Exhibit 2.1
AGREEMENT OF PURCHASE AND SALE OF ASSETS
AGREEMENT OF PURCHASE AND SALE OF ASSETS ("Agreement") is made January 19, 1999
by and among ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (each, a "Shareholder" and
collectively the "Shareholders"), OPTIMUM LIFESTYLE, INC., a California
corporation (the "Seller"), and AMBI INC., a New York corporation ("Purchaser").
Shareholders own all of the outstanding shares of capital stock of Seller.
W I T N E S S E T H:
IN CONSIDERATION of the mutual covenants and agreements hereinafter set forth,
the parties hereby agree as follows:
1. Purchase and Sale of Business and Assets.
(a) Purchase and Sale.
(i) Subject to and upon the terms and conditions set forth in
this Agreement, Seller will sell, transfer, convey, assign and deliver
to Purchaser, and Purchaser will purchase, at the closing described in
Section 6 (the "Closing"), all of the business, assets, properties,
goodwill and rights of Seller as a going concern, of every nature, kind
and description, tangible and intangible, wheresoever located and
whether or not carried or reflected on the books and records of Seller,
except for the Excluded Assets (as defined in Section 1(d)). Such
business, assets, properties, goodwill and rights other than the
Excluded Assets are hereinafter sometimes collectively called "Seller's
Assets."
(ii) The purchase and sale hereunder shall be deemed made as
of the opening of business on January 1, 1999 (the "Effective Date"),
so that, once the Closing has occurred, the economic benefits of
Seller's business from and after the Effective Date shall be deemed to
have accrued to the benefit of Purchaser, and the economic burdens of
Seller's business from and after the Effective Date shall be deemed to
be for the account of Purchaser. The parties will at the Closing make
such payments among themselves as shall be necessary to put the parties
in the same economic position they would have occupied had the Closing
occurred on the Effective Date (the "As-Of Adjustments").
(b) Except as set forth in Section 1(d), Seller's Assets include,
without limitation:
(i) All of Seller's merchandise, inventories, materials and
supplies used in the business of Seller including items in transit from
vendors (hereinafter collectively referred to as "Inventory");
(ii) All accounts receivable, notes receivable and all accrued
or unaccrued payments or obligations which have inured or shall inure
to the benefit of Seller as of the date of Closing (the "Closing
Date");
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(iii) All machinery, equipment, office equipment, leasehold
improvements, fixtures, and supplies of Seller existing as of the
Closing Date, including any replacements thereof but excluding any
office equipment and furniture currently located in the personal
residence of the Shareholders;
(iv) All of the right, title and interest of Seller in and to
all United States and foreign patents, trademarks and copyrights,
application for any of the foregoing, if any, all inventions and
technology of Seller, including, but not limited to, manufacturing
information, know-how and processes, quality control and quality
assurance information, testing specifications and procedures, product
formulations, and other trade secrets, and any and all variations or
derivations thereof, and in and to all logos, insignias and advertising
materials of Seller bearing the name "LITE BITES" or "HEALTHY BITES"
and/or relating to the Seller's Assets, and all trade dress, trade
names, and trademarks and trademark applications of Seller in any way
related to the business of making, having made, using, selling and
furnishing dietary supplements and other nutrition food products (the
"Business");
(v) All of the right, title and interest in and to all leases
of real and personal property to which Seller is a party with respect
to the Business; Purchaser will succeed to the current month-to-month
lease and will seek to amend the term thereof to a six-month or other
term;
(vi) All of the right, title and interest of Seller in and to
all agreements, contracts and orders, license agreements, franchise and
all other agreements and contracts with respect to the Business,
including but not limited to those described on the Disclosure Schedule
(as hereinafter defined) as "Assumed Contracts";
(vii) The lists of Seller of suppliers and of clients which
exist as of the Closing Date;
(viii) To the extent dated from and after January 1, 1997 or
relating to any period from and after January 1, 1997, all of Seller's
files, records and correspondence, including without limitation,
employee lists and files, and sales and advertising materials and
records, sales and purchase correspondence (reference is made to
Section 7(f) for Purchaser's rights with respect to all files and
materials prior to January 1, 1997);
(ix) All deposits, credits and prepaid items related to or
arising from the Business;
(x) The goodwill of Seller;
(xi) The assets referred to in the form of ▇▇▇▇ of Sale
attached hereto as Exhibit A to this Agreement;
(xii) The assets (except for Excluded Assets, as defined in
Section 1(d)) reflected on the December Balance Sheet (as defined in
Section 10(f)), with only such dispositions of such assets reflected on
the December Balance Sheet as shall have occurred in the ordinary
course of Seller's business between the date thereof and the Closing
and the existence of which shall not constitute a breach of any
representation or warranty by Seller or either Shareholder hereunder;
(xiii) All other assets, properties, rights and businesses of
every kind and nature owned or held by Seller relating to the Business,
or in which Seller has an interest, on the
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date hereof, known or unknown, fixed or unfixed, ▇▇▇▇▇▇ or inchoate,
accrued, absolute, contingent or otherwise, whether or not specifically
referred to in this Agreement.
(c) Seller's Assets shall be conveyed free and clear of all
liabilities, obligations, liens and encumbrances excepting
only those liabilities and obligations which are expressly to
be assumed by Purchaser hereunder and those liens and
encumbrances securing the same which are specifically
disclosed herein or expressly permitted by the terms hereof.
(d) Prior to the Closing, Seller shall distribute to its
shareholders an amount of cash and accounts receivable (if
necessary) equal to its good faith estimate of undistributed
profits (including amounts in its "AAA" account, if any, but
excluding any bonus awarded to ▇▇▇▇▇▇ ▇▇▇▇▇ in 1998) through
the Effective Date, except to the extent that such
distributions would reduce estimated working capital as of the
Effective Date to less than $50,000. Any such undistributed
profit which is not distributed by Seller to its shareholders
prior to the Closing is considered an Undistributed Amount.
The Undistributed Amount will be verified by Purchaser within
thirty days of Closing. Purchaser shall pay the Undistributed
Amount, if any, to Seller according to the following schedule:
(i) if the Undistributed Amount is less than $100,000,
Purchaser shall pay Seller the full amount promptly upon
verification of the amount, (ii) if the Undistributed Amount
is between $100,000 and $250,000, the Purchaser shall pay
Seller half each within 30 and 60 days of Closing, (iii) if
the Undistributed Amount is between $250,000 and $400,000,
then Purchaser shall pay one-third each within 30, 60 and 90
days of Closing, and (iv) if the Undistributed Amount is
greater than $400,000, then Purchaser shall pay one-fourth
each within 30, 60, 90 and 120 days of Closing. All payments
of Undistributed Amounts shall be offset by the Purchaser
against the First Contingent Payment (as hereinafter defined)
in the manner provided in Section 2(e)(i). Cash or receivables
distributed by Seller to its shareholders to satisfy
undistributed profit distribution prior to the Closing (the
"Pre-Closing Dividend"), the assets reflected on the December
Balance Sheet (as hereinafter defined) as "Non-Assumed
Accounts Receivables" and the assets designated on Schedule
1(d) (collectively the "Excluded Assets") are excluded from
Seller's Assets. The term "working capital" means the amount,
determined as of the Effective Date by which cash, accounts
receivable and inventory exceed trade accounts payable. If,
upon verification of the Undistributed Amount it is determined
that Seller has distributed assets in excess of actual profits
through the Effective Date, then Seller shall repay Purchaser
pursuant to the same terms and schedule as stated above.
2. Purchase Price.
(a) In consideration of the sale, transfer, conveyance, assignment
and delivery by Seller of the Seller's Assets to Purchaser,
and in reliance upon the representations and warranties made
herein by Seller and Shareholders, Purchaser will, in full
payment thereof, pay to Seller a purchase price (the "Purchase
Price") which shall be payable as and to the extent provided
in Sections 2(b) through 2(i) and which shall consist of:
(i) $6,000,000 (the "Cash Payment"), plus
(ii) the Post-Closing Cash Adjustment (as defined in Section
2(c)), plus
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(iii) a number of shares of Purchaser's fully paid and
nonassessable Common Stock (hereinafter "Purchase Price Shares")
calculated under Section 2(d)), plus
(iv) the First Contingent Payments (as defined in Section
2(e)), plus
(v) the Second Contingent Payments (as defined in Section
2(f)), plus
(vi) the Third Contingent Payment (as defined in Section 2(g).
(b) Purchaser shall pay the Cash Payment at the Closing by wire
transfer to accounts designated by Seller.
(c) The Post-Closing Cash Adjustment is as follows:
(i) The "Post-Closing Cash Adjustment" shall equal the amount,
if any, by which net sales of the Business during the period from
October 1, 1998 through March 31, 1999 shall exceed $3,430,000, but in
no event shall the Post-Closing Cash Adjustment be greater than
$1,500,000. By mutual written agreement, in the event of the occurrence
of material, non-ordinary events, the parties may determine that an
alternative means of calculating the Post-Closing Cash Adjustment is
necessary; but in the absence of such agreement, such calculation shall
be made as provided in the preceding sentence.
(ii) The Post-Closing Cash Adjustment shall be determined by
Purchaser's chief financial officer or other designated officer subject
to the provisions of Section 3. Within 30 days after such
determination, Purchaser shall pay the Post-Closing Cash Adjustment by
wire transfer to accounts designated by Seller.
(iii) "Net sales" means sales of Products (as hereinafter
defined) net of returns, discounts and allowances consistent with past
practices. "Products" means products currently marketed by Seller under
the name "Lite Bites" or "Healthy Bites" or the same product or any
substantially similar product marketed under any name by Purchaser.
(d) Purchase Price Shares.
(i) The Purchase Price Shares means 1,304,347 shares of common
stock of Purchaser ("Common Stock").
(ii) [omitted]
(iii) The Purchase Price Shares shall be issued to Seller
and/or its designees (the "Designees") at the Closing, provided that
each stock recipient has made customary investor representations to
Purchaser.
(iv) By mutual written agreement, the parties may agree that,
in lieu of the Purchase Price Shares or any agreed portion thereof,
Purchaser will at the Closing pay to Seller cash in an agreed amount.
(e) First Contingent Payments.
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(i) With respect to each of the first three anniversaries of
the Closing, at the times and as otherwise set forth in Section
2(e)(iii), Purchaser will be obligated to pay to Seller:
(1) a percentage of $1,000,000 which is equal to the
percentage that (x) the number of days in which
Purchaser engaged in the Base Business (as
hereinafter defined) during the 12-month period prior
to such anniversary is of (y) 365; and
(2) if Purchaser on any date (the "termination date")
before the third anniversary of the Closing ceases to
engage in the Base Business, then on each of such
anniversaries which occurs thereafter, Purchaser will
be obligated to pay to Seller an amount equal to
$1,000,000 times the Base Arms Sales Ratio (as
hereinafter defined) for (x) the 12-month period
prior to such anniversary or (y), if the termination
date occurred during such 12-month period, for the
period beginning after the termination date.
(ii) In no event shall Purchaser be obligated to pay to Seller
an aggregate amount in excess of $1,000,000 with respect to any
anniversary aforesaid.
(iii) Payments under this Section 2(e) are referred to herein
as "First Contingent Payments."
(iv) The "Base Business" means the business of selling
Products through (1) on-air sales over any television shopping network
which has substantially the market reach of QVC or HSN (a "television
shopping network"), (2) any non- on-air distribution arms of any
television shopping network, including, for example, the internet,
direct mail, telephone sales, reorders, and catalog etc. arms of any
television shopping network (collectively, "television shopping arms"),
and (3) infomercials on any television station, provided that:
(1) If Purchaser at its discretion terminates on-air
sales over television shopping networks as a channel
for the sale of Products, then the Base Business
shall also include sales of Products in any business
channel; and
(2) If television shopping networks terminate on-air
television sales of Products or refuse to engage in
the on-air sale of Products on terms substantially
similar to those in effect on the date hereof in
Seller's sales through QVC, Purchaser shall no longer
be deemed to be engaged in the Base Business whether
or not it sells Products through television shopping
arms, or through infomercials, or through other
business channels.
(v) The "Base Arms Business" means the business of selling
Products through television shopping arms, but only so long as such
sales are at the annual rate of not less than $2,000,000.
(vi) The "Base Arms Sales Ratio" for any period means sales of
the Base Arms Business in such period (net of returns, discounts and
allowances consistent with past practice), divided by (1) $500,000,
multiplied by (2) the number of whole calendar months in such period.
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(vii) The First Contingent Payment for each anniversary date
aforesaid shall be determined within 30 days after such anniversary,
and shall be paid promptly thereafter by wire transfer to accounts
designated by Seller. However, by notice given by Seller to Purchaser
not less than 20 days before a payment is due hereunder, Seller may
elect to receive all or 50% of such payment in shares of Common Stock
valued at the average closing price of the Common Stock during the 10
trading days prior to the anniversary for which such payment is being
made.
(viii) In the event that Purchaser's chief financial officer
or other designated officer shall determine, subject to the provisions
of Section 3, that Seller's working capital as of the Effective Date
(after giving effect to the distributions permitted under Section 1(d))
is less than $50,000, the amount of such deficiency shall be deducted
from the first payment which would otherwise be made in respect of the
First Contingent Payment.
(f) Second Contingent Payments.
(i) For each of the first two years after the Closing Date,
Purchaser will make a payment (a "Second Contingent Payment") to Seller
in an amount equal to such year's Base Business Ratio (as defined
below), multiplied by $1,500,000.
(ii) The Base Business Ratio for the first year shall be
determined as follows: If the quotient (the "Quotient") of (i) Base Net
Sales (as hereinafter defined) in such year, divided by (ii)
$7,500,000, is at least equal to one, the Base Business Ratio for such
year is the Quotient. If the Quotient is less than one, the Base
Business Ratio for such year is the Quotient squared (the Quotient
times the Quotient).
(iii) The Base Business Ratio for the second year shall be
determined as follows: If the quotient (the "Quotient") of (i) Base Net
Sales (as hereinafter defined) in such year, divided by (ii)
$8,400,000, is at least equal to one, the Base Business Ratio for such
year is the Quotient. If the Quotient is less than one, the Base
Business Ratio for such year is the Quotient squared.
(iv) The term "Base Net Sales" means sales of Products through
the Base Business, net of returns, discounts and allowances consistent
with past practice; provided that during periods in which the Company
does not engage in the Base Business, the term "Base Net Sales" shall
mean sales of Products through the Base Arms Business, net of returns,
discounts and allowances consistent with past practice.
(v) If during the first two years after the Closing Purchaser
records revenues from the sale of Products through mass consumer
markets (i.e., grocery, drug, discount, and other retail outlets with
"shelves," etc.) ("Additional Net Sales") and such Additional Net Sales
are not included in the term "Base Net Sales" because Purchaser has not
theretofore at its discretion terminated on-air sales over television
shopping networks as a channel for the sale of Products, then such
Additional Net Sales shall nevertheless be included in the calculation
of Base Net Sales for the applicable year, but only to the extent that
the Base Business Ratio as calculated in strict accordance with
Sections 2(f)(ii) or 2(f)(iii) above would otherwise be less than 1.00.
For such purpose, the Base Business Ratio will be calculated including
Additional Net Sales in the numerator of the ratio, but in no event
shall the Base Business Ratio exceed 1.00.
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(vi) By way of example, assume that Base Net Sales during the
first year are $13,000,000 and during the second year are $7,000,000.
The Quotient for the first year would be 1.7333 and the Quotient for
the second year would be .8333. The Second Contingent Payment for the
first year would be 1.7333 times $1,500,000, or $2,599,950. The Second
Contingent Payment for the second year would be 0.6943 (.8333 squared)
times $1,500,000, or $1,041,450. If, however, Purchaser records
Additional Net Sales of $2,000,000 in the second year of this example
and the Additional Net Sales are not included in the term "Base Net
Sales," then the full $2,000,000 Additional Net Sales would be added to
the $7,000,000 and the resulting $9,000,000 total would then be divided
by $8,400,000 yielding a quotient in excess of 1.00 (of which the
excess over 1.0 is disregarded) and a Second Contingent Payment of
$1,5000,000.
(vii) A "year" for the purpose of this Section is each of the
successive 12-month periods beginning on the first day of the first
month which begins after the Closing Date.
(viii) The amount of each Second Contingent Payment shall be
determined by Purchaser's chief financial officer subject to the
provisions of Section 3. Within 30 days after the final determination
of a Second Contingent Payment, Purchaser shall make such payment by
issuing to Seller and its Designees one share of 5% Series G Preferred
Stock of Purchaser (the "Preferred Stock") for each full $1,000 payable
in respect of the Second Contingent Payment, together with a cash
payment for any fractional share which would otherwise be issued
hereunder. The Certificate of Amendment of Purchaser's Certificate of
Incorporation in respect of the Preferred Stock shall be in the form of
Exhibit B to this Agreement.
(g) Third Contingent Payment.
(i) Purchaser will pay to Seller $1,000,000 (the "Third
Contingent Payment") within 30 days after the end of the first 12
consecutive month period which ends before the fifth anniversary of the
Closing during which:
(1) net sales of the Products in "mass consumer markets"
(i.e., grocery, drug, discount, and other retail
outlets with "shelves", etc.) are equal to or exceed
net on-air sales of the Products on the QVC
television network during such 12-month period, and
(2) net on-air sales of the Products on the QVC
television network or any other television channel
are at least equal to such net sales in the 12
consecutive whole calendar months prior to the
Closing.
(h) Imputed Interest Gross-up. To the extent that Seller shall
incur federal and state income tax based on imputed interest
on any portion of the Purchase Price paid after the Closing,
Purchaser shall gross up such payments in order to make Seller
whole in respect of the tax rate differential applicable to
ordinary income versus capital gain.
(i) The Purchase Price shall be allocated among the Seller's
Assets as set forth on Schedule 2(i) to this Agreement, and
the parties agree to report this transaction in all required
filings and reports to taxing authorities in accordance with
said allocation.
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3. Financial Reports, Audit Rights, Non-Circumvention.
(a) During the period beginning on the Closing Date and ending
upon the earlier of the Third Contingent Payment or the fifth
anniversary of the Closing (the "Contingent Payment Period"),
Purchaser shall make available to Seller and its
representatives: (i) copies of Purchaser's annual and
quarterly reports to the SEC within a reasonable time after
such reports are filed; and (ii) within 45 days after the end
of each quarter, detailed information regarding the number and
type of Products sold during the preceding quarter.
(b) Seller or its representative will have the right at Seller's
expense reasonably to audit Purchaser's records which are
relevant to Purchaser's obligations to make payments under
Section 2.
(c) If there is a dispute between Seller and Purchaser as to the
determination of any portion of the Purchase Price, the
undisputed portion (if any) shall be paid promptly as provided
in Section 2, and the dispute shall be submitted to Price
Waterhouse Coopers, which shall review Purchaser's books and
records and make a final determination within 30 days. The
determination of Price Waterhouse Coopers shall be final and
binding on all parties. The fees of Price Waterhouse Coopers
shall be paid (i) by Purchaser, if such firm determines that
Purchaser underpaid Seller by 3% or more, (ii) by Seller, if
such firm determines that Purchaser overpaid Seller by 3% or
more, and (iii) equally by Purchaser and Seller in all other
cases.
(d) Payments under Section 2 which are not made when due shall
accrue interest at the lesser of (i) 3.5 points over the
"Prime Rate" (as quoted in the Wall Street Journal) or (ii)
the highest rate permitted by law.
(e) During the Contingent Payment Period, Purchaser shall not take
actions which are designed to reduce payments to Seller
hereunder unless such actions are primarily intended to
benefit Purchaser economically other than by merely reducing
such payments to Seller.
4. Assumption of Certain Liabilities.
(a) Purchaser will at the Closing assume the liabilities of Seller
which are referred to in Seller's disclosure schedule
("Seller's Disclosure Schedule" or "Disclosure Schedule") as
"Assumed Liabilities." Purchaser is not assuming any
liabilities of Shareholders.
(b) Anything in this Agreement to the contrary notwithstanding,
Purchaser shall not assume, or in any way be liable or
responsible for:
(i) any liability under any contracts which arises out of
Seller's failure to perform its obligations thereunder to the extent
such performance is due on or prior to the Effective Date;
(ii) any liabilities or obligations for any foreign, federal,
state, county or local income, franchise, gross receipts or value added
taxes, or any interest, additions to tax or penalties thereon, accrued
for, applicable to or arising from any period prior to the Effective
Date;
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(iii) any liability or obligation arising in connection with
Excluded Assets or the operation thereof;
(iv) any liability to the extent covered by insurance of
Seller pursuant to a policy in effect on or prior to Closing; or
(v) any profit sharing or incentive bonuses or sales
commissions or similar bonuses or payments (including, without
limitation, the liability in the amount of $61,353 to ▇▇▇▇▇▇ ▇▇▇▇▇
which is reflected on the December Balance Sheet as a Non-Assumed
Commission Payable, and any other profit sharing or incentive bonuses,
or sales commissions or similar bonuses or payments to ▇▇▇▇▇▇ ▇▇▇▇▇ )
allocable to the period prior to the Effective Date, it being
understood that where such bonuses or payments are measured by results
during a period which straddles the Effective Date, the amount of such
bonus or payment shall be allocated to the periods before and after the
Effective Date on a pro rata basis based on the number of days in such
period before and after the Effective Date, and an estimate of the
amount due for the period through the Effective Date shall be paid by
Seller at the Effective Date; or
(vi) any payments to employees or others under
incentive/profit sharing arrangements; or
(vii) liabilities reflected on the December Balance Sheet as
"Non-Assumed Accounts Payable."
5. Securities Covenants, Lock-Ups and Registration Rights.
(a) Seller covenants that at the Closing each of Seller and its
Designees shall deliver to Purchaser a certificate in form
reasonably satisfactory to Purchaser in which it absolutely
and unconditionally represents and warrants to Purchaser that:
(i) It will acquire the shares of Common Stock and Preferred
Shares issuable hereunder, and the shares of common stock issuable on
conversion of the Preferred Stock (collectively, the "Shares") only for
its own account, for investment, and without a view to the distribution
thereof (except in compliance with applicable securities laws).
(ii) It understands that it may sell or otherwise transfer the
Shares only if such transaction is duly registered under the Securities
Act of 1933, as amended (the "Act"), or an exemption from such
registration is available. It has been advised or is aware of the
provisions of Rule 144 promulgated under the Act, which permits limited
resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, (1)
the availability of certain current public information about the
Purchaser, (2) the passage of required holding periods under Rule 144
and (3) compliance with limitations on the volume of shares which may
be sold during any three-month period.
(iii) It acknowledges that the certificates representing the
Shares will be legended to reflect these restrictions.
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(b) Without limiting Purchaser's other rights or remedies which
shall arise out of any breach of the aforesaid covenant, no
certificates for the Shares will be delivered if any of Seller
or its Designees fails to confirm the foregoing
representations as of the Closing.
(c) Seller will not, and will cause its Designees not to: (1) sell
or otherwise dispose of the shares of common stock issued at
Closing for a period of six months from and after the Closing;
(2) sell the common stock issued in respect of the First
Contingent Payment for a period of six months from and after
the date of such First Contingent Payment; or (3) convert the
Preferred Stock into common stock during the first six months
after the issuance of the Preferred Stock. No restriction is
imposed by this Section 5(d) on the sale of any shares of
common stock which are issued upon conversion of the Preferred
Stock, to the extent such sale is otherwise permitted
hereunder. Certificates for the Shares shall be legended to
reflect the provisions of this Section.
(d) Registration Rights.
(i) Purchaser will on or before the 45th day after the Closing
file a registration statement with the Securities and Exchange
Commission (the "SEC") for the public sale by the Seller and its
Designees of the shares of Common Stock issued to Seller and its
Designees at the Closing. Purchaser will also on or before the 90th day
after the issuance of the Preferred Stock file a registration statement
with the Securities and Exchange Commission (the "SEC") for the public
sale by the Seller and its Designees of the shares of Common Stock
issuable on conversion of the Preferred Stock. The term "Registration
Statement" means each registration statement referred to in this
Section.
(ii) If Purchaser shall at any time propose the registration
under the Act of any shares of common stock, Purchaser shall give
notice as promptly as possible (but no less than 15 days before filing
a registration statement with respect to such registration) of such
proposed registration to Seller, and Purchaser shall use its best
efforts to include in such registration statement such number of shares
of common stock as Seller and its Designees shall request within 10
days after the receipt of such notice to be included in any such
offering; provided, however, that
(1) Purchaser shall not be required to give notice or
include such shares in any such registration which is
(A) a registration of a stock option or compensation
plan or of securities issued or issuable pursuant to
any such plan, or (B) a registration of securities
proposed to be issued in exchange for securities or
assets of, or in connection with a merger or
consolidation with, another corporation;
(2) Purchaser shall not be required to include such
shares in any such registration if Purchaser is
advised in writing by its investment banking firm
that the inclusion of such shares would in its
opinion have a materially adverse effect on such
proposed offering of its common stock; provided,
however, that such exclusion shall be made in
proportion to the number of shares proposed to be
included in such offering other than by Purchaser,
and in no case shall such exclusion be more than 10%
of the total number of shares proposed to be sold in
any such offering; and
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(3) Purchaser may, without the consent of Seller,
withdraw such registration statement and abandon the
proposed offering in which Seller had requested to
participate.
(iii) Purchaser shall use commercially reasonable efforts to
cause the Registration Statement to become effective not later than 60
days after the date of filing, and to remain effective for two years.
The registration shall be accompanied by blue sky clearances in such
states as Seller and its Designees may reasonably request and in which
there is no applicable exemption from the requirement to register.
(iv) Purchaser shall pay all expenses of the registration
hereunder including reasonable fees of any one law firm which alone
represents Seller and all of its Designees, but Purchaser shall not pay
Seller's underwriting discounts.
(v) Purchaser shall supply to Seller and its Designees a
reasonable number of copies of all registration materials and
prospectuses. Purchaser and Seller shall execute and deliver to each
other indemnity agreements which are set forth in Schedule 5(d)(v). The
Shareholders shall reasonably cooperate with Purchaser in the
preparation and filing of the Registration Statement and appropriate
amendments thereto.
(vi) Whether or not any shares have been registered, neither
Seller nor either Shareholder shall engage (or cause others, including
without limitation Seller's employees, to engage) in the trading of
securities of Purchaser prior to the Closing.
6. Closing. The Closing shall take place at 10:00 A.M., local time, on
January __, 1999 at the offices of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇, or such other time and place as the parties
may agree upon. The day on which the Closing actually takes place is
herein sometimes referred to as the Closing Date. The Closing shall be
deemed to have taken place immediately prior to the opening of
business, East Coast time, on the Closing Date.
7. Other Transactions at Closing; Further Assurances.
(a) At the Closing, Seller and Shareholders will deliver to
Purchaser:
(i) Bills of Sale duly executed by Seller in the form of an
Exhibit to this Agreement;
(ii) such other good and sufficient instruments of conveyance,
assignment and transfer including trademark registrations and
applications, in form and substance satisfactory to Purchaser's
counsel, as shall be effective to vest in Purchaser good and marketable
title to Seller's Assets;
(iii) all contracts, files and other data included in Seller's
Assets;
(iv) all documents required to be delivered to Purchaser under
the provisions of this Agreement;
(v) a copy of the Articles of Incorporation of Seller
certified as of a date within 10 days of the Closing Date by an
appropriate government official of its jurisdiction of incorporation
and certified by its respective Secretary as to the absence of any
amendments between the dates of certification by the official and the
Closing Date;
11
(vi) a certificate from the appropriate governmental official
as to the good standing of Seller as of a date within ten days of the
Closing Date;
(vii) copies of the bylaws of Seller, certified by its
Secretary as a true and correct copy thereof as of the Closing Date;
(viii) [omitted]
(ix) the certificates referred to in Section 13;
(x) the opinion of Seller's counsel referred to in Section 13;
and
(xi) such other documents as may be required pursuant to this
Agreement or as may reasonably be requested by Purchaser and its
counsel.
(b) On the Closing Date, Purchaser shall deliver or cause to
be delivered to Seller and the shareholders, as applicable,
the following:
(i) payment of the cash and stock amounts which under Section
2 are required to be paid at the Closing;
(ii) a copy of the resolutions of the Board of Directors of
Purchaser, together with any and all required resolutions or consents
of the shareholders thereof, approving the execution and delivery of
this Agreement and the consummation of all of the transactions
contemplated hereby, duly certified by an officer of Purchaser;
(iii) the certificates referred to in Section 14;
(iv) a copy of the Certificate of Amendment of Purchaser's
Certificate of Incorporation in respect of the Preferred Stock in the
form attached as Exhibit C, certified as filed by the Secretary of
State of the State of New York;
(v) a certificate from the appropriate governmental official
as to the good standing of Purchaser as of a date within ten days of
the Closing Date;
(vi) the opinion of Purchaser's counsel referred to in Section
14; and
(vii) such other documents as may be required pursuant to this
Agreement or as may reasonably be requested by Seller and its counsel.
(c) At the Closing, Purchaser will execute and deliver, and each
Shareholder will execute and deliver, a consulting agreement
with Purchaser in the form of Exhibit D to this Agreement.
(d) At the Closing, Seller and each Shareholder shall execute and
deliver to Purchaser a Non-Competition Agreement in the form
of Exhibit E to this Agreement.
(e) At the Closing, the parties will make the As-Of Adjustments.
(f) At any time and from time to time after the Closing, at
Purchaser's request and without further consideration, Seller
and Shareholders will execute and deliver such other
12
instruments of sale, transfer, conveyance, assignment and
confirmation and take such action as Purchaser may reasonably
deem necessary or desirable in order to more effectively
transfer, convey and assign to Purchaser, and to confirm
Purchaser's title to, all of Seller's Assets, to put Purchaser
in actual possession and operating control thereof and to
assist Purchaser in exercising all rights with respect
thereto. Without limiting the generality of the foregoing,
Seller and each Shareholder agree that after the Closing, each
will execute any documents which may be required to vest all
right, title and interest to the Intangible Property (Section
10 (n)) acquired by Purchaser, including but not limited to,
confirmatory assignments and other documents, as well as all
documents as may be needed to record in the United States
Patent, Trademark and Copyright Offices and in foreign
countries, as well as in any States, the transfer to Purchaser
of Seller's and each Shareholder's right, title and interest
in the Intangible Property.
(g) After the Closing, at reasonable times and on reasonable
notice, Seller shall have access to the books and records
included in the Seller's Assets, and Purchaser shall have
access to Seller's books and records for the period prior to
the Closing to the extent that the same are not included in
Seller's Assets, and Purchaser shall have the right at its
expense to make copies of any of such records. Each party
shall retain such books and records for a period of not less
than three years after the Closing, and shall not dispose of
or destroy such books and records without in writing first
offering to deliver such books and records to the other party.
(h) Seller agrees that after the Closing Purchaser shall have the
right and authority to collect for its own account all
receivables and other items which shall be transferred to
Purchaser as provided herein and to endorse with the name of
Seller any checks received on account of any such receivables
or other items. Seller agrees that it will promptly transfer
and deliver to Purchaser any cash or other property which
Seller may receive in respect of such receivables or other
items.
8. Board Position. So long as Seller and the Shareholders own more than 10% of
the total number of outstanding shares of Common Stock (including in such
calculation that number of shares of Common Stock into which Preferred
Stock held by Seller and the Shareholders is convertible), Seller and the
Shareholders shall have the right jointly to nominate one member of
Purchaser's Board of Directors, subject to Purchaser's approval, which will
not be unreasonably withheld. Purchaser shall in Purchaser's annual proxy
statement to its shareholders submit such nominee to Purchaser's
shareholders for election as a management nominee.
9. License. Seller and Shareholders shall at the Closing grant to Purchaser a
non-exclusive, fully paid-up license in the form of Exhibit F to use the
name "Optimum Lifestyle" for a one-year period beginning on the Closing
Date. Seller represents and warrants that it will promptly cause its
trademark for "Optimum Lifestyle" to be cancelled, and that in any event
Seller will not use such term as a trademark or in connection with the
dietary supplement or nutrition food products business.
10. Representations and Warranties by Seller and Shareholders. Except as set
forth in the Disclosure Schedule with respect to specifically identified
subsections of this Section 10 or except where a disclosure with respect to
a specifically identified subsection manifestly is also an exception to
another one or more subsections, Seller and each Shareholder jointly and
severally represent and warrant to Purchaser as follows:
13
(a) Organization, Standing and Qualification. Seller is a
corporation duly organized, validly existing and in good
standing under the laws of the State of California and has
full corporate power and authority to carry on its business as
now being conducted and to own, lease or operate its
properties; and it is duly qualified, licensed or domesticated
and in good standing as a foreign corporation authorized to do
business in the states listed on Seller's Disclosure Schedule,
which are the only states where the nature of the activities
conducted by it or the character of the properties owned,
leased or operated by it require such qualification, licensing
or domestication and where the failure to be so qualified
would cause a material adverse effect on Seller's business.
(b) Subsidiaries. Seller has no subsidiaries. Seller has no
interest, direct or indirect, and has no commitment to
purchase any interest, direct or indirect, in any other
corporation or in any partnership, joint venture or other
business enterprise or entity. The business carried on by
Seller has not been conducted through any other direct or
indirect subsidiary or affiliate of any Shareholder.
(c) Transactions with Certain Persons.
(i) During the past three years Seller has not, directly or
indirectly, purchased, leased from others or otherwise acquired any
property or obtained any services from, or sold, leased to others or
otherwise disposed of any property or furnished any services to, or
otherwise dealt with (except with respect to remuneration for services
rendered as a director, officer or employee of Seller), in the ordinary
course of business or otherwise, (i) any shareholder of Seller or (ii)
any person, firm or corporation which, directly or indirectly, alone or
together with others, controls, is controlled by or is under common
control with Seller or any shareholder of Seller.
(ii) Seller does not owe any amount to, or have any contract
with or commitment to, any of its shareholders, directors, officers,
employees or consultants (other than compensation for current services
not yet due and payable and reimbursement of expenses arising in the
ordinary course of business), and none of such persons owes any amount
to Seller.
(iii) Seller does not use any property or assets of any
Shareholder or any direct or indirect subsidiary or affiliate of any
Shareholder.
(d) Execution, Delivery and Performance of Agreement; Authority.
Neither the execution, delivery nor performance of this
Agreement by Seller or any Shareholder will, with or without
the giving of notice or the passage of time, or both, conflict
with, result in a default, right to accelerate or loss of
rights under, or result in the creation of any lien, charge or
encumbrance pursuant to, any provision of Seller's articles of
incorporation or by laws or any franchise, mortgage, deed of
trust, lease, license, agreement, understanding, law, rule or
regulation or any order, judgment or decree to which Seller or
any Shareholder is a party or by which any of them may be
bound or affected. Seller and each Shareholder have the full
power and authority to enter into this Agreement and to carry
out the transactions contemplated hereby, all proceedings
required to be taken by them or its shareholders to authorize
the execution, delivery and performance of this Agreement and
the agreements relating hereto have been properly taken and
this Agreement constitutes a valid and binding obligation of
Seller and each Shareholder.
14
(e) Capitalization. Each Shareholder owns of record and
beneficially 50% of the authorized, issued and outstanding
shares of capital stock of Seller, free and clear of any
liens, claims, encumbrances or restrictions of any kind, and
all of such shares are validly issued and outstanding, fully
paid and nonassessable. There are no outstanding
subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or
arrangements of any character or nature whatsoever under which
Seller or any Shareholder is or may become obligated to issue,
assign or transfer any shares of the capital stock of Seller,
and there are no rights of first refusal or similar rights
with respect to any such shares.
(f) Financial Statements.
(i) The following financial statements of Seller (hereinafter
collectively called the "Financial Statements") which are attached as
Exhibit G have been prepared from the books and records of Seller in
accordance with accounting principles which have been consistently
applied and maintained throughout the periods indicated and which
differ from generally accepted accounting principles ("GAAP") only as
set forth on the Disclosure Schedule:
(1) unaudited balance sheet of Seller as at December 31,
1997 and unaudited statements of earnings and source
and application of funds (or trial balance) for the
year then ended; and
(2) unaudited balance sheet of Seller (the "December
Balance Sheet") as at December 31, 1998 (the
"December Balance Sheet Date") and Seller's
unaudited statements of earnings and source and
application of funds (or trial balance) for the 12
months then ended.
(ii) The Financial Statements fairly present the financial
condition of Seller as at their respective dates and the results of its
operations for the periods covered thereby.
(iii) The statements of earnings included in the Financial
Statements do not contain any items of special or nonrecurring income
or any other income not earned in the ordinary course of business
except as expressly specified therein, which consist only of normal
recurring accruals, necessary for such fair presentation.
(g) Absence of Undisclosed Liabilities. Except as and to the
extent reflected or reserved against on the December Balance
Sheet, as of the December Balance Sheet Date, Seller had no
debts, liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature whatsoever, including,
without limitation, any foreign or domestic tax liabilities or
deferred tax liabilities incurred in respect of or measured by
Seller's income, or its property or authorized or outstanding
capital stock, for any period prior to the close of business
on the December Balance Sheet date or any other debts,
liabilities or obligations relating to or arising out of any
act, transaction, circumstance or state of facts which
occurred or existed on or before the December Balance Sheet
Date, whether or not then known, due or payable.
(h) Taxes. All tax returns required to be filed by Seller have
been accurately prepared in all material respects and have
been duly and timely filed. All taxes, including, without
limitation, income, property, sales, use, franchise, added
value, employees' income withholding and social security
taxes, imposed by the United States or by any foreign
15
country or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign
country, or by any other taxing authority, which are due or
payable by Seller, and all interest and penalties thereon,
whether disputed or not, have been paid in full . All deposits
required by law to be made by Seller with respect to
employees' withholding taxes have been duly made. Seller has
not been delinquent in the payment of any foreign or domestic
tax, assessment or governmental charge or deposit and has no
tax deficiency or claim outstanding, proposed or assessed
against it, and there is no basis for any such deficiency or
claim. The audit status of Seller's federal income tax returns
is as set forth in the Disclosure Schedule, and there is not
now in force any extension of time with respect to the date on
which any tax return was or is due to be filed by or with
respect to Seller, or any waiver or agreement by it for the
extension of time for the assessment of any tax.
(i) Absence of Changes or Events. Since the December Balance Sheet
Date, Seller has conducted its business only in the ordinary
course and has not:
(1) incurred any obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to
become due, except current liabilities for trade or
business obligations incurred in the ordinary course
of business and consistent with its prior practice,
none of which liabilities, in any case or in the
aggregate, materially and adversely affects the
business, liabilities or financial condition of
Seller;
(2) discharged or satisfied any lien, charge or
encumbrance other than those then required to be
discharged or satisfied, or paid any obligation or
liability, absolute, accrued, contingent or
otherwise, whether due or to become due, other than
current liabilities shown on the December Balance
Sheet and current liabilities incurred since the
December Balance Sheet Date in the ordinary course of
business and consistent with its prior practice;
(3) except for the Pre-Closing Dividend, declared or made
any payment of dividends or other distribution to its
shareholders or upon or in respect of any shares of
its capital stock, or purchased, retired or redeemed,
or obligated itself to purchase, retire or redeem,
any of its shares of capital stock or other
securities;
(4) mortgaged, pledged or subjected to lien, charge,
security interest or any other encumbrance or
restriction any of its property, business or assets,
tangible or intangible;
(5) except for the Pre-Closing Dividend, sold,
transferred, leased to others or otherwise disposed
of any of its assets, except for inventory sold in
the ordinary course of business, or canceled or
compromised any debt or claim, or waived or released
any right of substantial value;
(6) received any notice of termination of any contract,
lease or other agreement or suffered any damage,
destruction or loss (whether or not covered by
insurance) which, in any case or in the aggregate,
has had or may have a materially adverse effect on
the assets, operations or prospects of Seller;
(7) encountered any labor union organizing activity, had
any actual or threatened employee strikes,
work-stoppages, slow-downs or lock-outs, or had or
may have
16
any material change in its relations with its
employees, agents, customers or suppliers;
(8) transferred or granted any rights under, or entered
into any settlement regarding the breach or
infringement of, any United States or foreign
license, patent, copyright, trademark, trade name,
invention or similar rights, or modified any existing
rights with respect thereto;
(9) except as reflected in the Disclosure Schedule, made
any change in the rate of compensation, commission,
bonus or other direct or indirect remuneration
payable, or paid or agreed or orally promised to pay,
conditionally or otherwise, any bonus, extra
compensation, pension or severance or vacation pay,
to any shareholder, director, officer, employee,
salesman, distributor or agent of Seller;
(10) made any capital expenditures or capital additions or
betterments in excess of an aggregate of $50,000;
(11) changed its banking or safe deposit arrangements;
(12) instituted, settled or agreed to settle any
litigation, action or proceeding before any court or
governmental body relating to Seller or its property;
(13) failed to replenish its inventories and supplies in a
normal and customary manner consistent with its prior
practice and prudent business practices prevailing in
the industry, or made any purchase commitment in
excess of the normal, ordinary and usual requirements
of its business or at any price in excess of the then
current market price or upon terms and conditions
more onerous than those usual and customary in the
industry, or made any change in its selling, pricing,
advertising or personnel practices inconsistent with
its prior practice and prudent business practices
prevailing in the industry;
(14) suffered any change, event or condition which, in any
case or in the aggregate, has had or could reasonably
be expected to have a materially adverse effect on
Seller's condition (financial or otherwise),
properties, assets, liabilities, operations or
prospects, including, without limitation, any change
in Seller's revenues, costs, backlog or relations
with its employees, agents, customers or suppliers;
(15) entered into any transaction, contract or commitment
other than in the ordinary course of business; or
(16) entered into any agreement or made any commitment to
take any of the types of action described in
subparagraphs (1) through (15) above.
(j) Litigation. There is no claim, legal action, suit,
arbitration, governmental investigation or other legal or
administrative proceeding, nor any order, decree or judgment
in progress, pending or in effect, or to the knowledge of
Seller or any Shareholder threatened, against or relating to
Seller, its officers, directors or employees, its properties,
assets or business or the transactions contemplated by this
Agreement.
17
(k) Compliance with Laws and Other Instruments. To the knowledge
of Seller and the Shareholders, Seller has complied with all
existing laws, rules, regulations, ordinances, orders,
judgments and decrees applicable to its business, properties
or operations as presently conducted, including without
limitation, all federal Occupational Safety and Health
Administration ("OSHA") and California Department of Health
requirements, and has all permits, licenses and other
authorizations applicable to its business, properties or
operations as presently conducted. To the knowledge of Seller
and the Shareholders, neither the ownership nor use of
Seller's properties nor the conduct of its business as
currently conducted conflicts with the rights of any other
person, firm or corporation or violates, or with or without
the giving of notice or the passage of time, or both, will
violate, conflict with or result in a default, right to
accelerate or loss of rights under, any terms or provisions of
its articles of incorporation or bylaws as presently in
effect, or any lien, encumbrance, mortgage, deed of trust,
lease, license, agreement, understanding, law, ordinance, rule
or regulation, or any order, judgment or decree to which
Seller is a party or by which it may be bound or affected; and
Seller is not aware of any proposed laws, rules, regulations,
ordinances, orders, judgments, decrees, governmental takings,
condemnations or other proceedings which would be applicable
to its business, operations or properties and which might
adversely affect its properties, assets, liabilities,
operations or prospects, either before or after the Closing.
(l) Title to Properties.
(i) Seller has good, marketable and insurable title to or
(where expressly disclosed in the Disclosure Schedule) valid leasehold
interests in and to all the properties and assets it owns or uses in
its business or purports to own, including, without limitation,
Seller's Assets and those assets and properties which are reflected in
the December Balance Sheet (except inventory sold after the December
Balance Sheet Date in the ordinary course of business and, effective
immediately prior to the Closing, the Pre-Closing Dividend).
(ii) None of such properties and assets is subject to any
mortgage, pledge, lien, charge, security interest, encumbrance,
restriction, lease, license, easement, liability or adverse claim of
any nature whatsoever, direct or indirect, whether accrued, absolute,
contingent or otherwise, except:
(1) as expressly set forth in the December Balance Sheet
or in the Disclosure Schedule as securing specific
liabilities or as otherwise expressly permitted by
the terms hereof, or
(2) liens for taxes not yet due and other statutory
liens arising in the ordinary course of business, or
(3) those imperfections of title and encumbrances, if
any, which
(a) are not substantial in character, amount or
extent and do not materially detract from
the value of the properties subject thereto,
(b) do not interfere with either the present and
continued use of such property or the
conduct of Seller's normal operations, and
(c) have arisen only in the ordinary course
of business.
18
(iii) All of the properties and assets owned, leased
or used by Seller are in good operating condition and repair,
are suitable for the purposes used, are adequate and
sufficient for all current operations of Seller and are
directly related to the business of Seller.
(m) Schedules.
(i) Seller's Disclosure Schedule includes a separate schedule
containing an accurate and complete list and description of:
(1) All inventions and technology used by or possessed by
Seller, including, but not limited to, manufacturing
information, know-how and processes, quality control
and quality assurance information, testing
specifications and procedures, product formulations,
and other trade secrets, and any and all variations
or derivations thereof.
(2) All real property in which Seller has a leasehold or
other interest or which is used by Seller in
connection with the operation of its business.
(3) As of a date no earlier than December 31, 1998, all
of Seller's receivables (which shall include accounts
receivable, loans receivable and any advances),
together with detailed information as to each such
listed receivable which has been outstanding for more
than 30 days.
(4) All property included within Seller's Assets as of a
date no earlier than the December Balance Sheet Date.
(5) All patents, patent applications, patent licenses,
trademarks, trademark registrations, and applications
therefor, service marks, service names, trade names,
copyrights and copyright registrations, and
applications therefor, wholly or partially owned or
held by Seller or currently used in the operation of
Seller's business.
(6) All contracts, agreements, commitments or licenses
relating to patents, trademarks, trade names,
copyrights, inventions, processes, know-how, formulae
or trade secrets to which Seller is a party or by
which it is bound.
(7) All contracts, agreements and commitments, whether or
not fully performed, in respect of the issuance, sale
or transfer of the capital stock of Seller.
(8) All contracts, agreements, commitments or other
understandings or arrangements to which Seller is a
party or by which it or any of its property is bound
or affected, but excluding:
(a) contracts entered into in the ordinary
course of business and involving payments or
receipts by Seller of less than $10,000 in
the case of any single contract but not more
than $50,000 in the aggregate, and
(b) contracts entered into in the ordinary
course of business which are terminable by
Seller on less than 30 days' notice without
any penalty or consideration.
19
(9) All collective bargaining agreements, employment and
consulting agreements, executive compensation plans,
bonus plans, deferred compensation agreements,
employee pension plans or retirement plans, employee
stock options or stock purchase plans and group life,
health and accident insurance and other employee
benefit plans, agreements, arrangements or
commitments, whether or not legally binding,
including, without limitation, holiday, vacation,
Christmas and other bonus practices, to which Seller
is a party or is bound which relate to the operation
of Seller's business.
(10) The names and current compensation of all persons
(including independent commission agents) whose
compensation (direct or indirect) is from Seller, and
showing separately for each such person the amounts
paid or payable as salary, bonus and/or
incentive/profit sharing or other payments, and any
indirect compensation for the year ended December 31,
1997, their current rates of compensation, and
anticipated total compensation, including the
aforesaid components thereof, for the year ending
December 31, 1998.
(11) The names of all of Seller's directors and officers;
the name of each bank in which Seller has an account
or safe deposit box and the names of all persons
authorized to draw thereon or have access thereto,
and the names of all persons, if any, holding tax or
other powers of attorney from Seller and a summary of
the terms thereof, and
(12) The names of all of employees of Seller or other
persons with knowledge of any of Seller's technology,
know-how or trade secrets ("Key Employees"), and
copies of non-disclosure or similar agreements.
(ii) All of the contracts, agreements, leases, licenses and
commitments required to be listed on Seller's Disclosure Schedule
(other than those which have been fully performed) are valid and
binding, enforceable in accordance with their respective terms, in full
force and effect and validly assignable to Purchaser without the
consent of any other party so that, after the assignment thereof to
Purchaser pursuant hereto, Purchaser will be entitled to the full
benefits thereof. There is not under any such contract, agreement,
lease, license or commitment any existing default by Seller or (to the
knowledge of Seller and Shareholders) any other party thereto, or event
which, after notice or lapse of time, or both, would constitute a
default by Seller or (to the knowledge of Seller and Shareholders) any
other party thereto, or result in a right to accelerate or loss of
rights. True and complete copies of all such contracts, agreements,
leases, licenses and other documents listed on Seller's Disclosure
Schedule (together with any and all amendments thereto) have been
delivered to Purchaser.
(n) Intangible Property.
(i) Seller's Disclosure Schedule sets forth a complete list of
the following:
(1) all of the following ("Proprietary Rights") which are
currently owned or currently used by Seller or
applicable to the business of Seller or in any way
relate to Seller's Assets (pursuant to license
agreements or otherwise): inventions, trademarks,
service marks, trade dress, trade names, label
filings,
20
patents, copyrights, royalty rights, logos,
insignias, and advertising materials bearing the name
"LITE BITES" OR "HEALTHY BITES";
(2) all applications for and registrations of Proprietary
Rights and the jurisdictions in which the Proprietary
Rights have been registered, filed or issued;
(3) contracts, agreements or understandings pursuant to
which Seller has authorized any person to use any of
the Proprietary Rights; and
(4) all inventions and technology used by or possessed by
Seller, including, but not limited to, manufacturing
information, know-how and processes, quality control
and quality assurance information, testing
specifications and procedures, product formulations,
and other trade secrets, and any and all variations
or derivations thereof (collectively, the "Trade
Secrets").
(ii) Seller has not received notice of any claims or demands
of any person pertaining to the Proprietary Rights or the Trade Secrets
or the rights of Seller thereunder, and to the knowledge of Seller or
any Shareholder, no proceedings have been instituted or are pending or
threatened which challenge the rights of Seller in respect thereof. To
the knowledge of Seller and Shareholders none of the issued trademarks,
service marks, trade names, trade dress, label filings, patents,
copyrights, logos, registrations thereof, or, as the case may be, the
rights granted to Seller in respect thereof and to be listed in
Seller's Disclosure Schedule, infringes on or is being infringed upon
by others, and none is subject to any outstanding order, decree,
judgment, stipulation, injunction, restriction or agreement restricting
the scope of the use by Seller.
(iii) To the knowledge of Seller and Shareholders, Seller is
not infringing or violating, and during the past five years, Seller has
not infringed or violated, any Proprietary Rights of others, nor, to
the knowledge of Seller and Shareholders, used any confidential
information or trade secrets or patentable or unpatentable inventions
of any former employer of any employee of Seller.
(iv) Seller and Shareholders have no knowledge of any patented
device or application therefor owned or held by others which could
materially and adversely affect the operation of the businesses of
Seller, as now conducted.
(v) The Trade Secrets have not been, and will not be,
disclosed by Seller to any person other than Purchaser and its agents
and representatives, and comprise all of the same necessary to permit
the continued operation of the business of Seller.
(o) No Guaranties. None of the obligations or liabilities of
Seller is guaranteed by any other person, firm or corporation,
nor has Seller guaranteed the obligations or liabilities of
any other person, firm or corporation.
(p) Inventory. All items of Seller's inventory and related
supplies (including raw materials, work-in-process and
finished goods) reflected on the December Balance Sheet or
thereafter acquired and not subsequently disposed of in the
ordinary course of business ( except for obsolete items and
items of below-standard quality, all of which have been
written off or written down in value as reflected on the
December Balance Sheet or which have not been written off or
written down but are reflected on the December Balance Sheet
at an aggregate of no more than $50,000) are merchantable, or
suitable and usable
21
for the production or completion of merchantable products, for
sale in the ordinary course of business as first quality goods
at normal ▇▇▇▇-ups, none of such items is obsolete or below
standard quality and each item of such inventory reflected in
the December Balance Sheet and the books and records of Seller
is so reflected on the basis of a complete physical count and
is valued at the lower of cost (on a first-in, first-out
basis) or market in accordance with generally accepted
accounting principles consistently applied. Seller's Assets
include a sufficient but not an excessive quantity of each
type of such inventory and supplies in order to meet the
normal requirements of Seller's business.
(q) Receivables. All receivables of Seller (including accounts
receivable, loans receivable and advances) which are reflected
in the December Balance Sheet, and all such receivables which
will have arisen since the date thereof, shall have arisen
only from bona fide transactions in the ordinary course of
Seller's business.
(r) Labor Matters. Seller is not a party to any collective
bargaining agreement and there are no material or formal
complaints, charges, cases or controversies or any
conciliation agreement, consent or decree pending or, to the
knowledge of Seller or Shareholders, threatened against Seller
and any of its employees acting individually or in concert and
to the knowledge of Seller and Shareholders no organization is
presently attempting to gain, petitioning for or asserting
representational status with respect to any group or groups of
employees of Seller, and Seller is in material compliance with
Federal and state laws respecting employment practices, terms
and conditions of employment, wages and hours, and is not
presently engaged in any unfair labor practice. All employees
of the Company are legally employed, and those who are not
U.S. citizens have appropriate U.S. governmental
authorizations. There is no labor strike or other labor
dispute and there is no complaint, proceeding or other action
instituted under the Equal Opportunity Act pending or, to the
knowledge of Seller or Shareholders, threatened against
Seller.
(s) Environmental Matters.
(i) Seller is, and at all times has been, in material
compliance with, and has not been in violation of, any federal, state,
foreign, or local laws, statutes, ordinances, regulations, rules and
orders pertaining to the environment, pollution and/or the health and
safety of human beings (collectively "Environmental Law"). Neither
Shareholder nor Seller has any basis to expect or has received, any
actual or threatened order, notice, or other communication from (A) any
governmental body or private citizen acting in the public interest, or
(B) the current or prior owner or operator of any facilities, of any
actual or potential violation or failure to comply with any
Environmental Law with respect to any of the properties or assets
(whether real, personal, or mixed) in which Seller has or has had an
interest, or with respect to any property at or to which any hazardous
or toxic waste or substance ("Hazardous Materials") was generated,
manufactured, refined, transferred, imported, used, or processed by
Seller, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(ii) To the knowledge of Seller and Shareholders, there are no
pending or threatened claims, encumbrances, or other restrictions of
any nature, resulting from any environmental, health, and safety
liabilities or arising under or pursuant to any Environmental Law, with
respect to or affecting any of the facilities or any other
22
properties and assets (whether real personal or mixed) in which Seller
has or had an interest.
(iii) Neither Shareholder nor Seller has permitted or
conducted, or is aware of, any Hazardous Materials activity conducted
with respect to the properties or assets (whether real, personal, or
mixed) in which Seller has or had an interest.
(iv) To the knowledge of Seller and the Shareholders, there
has been no release or threat of release of any Hazardous Materials at
or from the locations where any Hazardous Materials were generated,
manufactured, refined, transferred, produced, imported, used or
processed from or by the properties and assets (whether real, personal,
or mixed) in which Seller has or had an interest.
(v) Seller has delivered to Purchaser true and complete copies
and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by Seller pertaining to Hazardous Materials or
Hazardous Materials activities in, on, or under the properties of
Seller, or concerning compliance by Seller with respect to
Environmental Laws.
(t) Proceedings re Employee Benefit Plans. There has not been any
(i) termination of any "defined benefit plan" within the
meaning of the Employee Retirement Income Security Act of l974
("ERISA") maintained by Seller or any person, firm or
corporation ("Affiliate") which is under "common control"
(within the meaning of Section 4001(b) of ERISA) with Seller,
or (ii) commencement of any proceeding to terminate any such
plan pursuant to ERISA, or otherwise or (iii) written notice
given to Seller or any Affiliate of the intention to commence
or seek the commencement of any such proceeding. All accrued
benefits under each pension plan of Seller covering employees
who are to be transferred to the employ of Purchaser following
the Closing ("Transferred Employees") shall be fully provided
for as of the date of the Closing by any one or more of (i)
annuity contracts for the benefit of such Transferred
Employees issued by an insurance company acceptable to
Purchaser, (ii) the transfer to a successor plan established
or maintained by Purchaser for the benefit of such Transferred
Employees of assets having a fair market value of not less
than the present value of all such accrued benefits, (iii) in
the case of any multi-employer plan or any single employer
plan which Purchaser shall assume, by the fair market value of
the assets of such plan as of the date of the Closing being
not less than the present value of all accrued benefits under
such plan at such date and/or (iv) the termination of such
plan and the distribution of total account balances to
participants. Seller has no knowledge or information of any
planned or required increase in the level of contributions or
benefits under any such pension plan, or of any circumstances
which would suggest that such an increase may be required, or
that any union representing employees covered under any such
plan will attempt to negotiate for such an increase. In the
case of each pension plan to which Seller makes contributions
on behalf of Transferred Employees under which contributions
are fixed pursuant to a collective bargaining agreement, the
level of contributions currently provided for in the
applicable collective bargaining agreement is sufficient to
meet the funding requirements of ERISA applicable to such
plan, based on Acceptable Actuarial Assumptions. Each funded
pension plan maintained by Seller for one or more Transferred
Employees constitutes a qualified plan under section 40l(a) of
the Internal Revenue Code of l954 and meets all applicable
requirements of ERISA.
23
(u) Absence of Certain Business Practices. Neither Seller nor
either Shareholder, nor any other person acting on its or
their behalf, has, directly or indirectly, within the past
three years given or agreed to give any gift or similar
benefit, to any customer, supplier, governmental employee or
other person who is or may be in a position to help or hinder
the business of Seller (or assist Seller in connection with
any actual or proposed transaction) which (i) might subject
Seller to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (ii), if not given in
the past, might have had an adverse effect on the assets,
business or operations of Seller as reflected in the Financial
Statements or (iii), if not continued in the future, might
adversely affect Seller's assets, business, operations or
prospects or which might subject Seller to suit or penalty in
any private or governmental litigation or proceeding.
(v) Certain Representations
(i) To the knowledge of Seller and Shareholders, no supplier
or customer is considering termination, non-renewal or adverse
modification of its agreements or arrangements with Seller and the
transactions contemplated by this Agreement will not have a material
adverse effect on Seller's relationships with its suppliers and
customers. In particular, Seller's representative has notified
Shareholders that QVC intends to increase both the quantity and quality
of air time in 1999 as compared to 1998.
(ii) Within the past three years, Seller has not entered into
any agreement with, or been investigated by, any governmental
authority, community group or other third party that could restrict the
operation of its business.
(iii) No Key Employee of Seller has indicated to either
Shareholder that he or she is considering terminating his or her
employment.
(iv) No shareholder has any direct or indirect interest of any
kind in any business or entity which is competitive with Seller.
(w) Disclosure. No representation or warranty by Seller or any
Shareholder contained in this Agreement nor any statement or
certificate furnished or to be furnished by Seller or any
Shareholder to Purchaser or its representatives in connection
herewith or pursuant hereto contains or will contain any
untrue statement of a material fact, or omits or will omit to
state any material fact, in light of the circumstances when
made, required to make the statements herein or therein
contained not misleading. The representations and warranties
contained in this Section 10 shall not be affected or deemed
waived by reason of the fact that Purchaser and/or its
representatives knew or should have known that any such
representation or warranty is or might be inaccurate in any
respect, but any such representation or warranty shall be
deemed waived if Seller clearly and unambiguously demonstrates
that Purchaser's officers prior to the date of this Agreement
had actual knowledge that such representation or warranty was
inaccurate.
11. Representations and Warranties by Purchaser. Purchaser represents and
warrants to Seller and the Shareholders as follows:
(a) Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of New
York and has full corporate power and authority to carry on
its business as now being conducted and to own, lease or
operate its properties.
24
(b) Authorization and Approval of Agreement. All proceedings or
corporate action required to be taken by Purchaser relating to
the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall
have been taken.
(c) Execution, Delivery and Performance of Agreement. Neither the
execution, delivery nor performance of this Agreement by
Purchaser will, with or without the giving of notice or the
passage of time, or both, conflict with, result in a default,
right to accelerate or loss of rights under, or result in the
creation of any lien, charge or encumbrance pursuant to, any
provision of Purchaser's certificate of incorporation or
by-laws or any franchise, mortgage, deed of trust, lease,
license, agreement, understanding, law, ordinance, rule or
regulation or any order, judgment or decree to which Purchaser
is a party or by which it may be bound or affected. Purchaser
has full power and authority to enter into this Agreement and
to carry out the transactions contemplated hereby, all
proceedings required to be taken by Purchaser to authorize the
execution, delivery and performance of this Agreement and the
agreements relating hereto have been properly taken and this
Agreement constitutes a valid and binding obligation of
Purchaser.
(d) Litigation. There is no legal action, suit, arbitration,
governmental investigation or other legal or administrative
proceeding, nor any order, decree or judgment in progress,
pending or in effect, or to the knowledge of Purchaser
threatened, against or relating to Purchaser in connection
with or relating to the transactions contemplated by this
Agreement or otherwise, that could have a material adverse
effect upon Purchaser or its business or financial condition.
(e) Reports and Financial Statements.
(i) Purchaser has previously furnished to Seller copies of
Purchaser's (i) Annual Report on Form 10-K/A for the year ended June
30, 1998, as filed with the SEC (the "Purchaser Annual Report"), (ii)
Quarterly Report on Form 10-Q filed for the fiscal quarters ended
September 30, 1998 (the "Purchaser Quarterly Report"), (iii) proxy
statements relating to all meetings of its stockholders (whether annual
or special) since December 31, 1996, and (iv) all other reports,
registration statements and other written materials filed by Purchaser
with the SEC since December 31, 1996.
(ii) The financial statements included in such reports were
prepared in accordance with generally accepted accounting principles,
consistently applied, and present fairly the financial position and the
results of operations of Purchaser for the periods indicated. There has
been no material adverse change in Purchaser's business or financial
condition since September 30, 1998.
(iii) As of their respective dates, such reports, statements
and other written materials did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) Capitalization. The capitalization of Purchaser as of
September 30, 1998 was as set forth in the Purchaser Quarterly
Report. As of June 30, 1998, except as reflected in the
Purchaser Annual Report, there were no outstanding
subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or
arrangements of any character or nature whatsoever under which
Purchaser is or may become to issue, assign or transfer any
shares of the capital stock of Purchaser.
25
(g) Absence of Undisclosed Liabilities. Except as and to the
extent reflected in the Purchaser Quarterly Report, as of the
September 30, 1998, Purchaser had no debts, liabilities or
obligations which were not reflected in the Purchaser
Quarterly Report and which should have been reflected thereon
under GAAP as consistently applied by Purchaser.
(h) Taxes. All taxes, including, without limitation, income,
property, sales, use, franchise, added value, employees'
income withholding and social security taxes, imposed by the
United States or by any foreign country or by any state,
municipality, subdivision or instrumentality of the United
States or of any foreign country, or by any other taxing
authority, which are due or payable by Purchaser, and all
interest and penalties thereon, whether disputed or not, have
been paid in full, all tax returns required to be filed in
connection therewith have been accurately prepared and duly
and timely filed and all deposits required by law to be made
by Purchaser with respect to employees' withholding taxes have
been duly made. Purchaser has not been delinquent in the
payment of any foreign or domestic tax, assessment or
governmental charge or deposit and has no tax deficiency or
claim outstanding, proposed or assessed against it, and there
is no basis for any such deficiency or claim. The audit status
of Purchaser's federal income tax returns is as Purchaser has
advised by separate document. There is not now in force any
extension of time with respect to the date on which any tax
return was or is due to be filed by or with respect to
Purchaser, or any waiver or agreement by it for the extension
of time for the assessment of any tax.
(i) Labor Matters. Purchaser is not a party to any collective
bargaining agreement and there are no material or formal
complaints, charges, cases or controversies or any
conciliation agreement, consent or decree pending or, to the
knowledge of Purchaser, threatened against Purchaser and any
of its employees acting individually or in concert and to the
knowledge of Purchaser no organization is presently attempting
to gain, petitioning for or asserting representational status
with respect to any group or groups of employees of Purchaser,
and Purchaser is in material compliance with Federal and state
laws respecting employment practices, terms and conditions of
employment, wages and hours, and is not presently engaged in
any unfair labor practice. All employees of Purchaser are
legally employed, and those who are not U.S. citizens have
appropriate U.S. governmental authorizations. There is no
labor strike or other labor dispute and there is no complaint,
proceeding or other action instituted under the Equal
Opportunity Act pending or, to the knowledge of Purchaser,
threatened against Purchaser.
(j) Environmental Matters.
(i) Purchaser is, and at all times has been, in material
compliance with, and has not been in violation of, any federal, state,
foreign, or local laws, statutes, ordinances, regulations, rules and
orders pertaining to the environment, pollution and/or the health and
safety of human beings (collectively "Environmental Law"). Purchaser
has no basis to expect or has received, any actual or threatened order,
notice, or other communication from (i) any governmental body or
private citizen acting in the public interest, or (ii) the current or
prior owner or operator of any facilities, of any actual or potential
violation or failure to comply with any Environmental Law with respect
to any of the properties or assets (whether real, personal, or mixed)
in which Purchaser has or has had an interest, or with respect to any
property at or to which any hazardous or toxic waste or substance
("Hazardous Materials") was generated, manufactured, refined,
transferred, imported, used, or processed by Purchaser, or
26
from which Hazardous Materials have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
(ii) To the knowledge of Purchaser, there are no pending or
threatened claims, encumbrances, or other restrictions of any nature,
resulting from any environmental, health, and safety liabilities or
arising under or pursuant to any Environmental Law, with respect to or
affecting any of the facilities or any other properties and assets
(whether real personal or mixed) in which Purchaser has or had an
interest.
(iii) Purchaser has not permitted or conducted, or is aware
of, any Hazardous Materials activity conducted with respect to the
properties or assets (whether real, personal, or mixed) in which
Purchaser has or had an interest. (iv) To the knowledge of Purchaser,
there has been no release or threat of release of any Hazardous
Materials at or from the locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used
or processed from or by the properties and assets (whether real,
personal, or mixed) in which Purchaser has or had an interest.
(k) Proceedings re Employee Benefit Plans. There has not been any
(i) termination of any "defined benefit plan" within the
meaning of the Employee Retirement Income Security Act of l974
("ERISA") maintained by Purchaser or any person, firm or
corporation ("Affiliate") which is under "common control"
(within the meaning of Section 4001(b) of ERISA) with
Purchaser, or (ii) commencement of any proceeding to terminate
any such plan pursuant to ERISA, or otherwise or (iii) written
notice given to Purchaser or any Affiliate of the intention to
commence or seek the commencement of any such proceeding.
Purchaser has no knowledge or information of any planned or
required increase in the level of contributions or benefits
under any such pension plan, or of any circumstances which
would suggest that such an increase may be required, or that
any union representing employees covered under any such plan
will attempt to negotiate for such an increase. Each funded
pension plan maintained by Purchaser for one or more
Transferred Employees constitutes a qualified plan under
section 40l(a) of the Internal Revenue Code of l954 and meets
all applicable requirements of ERISA.
(l) Compliance with Laws and Other Instruments. To the knowledge
of Purchaser, Purchaser has complied with all existing laws,
rules, regulations, ordinances, orders, judgments and decrees
applicable to its business, properties or operations as
presently conducted, including without limitation, all federal
OSHA and California Department of Health requirements, and has
all permits, licenses and other authorizations applicable to
its business, properties or operations as presently conducted.
To the knowledge of Purchaser, neither the ownership nor use
of Purchaser's properties nor the conduct of its business as
currently conducted conflicts with the rights of any other
person, firm or corporation or violates, or with or without
the giving of notice or the passage of time, or both, will
violate, conflict with or result in a default, right to
accelerate or loss of rights under, any terms or provisions of
its certificate of incorporation or bylaws as presently in
effect, or any lien, encumbrance, mortgage, deed of trust,
lease, license, agreement, understanding, law, ordinance, rule
or regulation, or any order, judgment or decree to which
Purchaser is a party or by which it may be bound or affected;
and Purchaser is not aware of any proposed laws, rules,
regulations, ordinances, orders, judgments, decrees,
governmental takings, condemnations or other proceedings which
would be applicable to
27
its business, operations or properties and which might
adversely affect its properties, assets, liabilities,
operations or prospects, either before or after the Closing.
(m) Disclosure. No representation or warranty by Purchaser
contained in this Agreement nor any statement or certificate
furnished or to be furnished by Purchaser to Seller or the
Shareholders or their representatives in connection herewith
or pursuant hereto contains or will contain any untrue
statement of a material fact, or omits or will omit to state
any material fact, in light of the circumstances when made,
required to make the statements herein or therein contained
not misleading. The representations and warranties contained
in this Section 11 shall not be affected or deemed waived by
reason of the fact that Seller and/or its representatives or
the Shareholders knew or should have known that any such
representation or warranty is or might be inaccurate in any
respect, but any such representation or warranty shall be
deemed waived if Purchaser clearly and unambiguously
demonstrates that Seller or the Shareholders prior to the date
of this Agreement had actual knowledge that such
representation or warranty was inaccurate.
12. [omitted]
13. Conditions Precedent to Purchaser's Obligations. All obligations of
Purchaser hereunder are subject at the option of Purchaser, to the
fulfillment of each of the following conditions at or prior to the Closing,
and Seller and Shareholders shall exert their best efforts to cause each
such condition to be so fulfilled:
(a) All representations and warranties of Seller and the
Shareholders contained herein or in any document delivered
pursuant to this Agreement shall be true and correct in all
material respects when made.
(b) All covenants, agreements and obligations required by the
terms of this Agreement to be performed by Seller or by
Shareholders at or before the Closing shall have been duly and
properly performed in all material respects.
(c) [omitted]
(d) There shall be delivered to Purchaser a certificate executed
by the President and Secretary of Seller and by each
Shareholder, individually, dated the date of the Closing,
certifying that the conditions set forth in paragraphs (a) and
(b) of this Section have been fulfilled.
(e) All agreements, instruments and documents required to be
delivered to Seller and the Shareholders at or prior to the
Closing (including without limitation all agreements,
instruments and documents referred to in Section 7 as to be
delivered at the Closing) shall have been so delivered.
(f) Purchaser shall have received an opinion of Seller's counsel,
dated the date of the Closing, substantially in accordance
with Exhibit H to this Agreement.
(g) Seller shall have obtained a written consent to the transfer
or assignment to Purchaser, of Seller's manufacturing
agreement with Five Star Brands, Inc., and such agreement
shall have been amended to provide for a term ending on
December 31, 2001.
28
(h) Seller shall have obtained written confirmation from ▇▇▇▇▇▇▇,
Inc. a written consent to the transfer or assignment to
Purchaser of Seller's manufacturing agreement with ▇▇▇▇▇▇▇,
Inc.
(i) The parties shall have made the As-Of Adjustments.
14. Conditions Precedent to Seller's and Shareholders' Obligations. All
obligations of Seller and Shareholders at the Closing are subject, at the
option of Seller and the Shareholders, to the fulfillment of each of the
following conditions at or prior to the Closing, and Purchaser shall exert
its best efforts to cause each such condition to be so fulfilled:
(a) All representations and warranties of Purchaser contained
herein or in any document delivered pursuant to this Agreement
shall be true and correct in all material respects when made.
(b) All covenants, agreements and obligations required by the
terms of this Agreement to be performed by Purchaser at or
before the Closing shall have been duly and properly performed
in all material respects.
(c) [omitted]
(d) There shall be delivered to Seller and the Shareholders a
certificate executed by the President and Secretary of
Purchaser, dated the date of the Closing, certifying that the
conditions set forth in paragraphs (a) and (b) of this Section
have been fulfilled.
(e) Purchaser shall have paid the cash and stock amounts which
under Section 2 are required to be paid at the Closing.
(f) All agreements, instruments and documents required to be
delivered to Seller and the Shareholders at or prior to the
Closing (including without limitation all agreements,
instruments and documents referred to in Section 7 as to be
delivered at the Closing) shall have been so delivered.
(g) Seller and the Shareholders shall have received an opinion of
Purchaser's counsel, dated the date of the Closing,
substantially in accordance with Exhibit I to this Agreement.
(h) The parties shall have made the As-Of Adjustments.
15. Indemnification.
(a) Seller and Shareholders, jointly and severally, hereby
undertake and agree to indemnify Purchaser and its affiliates
and hold it and them harmless against and in respect of (and
shall on demand reimburse Purchaser for) the following:
(i) all claims, debts, liabilities and obligations of Seller
whether absolute or contingent arising out of the conduct of Seller's
business as conducted by Seller on or prior to the Closing Date, except
for such liabilities and obligations as are expressly assumed by
Purchaser pursuant to this Agreement;
(ii) any and all loss, liability or damage suffered or
incurred by Purchaser by reason of any untrue representation, breach of
warranty or non-fulfillment of any covenant
29
by Seller or any Shareholder contained herein or in any certificate,
document or instrument delivered to Purchaser pursuant hereto or in
connection herewith;
(iii) any and all loss, liability or damage suffered or
incurred by Purchaser in respect of or in connection with any liability
of Seller not specifically assumed by Purchaser pursuant to the terms
of this Agreement;
(iv) any and all loss, liability or damage suffered or
incurred by Purchaser by reason of or in connection with any claim for
finder's fee or brokerage or other commission arising by reason of any
services alleged to have been rendered to or at the instance of Seller
with respect to this Agreement or any of the transactions contemplated
hereby;
(v) any and all loss, liability or damage suffered or incurred
by Purchaser by reason of any claim for severance pay accruing or
incurred at any time on or after the date hereof and prior to the
Closing except to the extent any one or more specific employees are
discharged prior to the Closing hereunder with the prior written
consent of Purchaser and such consent contains the name(s) of such
specific employee(s);
(vi) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs, and expenses, including, without
limitation, legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to
oppose the imposition of any claims by third parties, or in enforcing
this indemnity.
(b) Purchaser hereby undertakes and agrees to indemnify Seller and
the Shareholders and their respective affiliates and to hold
them harmless against and in respect of (and shall on demand
reimburse them for) the following:
(i) all claims, debts, liabilities and obligations of Seller
whether absolute or contingent arising out of the conduct of Seller's
business as conducted by Purchaser from and after the Closing Date,
except for such liabilities and obligations as are not assumed by
Purchaser pursuant to this Agreement;
(ii) any and all loss, liability or damage suffered or
incurred by Seller or Shareholders by reason of any untrue
representation, breach of warranty or non-fulfillment of any covenant
by Purchaser contained herein or in any certificate, document or
instrument delivered to Seller and Shareholders pursuant hereto or in
connection herewith;
(iii) any and all loss, liability or damage suffered or
incurred by Seller or Shareholders in respect of or in connection with
any liability of Seller specifically assumed by Purchaser pursuant to
the terms of this Agreement;
(iv) any and all loss, liability or damage suffered or
incurred by Seller or Shareholders by reason of or in connection with
any claim for finder's fee or brokerage or other commission arising by
reason of any services alleged to have been rendered to or at the
instance of Purchaser with respect to this Agreement or any of the
transactions contemplated hereby; and
30
(v) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs, and expenses, including, without
limitation, legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to
oppose the imposition of any claims by third parties, or in enforcing
this indemnity.
(c) Indemnity Procedure.
(i) In the event any person indemnified under this Section (an
"Indemnified Party") seeks indemnification pursuant to this Agreement,
the Indemnified Party shall give prompt notice to the party or parties
from whom such indemnification is sought (the "Indemnifying Party") of
the assertion of any claim, or the commencement of any action or
proceeding, in respect of which indemnity may be sought hereunder.
(ii) The Indemnifying Party shall have the right to, and shall
at the request of the Indemnified Party, assume the defense of any such
action or proceeding at its own expense.
(iii) In any such action or proceeding, the Indemnified Party
shall have the right to retain its own counsel; but the fees and
expenses of such counsel shall be at its own expense unless (A) the
Indemnifying Party and Indemnified Party shall have mutually agreed to
the retention of such counsel or (B) the named parties to any suit,
action or proceeding (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party and representation of all
parties by the same counsel would be inappropriate due to actual or
potential conflicts of interest between them. An Indemnifying Party
shall not be liable under this Agreement for any settlement effected
without its consent of any claim, litigation or proceeding in respect
of which indemnity may be sought hereunder, but such consent shall not
be unreasonably withheld or delayed.
(iv) The Indemnifying Party may settle any claim without the
consent of the Indemnified Party, but only if the sole relief awarded
is monetary damages that are paid in full by the Indemnifying Party.
(d) The following limitations shall apply to any and all claims
for indemnification by any party under this Agreement:
(i) The representations and warranties of the parties
contained in Sections 10 and 11 of this Agreement (including the
Disclosure Schedule) shall survive the Closing until August 31, 2000,
provided that if written notice of a claim meeting the requirements of
this Section has been made during such period, the relevant
representations shall survive as to such claim until the claim has been
finally resolved. Notwithstanding the foregoing, the representations
and warranties set forth in Sections 10(h) and 10(s) shall survive
until 30 days after the applicable statutes of limitation.
(ii) No Indemnified Party listed in Section 15(a) shall be
entitled to assert any right to indemnification hereunder unless and
until the aggregate of all claims for indemnification equals or exceeds
$75,000. Once such claims equal or exceed the $75,000 threshold, such
Indemnified Party shall be entitled to the full amount of all
indemnified claims in excess of such threshold; provided that no claim
for
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indemnification hereunder may be asserted by an indemnified party
unless such claim (or series of related claims) equals or exceeds
$5,000 individually.
(iii) No Indemnified Party listed in Section 15(b) shall be
entitled to assert any right to indemnification hereunder unless and
until the aggregate of all claims for indemnification equals or exceeds
$75,000. Once such claims equal or exceed the $75,000 threshold, such
Indemnified Party shall be entitled to the full amount of all
indemnified claims in excess of such threshold; provided that no claim
for indemnification hereunder may be asserted by an indemnified party
unless such claim (or series of related claims) equals or exceeds
$5,000 individually.
Except in the case of fraud or intentional misrepresentations, the aggregate
liability under this Section 15 of Seller and the Shareholders shall not at any
time exceed an amount equal to (1) 30% of the initial or current value
(whichever is greater) of all cash and Common Stock theretofore paid by
Purchaser to Seller and Seller's Designees, plus (2) a 100% offset against all
payments which might otherwise subsequently become payable to Seller under
Section 2.
16. Bulk Sales Compliance. Purchaser hereby waives compliance by Seller
with the provisions of the Bulk Sales Law of any state, and Seller
warrants and agrees to pay and discharge when due all claims of
creditors which could be asserted against Purchaser by reason of such
non-compliance to the extent that such liabilities are not specifically
assumed by Purchaser under this Agreement. Seller and each of the
Shareholders, jointly and severally hereby indemnify and agree to hold
Purchaser harmless from, against and in respect of (and shall on demand
reimburse Purchaser for) any loss, liability, cost or expense,
including, without limitation, attorneys' fees, suffered or incurred by
Purchaser by reason of the failure of Seller to pay or discharge such
claims.
17. Termination. This Agreement may, by notice given prior to the Closing,
be terminated:
(a) by Purchaser if a material breach of any provision of this
Agreement has been committed by Seller or the Shareholders and
such breach has not been waived;
(b) by Seller if material breach of any provision of this
Agreement has been committed by Purchaser and such breach has
note been waived;
(c) by Purchaser if any condition in Section 13 has not been
satisfied as of the Closing Date and Purchaser has not waived
such condition on or before the Closing Date;
(d) by Seller if any condition in Section 14 has not been
satisfied as of the Closing Date and Seller has not waived
such condition on or before the Closing Date;
(e) by mutual consent of the parties; or
(f) by either Purchaser or Seller if the Closing has not occurred
(other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations
under this Agreement) on or before January 31, 1999, or such
later date as the parties may agree upon.
18. Nature and Survival of Representations and Warranties.
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(a) Each statement, representation, warranty, indemnity, covenant
and agreement made by Seller or any Shareholder in this
Agreement or in any document, certificate or other instrument
delivered by or on behalf of Seller or any Shareholder
pursuant to this Agreement or in connection herewith shall be
deemed the joint and several statement, representation,
warranty, indemnity, covenant and agreement of Seller and each
such Shareholder.
(b) All covenants and agreements made by each of the parties
hereto shall survive the Closing. Representations and
warranties shall survive the Closing only to the extent
provided in Section 15.
19. Notices. Any and all notices or other communications required or permitted
to be given under any of the provisions of this Agreement shall be in
writing and shall be deemed to have been duly given when personally
delivered, three business days after being sent by certified mail, or one
business day after being forwarded for priority delivery by Federal Express
or other recognized courier, addressed to the parties at the addresses set
forth below (or at such other address as any party may specify by notice to
all other parties given as aforesaid):
If to the Shareholders or to Seller, to them at
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ Godward LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
If to Purchaser, to it at:
▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
With a copy (which shall not constitute notice) to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Law Offices of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
20. Miscellaneous.
(a) This writing constitutes the entire agreement of the parties with
respect to the subject matter hereof and may not be modified, amended
or terminated except by a written agreement specifically referring to
this Agreement signed by all of the parties hereto. It supersedes all
prior agreements, instruments and documents between Purchaser on the
one hand and Seller and the Shareholders on the other hand, including
the letter of intent dated October 15, 1998. However, the
Confidentiality Agreement signed by the parties on July 15 and July 16,
1998 shall remain in full force and effect until the Closing.
33
(b) In the event of any controversy, claim or dispute between the parties
hereto arising out of or relating to this Agreement or any of the
documents provided for herein, or the breach thereof, the prevailing
party shall be entitled to recover from the losing party reasonable
attorney's fees, expenses and costs.
(c) No waiver of any breach or default hereunder shall be considered valid
unless in writing and signed by the party giving such waiver, and no
such waiver shall be deemed a waiver of any subsequent breach or
default of the same or similar nature.
(d) This Agreement shall be binding upon and inure to the benefit of each
corporate party hereto, its successors and assigns, and each individual
party hereto and his heirs, personal representatives, successors and
assigns. No person (including without limitation any employee of
Seller) shall have any rights as a third party beneficiary under this
Agreement.
(e) The paragraph headings contained herein are for the purposes of
convenience only and are not intended to define or limit the contents
of said paragraphs.
(f) Each party hereto shall cooperate, shall take such further action and
shall execute and deliver such further documents as may be reasonably
requested by any other party in order to carry out the provisions and
purposes of this Agreement.
(g) Seller will pay all sales, transfer and documentary taxes, if any,
payable in connection with the sale, conveyances, assignments,
transfers and deliveries to be made to Purchaser hereunder.
(h) This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed one original.
(i) This Agreement and all amendments thereof shall be governed by and
construed in accordance with the law of the State of California
applicable to contracts made and to be performed therein, provided that
the consulting and non-competition agreements referred to herein shall
be governed by and construed in accordance with the law of the State of
New York applicable to contracts made and to be performed therein.
(j) Any dispute, controversy or claim arising out of or relating to this
Agreement that cannot be resolved between the parties hereto shall be
resolved only by an action, suit or proceeding brought in any court of
competent jurisdiction located in Westchester County, New York or in
San Francisco, California, and, by execution and delivery of this
Agreement, each party (i) accepts, generally and unconditionally, the
exclusive jurisdiction of such courts and related appellate courts, and
irrevocably agrees to be bound by any judgement rendered thereby in any
such action, suit or proceeding, and (ii) irrevocably waives any
objection it may now or hereafter have as to the venue of
34
any such action, suit or proceeding brought in such a court or that
such court is an inconvenient forum. Each party hereto further agrees
that the service of process or of any other papers upon it or him in
the manner provided for notices hereunder shall be deemed good proper
and effective service upon it or him.
(k) Except as required by law and then only after discussion with the other
parties, until the Closing no party to this Agreement shall make any
public announcements in respect of this Agreement or the transactions
contemplated hereby or otherwise communicate with any news media about
the same, without first consulting with the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
Purchaser:
AMBI Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
Name and Title: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President & CEO
Seller:
OPTIMUM LIFESTYLE, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
Name and Title: ▇▇▇▇ ▇▇▇▇▇▇▇▇, CEO
Shareholders:
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
