructions, warranties and rights with respect thereto, and all products and
proceeds thereof and condemnation awards and insurance proceeds with respect
thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" will have the meaning ascribed to such term in
Section 2.
"Excluded Liabilities" will have the meaning ascribed to such term in
Section 3.
"FDA" means the Food and Drug Administration.
"Financial Statements" will have the meaning ascribed to such term in
Section 6(d)(i).
"Fixed Assets" will have the meaning ascribed to such term in Section
2(b).
"Fraud" means any fraud, misrepresentation, theft, embezzlement,
dishonesty or moral turpitude.
"GAAP" means generally accepted accounting principles as applied on a
consistent basis.
"Governmental Authority" means any foreign or domestic, federal,
territorial, state or local governmental authority, instrumentality, court,
government commission, tribunal or organization, or any regulatory,
administrative or other agency, including the FDA, or any political or other
subdivision, department or branch of any of the foregoing.
"Hazardous Substances" means any substance, material or waste that is
regulated by any Governmental Authority, including, without limitation, (i)
petroleum; (ii) asbestos; and (iii) any material or substance that is defined as
a "hazardous waste," "hazardous material," "hazardous substance," "extremely
hazardous waste," or "restricted hazardous waste" under any provision of any
Applicable Law, including, without limitation, Section 307 and Section 311 of
the Clean Water Act, 33 U.S.C. Section 1251 et seq. (33 U.S.C. Sections 1317,
1321), Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq. (42 U.S.C. Section 6903), and Section 101 of the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 et seq. (42 U.S.C. Section 9601).
"Indemnified Party" will have the meaning ascribed to such term in
Section 14(b).
"Indemnifying Party" will have the meaning ascribed to such term in
Section 14(b).
"Independent" means a person who is not and never has been an officer,
director, employee, or equity owner or either party or any Affiliate of either
party.
"Intangible Property" will have the meaning ascribed to such term in
Section 2(c).
"Intellectual Property" will have the meaning ascribed to such term in
Section 6(j) and 7(k).
"Inventory" will have the meaning ascribed to such term in Section 2(a).
"IRS" means the Internal Revenue Service.
"Issued and Outstanding Stock" shall mean the issued and outstanding
shares of Purchaser's common stock as of the Acquisition Date, plus any options,
warrants or other rights to acquire common stock of Purchaser, or any stock or
instrument convertible into common stock of Purchaser, at a price per common
share of less than $1.00, subject to any applicable adjustments.
"Know-how" will have the meaning ascribed to such term in Section 2(d).
"Letter of Credit Rights" means rights to payment or performance under a
letter of credit, whether or not Seller, as beneficiary, has demanded or is
entitled to demand payment or performance.
"Liability" or "Liabilities" means, with respect to any Person, any
liability or obligation of any kind, character or description, whether known or
unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise and whether
or not the same is required to be accrued on the financial statements of the
Person or is disclosed on any Schedule or Exhibit hereto.
"License" means any rights under any written agreement owned or acquired
by a party granting any right (i) to use any Copyright or Copyright
registration; (ii) any right with respect to any invention on which a Patent is
in existence; (iii) to use any Trademark; or (iv) any other license of rights or
interests held or acquired by such party.
"Liens" means any security interests, liens, pledges, charges, options,
rights of first refusal, encumbrances, claims or other third party rights of any
kind.
"Material Adverse Effect" means a change in, or effect on, the operations,
affairs, condition (financial or otherwise), results of operations, assets,
properties, Liabilities, earnings, prospects, reserves or any other aspect of
the Business that results in a material adverse effect on, or a material adverse
change in the Assets or the Business.
"Member" or "Members" shall mean the members of Seller.
"Patents" means all of the following in which either party holds any
interest: (i) all letters patent of the United States or of any other country,
all registrations and recordings thereof, and all applications for letters
patent of the United States or of any other country, including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any State or territory
thereof, or any other country, and (ii) all reissues, continuations,
continuations-in-part or extensions thereof.
"Permit" will have the meaning ascribed to such term in Section 6(n)(iv).
"Person" means an individual, corporation, partnership, joint venture,
trust, limited liability company or other business entity.
"Private Stock" means shares of Purchaser's unregistered common stock,
issued to Seller.
"Proceeding" or "Proceedings" means any lawsuit, claim, hearing,
arbitration, proceeding (public or private), governmental investigation, or
legal, administrative or other action.
"Proprietary Information" will have the meaning ascribed to such term in
Section 2(e).
"Purchaser" will have the meaning ascribed to such term in the Preamble.
"Purchaser Indemnitees" will have the meaning ascribed to such term in
Section 12.
"Purchaser's Documents" will have the meaning ascribed to such term in
Section 7(b).
"Purchaser SEC Reports" will have the meaning ascribed to such term in
Section 7(e).
"Reference Balance Sheet" will have the meaning ascribed to such term in
Section 6(d)(i).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" will have the meaning ascribed to such term in the Preamble.
"Seller's Documents" will have the meaning ascribed to such term in
Section 6(a).
"Stock Price" shall mean $.06 per share of Purchaser's common stock and
where applicable adjusted to reflect the Reverse Stock Split.
"Subordinated Convertible Note" will have the meaning ascribed to such
term in Section 4(b) and shall be in the form and content of Exhibit "A"
attached hereto and incorporated herein by reference.
"Subsidiary" means, with respect to any Person, (i) any corporation in
which such Person, then owns stock possessing more than fifty percent (50%) of
the total combined voting power of all classes of stock, (ii) any partnership in
which such Person is a general partner or (iii) any limited liability company,
partnership or other entity in which such Person possesses a fifty percent (50%)
or greater interest in the total capital or total income of such limited
liability company, partnership or other entity.
"Tax" or "Taxes" means any taxes, fees, levies, duties, tariffs, imposts,
and governmental impositions or charges of any kind in the nature of (or similar
to) taxes, payable to any taxing authority, including any Governmental Authority
and any taxing agency thereof, including, without limitation, (i) any federal,
state, local or foreign net income tax, alternative or add-on minimum tax,
profits or excess profits tax, franchise tax, gross income, adjusted gross
income or gross receipts tax, employment related tax (including employee
withholding or employer payroll tax, FICA or FUTA), real or personal property
tax or ad valorem tax, sales and use tax, excise tax, stamp tax or duty, any
withholding or back up withholding tax, value added tax, severance tax,
prohibited transaction tax, premiums tax, environmental tax, intangibles tax,
occupation tax, net worth tax, estimated tax, transfer and gains tax, (ii) any
interest or any penalty, addition to tax or additional amount imposed by any
Governmental Authority responsible for the imposition of any such tax, and (iii)
any liability with respect to the foregoing as a result of being a member of any
affiliated, consolidated, combined, unitary, or similar group, as a result of
any transferee liability in respect of the foregoing, as a result of any
agreement or otherwise by operation of law.
"Tax Returns" mean any return, report, form or other information filed or
required to be filed with the IRS or any other federal, foreign, state local,
provincial taxing authority with respect to any Tax, including any claim for
refund of Taxes and any amendments or supplements of any of the foregoing.
"Trademarks" means all of the following owned, adopted or acquired by a
Party: (i) all trademarks, trade names, corporate names, business names, trade
styles, service marks, logos, other source or business identifiers, prints and
labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature (whether registered or unregistered), all
registrations and recordings thereof, and all applications in connection
therewith, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any state or territory thereof, or any other country or any
political subdivision thereof; (ii) all reissues, extensions or renewals
thereof; and (c) all goodwill associated with or symbolized by any of the
foregoing.
2. PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions of
this Agreement, Seller agrees to sell, transfer, convey, assign, and deliver to
Purchaser, and Purchaser agrees to purchase, all of the business assets,
properties, real or personal, and rights of every nature, kind and description,
tangible and intangible, as reflected on the Closing Balance Sheet used or
useable in the Seller Business, owned by, leased by, or in the possession of the
Seller (the "Assets"), except that the Assets shall not include any of the
assets set forth on Schedule 2 hereto (the "Excluded Assets") all of which shall
be retained by Seller and shall not be sold or conveyed to Purchaser hereunder.
Without limiting the generality of the preceding sentence, the Assets include
the following:
(a) Inventory, wherever located, used or useable in the Business
(the "Inventory") consisting of inventory, merchandise, goods and other personal
property that are held by or on behalf of Seller for sale or lease or are
furnished or are to be furnished under a contract of service, or that constitute
raw materials, work in process,
finished goods, returned goods, or materials or supplies of any kind, nature or
description used or consumed or to be used or consumed in Seller's business or
in the processing, production, packaging, promotion, delivery or shipping of the
same, including all supplies and embedded software;
(b) Fixed and other physical assets, wherever located, used or
useable in the Business consisting of Equipment, and fixtures ("Fixed Assets");
(c) All Patents, Copyrights and Trademarks used or useable in the
Business, and all agreements of any nature whatsoever with respect to any of the
foregoing (the "Intangible Property"), including, without limitation, the rights
to all brand names;
(d) All inventions, discoveries, improvements, computer software,
data, skill, expertise, procedures and processes used or useable in the Business
and owned by Seller and all agreements of any nature whatsoever with respect
thereto (the "Know-how");
(e) All other trade secrets and proprietary information relating
to the Business, including customer lists, market surveys and all agreements of
any nature whatsoever with respect thereto (the "Proprietary Information");
(f) All right, title and interest of Seller in and to Licenses,
transferable permits, exemptions, approvals, franchises and privileges relating
to the Business to the extent transferable under Applicable Law;
(g) All books, records, accounts, correspondence and other
information which has been reduced to writing relating to or arising out of the
Business, including accounting records, legal records, technical information and
manuals, designs, blueprints, models, drawings, specifications, patterns and any
computer record of any of the foregoing;
(h) All of Seller's claims and rights under all leases, contracts,
agreements, and purchase and sales orders, whether written or oral, relating in
any manner to the Business including, without limitation, those set forth on
Schedule 6(k) hereto (collectively, the "Contracts");
(i) All accounts owned or acquired by Seller including, accounts
receivable, notes and notes receivable, other receivables, book debts and other
forms of obligations to Seller and Letter of Credit Rights relating to the
Business ("Accounts Receivable");
(j) All prepaid items, deposits, bank accounts, certificated
securities, all certificates of deposit, and all promissory notes and other
evidences of indebtedness and other similar assets relating to the Business;
(k) All interests in partnerships, joint ventures and other
business associations relating to the Business;
(l) All rights of Seller under express or implied warranties from
the suppliers of Seller with respect to the Assets to the extent transferable
under Applicable Law;
(m) All proceeds under insurance policies (excluding proceeds
under insurance policies that relate to Excluded Assets or Excluded
Liabilities);
(n) All of Seller's claims and causes of action against others
relating to the Business (except to the extent related to the Excluded Assets or
Excluded Liabilities); and
(o) All goodwill associated with the Business or Assets, together
with the right to represent to third parties that Purchaser is the successor to
the Business.
3. ASSUMED LIABILITIES; EXCLUDED LIABILITIES. Except for the
liabilities of Seller relating to the Business set forth on Schedule 3 (the
"Assumed Liabilities"), which Purchaser agrees to assume, Purchaser does not
assume, agree to perform or discharge, indemnify Seller against, or otherwise
have any responsibility for Liabilities of Seller, whether fixed or contingent,
known or unknown, matured or unmatured, liquidated or unliquidated, secured or
unsecured, and whether arising prior to, on or after the date hereof
(collectively, the "Excluded Liabilities"). Without limiting the generality of
the preceding sentence, the Excluded Liabilities include the following:
(a) Any Liability of Seller arising out of or relating to products
of Seller to the extent sold on or prior to the Acquisition Date except as set
forth on Schedule 6(t);
(b) Any Liability of Seller under any Contract that arises after
the Acquisition Date, but that arises out of any breach thereof by Seller that
occurred on or prior to the Acquisition Date;
(c) Any Liability for Taxes of Seller or any Member, including (i)
any Taxes arising as a result of Seller's operation of the Business or ownership
of the Assets occurring on or prior to the Acquisition Date, (ii) any Taxes that
will arise as a result of the sale of the Assets pursuant to this Agreement
except as otherwise expressly provided in Section 8(e), and (iii) any deferred
Taxes of any nature;
(d) Any Liability arising out of or relating to obligations owed
to Members or Seller's credit facilities or any security interest related
thereto except as set forth on Schedule 3(d);
(e) any Liability resulting from the failure to comply with any
Environmental Law by Seller arising out of or relating to the operation of the
Business or Seller's leasing or operation of real property occurring on or prior
to the Acquisition Date;
(f) Any Liability under any employment, severance, retention or
termination agreement of Seller with any employee of Seller;
(g) Any Liability of Seller arising out of or relating to any
employee or independent contractor grievance, including those under any
employment, severance, retention or termination agreement of Seller, arising out
of facts occurring on or prior to the Acquisition Date;
(h) Any Liability to distribute to any of Seller's members any
part of the consideration received hereunder;
(i) Any Liability of Seller based upon the operations of the
Business by Seller on or prior to the Acquisition Date arising out of any
Proceeding to which Seller is a party pending as of the Acquisition Date;
(j) Any Liability of Seller arising out of or resulting from
Seller's compliance or noncompliance with any Applicable Law;
(k) Any Liability of Seller arising out of or resulting from
Seller's compliance or noncompliance with any judgment, order, writ,
prohibition, injunction or decree of any Governmental Authority;
(l) Any Liability of Seller under this Agreement; and
(m) Any Liability of Seller based upon Seller's acts or omissions
occurring after the Acquisition Date.
4. PURCHASE PRICE AND CLOSING. In full consideration for the Assets and
the confidentiality and non-compete agreements contained in Section 8(a) of this
Agreement, Purchaser shall pay to Seller the aggregate consideration as follows:
(a) Stock Consideration. At the Closing, Purchaser will issue and
deliver to Seller 28,193,900 shares of Private Stock ("Stock Consideration"),
subject to adjustment as provided in Section 4(b) below.
(b) Subordinated Convertible Note. At the Closing, purchaser will
issue and deliver to Seller the Subordinated Convertible Note in the approximate
amount of Two Million Eight Hundred Seventeen Thousand Five Hundred
($2,817,500.00) (the exact principal amount will be determined at the Closing
and will be equal to the then principal amount of indebtedness of Seller for
money borrowed) (the "Note Payment"). If the principal amount is not more than
$450,000 the interest rate shall be 5.5% per annum. Otherwise the interest rate
shall be the prime rate as announced from time to time in The Wall Street
Journal under "Money Rates." Seller may elect to accept additional shares of
Private Stock as additional Stock Consideration and reduce the principal amount
of the Note Payment by a per share amount equal to the per share offering price
for the Private Placement described in Section 8(n) up to a maximum
$2,450,000.00 reduction of the Note Payment principal amount. The Note Payment
and Stock Consideration are collectively referred to as the Purchase
Consideration.
(c) Purchase Consideration Allocation.
(i) The parties shall allocate the Purchase Consideration
(plus all consideration attributable to the portion of the Assumed
Liabilities which are treated as purchase price for federal income tax
purposes) to each Asset or groups thereof in accordance with the
applicable provisions of Section 1060 of the Code (the "Consideration
Allocation") and generally as set forth in Schedule 4(c).
(ii) Each party agrees to timely file an IRS Form 8594
reflecting the Consideration Allocation for the taxable year that includes
the Acquisition Date.
(iii) Each party hereto shall adopt and utilize the
Consideration Allocation for purposes of all Tax Returns filed by them and
shall not voluntarily take any position inconsistent with the foregoing in
connection with any examination of any Tax Return, any refund claim, any
litigation proceeding or otherwise, except that Purchaser's cost for the
Assets may differ from the amount so allocated to the extent necessary to
reflect Purchaser's capitalized acquisition costs other than the amount
realized by Seller. In the event that any taxing authority disputes the
Consideration Allocation, the party receiving notice of the dispute shall
promptly notify the other parties hereto of such dispute and the parties
hereto shall cooperate in good faith in responding to such dispute in
order to preserve the effectiveness of the Consideration Allocation.
(d) Closing. Upon the terms and subject to the conditions set
forth in this Agreement, the closing of the sale and purchase of the Assets (the
"Closing") shall take place on the date as soon as reasonably practicable
following satisfaction of the conditions to Closing set forth in Section 9 to
this Agreement ("Acquisition Date"), at the offices of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ &
French, APC, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
5. POST-ACQUISITION PURCHASE CONSIDERATION ADJUSTMENT.
(a) Indemnity Obligations. If either party is required to
indemnify the other party pursuant to Sections 12 and 13 of this Agreement, the
Purchase Consideration will be adjusted as provided in this Section 5 of this
Agreement.
(b) Dispute Resolution. In the event that either party disagrees
with any demand for indemnification by the other party, such party shall give
written notice of its objections thereto within forty-five (45) days of any
claim for indemnification ("Dispute Notice"). If a party does not timely deliver
a Dispute Notice, the claim for indemnity will be final and binding on the
parties. If a party timely delivers a Dispute Notice, then during the 30-day
period following such delivery, Seller and Purchaser shall attempt to resolve
any differences which they may have with respect to any matters specified in the
Dispute Notice (which resolution, if any, shall be final and binding on all
parties). If, at the end of such 30-day period Seller and Purchaser shall have
failed to reach written agreement with respect to all such matters, then all
such matters specified in the Dispute Notice with respect to which an agreement
has not been reached (the "Disputed Matters") shall be submitted to and
arbitrated by an independent certified
public accounting firm selected by Independent members of Purchaser's Board of
Directors (the "Arbitrator"). The Arbitrator shall consider only the Disputed
Matters. The Arbitrator shall act promptly, and the Arbitrator's decision with
respect to all Disputed Matters shall be final and binding upon the parties
hereto. The prevailing party in the arbitration shall be entitled to the
reimbursement from the non-prevailing party of the prevailing party's reasonable
attorney's and accountant's fees and costs incurred in connection with the
arbitration. The fees and expenses of the Arbitrator incurred in connection with
its review and determination of any Disputed Matters shall also be borne by the
non-prevailing party.
(c) Adjustment to Purchase Price. If Seller is the Indemnifying
Party, Seller shall cause to be surrendered to the Purchaser shares of Private
Stock equal to the dollar amount of Seller's indemnity obligation divided by the
Stock Price, but in no event more than one hundred thousand (100,000) shares
(after giving effect to the Reverse Stock Split). If Purchaser is the
Indemnifying Party, Purchaser shall cause to be issued to Seller shares of
Purchaser common stock equal to the dollar amount of Purchaser's indemnity
obligation divided by the Stock Price, but in no event more than one hundred
thousand (100,000) shares (after giving effect to the Reverse Stock Split).
6. REPRESENTATIONS AND WARRANTIES OF SELLER. In order to induce
Purchaser to enter into this Agreement, as of the Acquisition Date, except as
set forth in the Disclosure Schedules attached hereto, Seller represents and
warrants to Purchaser that:
(a) Legal Authority, Binding Effect. Seller has the full capacity,
power and authority to execute and deliver this Agreement and to transfer the
Assets as contemplated herein. Seller has full capacity, right, power and
authority to execute, deliver and perform its obligations under this Agreement
and all other agreements, certificates and documents (collectively, the
"Seller's Documents") executed or delivered or to be executed or delivered by
Seller in connection herewith. This Agreement and the other Seller's Documents
constitute legal, valid and binding obligations of Seller, enforceable in
accordance with their respective terms.
(b) Organization, Good Standing. Seller is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of California, and has full power and authority to own, lease and
operate its assets and properties and to conduct the Business as it is now being
conducted. Seller is duly qualified or licensed to do business and is in good
standing as a foreign company under the laws of those jurisdictions in which the
conduct of its business or the ownership or leasing of its assets requires such
qualification. The copies of Seller's Articles of Organization, as amended
(certified by the Secretary of State of California), and Operating Agreement
which have been previously delivered to Purchaser or its representative are
correct and complete.
(c) Capitalization. The Members identified on Schedule 6(c) hold
one hundred percent (100%) of the membership interests in Seller. Seller has no
Subsidiaries
and has no equity in any corporation, partnership, joint venture or other entity
and Seller has conducted its business only through Seller.
(d) Financial Statements.
(i) Seller has delivered to Purchaser the unaudited balance
sheet of Seller as of December 31, 2003 (the "Reference Balance Sheet"),
and the related unaudited statements of operations and members' equity for
the fiscal year then ended (the "Financial Statements").
(ii) Except as set forth on Schedule 6(d)(ii), the Financial
Statements are complete, are in accordance with Seller's books and records
regularly maintained by management, have been prepared in accordance with
GAAP, consistently applied by Seller, and present fairly the financial
position, results of operations and changes in financial position of
Seller as of the dates and for the periods indicated.
(iii) There are no liabilities, debts, obligations or claims
against the Business or the Assets of any nature, absolute or contingent,
which in the aggregate exceeds $10,000, except (a) as and to the extent
reflected or reserved against on the Reference Balance Sheet, (b)
specifically described and identified as an exception to this paragraph in
any of the Schedules delivered to Purchaser pursuant to this Agreement,
(c) incurred since the Reference Balance Sheet Date, in the ordinary
course of business consistent with prior practice and Section 6(f) hereof,
or (d) open purchase or sales orders or agreements for delivery of goods
and services in the ordinary course of business consistent with prior
practice; provided Seller is not in default thereunder.
(e) Liabilities. As of December 31, 2003, all liabilities of
Seller are set forth or adequately reserved against or otherwise disclosed in
the Financial Statements, in each case in accordance with GAAP, consistently
applied by Seller. Since December 31, 2003, Seller has incurred no other
Liabilities, except for those incurred in the ordinary course of business as
theretofore conducted which are not materially adverse to the operations or
prospects (financial or otherwise) of the Business, except for the liabilities
set forth on Schedule 6(e).
(f) No Adverse Change. Except as set forth on Schedule 6(f), since
December 31, 2003, Seller has operated its business only in the ordinary course
of business as theretofore conducted, and there has been no: (i) Material
Adverse Effect, or any event or development which, individually or together with
other such events, could reasonably be expected to result in a Material Adverse
Effect; (ii) suffered any damage or destruction resulting in a loss or cost to
Seller of more than $10,000 in the aggregate, whether or not covered by
insurance; (iii) amendment of its Articles of Organization or Operating
Agreement; (iv) issuance of any additional units or other Seller securities or
issuance, sale or grant of any option or right to acquire or otherwise dispose
of any of its authorized but unissued units or other company securities; (v)
declaration or payment of any distribution in cash or property on its units;
(vi) repurchase or redemption of shares
of its units or other Seller securities; (vii) incurrence, performance or
payment or other discharge, of any obligation or liability (absolute or
contingent), except for current obligations and liabilities incurred in the
ordinary course of business consistent with past practice; (viii) entering into
of any employment agreement with, or becoming liable for any bonus,
profit-sharing or incentive payment to, or increasing of the compensation or
benefits of, any of its officers, directors or employees; (ix) sale, transfer or
acquisition of any properties or assets, tangible or intangible, other than in
the ordinary course of business; (x) material changes in its customary method of
operations including marketing, selling and pricing policies and maintenance of
business premises, fixtures, furniture and equipment; (xi) modification,
amendment or cancellation of any of its existing leases or entering into any
contracts, agreements, leases or understandings other than in the ordinary
course of business or entering into of any loan agreements; (xii) investments
other than in certificates of deposit or short-term commercial paper; (xiii)
capital expenditure or addition or commitment to make a capital expenditure or
addition, when considered as a whole is in excess of an aggregate of $10,000;
(xiv) Liens or restrictions of any of the Business or the Assets; (xv)
commencement of any litigation, action or proceeding before any court,
governmental or regulatory body or arbitrational tribunal relating to the
Business or the Assets; or (xvi) changes in respect of any election concerning
Taxes or Tax Returns, adopted or changed any accounting method, filed any
amended Tax Return, entered into any closing agreement with respect to Taxes,
settled any Tax claim or assessment or surrendered any right to claim a refund
of Taxes or obtained or entered into any Tax ruling, agreement, contract,
understanding, arrangement or plan.
(g) Taxes. Seller has duly, timely and properly filed within the
time prescribed by law, all Tax Returns required to be filed by it with respect
to the income, business or operations of Seller with the appropriate
Governmental Authority in all jurisdictions in which such Tax Returns are
required by law to be filed and such Tax Returns were complete and accurate.
Seller has paid in full all Taxes due or claimed to be due on or in respect of
all such Tax Returns. Seller is not the subject of any pending or, to the best
knowledge of Seller, threatened tax examination nor is it a party to any
proceeding or inquiry by any governmental authority for the assessment or the
proposed assessment or for the collection of Taxes nor has any claim for the
assessment or proposed assessment or for the collection of Taxes been asserted
against Seller. There are no Liens for Taxes that are due and unpaid on any of
the assets or properties of Seller. All amounts required to be withheld by
Seller in connection with its business or operations from customers with respect
to the sale of goods, or from or on behalf of employees for income, social
security and unemployment insurance taxes, have been collected or withheld and
either paid to the appropriate governmental agency or set aside and, to the
extent required by the Code or other Applicable Law, held in accounts for such
purpose.
(h) Title to Property; Condition; All Assets. Seller has and will
transfer to Purchaser good and marketable title to all the Assets, free and
clear of all Liens except as described in Schedule 6(h) hereto. Such Assets are
in good order and working condition, subject to ordinary wear and tear, and are
adequate and suitable for the purposes for which they are presently being used
and their use by Seller complies in
all material respects with Applicable Law. The Assets constitute all of the
properties and assets necessary to conduct the Business as it is presently
conducted.
(i) Real Property and Fixed Assets.
(i) Seller does not own any real property. Schedule 6(i)
hereto contains a list and brief description of all real property leased
by Seller. Seller's buildings and other structures (whether leased or
owned) are in good operating condition and repair, subject to ordinary
wear and tear, and are adequate and suitable for the purposes for which
they are presently being used and their use by Seller complies in all
material respects with Applicable Law.
(ii) All leases are valid, binding and enforceable in
accordance with their terms and are in full force and effect. No event or
condition exists, or to the best knowledge of Seller, is alleged by any of
the other parties thereto to exist, which constitutes, or with giving of
notice or lapse of time or both would constitute, a default under, or a
basis for termination of, any such lease. Seller does not owe any
brokerage commissions with respect to any such leased space. Seller has
delivered to Purchaser prior to the execution of this Agreement true and
complete copies of all such leases (including any amendments and renewal
letters).
(j) Patents, Trademarks and Copyrights. Seller has interests in or
the right to use the Intangible Property, the Know-how and the Proprietary
Information (collectively, the "Intellectual Property") disclosed in Schedule
6(j) hereto, each of which Seller has all right, title and interest in or valid
and binding rights under contract to use, and the use thereof in the operation
of the Business does not and will not infringe the rights of any other Person.
Other than the Intellectual Property disclosed in Schedule 6(j) hereto, no other
Intellectual Property is necessary in the conduct of the Business of Seller.
Except as disclosed in Schedule 6(j), with respect to the Intellectual Property:
(i) Seller has the exclusive right to use the Intellectual Property, (ii) all
registrations with and applications to any Governmental Authority in respect of
the Intellectual Property are valid and in full force and effect and are not
subject to the payment of any Taxes or maintenance fees or the taking of any
other actions by Seller to maintain their validity or effectiveness, (iii) there
are no restrictions on the direct or indirect transfer of any contract, or any
interest therein, held by Seller in respect of the Intellectual Property, (iv)
Seller has delivered to Purchaser prior to the execution of this Agreement
documentation with respect to any invention, process, design, computer program
or other know-how or trade secret included in the Intellectual Property, which
documentation is accurate in all material respects and reasonably sufficient in
detail and content to identify and explain such invention, process, design,
computer program or other know-how or trade secret and to facilitate its full
and proper use without reliance on the special knowledge or memory of any
person, (v) Seller has taken reasonable security measures to protect the
secrecy, confidentiality and value of its trade secrets (vi) Seller has not
received any notice that it is, in default (or with the giving of notice or
lapse of time or both, would be in default) under any contract to use the
Intellectual Property, (vii) to the best knowledge of Seller, no Intellectual
Property is being infringed by any other Person
and (viii) Seller does not pay any royalty to a third party with respect to its
use of any Intellectual Property.
Except at set forth on Schedule 6(j), Seller has not received
notice, either verbally or in writing, that Seller is infringing any
Intellectual Property of any other Person in connection with the conduct of the
Business, no claim is pending or has been made, either verbally or in writing,
to such effect and Seller is not infringing any Intellectual Property of any
other Person in connection with the conduct of the Business.
(k) Contracts and Commitments. Schedule 6(k) contains a list of
all material leases, contracts, agreements and purchase and sales orders,
whether written, or to Seller's best knowledge, oral, relating to the Business
and to which Seller is a party or and by which any of the Assets is bound. True
and complete copies of the foregoing (or, in the case of oral contracts,
accurate summaries) have been delivered to Purchaser. Except as set forth on
Schedule 6(k), all Contracts are in full force and effect and constitute legal,
valid and binding obligations of the respective parties thereto. Seller has
performed all obligations required to be performed by it pursuant to the
Contracts and no default, or event which with notice or lapse of time or both
would constitute a default, exists in respect thereof on the part of Seller or
the other parties thereto. Except as set forth on Schedule 6(k), each of the
Contracts will according to its terms continue in full force and effect with no
change to the material terms thereof following the transfer of the Assets to
Purchaser under this Agreement. The continuation, validity and effectiveness of
all the Contracts under the current material terms thereof (including without
limitation the current rentals under any leases or licenses) will in no way be
affected by the transfer of the Assets to Purchaser under this Agreement. All
the Contracts have been entered into on an arms-length basis and none is
materially burdensome to the Business. Except as set forth on Schedule 6(k),
Seller has no contracts, agreements or arrangements (a) providing for the
payment of any bonus or commission based on sales or earnings, or (b) with any
officer, member, director, consultant (other than fee agreements with Seller's
accountants and attorneys), agent or Affiliate of Seller, or (c) relating to
employment or severance or termination benefits (other than employment
arrangements terminable at will without liability on the part of Seller and
other than for severance or termination benefits required by statute or
regulation).
(l) Inventory. Except as set forth on Schedule 6(l) and to
Seller's best knowledge, the Inventory is in good condition, does not include
any items below standard quality, damaged or spoiled, obsolete or of a quality
or quantity not usable or salable in the ordinary course of the business of
Seller as currently conducted within normal inventory "turn" experience, the
value of which has not been fully written down, or with respect to which
adequate reserves have not been provided. All items included in the inventory of
Seller are the property of Seller, free and clear of any Lien, have not been
pledged as collateral, are not held by Seller on consignment from others and
conform in all respects to all specifications and warranties applicable to such
inventory or its use or sale imposed by any Governmental Authority. All
in-process and finished products in the Inventory have been produced in
compliance with Seller's applicable quality control procedures. The values at
which such inventory are carried in accordance with GAAP.
The amount and mix of the Inventory of supplies, in-process and finished
products is consistent with Seller's past business practices.
(m) Accounts Receivable. All of the Accounts Receivable reflected
on the Financial Statements and thereafter acquired through the date hereof
constitute only valid claims against third parties not affiliated with Seller or
Members arising in the ordinary course of the Business. The Accounts Receivable
arose in the ordinary course of business for goods or services delivered or
rendered, are payable upon ordinary trade terms, constitute only legal, valid
and binding obligations of the respective debtors enforceable in accordance with
their terms and are not subject to counterclaims or setoffs.
(n) Compliance with Laws; Restrictions; Permits.
(i) Except as set forth on Schedule 6(n)(i), Seller is
conducting the Business, and all of its properties and assets are, in
compliance with Applicable Law.
(ii) Seller is not aware and has not received any written or
verbal notification of any present or past failure so to comply or of any
past or present events, activities or practices of Seller or incidents or
actions of Seller or plans of Seller which may be construed to indicate
interference with or prevention of continued compliance with Applicable
Law or which may give rise to any common law or statutory liability, or
otherwise form the basis of any claim, action, suit, proceeding, hearing
or investigation.
(iii) The authorization, execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated
hereby do not and will not (1) violate any of the provisions of Seller's
Articles of Organization or Operating Agreement, (2) violate, conflict
with, result in a breach of or constitute a default under, require any
notice or consent under, give rise to a right of termination of, or
accelerate the performance required by, any terms or provisions of any
lease, contract, agreement or purchase or sale order, whether written, or
oral, to which Seller is a party or is bound, or any of its assets or
business is subject, (3) result in the creation of any Lien on any of
Seller's assets or properties or (4) violate any judgment, order, writ,
prohibition, injunction or decree of any court or other governmental body
to which Seller is a party, subject to or bound by.
(iv) Set forth on Schedule 6(n)(iv) is a list of all
approvals, authorizations, certificates, consents, licenses, orders and
permits or other similar authorizations of any Governmental Authority
necessary for the operation of the Business in substantially the same
manner as currently operated. No other governmental or other registration,
filing, application, permit, notice, transfer, consent, approval, order,
qualification or waiver (collectively, a "Permit") is required under
Applicable Law to be obtained by Seller or Purchaser by virtue of the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby or to avoid the loss of any such Permit.
(o) Compensation of and Indebtedness to and from Employees.
(i) Schedule 6(o)(i) sets forth a true and complete list of
the names of and positions held by each employee of Seller and the current
compensation of each such employee, including salary, bonus, other
incentive compensation and other perquisites and benefits.
(ii) Except as set forth in Schedule 6(o)(ii), Seller has no
financial obligation and is not otherwise indebted to any person who is an
officer, director, member or employee of Seller, or to any relative of any
such person or to any entity controlled directly or indirectly by, or
otherwise affiliated with, such person, in any amount whatsoever other
than for compensation for services rendered since the start of the current
pay period of Seller generally utilized for its employees and for normal
and customary business expenses, nor is any officer, director, member or
employee of Seller, or any relative of such person or any entity
controlled directly or indirectly by, or otherwise affiliated with, such
person, indebted to Seller except for normal and customary business
reimbursement advances made in the ordinary course of business.
(p) Insurance. Schedule 6(p) hereto lists all insurance policies
covering Seller or any aspect of the Business, indicating the type of coverage,
name of insured, the insurer, the amount of coverage, the premium and the
expiration date of each policy. The insurance coverage provided by any of the
policies described above will not terminate or lapse by reason of the
transactions contemplated by this Agreement. Each policy listed is valid and
binding and in full force and effect, no premiums due thereunder have not been
paid, and Seller has not received any notice of cancellation or termination in
respect of any such policy or notice that Seller is in default thereunder.
(q) Litigation. Except as set forth in Schedule 6(q), there are
presently no actions, suits, disputes, claims, proceedings or investigations
pending or threatened against or affecting Seller, the Business or the Assets,
at law or in equity, before or by any court, agency, or other governmental
authority, including, without limitation, litigation with competitors, customers
or with contractors or suppliers who have performed work on or supplied
equipment or materials relating to the Business or the properties of Seller. To
the best knowledge of Seller, there is no basis for any such action, suit,
dispute, claim, proceeding or investigation and none of the foregoing has been
pending during the last three years. There is no outstanding order, injunction
or decree of any court, governmental authority or arbitration tribunal against
or affecting Seller, the Business or the Assets.
(r) Environmental Matters.
(i) Seller's business, assets and properties are and have
been operated and maintained in compliance with all environmental
protection laws and regulations of any Applicable Law (the "Environmental
Laws"). No event has occurred which, with or without the passage of time
or the giving of notice, or
both, would constitute non-compliance by Seller with, or a violation by
Seller of, the Environmental Laws.
(ii) No real property leased, occupied or used in the
Business contains any underground storage tanks or Hazardous Substances.
Seller has not caused or permitted to exist, as a result of an intentional
or unintentional act or omission, a disposal, discharge or release of
Hazardous Substances originating on or from any site which currently is or
formerly was owned, leased, occupied or used in connection with the
Business, except where such disposal, discharge or release was pursuant to
and in compliance with the conditions of a permit issued by the
appropriate Governmental Authority. There are no properties owned, leased,
occupied or used in connection with the Business which are listed, or
proposed for listing, on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Sections 9601 et seq., or on a registry or inventory of inactive
hazardous waste sites maintained by any state (i) which currently is or
formerly was owned, leased, occupied or used or (ii) with respect to which
Seller has received notice that it is considered to be a potentially
responsible person.
(s) Customers and Suppliers. No supplier or customer of the
Business has cancelled or otherwise terminated, or made any written threat to
Seller to cancel or otherwise terminate, for any reason, including the
consummation of the transactions contemplated hereby, its relationship with the
Business or has at any time on or after January 1, 2004, decreased materially
its services or supplies to the Business in the case of any such supplier, in
each case if and only to the extent that such cancellation, termination or
threat, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. To Seller's best knowledge, no supplier or customer
intends to cancel or otherwise terminate or decrease materially its services or
supplies to the Business or its usage of the services or products of the
Business, as the case may be, in each case if and only to the extent that such
cancellation, termination or reduction, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(t) Products.
(i) Schedule 6(t) sets forth all claims asserted or, to the
best knowledge of Seller, threatened at any time since January 1, 2002
against the Business in respect of personal injury, wrongful death or
property damage alleged to have resulted from products provided by the
Business, together with a description of each such claim or action
initiated with respect thereto and the disposition thereof.
(ii) The Business has not experienced product recall or
warranty claims, other than warranty claims less than $1,000.00 since the
year ended December 31, 2003.
(u) Securities Purchase Representations. Seller and each Member of
Seller is an accredited investor within the meaning of Rule 501 under the
Securities Act. Seller and each Member has such knowledge and experience in
financial or business matters as to be able to evaluate the merits and risks of
the transactions contemplated by this Agreement. Seller has had an opportunity
to ask questions of and to receive answers satisfactory to it from Purchaser in
respect of the investment it is making in the Private Stock. Seller and each
Member has access to the Purchaser SEC Reports. Seller has not been organized
solely for the purpose of acquiring the Private Stock. Seller and each Member to
whom Private Stock may be distributed is acquiring the Private Stock solely for
its own account for investment, not as a nominee or an agent, and without a view
to or in connection with, the sale or distribution of any part thereof.
(v) Disclosure. No representation or warranty contained in this
Agreement, and no statement contained in the Schedules to this Agreement or in
any certificate, list or other writing furnished to Purchaser pursuant to any
provision of this Agreement (including without limitation the Financial
Statements), contains any untrue statement of a material fact, or when taken as
a whole, omits to state a material fact necessary in order to make the
statements herein or therein, in the light of the circumstances under which they
were made, not misleading. There is no fact known to Seller which Seller
believes has or could have a Material Adverse Effect on the Business; which has
not been set forth in this Agreement, including without limitation any Schedules
or Exhibits hereto, the Financial Statements or certificate delivered in
accordance with the terms hereof or any document or statement in writing which
has been supplied by or on behalf of Seller or by any employee of Seller in
connection with the transactions contemplated by this Agreement. Seller has
furnished or caused to be furnished to Purchaser complete and correct copies of
all agreements, instruments and documents set forth on a Schedule hereto or
underlying a disclosure set forth on any Schedule hereto. Each of the Schedules
hereto is complete and correct.
7. REPRESENTATIONS AND WARRANTIES OF PURCHASER. As an inducement for
Seller to enter into this Agreement and to consummate the transactions
contemplated hereby, Purchaser represents and warrants to Seller that:
(a) Organization and Good Standing. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California and has full power and authority to own, lease and operate
its assets and properties and to conduct Purchaser's Business as it is now being
conducted. Purchaser is duly qualified or licensed to do business and is in good
standing as a foreign corporation under the laws of those jurisdictions in which
the conduct of its business or the ownership or leasing of its assets requires
such qualification. The copies of Seller's Articles of Incorporation, as amended
(certified by the Secretary of State of California), and Bylaws which have been
previously delivered to Seller or its representative are correct and complete.
(b) Legal Authority, Binding Effect. . Purchaser has the full
right, power and authority to enter into and perform this Agreement and all
other agreements, certificates and documents executed or delivered or to be
executed or delivered by Purchaser in connection herewith (collectively, with
this Agreement, "Purchaser's
Documents"). The execution, delivery and performance by Purchaser of Purchaser's
Documents have been duly authorized by the Board of Directors of Purchaser and,
when approved by the Shareholders of Purchaser by all other necessary corporate
action of Purchaser. This Agreement has been duly executed and delivered by
Purchaser and Purchaser's Documents are (or when executed and delivered by
Purchaser will be) legal, valid and binding obligations of Purchaser (to the
extent each of them is a party thereto), enforceable in accordance with their
respective terms.
(c) Restrictions. Except as set forth on Schedule 7(c), the
authorization, execution, delivery and performance of Purchaser's Documents and
the consummation of the transactions contemplated hereby and thereby do not and
will not (i) violate any of the provisions of the charter or bylaws of Purchaser
(ii) violate, conflict with, result in a breach of or constitute a default
under, require any notice or consent under, give rise to a right of termination
of, or accelerate the performance required by, any terms or provisions of any
agreement, instrument or writing of any nature to which Purchaser is a party or
is bound or any of its assets or business is subject, or (iv) violate, conflict
with or result in a breach of, or require any notice, filing or consent under,
any statute, rule, regulation or other provision of law, or any order, judgment
or other direction of a court or other tribunal, or any other governmental
requirement, permit, registration, license or authorization applicable to
Purchaser.
(d) Private Stock. As of the Acquisition Date, the Stock
Consideration shall be duly authorized and validly issued, fully paid,
nonassessable and issued without violation of any preemptive rights.
(e) Public Filings. Purchaser has filed all required forms,
reports and documents ("Purchaser SEC Reports") with the SEC since January 1,
2002, each of which has complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, each as in effect on
the dates such forms, reports and documents were filed. None of such Purchaser
SEC Reports, including, without limitation, any financial statements or
schedules included or incorporated by reference therein, contained when filed
any untrue statement of a material fact or omitted to state a material fact
required to be stated or incorporated by reference therein or necessary in order
to make the statements therein in light of the circumstances under which they
were made not misleading. The financial statements included in the Purchaser SEC
Reports have been prepared in accordance with GAAP applied on a consistent basis
by Purchaser (except as may be indicated in the notes thereto), and fairly
present in all material respects the consolidated financial position of
Purchaser as of the dates thereof and their consolidated results of operations
and changes in financial position for the periods then ended, except, in the
case of unaudited interim financial statements, for normal year-end audit
adjustments and the fact that certain information and notes have been condensed
or omitted in accordance with the applicable rules of the SEC.
(f) Liabilities. As of December 31, 2003, all liabilities of
Purchaser are set forth or adequately reserved against or otherwise disclosed in
the Financial Statements, in each case in accordance with GAAP, consistently
applied by Purchaser. Since December 31, 2003, Purchaser has incurred no other
Liabilities, except for those
incurred in the ordinary course of business as theretofore conducted which are
not materially adverse to the operations or prospects (financial or otherwise)
of the Purchaser's Business, except for the liabilities set forth on
Schedule 7(f).
(g) No Adverse Change. Since December 31, 2003, Purchaser has
operated its business only in the ordinary course of business as theretofore
conducted, and there has been no: (i) Material Adverse Effect, or any event or
development which, individually or together with other such events, could
reasonably be expected to result in a Material Adverse Effect; (ii) suffered any
damage or destruction resulting in a loss or cost to Purchaser of more than
$10,000 in the aggregate, whether or not covered by insurance; (iii) amendment
of its Articles of Incorporation or Bylaws; (iv) issuance of any additional
shares or other Purchaser securities or issuance, sale or grant of any option or
right to acquire or otherwise dispose of any of its authorized but unissued
shares or other company securities; (v) declaration or payment of any
distribution in cash or property on shares; (vi) repurchase or redemption of
shares or other Purchaser securities; (vii) incurrence, performance or payment
or other discharge, of any obligation or liability (absolute or contingent),
except for current obligations and liabilities incurred in the ordinary course
of business consistent with past practice; (viii) entering into of any
employment agreement with, or becoming liable for any bonus, profit-sharing or
incentive payment to, or increasing of the compensation or benefits of, any of
its officers, directors or employees; (ix) sale, transfer or acquisition of any
properties or assets, tangible or intangible, other than in the ordinary course
of business; (x) material changes in its customary method of operations
including marketing, selling and pricing policies and maintenance of business
premises, fixtures, furniture and equipment; (xi) modification, amendment or
cancellation of any of its existing leases or entering into any contracts,
agreements, leases or understandings other than in the ordinary course of
business or entering into of any loan agreements; (xii) investments other than
in certificates of deposit or short-term commercial paper; (xiii) capital
expenditure or addition or commitment to make a capital expenditure or addition,
when considered as a whole is in excess of an aggregate of $10,000; (xiv) Liens
or restrictions of any of Purchaser's Business or Purchaser's Assets; (xv)
commencement of any litigation, action or proceeding before any court,
governmental or regulatory body or arbitrational tribunal relating to
Purchaser's Business or Purchaser's Assets; or (xvi) changes in respect of any
election concerning Taxes or Tax Returns, adopted or changed any accounting
method, filed any amended Tax Return, entered into any closing agreement with
respect to Taxes, settled any Tax claim or assessment or surrendered any right
to claim a refund of Taxes or obtained or entered into any Tax ruling,
agreement, contract, understanding, arrangement or plan.
(h) Taxes. Purchaser has duly, timely and properly filed within
the time prescribed by law, all Tax Returns required to be filed by it with
respect to the income, business or operations of Purchaser with the appropriate
Governmental Authority in all jurisdictions in which such Tax Returns are
required by law to be filed and such Tax Returns were complete and accurate.
Purchaser has paid in full all Taxes due or claimed to be due on or in respect
of all such Tax Returns. Purchaser is not the subject of any pending or, to the
best knowledge of Purchaser and each Member, threatened tax examination nor is
it a party to any proceeding or inquiry by any
governmental authority for the assessment or the proposed assessment or for the
collection of Taxes nor has any claim for the assessment or proposed assessment
or for the collection of Taxes been asserted against Purchaser. There are no
Liens for Taxes that are due and unpaid on any of the assets or properties of
Purchaser. All amounts required to be withheld by Purchaser in connection with
its business or operations from customers with respect to the sale of goods, or
from or on behalf of employees for income, social security and unemployment
insurance taxes, have been collected or withheld and either paid to the
appropriate governmental agency or set aside and, to the extent required by the
Code or other Applicable Law, held in accounts for such purpose.
(i) Title to Property; Condition; All Assets. Purchaser has good
and marketable title to all of Purchaser's Assets, free and clear of all Liens
except as described in Schedule 7(i) hereto. Such Assets are in good order and
working condition, subject to ordinary wear and tear, and are adequate and
suitable for the purposes for which they are presently being used and their use
by Purchaser complies in all material respects with Applicable Law. Purchaser's
Assets constitute all of the properties and assets necessary to conduct
Purchaser's Business as it is presently conducted. There are no individual
refundable deposits, prepaid expenses, or deferred charges due Purchaser and
Purchaser has made no loans or advances to any Person.
(j) Real Property and Fixed Assets.
(i) Purchaser does not own any real property. Schedule 7(j)
hereto contains a list and brief description of all real property leased
by Purchaser. Purchaser's buildings and other structures (whether leased
or owned) are in good operating condition and repair, subject to ordinary
wear and tear, and are adequate and suitable for the purposes for which
they are presently being used and their use by Purchaser complies in all
material respects with Applicable Law.
(ii) All leases are valid, binding and enforceable in
accordance with their terms and are in full force and effect. No event or
condition exists, or to the best knowledge of Purchaser, is alleged by any
of the other parties thereto to exist, which constitutes, or with giving
of notice or lapse of time or both would constitute, a default under, or a
basis for termination of, any such lease. Purchaser does not owe any
brokerage commissions with respect to any such leased space. Purchaser has
delivered to Purchaser prior to the execution of this Agreement true and
complete copies of all such leases (including any amendments and renewal
letters).
(k) Patents, Trademarks and Copyrights. Purchaser has interests in
or the right to use the Intangible Property, the Know-how and the Proprietary
Information (collectively, the "Intellectual Property") disclosed in Schedule
7(k) hereto, each of which Purchaser has all right, title and interest in or
valid and binding rights under contract to use, and the use thereof in the
operation of Purchaser's Business does not and will not infringe the rights of
any other Person. Other than the Intellectual Property disclosed in Schedule
7(k) hereto, no other Intellectual Property is necessary in the conduct of the
Business of Purchaser. Except as disclosed in Schedule 7(k), with respect
to the Intellectual Property: (i) Purchaser has the exclusive right to use the
Intellectual Property, (ii) all registrations with and applications to any
Governmental Authority in respect of the Intellectual Property are valid and in
full force and effect and are not subject to the payment of any Taxes or
maintenance fees or the taking of any other actions by Purchaser to maintain
their validity or effectiveness, (iii) there are no restrictions on the direct
or indirect transfer of any contract, or any interest therein, held by Purchaser
in respect of the Intellectual Property, (iv) Purchaser has delivered to Seller
prior to the execution of this Agreement documentation with respect to any
invention, process, design, computer program or other know-how or trade secret
included in the Intellectual Property, which documentation is accurate in all
material respects and reasonably sufficient in detail and content to identify
and explain such invention, process, design, computer program or other know-how
or trade secret and to facilitate its full and proper use without reliance on
the special knowledge or memory of any person, (v) Purchaser has taken
reasonable security measures to protect the secrecy, confidentiality and value
of its trade secrets (vi) Purchaser has not received any notice that it is, in
default (or with the giving of notice or lapse of time or both, would be in
default) under any contract to use the Intellectual Property, (vii) to the best
knowledge of Purchaser and each of its officers and directors, no Intellectual
Property is being infringed by any other Person and (viii) Purchaser does not
pay any royalty to a third party with respect to its use of any Intellectual
Property.
Except as set forth on Schedule 7(k), Purchaser has not received
notice, either verbally or in writing, that Purchaser is infringing any
Intellectual Property of any other Person in connection with the conduct of
Purchaser's Business, no claim is pending or has been made, either verbally or
in writing, to such effect and Purchaser is not infringing any Intellectual
Property of any other Person in connection with the conduct of the Business.
(l) Contracts and Commitments. Schedule 7(l) contains a list of
all material leases, contracts, agreements and purchase and sales orders,
whether written, or to Purchaser's best knowledge, oral, relating to Purchaser's
Business and to which Purchaser is a party or and by which any of Purchaser's
Assets is bound. True and complete copies of the foregoing (or, in the case of
oral contracts, accurate summaries) have been delivered to Seller. Except as set
forth on Schedule 7(l), all of Purchaser's Contracts are in full force and
effect and constitute legal, valid and binding obligations of the respective
parties thereto. Purchaser has performed all obligations required to be
performed by it pursuant to the Contracts and no default, or event which with
notice or lapse of time or both would constitute a default, exists in respect
thereof on the part of Purchaser or the other parties thereto. Except as set
forth on Schedule 7(l), each of the Contracts will according to its terms
continue in full force and effect with no change to the material terms thereof
following the transfer of the Closing under this Agreement. The continuation,
validity and effectiveness of all the Contracts under the current material terms
thereof (including without limitation the current rentals under any leases or
licenses) will in no way be affected by the transfer of the Private Stock to
Seller under this Agreement or for any reason as a result of Seller entering
into the Royalty Liquidation Trust pursuant to Section 8(l) of this Agreement.
All the Contracts have been entered into on an arms-length basis and none is
materially burdensome to
Purchaser's Business. Except as set forth on Schedule 7(l), Purchaser has no
contracts, agreements or arrangements (a) providing for the payment of any bonus
or commission based on sales or earnings, or (b) with any officer, member,
director, consultant (other than fee agreements with Purchaser's accountants and
attorneys), agent or Affiliate of Purchaser, or (c) relating to employment or
severance or termination benefits (other than employment arrangements terminable
at will without liability on the part of Purchaser and other than for severance
or termination benefits required by statute or regulation).
(m) Inventory. Purchaser has no inventory.
(n) Accounts Receivable. All of Purchaser's Accounts Receivable
reflected on the financial statements of Purchaser and thereafter acquired
through the date hereof constitute only valid claims against third parties not
affiliated with Purchaser arising in the ordinary course of Purchaser's
Business. The Accounts Receivable arose in the ordinary course of business for
goods or services delivered or rendered, are payable upon ordinary trade terms,
constitute only legal, valid and binding obligations of the respective debtors
enforceable in accordance with their terms and are not subject to counterclaims
or setoffs.
(o) Compliance with Laws; Restrictions; Permits.
(i) Except as set forth on Schedule 7(o)(i), Purchaser is
conducting its Business, and all of its properties and Assets are, in
compliance with Applicable Law.
(ii) Purchaser is not aware and has not received any written
or verbal notification of any present or past failure so to comply or of
any past or present events, activities or practices of Purchaser or
incidents or actions of Purchaser or plans of Purchaser which may be
construed to indicate interference with or prevention of continued
compliance with Applicable Law or which may give rise to any common law or
statutory liability, or otherwise form the basis of any claim, action,
suit, proceeding, hearing or investigation.
(iii) The authorization, execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated
hereby do not and will not (1) violate any of the provisions of
Purchaser's Articles of Incorporation or Bylaws, (2) violate, conflict
with, result in a breach of or constitute a default under, require any
notice or consent under, give rise to a right of termination of, or
accelerate the performance required by, any terms or provisions of any
lease, contract, agreement or purchase or sale order, whether written, or
oral, to which Purchaser is a party or is bound, or any of its Assets or
Business is subject, (3) result in the creation of any Lien on any of
Purchaser's Assets or properties or (4) violate any judgment, order, writ,
prohibition, injunction or decree of any court or other governmental body
to which Purchaser is a party, subject to or bound by.
(iv) Set forth on Schedule 7(o)(iv) is a list of all
approvals, authorizations, certificates, consents, licenses, orders and
permits or other similar authorizations of any Governmental Authority
necessary for the operation of the Business in substantially the same
manner as currently operated. No other governmental or other registration,
filing, application, permit, notice, transfer, consent, approval, order,
qualification or waiver (collectively, a "Permit") is required under
Applicable Law to be obtained by Purchaser or Seller by virtue of the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby or to avoid the loss of any such Permit.
(p) Compensation of and Indebtedness to and from Employees and
Consultants.
(i) Purchaser currently has no employees, but Purchaser has
had employees in the past.
(ii) Except as set forth in Schedule 7(p)(ii), Purchaser has
no financial obligation and is not otherwise indebted to any person who is
or was an officer, director, shareholder, consultant or former employee of
Purchaser, or to any relative of any such person or to any entity
controlled directly or indirectly by, or otherwise affiliated with, such
person, in any amount whatsoever other than for compensation for services
rendered since the start of the current fiscal year of Purchaser generally
utilized for its employees and for normal and customary business expenses,
nor is any officer, director, shareholder or former employee of Purchaser,
or any relative of such person or any entity controlled directly or
indirectly by, or otherwise affiliated with, such person, indebted to
Purchaser except for normal and customary business reimbursement advances
made in the ordinary course of business.
(q) Insurance. Schedule 7(q) hereto lists all insurance policies
covering Purchaser or any aspect of Purchaser's Business, indicating the type of
coverage, name of insured, the insurer, the amount of coverage, the premium and
the expiration date of each policy. The insurance coverage provided by any of
the policies described above will not terminate or lapse by reason of the
transactions contemplated by this Agreement. Each policy listed is valid and
binding and in full force and effect, no premiums due thereunder have not been
paid, and Purchaser has not received any notice of cancellation or termination
in respect of any such policy or notice that Purchaser is in default thereunder.
(r) Litigation. Except as set forth in Schedule 7(r), there are
presently no actions, suits, disputes, claims, proceedings or investigations
pending or threatened against or affecting Purchaser, Purchaser's Business or
Purchaser's Assets, at law or in equity, before or by any court, agency, or
other governmental authority, including, without limitation, litigation with
competitors, customers or with contractors or suppliers who have performed work
on or supplied equipment or materials relating to the Business
or the properties of Purchaser. To the best knowledge of Purchaser, there is no
basis for any such action, suit, dispute, claim, proceeding or investigation and
none of the foregoing has been pending during the last three years. There is no
outstanding order, injunction or decree of any court, governmental authority or
arbitration tribunal against or affecting Purchaser, its Business or its Assets.
(s) Environmental Matters.
(i) Purchaser's business, assets and properties are and have
been operated and maintained in compliance with all environmental
protection laws and regulations of any Applicable Law (the "Environmental
Laws"). No event has occurred which, with or without the passage of time
or the giving of notice, or both, would constitute non-compliance by
Purchaser with, or a violation by Purchaser of, the Environmental Laws.
(ii) No real property leased, occupied or used in the
Business contains any underground storage tanks or Hazardous Substances.
Purchaser has not caused or permitted to exist, as a result of an
intentional or unintentional act or omission, a disposal, discharge or
release of Hazardous Substances originating on or from any site which
currently is or formerly was owned, leased, occupied or used in connection
with the Business, except where such disposal, discharge or release was
pursuant to and in compliance with the conditions of a permit issued by
the appropriate Governmental Authority. There are no properties owned,
leased, occupied or used in connection with Purchaser's Business which are
listed, or proposed for listing, on the National Priorities List pursuant
to the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Sections 9601 et seq., or on a registry or inventory of
inactive hazardous waste sites maintained by any state (i) which currently
is or formerly was owned, leased, occupied or used or (ii) with respect to
which Purchaser has received notice that it is considered to be a
potentially responsible person.
(t) Customers and Suppliers. No supplier or customer of
Purchaser's Business has cancelled or otherwise terminated, or made any written
threat to Purchaser to cancel or otherwise terminate, for any reason, including
the consummation of the transactions contemplated hereby, its relationship with
the Business or has at any time on or after January 1, 2004, decreased
materially its services or supplies to the Business in the case of any such
supplier, in each case if and only to the extent that such cancellation,
termination or threat, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect. To Purchaser's best knowledge, no
supplier or customer intends to cancel or otherwise terminate or decrease
materially its services or supplies to the Business or its usage of the services
or products of the Business, as the case may be, in each case if and only to the
extent that such cancellation, termination or reduction, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
(u) Products.
(i) Schedule 7(u) sets forth all claims asserted or, to the
best knowledge of Purchaser, threatened at any time since January 1, 2002
against Purchaser's Business in respect of personal injury, wrongful death
or property damage alleged to have resulted from products provided by the
Business, together with a description of each such claim or action
initiated with respect thereto and the disposition thereof.
(ii) Purchaser's Business has not experienced product recall
or warranty claims, other than warranty claims less than $1,000.00 since
the year ended December 31, 2003.
(v) Disclosure. No representation or warranty contained in this
Agreement, and no statement contained in the Schedules to this Agreement or in
any certificate, list or other writing furnished to Seller pursuant to any
provision of this Agreement (including without limitation Purchaser's Financial
Statements), contains any untrue statement of a material fact, or when taken as
a whole, omits to state a material fact necessary in order to make the
statements herein or therein, in the light of the circumstances under which they
were made, not misleading. There is no fact known to Purchaser which Purchaser
believes has or could have a Material Adverse Effect on Purchaser's Business,
which has not been set forth in this Agreement, including without limitation any
Schedules or Exhibits hereto, the financial statements of Purchaser or
certificate delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by or on behalf of Purchaser or by
any employee of Purchaser in connection with the transactions contemplated by
this Agreement. Purchaser has furnished or caused to be furnished to Seller
complete and correct copies of all agreements, instruments and documents set
forth on a Schedule hereto or underlying a disclosure set forth on any Schedule
hereto. Each of the Schedules hereto is complete and correct.
8. COVENANTS OF THE PARTIES.
(a) Covenant Against Competition and Disclosure.
(i) During the period commencing on the date hereof and
ending on December 31, 2006, neither Seller nor any officer, director or
controlling person of Seller or Purchaser shall, directly or indirectly,
for itself or themselves or on behalf of any other Person, (A) engage in
any business competitive with the Seller Business (including within the
definition of the Business, without limitation, any business of the type
or types conducted by Seller at any time during the two year period
preceding the date hereof or under development by Seller on the date
hereof) in any county or other political subdivision of any state of the
United States of America or of any other country in the world where Seller
has conducted any aspect of Business (including the sale of any products)
at any time during the two (2) year period preceding the date hereof, (B)
disclose to any Person other than Purchaser or Seller, any information
relating to the business of Seller or Purchaser (including without
limitation information relating to accounts, financial dealings,
transactions, trade secrets, Intellectual Property, customer lists and
pricing lists), whether or not marked or otherwise identified as
confidential or secret, (C) solicit, divert, take away or attempt to take
away, with respect to the products of either Business as presently
conducted, any of Seller's or Purchaser's customers or suppliers, or (D)
hire any employee or induce or attempt to induce any employee to leave his
or her employment with Purchaser without the prior written consent of
Purchaser. At the request of Seller and/or Purchaser, Seller and Purchaser
shall use their best efforts to cause their respective officer, directors,
and controlling persons to enter into agreements for the benefit of
Purchaser and Seller consistent with the terms of this Section 8(a)(i)
effective as of the Acquisition Date (the "Non-Competition Agreements")
(ii) Seller acknowledges that the restrictions contained in
this Section 8(a) are reasonably necessary to protect the good will
transferred to Purchaser and the legitimate business interests of
Purchaser and that any violation of such restrictions will result in
irreparable injury to Purchaser and the Business acquired by Purchaser
hereunder for which damages will not be an adequate remedy. Purchaser
shall therefore be entitled to preliminary and injunctive relief as well
as to an equitable accounting of earnings, profits and other benefits
arising from such violation and any other remedies at law or in equity
available to Purchaser. The parties hereto agree that the duration and
area for which the covenants set forth in this Section 8(a) are to be
effective are reasonable. In the event that any court determines that the
time period or the area, or both of them, are unreasonable, the parties
hereto agree that the covenants shall remain in full force and effect for
the greatest time period and in the greatest area that would not render
them unenforceable.
(iii) Purchaser acknowledges that the restrictions contained
in this Section 8(a) are reasonably necessary to protect the good will of
Purchaser and the legitimate business interests of Purchaser and that any
violation of such restrictions will result in irreparable injury to Seller
and the Business in which Seller is acquiring a substantial equity
interest hereunder for which damages will not be an adequate remedy.
Seller shall therefore be entitled to preliminary and injunctive relief as
well as to an equitable accounting of earnings, profits and other benefits
arising from such violation and any other remedies at law or in equity
available to Seller. The parties hereto agree that the duration and area
for which the covenants set forth in this Section 8(a) are to be effective
are reasonable. In the event that any court determines that the time
period or the area, or both of them, are unreasonable, the parties hereto
agree that the covenants shall remain in full force and effect for the
greatest time period and in the greatest area that would not render them
unenforceable.
(b) Employment of ▇▇▇▇▇ ▇▇▇▇▇. Purchaser's Board of Directors will
offer to employ ▇▇▇▇▇ ▇▇▇▇▇ as the President and Chief Executive Officer of
Purchaser for a term of three (3) years after the Acquisition Date subject to
the terms of the letter
agreement attached hereto as Exhibit "B" and incorporated herein by reference,
and Seller will cause ▇▇▇▇▇ ▇▇▇▇▇ to accept such employment.
(c) Employment of Other Employees. Purchaser will offer employment
to all other employees (other than Members) of the Business on terms
substantially equivalent to the salary and benefits provided to such employees
by Seller. Any such employees so employed will be at-will employees terminable
by Purchaser at any time with or without cause, subject to Purchaser's normal
termination policies considering the length of employment of such employee by
Purchaser and Seller. Seller agrees to use its best efforts to assist Purchaser
in hiring as its employees any employees of Seller under substantially similar
terms to the terms under which such employee was employed by Seller. Purchaser
will use its best efforts to obtain from ▇. ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ a general release of all known or unknown claims either may have
arising out of or in connection with performing services for the Company as an
employee, agent and/or consultant (other than claims for indemnity under the
Purchaser's Articles of Incorporation or Bylaws which arise out of their
respective actions taken in good faith as directors or officers of Purchaser).
(d) Retention of Independent Contractors. Seller agrees to use its
best efforts to assist Purchaser in engaging as its independent contractors the
current key independent contractors of Seller as set forth on Schedule 8(d)
hereto, on substantially similar terms under which such independent contractor
was engaged by Seller. Purchaser will offer to engage ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ as a
consultant to the Company pursuant to a consulting contract on terms and
conditions reasonably acceptable to Seller and ▇▇. ▇▇▇▇▇▇▇▇▇.
(e) Sales Taxes. All sales and other transfer taxes relating to
the sale of the Seller Assets pursuant to the terms hereof shall be shared
equally between Seller and Purchaser.
(f) Bulk Sales. Seller shall cooperate with Purchaser as
reasonably requested by Purchaser to comply with Applicable Law relating to bulk
sales or transfers of assets.
(g) Assignment of Contracts and Rights. Anything in this Agreement
to the contrary notwithstanding, this Agreement shall not constitute an
agreement to assign any Asset or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted assignment thereof, without
the consent of a third party thereto, would constitute a breach or other
contravention thereof, be ineffective with respect to any party thereto or in
any way adversely affect the rights of Seller or, upon transfer, Purchaser
thereunder. Seller agrees that it will use its best efforts to obtain the
necessary consents to the assignment of each Seller Contract or other Seller
Asset which by its terms requires the consent of any of the other contracting
parties thereto to an assignment thereof to Purchaser. If such consent is not
obtained with respect to any such Contract or other Asset, Seller and Purchaser
will cooperate in an arrangement reasonably satisfactory to Purchaser and Seller
under which Purchaser shall obtain, to the extent practicable, the claims,
rights and benefits and assume the corresponding obligations
thereunder in accordance with this Agreement, including subcontracting,
sub-licensing or sub-leasing to Purchaser, or under which Seller shall enforce
for the benefit of Purchaser, with Purchaser assuming Seller's obligations, any
and all claims, rights and benefits of Seller against a third party thereto.
Seller will promptly pay to Purchaser when received all monies received by
Seller under any Contract or other Asset or any claim, right or benefit arising
thereunder not transferred to Purchaser pursuant to this Section 8(j). Purchaser
agrees to perform at its sole expense all of the obligations of Seller to be
performed after the Acquisition Date under any such Contract or other Asset the
benefits of which Purchaser is receiving pursuant to the provisions of this
Section 8(g).
(h) Power of Attorney. Seller hereby constitutes and appoints
Purchaser the true and lawful attorney of Seller, with full power of
substitution, in the name of Seller or in the name of Purchaser, but for the
benefit of Purchaser and at the expense of Purchaser (provided, however, that,
Seller's obligations will not in any way be limited as a result of Purchaser
undertaking such expense) (1) to collect, assert or enforce any claim, right or
title of any kind in or to the Assets, to institute and prosecute all actions,
suits and proceedings which Purchaser may deem proper in order to collect,
assert or enforce any such claim, right or title, to defend and compromise all
actions, suits and proceedings in respect of any Asset, and to do all such acts
and things in relation thereto as Purchaser shall deem advisable and (2) to
endorse, without recourse, the name of Seller on any check or other evidence of
indebtedness received by Purchaser on account of any Asset. Seller acknowledges
that such powers are coupled with an interest and shall not be revocable by it
in any manner or for any reason, including its dissolution, and that Purchaser
shall be entitled to retain for its own account any amounts collected pursuant
to such powers, including any amounts payable as interest in respect thereof.
Such powers shall be granted by such powers of attorney and other instruments as
shall be reasonably requested by counsel for Purchaser.
(i) Change of Name. On the Acquisition Date, Seller will change
its name to a name not using the name "Allergy Free" or any name confusingly
similar to "Allergy Free." On the Acquisition Date, subject to availability,
Purchaser will change its name to "Planet Technologies, Inc."
(j) Transfer of Trade Names and Trademarks. Prior to the
Acquisition Date, Seller will cause all trade names and trademarks which are
used in the Seller Business to be transferred to Seller, and Members shall cause
any such transfers to be promptly recorded in the appropriate offices in order
to give effect to, and to reflect, such transfers.
(k) Surrender of Certain Options. Purchaser will use its best
efforts to cause all options at an exercise price above $1.00 per share, pre
split, but considering any applicable anti-dilution adjustments, to be
surrendered and cancelled and the closing of the transaction by Seller will be
contingent upon the surrender and cancellation of substantially all of such
out-of-the-money options.
(l) Distribution of Royalty Rights. Immediately prior to the
Closing, Purchaser shall assign to US Bank, or another Person, as Trustee, for
the benefit of
Purchaser's shareholders of record as of the record date of the meeting called
to vote on the Acquisition, the right to receive all royalties payable to
Purchaser pursuant to those certain Sale and Licensing Agreements between
Purchaser and Agway, Inc., each dated March 31, 2003, relating to Purchaser's
FreshSeal and Optigen technology ("Agway Agreements"), the rights under which
have been sold by Agway to BASF and Alltech, respectively, and that certain
Purchase, Sale and License Agreement between Purchaser and ▇▇▇▇ Enterprises,
LLC, dated May 1, 2003, relating to Purchaser's MIM technology ("▇▇▇▇
Agreement"). The Trustee will be instructed to distribute royalties received, if
any, quarterly. The Agway Agreements and ▇▇▇▇ Agreement are collectively
referred to as the Sale and Licensing Agreements. Other than the right to
receive and collect royalties, Purchaser will retain all other rights and
obligations under the Sale and License Agreements. Purchaser will also assign to
the Trustee substantially all of the monthly installments received from ▇▇▇▇
post closing, in cash, in one or more payments to create a cash reserve at the
Trustee in such amounts as the Trustee and Purchaser shall agree to provide a
reserve from which the Trustee may pay its trustee's fees and reimbursement for
costs and expenses incurred by the Trustee in connection with enforcing payment
of the royalties. In the event Purchaser incurs costs or expenses in connection
with obligations under the Sale and Licensing Agreements, Purchaser shall be
entitled to reimbursement from the trust for such costs and expenses to the
extent of any undistributed royalties received by the Trustee, provided such
rights shall be subordinate to any rights of the Trustee for payment of its fees
and expenses. In the event pursuant to the Sale and Licensing Agreement,
Purchaser recovers the exclusive or nonexclusive right to exploit such
technologies, Purchaser may do so for Purchaser's own account and with no
obligation to pay royalties to the Trustee.
(m) Reverse Stock Split. Effective as of the Acquisition Date or
immediately thereafter, Purchaser will implement a reverse split of it shares by
a ratio of 50:1 (the "Reverse Stock Split").
(n) Private Placement. Concurrently with the Acquisition,
Purchaser will offer to shareholders of Purchaser and Members of Seller the
opportunity to purchase from Purchaser Common Stock in an unregistered Private
Placement at a purchase price equal to the greater of (i) $0.03 per share or
(ii) 70% of weighted average market price of Purchaser Common Stock for the ten
(10) Business Day period immediately preceding the Acquisition Date (the
"Private Placement"). The aggregate offering will be up to $2,000,000 plus any
debt converted by Seller, and subscriptions will be limited to accredited
investors and up to thirty-five (35) other investors. If the offering is
oversubscribed, shares will first be allocated to Purchaser shareholders on a
pro rata basis, second to Seller Members and the balance, if any, to new
investors.
(o) Board of Directors. The parties will use their best efforts to
cause the appointment and election of a board of directors of Purchaser
effective immediately after closing consisting of ▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇. ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇.
(p) Registration Rights. Prior to the Effective Date, Purchaser
and Seller shall enter into a Registration Rights Agreement on reasonable and
customary
terms pursuant to which Purchaser will agree to use its best effort to cause the
Private Stock and shares issuable upon conversion of the Subordinated
Convertible Note to be registered under the Securities Act within 180 days after
the Acquisition Date.
9. CONDITIONS.
(a) Conditions to Each Party's Obligations. The respective
obligation of each of the parties hereto to consummate the Acquisition is
subject to the fulfillment or written waiver by the parties hereto prior to the
Acquisition Date of each of the following conditions:
(i) Shareholder Approvals. This Agreement shall have been
duly approved by the affirmative vote of holders of not less than a
majority of the outstanding Members of Seller, in accordance with
applicable law. The principal terms of this Agreement shall have been
approved by the affirmative vote of the holders of not less than a
majority of the outstanding shares of Purchaser, in accordance with
applicable law.
(ii) Regulatory Matters. Purchaser shall have obtained an
affirmative response to its "No Action Letter" to the SEC, relating to
distribution of the right to receive royalty payments to the Trustee as
described in Section 8(l).
(iii) No Injunction. No Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and
prohibits consummation of the transactions contemplated by this Agreement.
(b) The obligation of the Seller to consummate the Acquisition is
also subject to the fulfillment or written waiver prior to the Acquisition Date
of each of the following additional conditions:
(i) Representations and Warranties. The representations and
warranties of Purchaser set forth in this Agreement shall be true and
correct as of the date of this Agreement and as of the Acquisition Date as
though made on and as of the Acquisition Date (except that representations
and warranties that by their terms speak as of the date of this Agreement
or some other date shall be true and correct as of such date). For
purposes of this paragraph, such representations and warranties shall be
deemed to be true and correct in all material respects unless the failure
or failures of such representations and warranties to be true and correct
in all material respects, either individually or in the aggregate, and
without giving effect to any materiality, material adverse effect or
similar qualifications set forth in such representations and warranties,
will have or would reasonably be expected to have a Material Adverse
Effect on Purchaser. Purchaser shall have performed, in all material
respects, each of its covenants and agreements contained in this
Agreement. The Seller shall have received a certificate, dated the
Acquisition
Date, signed on behalf of Purchaser by the Chief Executive Officer and the
Chief Financial Officer of Purchaser to such effect.
(ii) Performance of Obligations of Parent. Purchaser shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Acquisition Date,
and the Seller shall have received a certificate, dated the Acquisition
Date, signed on behalf of Purchaser by the Chief Executive Officer and the
Chief Financial Officer of Purchaser to such effect.
(iii) Satisfaction of Covenants. Purchaser shall have retained
▇▇▇▇▇ ▇▇▇▇▇ as President and Chief Executive Officer, entered into a
consulting agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, and taken all steps necessary
to effectuate the Reverse Stock Split, election of the board of directors,
Private Placement, surrender of out of the money options and distribution
of the royalty rights, all as more fully provided in Section 8 of this
Agreement.
(c) The obligation of the Purchaser to consummate the Acquisition
is also subject to the fulfillment or written waiver prior to the Acquisition
Date of each of the following additional conditions:
(i) Representations and Warranties. The representations and
warranties of Seller set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Acquisition Date as though
made on and as of the Acquisition Date (except that representations and
warranties that by their terms speak as of the date of this Agreement or
some other date shall be true and correct as of such date). For purposes
of this paragraph, such representations and warranties shall be deemed to
be true and correct in all material respects unless the failure or
failures of such representations and warranties to be true and correct in
all material respects, either individually or in the aggregate, and
without giving effect to any materiality, material adverse effect or
similar qualifications set forth in such representations and warranties,
will have or would reasonably be expected to have a Material Adverse
Effect on Seller The Purchaser shall have received a certificate, dated
the Acquisition Date, signed on behalf of Seller by the Chief Executive
Officer and the Chief Financial Officer of Seller to such effect.
(ii) Performance of Obligations of Purchaser. Seller shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Acquisition Date,
and Purchaser shall have received a certificate, dated the Acquisition
Date, signed on behalf of Seller by the Chief Executive Officer and the
Chief Financial Officer of Seller to such effect.
(iii) Satisfaction of Covenants. Purchaser shall have retained
▇▇▇▇▇ ▇▇▇▇▇ as President and Chief Executive Officer, and taken all steps
necessary to effectuate the election of the board of directors, the
Private
Placement, and distribution of the royalty rights, all as more fully
provided in Section 8 of this Agreement.
10. TERMINATION.
(a) This Agreement may be terminated:
(i) Mutual Consent. At any time prior to the Acquisition
Date, by the mutual consent of Purchaser and Seller.
(ii) Breach. At any time prior to the Acquisition Date, by
Purchaser or Seller in the event of a breach or any representation,
warrant, covenant or obligation contained herein by Seller, in the case of
termination by Purchaser, or by Purchaser, in the case of termination by
Seller, which breach cannot be or has not been cured within thirty (30)
days after the giving of written notice to the breaching party or parties
of such breach provided that such breach would be reasonably likely,
individually or in the aggregate with other breaches, to result in a
Material Adverse Effect with respect to Purchaser or Seller, as the case
may be.
(iii) Delay. At any time prior to the Acquisition Date by
Purchaser or Seller in the event that the Acquisition is not consummated
by June 20, 2004, except that Purchaser or Seller, as the case may be,
shall not have the right to terminate pursuant to this Sub-Section
10(a)(iii) to the extent that the failure to close arises out of or
results from the knowing action or inaction of the party seeking to
terminate pursuant to this Sub-Section 10(a)(iii), which action or
inaction is in violation of its obligations under this Agreement.
(iv) At any time prior to the Acquisition Date, by Purchaser
if Purchaser receives a written proposal or offer with respect to a
merger, reorganization, share exchange, consolidation or similar
transaction involving, or any purchase of all or substantially all of the
assets of the Purchaser or more than 50% of the outstanding equity
securities, of the Purchaser (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal"), if and only to the extent that,
the Board of Purchaser determines in good faith that (i) acceptance of the
Acquisition Proposal would be legally required in order for the directors
to comply with their respective fiduciary duties under applicable law,
(ii) such Acquisition Proposal, if accepted, is reasonably likely to be
consummated, taking into account all legal, financial and regulatory
aspects of the proposal, and the Person making the proposal, and (iii) if
consummated, the Acquisition Proposal would result in a transaction more
favorable to the Purchaser's shareholders from a financial point of view
than the transaction contemplated by this Agreement. The Purchaser agrees
that its officers or directors shall not, and that it shall direct and use
its reasonable best efforts to cause its employees, agents and
representatives not to, directly or indirectly, initiate, solicit or
otherwise encourage any inquiries or the making of any proposal or offer
with respect to an Acquisition Proposal. Purchaser agrees that it will
notify Seller immediately if
any inquiries, proposals or offers are received by, or any discussions or
negotiations are sought to be initiated or continued with, Purchaser or
any of its representatives relating to a potential Acquisition Proposal.
(v) Due Diligence. By either party, if at or prior to April
15, 2004, such party notifies the other party that it has decided not to
pursue the transaction contemplated by this Agreement, following review of
the information regarding the other party not provided to such party prior
to the date of this Agreement.
(b) Effect of Termination. In the event of termination of this
Agreement pursuant to this Section 10, no party to this Agreement shall have any
liability or obligation to any other party hereunder except as set forth in
Sub-Sections (i) and (ii) and provided that termination will not relieve a
breaching party and liability for any willful breach of any covenant, agreement,
representation or warranty or this Agreement giving rise to such termination.
(i) If this Agreement is terminated by the Purchaser
pursuant to Sub-Section (10)(a)(iv), upon such termination, Purchaser
shall pay to the Seller a termination fee of $50,000.00 (the "Termination
Fee").
(ii) If this Agreement is terminated by either party pursuant
to Section 10(a)(v), such party shall pay to the other party upon such
termination a due diligence fee of $25,000.00 ("Due Diligence Fee").
(iii) Each party agrees that the agreements contained in
Sub-Sections (i) and (ii) above are an integral part of the transactions
contemplated by this Agreement, that without such agreements the parties
would not have entered into this Agreement, and that such amounts do not
constitute a penalty.
11. DELIVERIES. Upon the terms and subject to the conditions set forth
in this Agreement, at the Closing, the parties shall make the following
deliveries:
(a) Instruments of Conveyance. Seller is delivering to Purchaser
bills of sale, instruments of transfer, assignment and conveyance, and other
instruments as the parties and their respective counsel shall deem reasonably
necessary or appropriate, to convey, transfer and assign to Purchaser and
effectively vest in Purchaser all right, title and interest in and to, and good
and marketable title to, the Assets.
(b) Possession. Seller shall transfer and deliver to Purchaser on
the Acquisition Date such keys, passwords, codes, lock and safe combinations and
other similar items as Purchaser shall require to obtain immediate and full
possession and control of the Assets, and shall also make available to Purchaser
at their then existing locations the originals of all documents in Seller's
possession that are required to be transferred to Purchaser by this Agreement.
(c) Opinion of Counsel. Each party shall deliver to the other
party an opinion of counsel for such party substantially in the form and content
of Exhibit "C"
addressed to the other party and dated the Acquisition Date. In rendering such
opinion, counsel may rely upon certificates of public officials and upon
certificates of officers as to factual matters.
(d) Contract Assumption. Purchaser shall deliver to Seller
instruments of assumption of the Contracts listed on Schedule 6(k).
(e) Closing Balance Sheet. Seller shall deliver to Purchaser the
Closing Balance Sheet.
12. INDEMNIFICATION BY SELLER. Subject to the limitations set forth in
Section 5(c) and Section 14(c), Seller shall indemnify, defend and save
Purchaser and its officers, directors and shareholders (collectively, the
"Purchaser Indemnitees"), harmless from, against, for and in respect of any and
all Damages suffered, sustained, incurred or required to be paid by any
Purchaser Indemnitee caused by, resulting from or arising out of (A) the claims
of any broker or finder engaged by Seller, (B) the untruth, inaccuracy or breach
of any representation or warranty of Seller contained in or made in connection
with this Agreement or any Schedule or Exhibit hereto or any other Seller's
Document, (C) the breach of any agreement or covenant of Seller contained in or
made in connection with this Agreement, (D) any failure of Seller to pay,
perform or discharge any of the Excluded Liabilities in accordance with the
terms thereof, (E) any Liabilities in connection with noncompliance with the
provisions of any Applicable Law relating to bulk sales or transfers of assets
in connection with the transactions contemplated by this Agreement (other than
an Assumed Liability).
13. INDEMNIFICATION BY PURCHASER. Subject to the limitations set forth
in Section 5(c) and Section 14(c), subject to the limitations hereinafter set
forth, Purchaser shall indemnify, defend and save Seller, and its Members,
officers and directors ("Seller Indemnitees"), harmless from, against, for and
in respect of any and all Damages suffered, sustained, incurred or required to
be paid by any Seller Indemnitee because of (A) the claims of any broker or
finder engaged by Purchaser, (B) the untruth, inaccuracy or breach of any
representation, warranty, agreement or covenant of Purchaser contained in or
made in connection with this Agreement or any Schedule or Exhibit hereto or any
other Purchaser's Document (c) the breach of any agreement or covenant of
Purchaser contained in or made in connection with this Agreement, and (D) any
Liability arising out of the operation of the Business after the Acquisition
Date, except to the extent the foregoing is otherwise subject to indemnification
by Seller under this Agreement.
14. FURTHER PROVISIONS REGARDING INDEMNIFICATION.
(a) Survival.
(i) All representations, warranties, covenants, agreements
and obligations of each of Seller Purchaser and Purchaser in this
Agreement or in Seller's Documents and Purchaser's Documents and all
claims of an Indemnified Party (as defined below) in respect of any breach
of any representation, warranty, covenant, agreement or obligation of any
Indemnifying Party (as defined below)
contained in this Agreement, shall survive the consummation of the
transactions contemplated herein and shall expire on the second (2nd)
anniversary of the Acquisition Date.
(ii) Notwithstanding anything herein to the contrary,
indemnification for claims for which written notice as provided in Section
14(b) has been given prior to the expiration of the representation,
warranty, covenant, agreement or obligation upon which such claim is based
shall not expire, and claims for indemnification may be pursued, until the
final resolution of such claim.
(iii) Nothing in this Section 14(a) shall modify in any
respect any covenant, agreement or obligation to be performed by any party
pursuant to the provisions of this Agreement.
(iv) Nothing contained in this Agreement or otherwise shall
in any way limit any claim, suit, cause of action or remedy that may be
available to any party based on Fraud.
(b) Defense of Claims. Whenever any claim shall arise for
indemnification hereunder, the party entitled to indemnification (the
"Indemnified Party") shall promptly notify the other party (the "Indemnifying
Party") in writing of the claim and, when known, the facts constituting the
basis for such claim. The Indemnifying Party may, upon written notice to the
Indemnified Party within 30 calendar days of receipt of the notice specified in
the first sentence of this paragraph, assume the defense of any such claim if
the Indemnifying Party acknowledges to the Indemnified Party the Indemnified
Party's right to indemnify pursuant hereto in respect of the entirety of such
claim. If the Indemnifying Party assumes the defense of any such claim, the
Indemnifying Party shall select counsel acceptable to the Indemnified Party to
conduct the defense of such claim, shall take all steps necessary in the defense
or settlement thereof and shall at all times diligently and promptly pursue the
resolution thereof. If the Indemnifying Party shall have assumed the defense of
any claim in accordance with this Section 13(b), the Indemnifying Party shall be
authorized to consent to a settlement of, or the entry of any judgment arising
from, any such claim, without the prior written consent of the Indemnified
Party; provided, however, that (i) the Indemnifying Party shall pay or cause to
be paid all amounts arising out of such settlement or judgment concurrently with
the effectiveness thereof; (ii) the Indemnifying Party shall not be authorized
to encumber any of the assets of the Indemnified Party or to agree to any
restriction that would apply to the Indemnified Party or to its conduct of
business; and (iii) a condition to any such settlement shall be a complete
release of the Indemnified Party with respect to such claim which contains no
admission of liability on the part of the Indemnified Party. The Indemnified
Party shall be entitled to participate in the defense of any such action, with
its own counsel and at the expense of the Indemnifying Party. The Indemnified
Party shall, and shall cause each of its Affiliates, officers, employees,
consultants and agents to, cooperate fully with the Indemnifying Party in the
defense of any claim or Proceeding being defended by the Indemnifying Party
pursuant to this Section 14(b). If the Indemnifying Party does not assume the
defense of any claim resulting therefrom in
accordance with the terms of this Section 13(b), the Indemnified Party may
defend against such claim in such manner as it may deem appropriate, including
settling such claim after giving notice of the same to the Indemnifying Party,
on such terms as the Indemnified Party may deem appropriate.
(c) Indemnification Threshold. No claim for indemnification will
be made by any Indemnified Party against any Indemnifying Parties unless the
aggregate of all Damages incurred by the Indemnified Parties exceeds $10,000, in
which case the Indemnifying Parties shall be liable for such Damages including
the initial $10,000.
15. GENERAL PROVISIONS.
(a) Further Assurances. The parties shall cooperate and take such
actions, and execute such other documents subsequent to the Acquisition Date as
either may reasonably request in order to carry out the provisions or purpose of
this Agreement.
(b) Notices. All notices or other communications in connection
with this Agreement shall be in writing and shall be deemed given (a) if
personally delivered, when delivered, (b) if mailed, two Business Days after
having been sent by registered or certified mail, postage prepaid, return
receipt requested, or (c) if sent through an overnight delivery service in
circumstances to which such service guarantees next-day delivery, the day
following be so sent, as follows:
(i) If to Seller:
▇▇▇▇▇ ▇▇▇▇▇
Allergy Free, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇.▇. ▇▇▇ ▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(ii) If to Purchaser:
c/o ▇. ▇▇▇ ▇▇▇▇▇
Planet Polymer Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & French
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(c) Entire Agreement; Amendment; No Waiver. This Agreement (which
includes the Schedules and Exhibits hereto) sets forth the parties final and
entire agreement with respect to its subject matter and supersedes any and all
prior understandings and agreements. This Agreement can be amended or
supplemented, and any provision hereof can be waived, only by a written
instrument making specific reference to this Agreement, in the case of amendment
or supplement, signed by all the parties hereto, or in the case of a waiver,
signed by the party against whom enforcement of such waiver is sought. No waiver
by a party of any default, misrepresentation or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent occurrence. No failure or delay by a party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
(d) Public Announcements. Seller agrees that they will not make
any public announcement, including any announcement to the employees of the
Business, or otherwise cause to be publicized in any manner by way of press
interviews, responses to press questions or inquiries, press releases or
otherwise in any manner designed for
release to the general or trade press, any aspect or proposed aspect of this
transaction (including but not limited to the price paid and other terms of the
transaction) without the mutual agreement of Purchaser.
(e) Successors; Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and assigns.
This Agreement or any of its rights, interests or obligations hereunder may not
be assigned or transferred by either party without the prior written consent of
the other party.
(f) Captions. The section and paragraph headings in this Agreement
and in the Schedules hereto are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
(g) Fees and Expenses. Whether or not the transactions
contemplated hereby are consummated, the parties hereto shall pay their own
respective expenses.
(h) Severability; Construction. If any provision of this Agreement
shall be held by any court of competent jurisdiction to be illegal, invalid,
unenforceable or void, such provision shall be construed and enforced as if it
had been more narrowly drawn so as not to be illegal, invalid, unenforceable or
void, and such illegality, invalidity or unenforceability shall have no affect
upon and shall not impair the enforceability of any other provision of this
Agreement. The parties hereto intend that each representation, warranty and
covenant contained herein will have independent significance. If any party has
breached any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) that the party has not breached will not detract from or mitigate
the fact that the party is in breach of the first representation, warranty or
covenant.
(i) Governing Law; Exclusive Jurisdiction. This Agreement shall be
governed by and construed and interpreted in accordance with the internal law of
the State of California (without reference to its rules as to choice or conflict
of law). Each of the parties hereto agrees that any legal action or proceeding
against it or any of its property with respect to this Agreement or any other
agreement executed in connection herewith, except as otherwise provided herein,
shall be brought exclusively in the Superior Courts for the County of San Diego,
State of California, or the Federal District Court for the Southern District of
California, and all related appellate courts, and the parties irrevocably
consent to the jurisdiction of such courts.
(j) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
[The remainder of this page is intentionally left blank]
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
PLANET POLYMER TECHNOLOGIES, INC.
By: ____________________________________
▇. ▇▇▇ ▇▇▇▇▇, President
ALLERGY FREE, LLC
By: SR Technologies Associates, Manager
By: ____________________________________
▇▇▇▇▇ ▇▇▇▇▇, President
FIRST AMENDMENT TO THE ASSET PURCHASE AGREEMENT
DATED AS OF MARCH 18, 2004 BY AND AMONG
PLANET POLYMER TECHNOLOGIES, INC. AND ALLERGY FREE, LLC
This first amendment ("Amendment") to the Asset Purchase Agreement
("Agreement") dated as of March 18, 2004 by and among Planet Polymer
Technologies, Inc. ("Purchaser") and Allergy Free, LLC ("Seller") is made and
entered into as of June 11, 2004 by and among the parties to the Agreement and
is made with reference to the following:
RECITALS
WHEREAS, the parties entered into the Agreement as of March 18, 2004;
WHEREAS, the ability of the parties to close the transaction has been
delayed due to factors outside of the control of either party, the parties now
desire to amend the Agreement;
AGREEMENT
NOW THEREFORE, in consideration of the above recitals and the mutual
promises and agreements contained in this Amendment, and for valuable
consideration, the receipt and sufficiency of which is hereby acknowledged and
agreed, the parties hereby agree as follows:
1. In accordance with Section 4(b) of the Agreement, Seller has elected
to reduce the Subordinated Convertible Note to $356,430 and take additional
shares of common stock of Purchaser for the balance of the outstanding
indebtedness of Allergy Free to its members determined at $.05 per share.
2. Section 8(l) is hereby amended and restated as follows:
"(1) Distribution of Royalty Rights. Immediately prior to the
Closing, Purchaser shall assign to US Bank, or another Person, as Trustee, for
the benefit of Purchaser's shareholders of record on April 15, 2004, the right
to receive all royalties payable to Purchaser pursuant to those certain Sale and
Licensing Agreements between Purchaser and Agway, Inc., each dated March 31,
2003, relating to Purchaser's FreshSeal and Optigen technology ("Agway
Agreements"), the rights under which have been sold by Agway to BASF and
Alltech, respectively, and that certain Purchase, Sale and License Agreement
between Purchaser and ▇▇▇▇ Enterprises, LLC, dated May 1, 2003, as amended,
relating to Purchaser's MIM technology ("▇▇▇▇ Agreement"). The Trustee will be
instructed to distribute royalties received, if any, quarterly. The Agway
Agreements and ▇▇▇▇ Agreement are collectively referred to as the Sale and
Licensing Agreements. Purchaser will also assign to US Bank or another Person,
as Trustee, for the benefit of
C1-1
Purchaser's shareholders of record as of April 15, 2004, all proceeds received
from ▇▇▇▇ or its Successor in prepayment of the ▇▇▇▇ Note, less fees and
expenses related to accepting such prepayment and amending the ▇▇▇▇ Agreement.
The terms of the ▇▇▇▇ Note are described more fully in the ▇▇▇▇ Agreement. Other
than the right to receive and collect (i) royalties and (ii) proceeds received
in prepayment of the ▇▇▇▇ Note, Purchaser will retain all other rights and
obligations under the Sale and License Agreements. In the event Purchaser incurs
costs or expenses in connection with obligations under the Sale and Licensing
Agreements, Purchaser shall be entitled to reimbursement from the trust for such
costs and expenses to the extent of any undistributed royalties received by the
Trustee, provided such rights shall be subordinate to any rights of the Trustee
for payment of its fees and expenses. In the event pursuant to the Sale and
Licensing Agreement, Purchaser recovers the exclusive or nonexclusive right to
exploit such technologies, Purchaser may do so for Purchaser's own account and
with no obligation to pay royalties to the Trustee."
3. Section 10(a)(iii) of the Agreement is hereby amended and restated
as follows:
"(iii) Delay. At any time prior to the Acquisition Date by Purchaser or
Seller in the event that the Acquisition is not consummated by August 31, 2004,
except that Purchaser or Seller, as the case may be, shall not have the right to
terminate pursuant to this Sub-Section 10(a)(iii) to the extent that the failure
to close arises out or results from the knowing action or inaction of the party
seeking to terminate pursuant to this Sub-Section 10 (a)(iii), which action or
inaction is in violation of its obligations under this Agreement."
4. Purchaser has selected June 15, 2004 as the "record date" for which
shareholders of Purchaser will be entitled to vote on whether to approve the
Acquisition.
5. Section 8(n) of the Agreement is hereby amended and restated as
follows:
"8.(n) Concurrently with the Acquisition, Purchaser will offer to
shareholders of Purchaser and Members of Seller the opportunity to purchase from
Purchaser Common Stock in an unregistered Private Placement at a purchase price
equal to $0.05 per share (the "Private Placement"). The aggregate offering will
be up to $2,000,000 and subscriptions will be limited to accredited investors
and up to thirty-five (35) other investors. If the offering is oversubscribed,
shares will first be allocated to Purchaser shareholders on a pro rata basis,
second to Seller Members and the balance, if any, to new investors."
C1-2
IN WITNESS WHEREOF, the parties have duly executed the amendment to
agreement on the date first written above.
PLANET POLYMER TECHNOLOGIES, INC.
By: _________________________
▇. ▇▇▇ ▇▇▇▇▇, President
ALLERGY FREE, LLC
By: SR Technologies Associates, Manager
By: _________________________
▇▇▇▇▇ ▇▇▇▇▇, President
C1-3
SECOND AMENDMENT TO THE ASSET PURCHASE AGREEMENT
DATED AS OF MARCH 18, 2004 BY AND AMONG
PLANET POLYMER TECHNOLOGIES, INC. AND ALLERGY FREE, LLC
This second amendment ("Amendment") to the Asset Purchase Agreement
("Agreement") dated as of March 18, 2004, as amended June 11, 2004, by and among
Planet Polymer Technologies, Inc. ("Purchaser") and Allergy Free, LLC ("Seller")
is made and entered into as of October 6, 2004 by and among the parties to the
Agreement and is made with reference to the following:
RECITALS
WHEREAS, the parties entered into the Agreement as of March 18, 2004, as
amended June 11, 2004;
WHEREAS, the ability of the parties to close the transaction has been
delayed due to factors outside of the control of either party, the parties now
desire to amend the Agreement;
AGREEMENT
NOW THEREFORE, in consideration of the above recitals and the mutual
promises and agreements contained in this Amendment, and for valuable
consideration, the receipt and sufficiency of which is hereby acknowledged and
agreed, the parties hereby agree as follows:
1. In accordance with Section 4(b) of the Agreement, Seller has elected
to reduce the Subordinated Convertible Note to $274,300 and the parties agree
the balance of the purchase price shall be paid by delivery of 82,732,970 shares
of common stock of Purchaser.
2. Section 8(l) is hereby amended to change the record date for
distribution or the Royalty Rights to September 30, 2004.
3. Section 10(a)(iii) of the Agreement is hereby amended to replace
August 31, 2004 with November 30, 2004.
4. Purchaser has selected September 30, 2004 as the "record date" for
which shareholders of Purchaser will be entitled to vote on whether to approve
the Acquisition.
5. Section 8(n) of the Agreement is hereby amended to provide that
shares not purchased in the Private Placement concurrently with the closing may
be purchased up to 30 days after the closing or such later date as the board of
Purchaser shall approve."
C1-1
IN WITNESS WHEREOF, the parties have duly executed the amendment to
agreement on the date first written above.
PLANET POLYMER TECHNOLOGIES, INC.
By: _______________________
▇. ▇▇▇ ▇▇▇▇▇, President
ALLERGY FREE, LLC
By: SR Technologies Associates, Manager
By: ______________________
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇-▇