ASSETS PURCHASE AND SALE AGREEMENT
ASSETS PURCHASE AND SALE AGREEMENT (the "Agreement") made this 8th day of
March, 2001, by and between TREE OF LIFE, INC., a Delaware corporation (the
"Buyer"), and FOOD FOR HEALTH CO., INC., an Arizona corporation ("FFH" or
"Seller") and AMCON DISTRIBUTING COMPANY, INC., a Delaware corporation (the
"Shareholder").
W I T N E S S E T H:
WHEREAS, FFH is engaged in the wholesale distribution of health and natural
food products, vitamins, supplements, and related products to retail health
food stores, to retail natural food stores and to natural food sections of
supermarkets (hereafter referred to as the "Business") and in retail business
that is not being sold to Buyer;
WHEREAS, Buyer desires to acquire, and Seller desire to sell materially all of
the assets of Seller used in the Business upon the terms and subject to the
conditions hereinafter set forth (the "Sale Transaction");
NOW, THEREFORE, in consideration of the premises and mutual provisions,
covenants and conditions herein contained, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1. Purchase and Sale of Assets.
1.1 Transfer of Assets. Upon the terms and subject to the conditions of
this Agreement, as of the Closing Date, Buyer shall purchase from Seller, and
Seller shall sell, assign, transfer, convey and deliver to Buyer, the
following assets (the "Assets") free and clear of all Encumbrances except the
Assumed Liabilities and Permitted Encumbrances:
(a) Inventory. All saleable inventory, merchandise and supplies (the
"Inventory") owned by Seller listed on Schedule 1.1(a), which Schedule shall
be updated by Seller and Buyer as of the Closing Date; provided, however, that
notwithstanding anything herein to the contrary, Inventory shall specifically
exclude, and Buyer shall not purchase the following inventory items (the
"Excluded Inventory"):
i. produce inventory bearing an expiration date earlier than 3 days
following the Closing Date;
ii. refrigerated inventory bearing an expiration date earlier than 14
days following the Closing Date;
iii. non-refrigerated inventory bearing an expiration date earlier than
90 days following the Closing Date;
iv. inventory which has been discontinued by the manufacturer by public
announcement on or prior to the Closing Date or which the manufacturer has
publicly announced on or prior to the Closing Date will be discontinued or
substituted within 60 days following the Closing Date;
v. inventory regarding which the labeling has been discontinued by the
manufacturer by public announcement on or prior to the Closing Date or which
the manufacturer has publicly announced on or prior to the date will be
discontinued or substituted within 60 days following the Closing Date;
vi. inventory stock-keeping units which are not stocked by Buyer and of
which no more than five cases in the aggregate have been sold by FFH during
the six-month period ending on the Closing Date;
vii. unsaleable, unusable, damaged, spoiled or deteriorated inventory;
viii. all Nature's Way inventory; and
ix. consigned inventory.
Inventory shall be valued at the lower of cost or market value where cost
is derived using the weighted average cost method consistent with Seller's
past practices. Immediately following the Closing Date, the Inventory to be
purchased and sold hereunder shall be determined by a physical inventory
pursuant to which all Inventory will be counted as to quantity by personnel of
Seller and Buyer. Both Buyer and Seller will have the right to have its
representatives present to observe the physical inventories to be conducted at
the Phoenix and Melbourne facilities. Any disputes as to the physical count,
usability, saleability or value of any item of Inventory will, if possible, be
resolved while such physical inventory is being taken. Unresolved Inventory
disputes will be subject to binding determination by the Accountants pursuant
to Section 2.2 below. All saleable Inventory shall be set forth separately on
a Certificate of Inventory, the original and a copy of which shall be signed
and dated by representatives of both Seller and Buyer and shall indicate the
value of each item of Inventory as of the Closing Date, as determined
pursuant to this paragraph.
(b) Accounts Receivable. All accounts receivable of Seller (the
collectibility of which is as represented and warranted in Section 3.15(b)
below) related to the Business listed on Schedule 1.1(b), which Schedule shall
be updated by Seller and Buyer as of the Closing Date, plus unpaid interest
accrued thereon and security or collateral therefor, net of any and all
applicable offsets determined as of the Closing, including, without
limitation, credit memos and earned and/or accrued customer rebates (e.g.,
volume, cash) and allowances (e.g., service, delivery, spoilage, marketing,
and other service agreement allowances) (the "Accounts Receivable"). All
Accounts Receivable must be evidenced by applicable invoices, applicable
credit memos, corresponding signed bills of lading or other supporting
documentation acknowledging receipt of goods by the recipient or otherwise
reasonably acceptable to Buyer ("Supporting Documentation"). Unless and to
the extent otherwise determined by Buyer, Accounts Receivable shall
specifically exclude, and Buyer shall not purchase, any of Seller's
outstanding accounts receivable (i) of customers to whom FFH has not made
sales in excess of $1,000 during the 90 day period ending on the Closing Date,
(ii) which are due and owing from an Affiliate, (iii) for which there is
insufficient Supporting Documentation as described above, or (iv) which are
dated more than 90 days past the applicable customer's due date (the "Excluded
Accounts Receivables").
(c) Vendor Receivables. All receivables of Seller (the collectibility of
which is as represented and warranted in Section 3.15(c) below) arising in the
Business in the ordinary course from Seller's vendors (regardless whether
designated as a rebate, credit, future deduction or the like) listed on
Schedule 1.1(c), which Schedule shall be updated by Seller and Buyer as of the
Closing Date, classified as a receivable or a deduction, credit or the like
against any account payable on any of the Seller's Transferred Books and
Records ("Vendor Receivables"). All Vendor Receivables must be evidenced by
Supporting Documentation. Vendor Receivables shall specifically exclude, and
Buyer shall not purchase, any of Seller's vendor receivables which, as of the
Closing Date, have been outstanding more than 90 days (the "Excluded Vendor
Receivables"), or for which there is insufficient Supporting Documentation.
(d) Fixed Assets and Equipment. The machinery, equipment, furniture,
fixtures, owned vehicles, rolling stock and other personal property owned by
Seller and used and useful in the Business as of the close of business on the
Closing Date and as identified on Schedule 1.1(d) ("Fixed Assets"), which
Schedule shall be updated by Seller and Buyer as of the Closing Date.
(e) Prepaid Expenses. Seller's prepaid expenses listed on Schedule
1.1(e), which Schedule shall be updated by Seller and Buyer as of the Closing
Date ("Prepaid Expenses"), related to the Business, but specifically excluding
prepaid expenses related to Real Property Leases and medical, property and
casualty insurance policies of Seller ("Excluded Prepaid Expenses").
(f) Intangibles. Seller's intangible assets (excepting recorded
goodwill) related to the Business as of the Closing Date (the "Intangible
Assets"), consisting of:
i. the leasehold interests under leases for personal property listed on
Schedule 1.1.(f)(i) hereto (the "Personal Property Leases");
ii. all of Seller's rights and interests in and to the customer contracts
of Seller relating to the Business and entered into in the ordinary course, as
set forth on Schedule 1.1(f)(ii), which Schedule shall be updated by Seller
and Buyer as of the Closing Date, including without limitation, "open"
customer orders (i.e., orders received but unfilled), distribution and service
agreements, customer security documentation, including security agreements and
guaranties (including Seller's customer account guaranties and recorded/filed
financing statements), except that open customer orders shall not be described
on Schedule 1.1(f)(ii);
iii. all of Seller's rights and interests in and to the supplier
contracts of Seller relating to the Business and entered into in the ordinary
course, as set forth on Schedule 1.1(f)(iii), which Schedule shall be updated
by Seller and Buyer as of the Closing Date, including without limitation,
"open" purchase orders (i.e., orders placed but not received), supplier sales
guarantees (to the extent assignable), quotations and bids, except that open
purchase orders, quotations and bids shall not be described on Schedule
1.1(f)(iii);
iv. all of Seller's rights and interests in and to such other contracts
of Seller relating to the Business and entered into in the ordinary course, as
set forth on Schedule 1.1(f)(iv), which Schedule shall be updated as of the
Closing by Buyer and Seller;
v. to the extent assignable, claims, interests and rights with respect to
the Assets (including rights against suppliers under warranties), provided
that Seller shall hold, together with Buyer, all such claims, interests and
rights to the extent they relate to any matter for which Seller may be
obligated to indemnify Buyer;
vi. all rights in trade dress, trade names, corporate names, trademarks,
service marks, proprietary names, marks, logos, and copyrights, including all
common law rights thereto, domain names related to the Business, and the
registrations and applications therefor, along with all goodwill associated
therewith and all common law rights thereto, and trade secrets related to the
Business, and any and all other intellectual property rights, proprietary
information or material of the Seller related to the Business, including,
without limitation, to the extent related to the Business, any computer
software programs or applications (including source and object codes thereto),
secret processes, know-how, formulae, recipes, patterns, drawings, designs and
trade secrets, manuals and data, sales and advertising materials, sale and
purchase correspondence, shipping records and other records necessary or
appropriate to the Assets, all of which are set forth in Schedule 1.1(f)(vi)
("Intellectual Property"). Schedule 1.1(f)(vi) shall be updated as of the
Closing by Buyer and Seller;
vii. the customer lists and supplier lists of Seller, together with all
goodwill associated therewith;
viii. all Permits as issued to Seller, to the extent transferable and
necessary for the conduct of the Business by Buyer from and after the Closing
Date;
ix. the Seller's following telephone numbers: (000) 000-0000, (800) 669-
7509, (000) 000-0000 and (000) 000-0000; and
x. subject to Section 10.15(b), all Books and Records in Seller's care,
custody or control related to the Assets, Assumed Liabilities and the Business
(the "Transferred Books and Records").
The contracts described in subsections (i) through (iv) inclusive are
hereinafter referred to as the Assigned Contracts. Except for the Assigned
Contracts, Buyer shall not assume or have any obligation under any other
contract or agreement of Seller including, without limitation, Seller's
[MATERIAL REDACTED].
(g) Restrictive Covenant. The restrictive covenant of the Seller and
Shareholder as set forth in Exhibit "A" attached hereto ("Restrictive
Covenant").
(h) Unrecorded Goodwill. All unrecorded goodwill as of the Closing Date
associated with the Assets or the Business; and
(i) 800 Code Inventory. Possession (but not ownership of 800 Code
Inventory) listed on Schedule 1.1(i), which shall be updated at Closing by
Seller and Buyer.
1.2 Excluded Assets. Notwithstanding anything to the contrary herein,
specifically excluded from the Assets are the following assets (the "Excluded
Assets"):
(a) Seller's rights under or pursuant to the Real Property Leases and all
leasehold improvements;
(b) all equity interests of Seller in Xxxxxxxxxx Natural Foods, Inc. and
Health Food Associates, Inc.;
(c) all claims of the Seller relating to any matter which, as of the
close of business on the Closing Date, have been accrued by Seller or are in
litigation, arbitration or other proceedings, including, without limitation,
all of Seller's rights under insurance policies and rights of indemnification
from others (except to the extent such rights of indemnification relate to the
Assets or an Assumed Liability);
(d) Seller's rights under or pursuant to all contracts, leases or
agreements which are not specifically identified as Assigned Contracts,
[MATERIAL REDACTED], all employment, consulting and other broker agreements,
and any contract with Nature's Way.
(e) recorded goodwill on the books of Seller;
(f) all cash and cash equivalent accounts of Seller;
(g) any obligation of Shareholder, or any Affiliate, owed to Seller;
(h) all inventory in the possession or control of Seller known as 800
Code Inventory and all Excluded Inventory;
(i) such fixed assets as are mutually agreed to by the parties;
(j) all Excluded Accounts Receivable;
(k) all Excluded Vendor Receivables;
(l) Healthy Edge and all other marks and names owned by Seller not
otherwise identified in Schedule 1.1(f)(vi) (the "Excluded Proprietary
Marks"); and
(m) all Excluded Prepaid Expenses.
Notwithstanding anything to the contrary herein, no inventory in the
possession or control of Seller known as 800 Code Inventory shall be included
as an Asset in the Sale Transaction and Seller acknowledges that such
inventory is the property of its customers.
1.3 Assumption of Liabilities. Upon the terms and subject to the
conditions contained herein, at the Closing, Buyer shall assume the following,
and only the following, liabilities of Seller (the "Assumed Liabilities"):
(a) all liabilities accruing, arising out of, or relating to events or
occurrences happening after Closing under the Assigned Contracts, but not
including any liability for any breach or default under any such Assigned
Contract occurring on or prior to the Closing , or for any occurrence of an
event on or before the Closing that, with the passage of time or the giving of
notice or both, would constitute a breach or default thereunder;
(b) Seller's accounts payable incurred in the ordinary course of the
Business as of the Closing Date, listed on Schedule 1.3(b) ("Accounts
Payable"), which Schedule shall be updated by Seller and Buyer as of the
Closing Date, subject to reduction in the Purchase Price pursuant to Section
1.4; and
(c) Seller's obligation to store, insure and deliver 800 Code Inventory
as directed by the owners of such goods; provided that nothing herein shall be
deemed to obligate Buyer to continue Seller's customer program regarding 800
Code Inventory after Closing.
Notwithstanding any other provision of this Agreement and regardless of
whether any of the following may be disclosed to Buyer pursuant to Article III
hereof or whether Buyer may otherwise have Knowledge of the same, Buyer shall
not assume, and Seller shall retain sole responsibility for, any claims (other
than claims for which Buyer has agreed to indemnify Seller under Section 8.2),
against, or liabilities, potential liabilities or obligations of Seller other
than the Assumed Liabilities, whether liquidated or unliquidated, known or
unknown, whether arising out of occurrences prior to, at or after the date
hereof and the Closing Date.
All liabilities of Seller other than the Assumed Liabilities are
hereinafter referred to collectively as the "Retained Liabilities" and shall
be excluded from the term "Assumed Liabilities."
1.4 Purchase Price. Subject to adjustment pursuant to Section 2.2
below, the purchase price for the Assets shall be an amount equal to the sum
of:
(a) U.S.[MATERIAL REDACTED] for unrecorded goodwill, general intangibles
and the Restrictive Covenant; plus
(b) the book value of the Assets, net of the book value of the Assumed
Liabilities determined as of the Closing, computed as provided below.
The purchase price to be paid at Closing (the "Preliminary Purchase
Price") shall be calculated in accordance with Sections 1.1 and 1.3, using the
information found in the Estimated Closing Balance Sheet, and set forth in the
form attached hereto as Exhibit "B" entitled Preliminary Purchase Price
Schedule, subject to later adjustments pursuant to Section 2.2. The
Preliminary Purchase Price so computed shall be paid to Seller in current
funds by wire transfer on the Closing Date to one or more accounts designated
by Seller.
1.5 Prorations. Consistent with Schedule 1.5, at Closing or as soon
thereafter as practicable, Buyer and Seller shall prorate as of the Closing
all items relating to the Business which are properly allocable in part to a
time period prior to the Closing. Such prorations shall be included in the
Final Closing Balance Sheet (as defined in Section 2.2 below).
1.6 Closing Costs; Transfer Taxes and Fees. All sales and use taxes
incurred by reason of the transfers of Assets provided hereunder
(collectively, "Transfer Taxes") shall be paid by Buyer when due, and Buyer
will, at its own expense, file all necessary tax returns and other
documentation with respect to all such Transfer Taxes. Seller shall pay all
fees and costs of recording or filing all applicable conveyancing instruments
necessary to transfer the Assets to Buyer free and clear of all Encumbrances
except the Assumed Liabilities and Permitted Encumbrances, and to obtain the
transfer of existing Permits necessary for the conduct of the Business by
Buyer from and after the Closing Date which may be lawfully transferred, and
shall pay all costs and fees associated with the Letter of Credit.
ARTICLE II
CLOSING
2. Closing.
2.1 Closing. The closing of the purchase and sale of the Assets (the
"Closing") shall take place at the offices of Xxxxx and Roca LLP, Phoenix,
Arizona, on March 23, 2001, or at such other date, place and time as the
parties may agree (the "Closing Date"). The Closing shall take effect at the
close of business on the day of the Closing. References to "at" or "as of" or
"after" the "Closing" or the "Closing Date" shall mean as of or after the
close of business on the day of Closing.
2.2 Adjustment to Purchase Price.
(a) Within thirty (30) days after the Closing Date, the Buyer and Seller
shall jointly prepare, in accordance with GAAP and in accordance with Sections
1.1 and 1.3, a balance sheet for the Seller as of the Closing Date (the "Final
Closing Balance Sheet") and a Final Purchase Price Schedule in the form of
Exhibit "C," to include a calculation of the Adjustment Amount (defined
below). Buyer and Seller shall use their best efforts during said thirty (30)
day period to resolve any disputes regarding preparation of the Final Closing
Balance Sheet, the Final Purchase Price Schedule or the calculation of the
Adjustment Amount. Any unresolved disputes between the Buyer and Seller with
respect thereto shall, at the request of either the Buyer or Seller,
immediately be referred to the Accountants. The decision of the Accountants
on any matter referred to it shall be final and binding on the parties hereto.
The parties shall use their best efforts to cause the Accountants to render
their decision within 30 days of referral. The fees and expenses of the
Accountants for its services rendered shall be paid one-half by the Buyer and
one-half by the Seller.
(b) Adjustment Amount. The "Adjustment Amount" shall be the amount by
which the Purchase Price as determined using the information set forth on the
Final Closing Balance Sheet and shown on the Final Purchase Price Schedule is
greater or less than the Preliminary Purchase Price as shown on the
Preliminary Purchase Price Schedule.
(i) If the Adjustment Amount is a positive number, then Buyer shall pay
Seller an amount equal to the Adjustment Amount by wire transfer in
immediately available funds.
(ii) If the Adjustment Amount is a negative number, then Seller shall pay
Buyer an amount equal to the Adjustment Amount by wire transfer in immediately
available funds.
The amount of the Preliminary Purchase Price, as adjusted, shall be the
"Purchase Price."
(c)The obligations of the parties hereunder shall survive the closing of
this transaction.
2.3 Allocation of Purchase Price. The Purchase Price shall be allocated
by Buyer among the Assets in the manner required by Section 1060 of the Code
and regulations thereunder. Buyer and Seller agree to each prepare and file
on a timely basis with the Internal Revenue Service substantially identical
initial and supplemental Internal Revenue Service Forms 8594 "Asset
Acquisition Statements Under Section 1060" consistent with such allocation and
which gives effect to any Adjustment Amount determined in accordance with
Section 2.2 hereof.
2.4 Conveyances at Closing.
(a) Instruments of Transfer. On the Closing Date, Seller and
Shareholder, as applicable, shall execute and deliver to Buyer such good and
sufficient instruments of conveyance and transfer, including bills of sale,
instruments of title, endorsements, assignments of contracts, assignments of
personal property leases, and assignments of Intellectual Property (including,
without limitation, assignments by Seller to Buyer of the trademarks included
in the Assets suitable for recording said transfers in the U.S. Patent and
Trademark office or any relevant state, local or foreign government office, as
applicable), a copy of each which shall be attached to this Agreement as a
part of composite Exhibit "D", and instructions to the appropriate
institutions to effect the transfer to Buyer of all of Seller's lock boxes
pertaining to the Accounts Receivable, if any, in form and substance
reasonably satisfactory to Buyer and its counsel, but in any event as shall be
effective to vest in Buyer all of Seller's right, title and interest in and to
all of the Assets, free and clear of all Encumbrances except the Assumed
Liabilities and Permitted Encumbrances.
(b) Assumption Document. On the Closing Date, Buyer shall execute and
deliver to Seller an instrument of assumption evidencing Buyer's assumption of
the Assumed Liabilities, a copy of which is attached to this Agreement as
Exhibit "E."
(c) Certificates and Opinions. Buyer and Seller shall deliver the
certificates, opinions of counsel and other matters described in Articles VI
and VII.
(d) Consents. Seller shall deliver all Permits and third party consents
required for valid transfer of the Assets and consummation of the Sale
Transaction contemplated by this Agreement.
(e) Resale Certificate. Buyer shall deliver all applicable resale
exemption certificates or similar documentation evidencing that the Inventory
purchased by Buyer is purchased for resale.
(f) Letter of Credit. At or before Closing, Seller shall deliver to
Buyer an irrevocable standby letter of credit in favor of Buyer in the amount
of [MATERIAL REDACTED] with a term of 12 months after the Closing Date (the
"Letter of Credit"), to secure Buyer against Losses regarding which there has
been a final determination under the procedure set forth in Section 8.5. The
Letter of Credit (i) shall be in the form attached hereto as Exhibit "F" and
(ii) shall be issued by LaSalle National Bank, N.A.. Buyer may draw under the
then current Letter of Credit in an amount equal to so much of any
Indemnification Claim as is accepted by Seller (by failure to object or
otherwise). If no final determination of the validity and amount of all or
any portion of a timely and outstanding Indemnification Claim has occurred by
the 12th month of the then current Letter of Credit, Buyer may give notice to
the bank that issued that Letter of Credit to extend that Letter of Credit for
an additional 12 months, in the amount of the lesser of the balance of the
Letter of Credit and the asserted but undetermined portion of that
Indemnification Claim (the "Balance"). If Buyer gives such notice, Seller
shall cause that bank to extend that Letter of Credit. If Buyer does not
receive within ten days before the then current expiration date of that Letter
of Credit sufficient evidence that such Letter of Credit has been so extended,
Buyer may draw the Balance of the Indemnification Claim under that Letter of
Credit and hold the proceeds from such draw in an interest-bearing escrow
account, for the purposes for which the Letter of Credit is furnished to
Buyer. Nothing in this section, and no action or inaction of Buyer under this
section or with regard to the Letter of Credit or substitute therefor, shall
be construed to limit Buyer's remedies against Seller or Shareholder for
Losses, except to the extent of the proceeds of any draw actually received by
Buyer for its own account (as opposed to being received by Buyer to be held in
escrow hereunder).
(g) Form of Instruments. To the extent a form or document to be
delivered hereunder is not attached as an exhibit hereto, such document shall
be in the form and substance, and shall be executed and delivered in a manner,
reasonably satisfactory to Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND SHAREHOLDER
3. Representations and Warranties. Seller and Shareholder, jointly and
severally, hereby represent and warrant to the Buyer, as follows:
3.1 Authorization of Seller. Seller and Shareholder have all requisite
power and authority or legal capacity, as the case may be, to enter into each
of the Transaction Documents to which it is a party and any other instruments
and agreements to be executed by such party pursuant to this Agreement and to
consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and all other agreements and documents required
hereunder (and the due consummation of the transactions contemplated hereby
and thereby) have been duly authorized by the Board of Directors and the
Shareholder of the Seller.
3.2 Binding Effect. The Transaction Documents to which Seller and
Shareholder are a party and such other instruments and agreements have been
duly executed and delivered by such party and constitute the valid and binding
obligations of such party enforceable against such party in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
generally and by general equitable principles (regardless of whether the issue
of enforceability is considered in a proceeding in equity or at law).
3.3 Existence and Good Standing of Seller. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of Arizona,
with all requisite corporate power to carry on its Business as now conducted,
and to own and lease the properties owned, leased or operated by it. Seller
has heretofore delivered to Buyer complete and correct copies of its Articles
of Incorporation and Bylaws, each as amended and in effect on the date of this
Agreement and as of the Closing Date.
3.4 Subsidiaries and Investments. Set forth on Schedule 3.4 is a list of
each Person in which Seller owns, directly or indirectly, any equity security
(each such corporation, partnership or limited liability company is
hereinafter referred to as a "Subsidiary"). Except as set forth on Schedule
3.4, the Business carried on by Seller has not been conducted through any
direct or indirect Subsidiary or Affiliate of Seller or Shareholder.
3.5 No Violations. Except as disclosed on Schedule 3.5 hereto, as
related to the execution and delivery by any party thereto of this Agreement
or any of the other Transaction Documents and any other instruments or
agreements to be executed pursuant hereto or thereto, the consummation by
Seller or Shareholder, as applicable, of the transactions contemplated hereby
or thereby will not: (i) violate, conflict with, or result in a breach or
default under any provision of the Certificate or Articles of Incorporation or
Bylaws or other constitutive documents of such party; or (ii) violate any
statute, ordinance, rule, regulation, order, judgment or decree of any court
or any governmental or regulatory body, agency or authority applicable to such
party or by which it or any of its properties or assets may be bound; or (iii)
require it to obtain any Permit, consent or approval of, or require such party
to give any notice to, any governmental regulatory body, agency or authority;
or (iv) constitute a violation or breach by such party or, conflict with,
constitute (with or without due notice or lapse of time or both) a default by
Seller (or give rise to any right of termination, cancellation, payment or
acceleration) or result in the creation of any Encumbrance upon any of the
properties or assets of such party under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture license, franchise, permit,
agreement, lease, franchise agreement or other instrument or obligation to
which such party is a party, or by which it or its properties or assets may be
bound.
3.6 No Actions. No action or proceeding has been instituted or, to the
best Knowledge of Seller, threatened, against Seller, before any court or
other governmental body by any Person seeking to restrain, prohibit, alter or
delay the execution and delivery of this Agreement, any other Transaction
Document or the transactions contemplated hereby or thereby.
3.7 Financial Statements.
(a) Attached as Schedule 3.7(a) are (i) the audited balance sheets of
Seller as at September 12, 1999 and September 13, 1998 and the related
statements of income for the periods then ended; (ii) the unaudited balance
sheets of the Business of Seller as at September 13, 1998, September 12, 1999,
and October 1, 2000, and the related statements of income for the periods then
ended and (iii) the unaudited interim balance sheet of the Business of Seller
at January 21, 2001, and the related statements of income for the four
accounting periods then ended (the "Interim Financial Statements"). All of
the preceding financial statements are collectively referred to herein as the
"Financial Statements." Except as provided in Schedule 3.7(a), the Financial
Statements are in accordance with the Books and Records of Seller and have
been prepared in accordance with GAAP consistently applied throughout the
periods indicated. Subject to the adjustments and conventions used in
preparing the Financial Statements, which are disclosed on Schedule 3.7(a),
the Financial Statements fairly present the assets, liabilities, and financial
condition of Seller at the respective dates thereof and, except as indicated
therein, reflect all claims against and all debts and liabilities of Seller
which are known to Seller or should reasonably be known to Seller, fixed or
contingent, as of the respective dates thereof, and the related statements of
income fairly present the results of operations of Seller for the periods
indicated (subject in the case of the Interim Financial Statements, to normal
year-end adjustments). At the respective dates of the Financial Statements,
there were no liabilities of Seller which, in accordance with GAAP, should
have been set forth or reserved for therein or in the notes thereto, which are
not set forth or reserved therein or the notes thereto.
(b) Seller shall deliver to Buyer promptly any financial statements which
Seller may subsequently prepare prior to the Closing Date with respect to
annual, quarterly and monthly periods ending subsequent to those periods
covered by the Financial Statements.
3.8 Absence of Certain Changes or Events. Except as set forth on
Schedule 3.8 attached hereto, since January 21, 2001, there has not been, with
respect to Seller, any material:
(i) commitment or transaction except in the ordinary course of business
consistent with past practice or with Buyer in connection with the Sale
Transaction;
(ii) adverse change in the business relationship of Seller with any
customer or supplier of the Business and neither Seller nor Shareholder have
caused or have Knowledge of any fact or condition which might reasonably be
expected to cause such an adverse change now or in the future in the business
relationship of Seller with the customers or suppliers of its Business, nor,
to the Knowledge of Seller or Shareholder, is such threatened;
(iii) destruction, damage to or loss (whether or not covered by
insurance) that individually or in the aggregate has had an adverse effect on
the Assets or Business;
(iv) labor troubles or other event or condition of any character which
has had, or could reasonably be expected to have, an adverse effect, excluding
the effect, if any, of the Sale Transaction;
(v) mortgage, pledge or other encumbrance or lien affecting any of the
Assets, tangible or intangible;
(vi) sale, transfer, lease, license or other disposal of any Asset or
property, tangible or intangible, pertaining to the Business except in the
ordinary course, or discontinuance of any material product line or the
distribution of any of its material products or services (as measured by
annual sales volume);
(vii) amendment or termination of any contract, agreement or Permit other
than in the ordinary course of business;
(viii) waiver, settlement or release of any right or claim;
(ix) revaluation with respect to any of the Assets;
(x) increase in the salary or other benefits or compensation payable or
to become payable to any employee or any declaration, payment, or commitment
or obligation of any kind for the payment of a bonus or other additional
salary or compensation to any employee other than in the ordinary course of
business and consistent with the past practice;
(xi) sale, lease, abandonment or other disposition of all or any part of
the Assets or facilities or, other than in the ordinary course of business, of
any equipment or other operating property or any sale, assignment, transfer,
license or other disposition of any Permit;
(xii) contracts or agreements of any kind or character or any liabilities
created (direct, contingent or otherwise), except those which have been
entered into or incurred in the ordinary course of business consistent with
past practice;
(xiii) capital expenditure or commitment made in excess of $25,000;
(xiv) bonus, pension, retirement or profit sharing distribution or
payment of any kind except in the ordinary course of business consistent with
past practice;
(xv) change in insurance coverage;
(xvi) notes or accounts receivable written off as uncollectible, except
write-offs in the ordinary course of business charged to applicable reserves;
(xvii) action or decision taken which would be restricted by Section 5.1;
(xviii) changes in any accounting methods or procedures;
(xix) disposition or lapsing of any Intellectual Property or any
disposition or disclosure to any person of any Intellectual Property not
theretofore a matter of public knowledge;
(xx) other event of any character that has or could reasonably be
expected to adversely affect the Assets or the Business; or
(xxi) agreement, whether or not in writing, to do any of the foregoing.
Except as set forth on Schedule 3.8, no fact or condition exists or is
contemplated or, to the best Knowledge of any Seller and Shareholder,
threatened which might cause any change described in clauses (i)-(xxi) hereof
in the future.
3.9 Leased Real Property. No Real Property Leases are being assigned to
Buyer. Schedule 3.9 attached hereto contains an accurate and complete list
and a summary of the material terms of all leases of real property to which
Seller is a party (as lessee or lessor) and where the Assets are located
("Real Property Leases"). Seller has delivered to Buyer true, correct and
complete copies of all such leases, including all amendments thereto. Each
lease of real property set forth on Schedule 3.9 (or required to be set forth
on Schedule 3.9) is in full force and effect; all rents and additional rents
due to date on each such lease have been paid; in each case, the lessee is not
in default thereunder and no waiver, indulgence or postponement of the
lessee's obligations thereunder has been granted by the lessor; and there
exists no event of default or event, occurrence, condition or act which, with
the giving of notice, the lapse of time or the happening of any further event
or condition, would become a default under such lease. Seller has not
violated any of the material terms or conditions under any such lease, and, to
the best Knowledge of Seller and Shareholder, all of the covenants to be
performed by any other party under any such lease have been fully performed.
3.10 No Undisclosed Liabilities. Other than Retained Liabilities, Seller
has no material liabilities in connection with the Business due or to become
due, except (a) liabilities which are set forth or reserved for on the Interim
Financial Statements, (b) liabilities arising in the ordinary course of
business under the Assigned Contracts and Permits and other business
arrangements described in the Disclosure Schedules and (c) liabilities
incurred since the date of the Interim Financial Statements in the ordinary
course of business and in accordance with this Agreement (none of which
relates to any default by Seller under any contract or lease, breach of
warranty, tort, infringement or violation of any regulation or court order or
arose out of any action) and none of which, individually or in the aggregate,
has or would have an adverse effect on the Business or the Assets.
3.11 Tax Matters. 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 Seller, and all interest and penalties thereon,
whether disputed or not, have been paid in full, or will be paid by the date
due, all tax returns (each, a "Return") required to be filed in connection
therewith have been accurately prepared and duly and timely filed or will be
so prepared and filed by the date due and all deposits required by law to be
made by Seller with respect to employees' withholding and other taxes have
been duly made or will be made by the date due. 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 to the best of Seller's and Shareholder's
Knowledge, there is no basis for any such deficiency or claim.
3.12 Contracts. Schedules 1.1(f)(i)-(iv), inclusive, set forth a
complete and accurate list of all the Assigned Contracts. There are no
contracts other than the Assigned Contracts which are necessary for Buyer to
operate the Business from and after the Closing Date. Each contract or
agreement set forth on Schedules 1.1(f)(i)-(iv), inclusive, (or required to be
set forth on Schedules 1.1(f)(i)-(iv), inclusive) is in full force and effect,
and there exists no default or event of default by Seller or any third party
to such contract or agreement or event, occurrence, condition or act
(including the consummation of the transactions contemplated hereby) which,
with the giving of notice, the lapse of time or the happening of any other
event or condition, would become a default or event of default by any party
thereto. Seller has delivered to Buyer true, correct and complete copies of
all such contracts, including all amendments thereto.
3.13 Litigation. Except as set forth on Schedule 3.13 attached hereto,
which, together with other schedules as permitted in Section 5.8, may be
updated through the Closing Date, there are no claims, actions, suits,
proceedings or investigations pending or, to the best Knowledge of the Seller
and Shareholder, threatened against or involving Seller or Shareholder or
affecting the Assets or the Business, at law or in equity, or before or by any
court, arbitrator or federal, state, municipal or other governmental
department, commission, board, agency or instrumentality. Except as set forth
on Schedule 3.13, Seller is not subject to any continuing court or
administrative order, writ, injunction, or decree applicable to it or any of
the Assets or the Business. There are no unsatisfied judgments against the
Seller, the Business or the Assets.
3.14 Compliance with Laws and Regulations.
(a) Seller is in compliance with all laws, rules, regulations, orders,
judgments, licenses, permits, certificates, approvals and decrees applicable
to Seller, the Assets or the Business, except for such non-compliance as would
not have a material adverse effect on the Business or the Assets and has not
received any notice that Seller is not in compliance with a particular
federal, state or local law applicable to the operation of the Business.
(b) The products and packages included in the Inventory and the
facilities and operations of Seller as they relate to the Business are in
compliance with all applicable provisions of the Federal Food, Drug and
Cosmetic Act, all other labeling and food laws and all rules and regulations
promulgated under such acts and laws, whether federal, state or local, except
for such non-compliance as would not have a material adverse effect on the
Business or the Assets and no charge is pending or, to the Knowledge of Seller
and Shareholder, threatened that Seller has violated or is in violation of any
such act, rule or regulation. Seller has received all Permits, approvals and
other consents which may be required for Seller to operate the Business, each
of which is listed on such Schedule 3.14(b), along with its date of renewal or
expiration, if any, and Seller has not had any such Permit, approvals and
other consents revoked and Seller is not in violation thereof.
3.15 Inventory, Receivables, Accounts Payable, Prepaid Expenses and Fixed
Assets.
(a) All items of Inventory listed on Schedule 1.1(a) are owned by Seller
(unless consigned), were acquired in the ordinary course of Seller's Business,
are maintained at levels consistent with the Seller's usual and customary
practices, are saleable in the ordinary course, and are valued on a weighted
average cost basis. Except as set forth on Schedule 3.15, no items included
in the Inventory have been pledged as collateral by Seller or are on
consignment. Schedule 3.15 will be updated by Seller at Closing.
(b) The Accounts Receivable set forth on Schedule 1.1(b) represent bona
fide claims of the Business against debtors for sales, services performed or
other charges arising on or before the date hereof, and all the goods
delivered and services performed which gave rise to said accounts were
delivered or performed in accordance with the applicable orders, contracts or
customer requirements. To the best of Seller's and Shareholder's Knowledge,
the Accounts Receivable are subject to no defenses, counterclaims or rights of
setoff and are fully collectible in the ordinary course of business.
(c) The Vendor Receivables set forth on Schedule 1.1(c) represent bona
fide claims of the Business against Seller's vendors arising in the Business
in the ordinary course on or before the date hereof which have not been
outstanding for more than 90 days and are evidenced by appropriate Supporting
Documentation. To the best of Seller's and Shareholder's Knowledge, the
Vendor Receivables are subject to no defenses, counterclaims or rights of
setoff and are fully collectible in the ordinary course of business.
(d) The Accounts Payable set forth on Schedule 1.3(b) represent all trade
payables of the Business incurred in the ordinary course of business as of the
Closing Date to be assumed by the Buyer.
(e) Schedule 1.1(e) hereto sets forth an accurate and complete list of
the Prepaid Expenses of the Business as of January 21, 2001. There are no
prepaid expenses other than the Prepaid Expenses which are necessary for Buyer
to operate the Business from and after the Closing Date. Seller has good,
valid and marketable title to the Prepaid Expenses, and all such Prepaid
Expenses are freely transferable, have been recorded in accordance with GAAP
and, in the good faith business judgment of Seller and Shareholder, have
future value toward the conduct of the Business by Buyer.
(f) Schedule 1.1(d) hereto sets forth an accurate and complete list of
the Fixed Assets of the Business of the Seller as of February 26, 2001. There
are no fixed assets other than the Fixed Assets which are necessary for Buyer
to operate the Business from and after the Closing Date. Seller has good,
valid and marketable title to the Fixed Assets and all of the personal
properties and assets (tangible and intangible) reflected in Schedule 1.1(d),
in each case free and clear of Encumbrances, except for Assumed Liabilities
and the Permitted Encumbrances. The Fixed Assets owned by Seller and used in
its Business are in good operating condition and repair, ordinary wear and
tear excepted, and are adequate and suitable for the purposes for which they
are presently being used.
(g) All of the inventory, accounts receivable, vendor receivables,
accounts payable, prepaid expenses and personal property shown on the Interim
Financial Statements are, or will be, set forth on the Books and Records, all
in accordance with GAAP, consistently applied.
3.16 Employment Relations.
(a) Except as set forth on Schedule 3.16(a): (i) Seller is in compliance
in all material respects with all federal, state or other applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and has not and is not engaged in any unfair
labor practice with respect to employees of Seller; (ii) no unfair labor
practice complaint against Seller is pending or, to the best Knowledge of
Seller and Shareholder, threatened before the National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable government
body; (iii) there is no labor strike, dispute, slowdown, or stoppage actually
pending or, to the best Knowledge of Seller and Shareholder, threatened
against or involving Seller; (iv) no representation question exists respecting
the employees of Seller; (v) no grievance which might have an adverse effect
upon Seller or the conduct of its Business, and no arbitration proceeding
arising out of or under any collective bargaining agreement with respect to
employees of Seller are pending and no claim therefor has been asserted; (vi)
no collective bargaining agreement is currently applicable to Seller or is
being negotiated by or to the best of Seller's and Shareholder's Knowledge,
applied for with respect to employees of Seller; (vii) there exists no written
or oral employment, consulting, sales representation, broker, severance or
indemnification agreements with respect to employees of Seller in the Business
or applicable to Seller or Shareholder that would give, either directly or
indirectly, any Person the right to receive any payment from any assignee of
Seller, including Buyer, as a result of this Agreement; and (viii) Seller is
in compliance and shall comply with the requirements of the Federal Workers'
Adjustment and Retraining Notification Act (hereinafter referred to as "WARN")
by no later that the Closing Date.
(b) Attached hereto as Schedule 3.16(b) is an accurate and complete
preliminary listing of the employees of the Business affected by the
application of WARN to the Sale Transaction, their current wages and benefits,
and the estimated wages and benefits required to be paid to such employees as
a direct result of the application of WARN to the Sale Transaction (excluding
administrative or legal costs and fees) ("WARN Wage Expenses"). Seller shall
update Schedule 3.16(b) as of the Closing Date.
3.17 Employee Benefit Plans.
(a) Schedule 3.17 sets forth a true and complete list of each Employee
Benefit Plan under which benefits (including, but not limited to, severance
benefits) are provided to employees or other providers of services that is
maintained as of the date of this Agreement by Seller or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), all of which
together with Seller would be deemed a "single employer" within the meaning of
Sections 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA.
(b) Except as set forth in Schedule 3.17, (a) each Employee Benefit Plan
is in compliance in all material respects with all applicable compliance
requirements with respect to applicable laws for employee benefit plans,
including, but not limited to ERISA, the Code, and in particular Code Section
401(a) for qualified plans; (b) there is no Employee Benefit Plan which
provides benefits, including, without limitation, death or medical benefits
(whether or not insured), with respect to current or former employees of
Seller or any ERISA Affiliate beyond their retirement or other termination of
service; (c) there is no Employee Benefit Plan which is a "multi-employer
plan," as such term is defined in Section 3(37) or 4001(a)(3) of ERISA; (d)
there are no material reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports and summary plan descriptions) which were
required to be made in Seller's fiscal year 2000 or fiscal year-to-date 2001,
with respect to any employee pension benefit plans and employee welfare
benefit plans maintained by Seller or any ERISA affiliate for its employees;
(e) no Plan which is an employee pension benefit plan (other than any multi-
employer plan) has been completely or partially terminated or has been the
subject of a reportable event within the meaning of ERISA Section 4043 as to
which notices would be required to be filed with the Pension Benefit Guaranty
Corporation (the "PBGC"); (f) no proceeding by the PBGC to terminate any such
employee pension benefit plans (other than any multi-employer plan) has been
instituted, or to the Knowledge of Seller or Shareholder, threatened; and (g)
Seller has not incurred any liability (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated and whether due or to become due) to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA (including any
withdrawal liability) or under the Code with respect to such Plan which is an
employee pension benefit plan.
(c) Except as set forth in Schedule 3.17, neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (a) result in any material payment (including,
without limitation, deferred compensation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director or
any employee of Seller or any of their affiliates under any Employee Benefit
Plan or otherwise, (b) materially increase any benefits otherwise payable
under any Employee Benefit Plan or otherwise, or (c) result in any
acceleration of the time of payment or vesting of any such benefits to any
material extent.
3.18 Intellectual Property. Except as set forth in Schedule 1.1(f)(vi):
(a) Seller exclusively owns, without restrictions, or has a valid and
enforceable license to use, the rights to all Intellectual Property. Seller
is not, nor as a result of the execution, delivery or performance of Seller's
obligations hereunder will be, in violation of, or lose any rights under, any
license or agreement described in Schedule 1.1(f)(vi).
(b) No claims with respect to the Intellectual Property have been
asserted or, to the best Knowledge of Seller and Shareholder, are threatened
by any Person nor does Seller and Shareholder know of any valid grounds for
any bona fide claims (i) to the effect that the manufacture, sale or use of
any product or process as now used or offered or proposed for use or sale by
Seller infringes on any patent, trademark, copyright, trade secret, or other
intellectual property right of any Person, (ii) against the use by Seller of
any Intellectual Property or (iii) challenging the ownership, validity or
effectiveness of any of the Intellectual Property. All registered trademarks
and service marks set forth in Schedule 1.1(f)(vi) hereto and all registered
copyrights held by Seller are valid, enforceable and subsisting. To the best
of Seller's and Shareholder's Knowledge, without undertaking any separate
investigation in connection with this Agreement, there has not been and there
is not currently any unauthorized use, infringement or misappropriation of any
of the Intellectual Property by any other Person, including any employee or
former employee of Seller.
(c) No Intellectual Property is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting in any material manner
the licensing thereof by Seller. Seller has not entered into any agreement to
indemnify any other Person against any charge of infringement of any
Intellectual Property. Seller has not entered into any agreement granting any
third party the right to bring infringement actions with respect to, or
otherwise to enforce rights with respect to, any Intellectual Property.
3.19Customers, Vendors and Brokers.
(a) Schedule 3.19(a) hereto (the "Customer List") lists all customers of
the Business for the fiscal year ended September 30, 2000, and for the four
accounting periods ending on January 21, 2001. The Customer List shall
include the amount of sales to each such customer for such fiscal year and
period. Except as noted in Schedule 3.19(a), neither Seller nor Shareholder
has Knowledge of or has received any information indicating that any of the
customers of the Business intends to cease doing business with it prior to
Closing or with Buyer after the Closing or alter the amount of the business
that it is presently doing with Seller before the Closing or may do with Buyer
after the Closing with respect to the Business being acquired pursuant to this
transaction. Schedule 3.19(a) hereto lists each of Seller's written customer
agreements, related correspondence and all amendments thereto (copies of which
have been provided to Buyer), and describes the terms and conditions of each
written and non-written customer Sales Plan existing as of January 31, 2001.
Schedule 3.19(a) shall be updated by Seller and Buyer as of the Closing Date.
For purposes of this Agreement, "Sales Plan", means all terms and conditions
of customer arrangements including, without limitation, pricing, discounts,
rebates and allowance policies, credit arrangements, level of service (i.e.,
out of stocks guarantees and delivery time and/or date commitments) and any
other form of commitments to customers.
(b) Schedule 3.19(b) hereto (the "Vendor List") lists all vendors of
the Business with whom Seller did business for the fiscal year ended September
30, 2000, and for the four accounting periods ending January 21, 2001, and
shall include the amounts of purchases by Seller and payment terms received
from each such vendor for such fiscal year end period. Such Schedule shall be
updated by Seller and Buyer as of the Closing Date. There are no credit,
discount, rebate or allowance arrangements of any kind or nature due from any
vendor or pursuant to any vendor contract, except as set forth on Schedule
3.19(b).
(c) Schedule 3.19(c) hereto (the "Broker List") lists the Brokers of the
Business with whom the Seller did business for the fiscal year ended September
30, 2000, and for the four accounting periods ending on January 21, 2001, and
the terms of such arrangements, including without limitation, fee schedules
and service levels. Such Schedule shall be updated by Seller and Buyer as of
the Closing Date.
3.20 Disclosure. None of this Agreement, the other Transaction
Documents, the Financial Statements, the Disclosure Schedules, Exhibits and
the certificates attached hereto or delivered pursuant to this Agreement
contain any untrue statement of a material fact, or omit any statement of a
material fact necessary in order to make the statements contained herein or
therein not misleading. To Seller's and Shareholder's best Knowledge, there
is no fact known to Seller or Shareholder that has specific application to
Seller (other than general economic or industry conditions) and that
materially affects the Assets, Business, prospects and financial condition of
Seller that has not been set forth in this Agreement or the Disclosure
Schedules.
3.21 Brokers. Except as listed on Schedule 3.21, Seller is not a party
to or in any way obligated under any contract or other agreement, and there
are no outstanding claims against Seller for the payment of any broker's or
finder's fee in connection with the origin, negotiation, execution, or
performance of any of the Transaction Documents or the consummation of the
transactions contemplated hereby or thereby.
3.22 Books and Records. The Books and Records are complete and correct
and reflect an accurate and complete record of the conduct of the business of
Seller. Such Books and Records fairly reflect the ownership, operation and
control of the Business of Seller. Upon consummation of the transactions
contemplated by this Agreement, the Buyer will have good title to the
Transferred Books and Records.
3.23 Environmental Laws and Regulations. Except as set forth on Schedule
3.23: (i) Hazardous Materials have not at any time since Seller began its
leasing of, or operations on, the Leased Real Property been generated, used,
treated or stored on, transported to or from, or released or disposed of on,
the Leased Real Property of Seller listed in Schedule 3.9; (ii) Seller is in
compliance with all Environmental Laws and Permits issued under such
Environmental Laws; (iii) there are no past, pending or, to the best Knowledge
of Seller and Shareholder, threatened Environmental Claims against Seller or
any of the Leased Real Property; (iv) there are no facts or circumstances,
conditions or occurrences regarding the Business or operations of Seller, the
Leased Real Property or, to the best Knowledge of Seller and Shareholder, any
property adjoining or adjacent to any Leased Real Property or such real
property or facility, that could reasonably be anticipated (i) to form the
basis of any Environmental Claim against Seller or the Leased Real Property or
(ii) to cause such Leased Real Property to be subject to any restrictions on
its ownership, occupancy, use or transferability under any Environmental Law
other than restrictions applicable generally; (iii) there are no consent
decrees, consent orders, judgments, judicial or administrative orders,
agreement with (other than Permits) or Encumbrances by, any governmental
authority or quasi-governmental entity under any Environmental Law which
regulate, obligate or bind Seller except as are applicable generally; and (iv)
true and correct copies of any environmental reports, as well as all other
written environmental reports, audits or assessments which have been conducted
by the Seller, at any Leased Real Property have been made available to the
Buyer and a list of all such reports, audits and assessments are set forth on
Schedule 3.23.
3.24 Permits. Seller has obtained and possesses all governmental and
third party licenses, permits (including, but not limited to, occupancy
permits), consents, certifications, franchises and other authorizations and
has made all required registrations or filings with, any Federal, state or
local governmental authority required in connection with the use, operation or
the ownership of its properties and assets and the operation of its Business
as currently conducted (collectively, "Permits"). All such Permits are in
full force and effect and Seller is in compliance with all such Permits.
There are no proceedings pending against Seller or, to the best Knowledge of
Seller and Shareholder, threatened, seeking the revocation or the limitation
of any Permit. Any applications for the renewal or transfer of any such
Permits which were due prior to the Closing Date have been or will be timely
filed prior to the Closing Date.
3.25 Interests in Customers, Suppliers, Etc. Except as set forth in
Schedule 3.25, neither Seller, Shareholder nor any of its respective
Affiliates possesses, directly or indirectly, any financial interest in, or is
a director, officer or employee of, any Person which is a supplier, customer,
lessor, lessee, or competitor or potential competitor of Seller. Ownership of
5% or less of any class of securities of a Person whose securities are
registered under the Securities Exchange Act of 1934, as amended, shall not be
deemed to be a financial interest for purposes of this Section 3.28.
3.26 Insurance Policies. Schedule 3.26 attached hereto contains an
accurate and complete description of all insurance policies maintained by
Seller with respect to its Business, Assets and employees since January 1,
1999, including, but not limited to, with respect to each insurance policy:
name, address and telephone number of the insurance broker or agent; insurance
policy number; principal amount; policy limits; periods covered; and
deductibles. All such current insurance policies are in full force and effect.
Seller is not in default with respect to any such insurance policies and
Seller has not failed to give any notice or present any claim under such
insurance policies in due and timely fashion and has not waived or released
any rights thereunder. The coverage of any insurance policy in the Business
has not been limited or canceled by any insurance carrier. With respect to
the Business, Seller has maintained and now maintains (i) insurance on all of
the assets and business of a type customarily insured in the industry,
covering property damage and loss of income by fire or other casualty and (ii)
adequate insurance protection against all liabilities, claims, and risks
against which it is customary in the industry to insure. With respect to the
Business, since January 21, 2001, there has not been any adverse effect on the
relationship of Seller with its insurers or in the premiums payable pursuant
to such insurance policies.
3.27 Solvency. Seller is financially solvent, able to meet its
obligations as they become due and has made adequate provision for the payment
of its debts and liabilities.
3.28 800 Code Inventory. The inventory records attached hereto as
Schedule 3.28 for each customer of Seller with 800 Code Inventory in the
possession or control of Seller as of the Closing Date are true and correct in
all respects as of the Closing Date and have been confirmed in writing by each
such customer as being true and correct. Schedule 3.28 shall be updated at
closing by Seller. There are no unresolved customer disputes regarding any of
the 800 Code Inventory.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
4. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller and Shareholder as follows:
4.1 Existence and Good Standing of Buyer. The Buyer is incorporated and
in good standing under the laws of the State of Delaware.
4.2 Authorization. The Buyer has all requisite corporate power and
authority to enter into each of the Transaction Documents to which it is a
party and any other instruments and agreements to be executed by the Buyer
pursuant to this Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of the Transaction Documents
to which the Buyer is a party and any other instruments and agreements to be
executed by it pursuant to this Agreement and the consummation by the Buyer of
the transactions contemplated hereby and thereby have been duly authorized by
it. The Transaction Documents to which the Buyer is a party and such other
instruments and agreements have been duly executed and delivered by the Buyer
and constitute the valid and binding obligations of the Buyer enforceable
against the Buyer in accordance with its terms except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws affecting creditors' rights generally and by general equitable principles
(regardless of whether the issue of enforceability is considered in a
proceeding in equity or at law).
4.3 No Violations. Except as set forth in Schedule 4.3 attached hereto,
the execution, delivery and performance of this Agreement and any other
instruments or agreements to be executed by the Buyer pursuant to this
Agreement and the consummation by the Buyer of the transactions contemplated
hereby and thereby will not, with or without the giving of notice or the lapse
of time or both, (i) violate, conflict with, or result in a breach or default
under any provision of the Certificate of Incorporation or Bylaws of the
Buyer; or (ii) violate any statute, ordinance, rule, regulation, order,
judgment or decree of any court or any governmental or regulatory body, agency
or authority applicable to the Buyer or by which any of its properties or
assets may be bound; or (iii) require any filing by the Buyer, or require the
Buyer to obtain any permit, consent or approval of, or require the Buyer to
give any notice to, any governmental regulatory body, agency or authority; or
(iv) constitute a violation or breach by the Buyer of, conflict with,
constitute (with or without due notice or lapse of time or both) a default by
the Buyer (or give rise to any right of termination, cancellation, payment or
acceleration) under, or result in the creation of any Encumbrance upon any of
the properties or assets of the Buyer under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, franchise, permit,
agreement, lease, franchise agreement or other instrument or obligation to
which the Buyer is party, or by which the Buyer or its properties or assets
may be bound.
4.4 No Actions. No action or proceeding has been instituted or, to the
best Knowledge of the Buyer, threatened, against the Buyer before any court
or other governmental body by any person or public authority seeking to
restrain, prohibit, alter or delay the execution and delivery of this
Agreement or any other Transaction Document or the transactions contemplated
hereby or thereby.
4.5 Brokers. The Buyer is not a party to or in any way obligated under
any contract or other agreement, nor are there any outstanding claims against
it with respect to, payment of any broker's or finder's fee in connection with
the origin, negotiation, execution, or performance of any of the Transaction
Documents or the consummation of the transactions contemplated hereby and
thereby.
ARTICLE V
COVENANTS OF SELLER
5. Seller agrees (and Shareholder agrees to cause Seller to comply with such
agreements) that, except as otherwise agreed in writing by Buyer, from the
date hereof through the Closing Date:
5.1 Conduct of Business by Seller.
(a) Seller shall conduct its operations of the Business lawfully and in
the ordinary course, including, without limitation, by preserving intact its
business organization, maintaining sales and customer service at such levels
consistent with past practice, maintaining its properties in the normal course
of business and consistent with past practice, maintaining its insurance
coverage in the ordinary course, paying its payables and other indebtedness on
a timely basis, collecting its receivables in the ordinary course, keeping
available the services of its officers and employees including, without
limitation, at the request of Buyer, the offering of stay-on incentives to
certain key employees of Seller who have been identified to Buyer to encourage
such employees to remain through the Closing Date (which incentives if made
shall be reimbursed by Buyer at Closing) and, without making commitments on
behalf of Buyer, maintaining satisfactory relationships with licensors,
suppliers, distributors, customers and others having business relationships
with it.
(b) Seller shall (i) refrain from subjecting the Assets to any mortgage,
pledge, lien, security interest, Encumbrance, restriction or charge of any
kind, (ii) refrain from selling or otherwise disposing of any of its Business
properties to any person other than the sale of inventory and other assets in
its ordinary and usual course of business, (iii) refrain from entering into
any contract or commitment regarding the Business other than in the ordinary
and usual course, and (iv) maintain its inventory in the Business at such
levels consistent with past practice.
(c) Beginning on March 8, 2001, the date when Seller and Buyer may
publicly disclose the Sale Transaction pursuant to Section 8.9, Seller shall
permit Buyer to contact such of Seller's employees of the Business at all
reasonable times for the purpose of discussing with such employees prospective
employment by Buyer after the Effective Time of Closing, and Seller shall
encourage employees to accept employment offered by Buyer pursuant to Section
10.14.
(d) Seller shall comply with all federal, state and local laws respecting
employment and employment practices, including, without limitation, COBRA
(including the provision of continuation coverage for each individual who is
an "M&A qualified beneficiary" as such term is defined in proposed Treasury
Regulation Sections 54.4980 B-9(c)A-4, with respect to the sale transaction),
all laws relating to equal employment opportunity, wages, hours and the
payment of Social Security taxes, and the applicable portions of WARN as a
result of "plant closings" or a "mass layoff" by Seller as a result of the
Closing.
(e) Seller shall refrain from entering into any contract, commitment, or
transaction not in the ordinary and usual course of business with respect to
the Business without first obtaining Buyer's prior written consent.
(f) Seller shall not modify, amend, cancel, or terminate any of the
Assigned Contracts in any manner which would have an adverse effect on its
Business, or agree to do any of those acts, without the prior written consent
of Buyer (which consent shall not be unreasonably withheld or delayed).
Notwithstanding the foregoing, Seller shall not modify, amend, cancel or
terminate any of the following Assigned Contracts without the consent of Buyer
(which consent will not be unreasonably withheld or delayed): Real Property
Leases, material customer agreements, material vendor agreements, master fleet
vehicle leases, material equipment leases, computer leases, broker agreements,
and distributor agreements.
(g) Seller shall not enter into any transaction or contract pertaining to
the Business other than as to inventory acquisition in the ordinary course of
the Business, which involves expenditures in excess of $50,000 without Buyer's
consent.
(h) Beginning on execution of this Agreement, Seller shall confer with
Xxxxxxx X. Xxxxxx or X.X. Xxxxxx or their designees to report material
operational matters and to report the general status of ongoing operations of
Seller. Seller shall notify Buyer of any emergency or other materially
adverse change outside of the ordinary course of its Business and of any
governmental, union, or third party complaints, investigations, grievances or
hearings (or communications indicating that the same may be contemplated),
adjudicatory proceedings, customer or vendor meetings or submissions involving
the Business or any of the Assets, and any litigation begun or claim made that
is not listed in Schedule 3.13, and will keep Buyer fully informed of such
events and permit its representatives prompt access to all materials prepared
in connection therewith. Buyer shall promptly notify Seller and Shareholder of
any event, condition or circumstance occurring from the date hereof through
the Closing Date that would constitute a violation or breach of this Agreement
by Seller or Shareholder.
5.2 Further Agreements. In addition, Seller agrees with Buyer that,
pending the Closing Date:
(a) Seller shall use all commercially reasonable efforts to obtain all
consents, waivers, amendments, approvals, authorizations, permits and licenses
from all third parties and governmental and regulatory authorities, if any,
which are required for the due and punctual consummation of the transactions
by Seller contemplated by this Agreement, specifically excluding any Permits
required by Buyer to run the Business after Closing.
(b) Subject to Section 1.6, Seller shall make all filings and give all
notices required of Seller or Shareholder by any third parties or any federal,
state or local regulatory agency having jurisdiction over the Sale
Transaction, and Seller and Shareholder shall cooperate with Buyer in making
filings and giving notices required of Buyer relating to the Sale Transaction,
including all filings required under any applicable federal, state or local
law, rule or ordinance; provided, however, that subject to Seller's
indemnification obligations set forth in Section 8.1(h), Seller and Buyer
waive compliance with any bulk transfer laws applicable to the Sale
Transaction.
(c) Seller shall obtain such executed releases of liens on the Assets
from any and all secured parties in the form of UCC-3 Financing Statements
reasonably acceptable to Buyer and such other forms as may be necessary to
release all such liens on the Assets.
5.3 Use of Intellectual Property. Seller recognizes and expressly
acknowledges that, by the assignment, sale and transfer to Buyer of the
Intellectual Property, Seller relinquishes for all time after the Closing Date
the right to use or exploit such Intellectual Property for all commercial or
non-commercial purposes and Seller, Shareholder, their respective Affiliates,
and the officers, directors, employees, agents and consultants engaged by or
under the control of each, shall on the Closing Date discontinue use of the
Intellectual Property and shall not thereafter use, exploit or assist any
third party to use any of the Intellectual Property (including without
limitation any trademarks or any name designation, symbol or acronym
confusingly similar to any trademark or name designation) except as follows:
(i) Seller may use out of existing supplies for 90 days following Closing
certain checks and printed materials containing the Food for Health trademark
and trade name solely for the purpose of making payments to employees and for
the purpose of maintaining continuity of the identification cards employees
currently use in relation to major medical coverage; (ii) Seller shall
promptly change its corporate and trade name as required under Section 5.6,
but may for up to 90 days after Closing continue to identify itself as also
formerly known as Food for Health to customers, former customers and others
who may call it, provided that after so answering, all parties so calling will
be asked if the matter of the call relates to the wholesale distribution
business of the Company, and if answered in the affirmative, they will be told
that the wholesale distribution business of the Company has been sold and the
caller will be further informed that they should contact Tree of Life at (800)
800-2155. Any continuation of this practice after 90 days shall be only with
the written agreement of both Seller and Buyer. Seller will not at any time
challenge the validity or enforceability of any of the Intellectual Property.
5.4 Restrictive Covenants. The Seller and the Shareholder shall execute
and deliver to Buyer at Closing the Restrictive Covenant as set forth in
Exhibit "A" attached hereto.
5.5 Shareholder Approval. On or before the execution of this Agreement,
Shareholder shall have voted, in accordance with the requisite laws and the
requirements under the Articles of Incorporation and Bylaws of Seller, to
approve the sale of the Assets pursuant to this Agreement. Concurrent with
the signing of this Agreement, Buyer shall have received a certified copy of
resolutions duly adopted by the Board of Directors and shareholder of Seller
and the Board of Directors of Shareholder approving the transactions
contemplated by this Agreement.
5.6 Trade Name Change. On the Closing Date, Seller shall take all
necessary action to discontinue its use of "Food for Health," "U.S. Health
Distributors, Inc.," "American Direct, Inc.," "Nutri-Value" and all other
trade names currently or previously used by Seller in the Business, excluding
only the Excluded Proprietary Marks ("Trade Names"), as corporate and trade
names. From and after the Closing Date, Seller and Shareholder shall forever
cease and desist from using the Trade Names in any operations or otherwise.
5.7 Amendment of Schedules. Seller, Shareholder and Buyer acknowledge
that Schedules 1.1(a) through (e), Schedule 1.3(b) and Schedule 1.5 as
attached at execution do not accurately reflect the Assets and Assumed
Liabilities but contain assets and liabilities which should be excluded from
such defined categories. The parties further acknowledge that the foregoing
schedules shall be updated jointly by Seller and Buyer at Closing to
accurately reflect the Assets and Assumed Liabilities in accordance with the
definitions contained herein, subject to adjustment pursuant to Section 2.2,
as a condition precedent to Buyer's obligation to close. Except with respect
to those Schedules specifically updated by Seller and Buyer jointly as
mutually agreed as required by the terms of this Agreement prior to or at
Closing, Disclosure Schedules shall be deemed final and Buyer shall not be
obligated to agree to any updating following execution hereof, other than to
reflect changes which are not materially adverse either individually or in the
aggregate. As to those Schedules jointly updated by Buyer and Seller at
Closing, such Schedules shall prevail over the original Schedules attached
upon execution hereof.
5.8 Damage or Destruction. If any portion of the tangible Assets is
destroyed or damaged by fire or any other cause on or prior to the Closing
Date, other than use, wear or loss in the ordinary course of business, Seller
shall give written notice to Buyer as soon as practicable after, but in any
event within ten (10) calendar days of, discovery of such damage or
destruction, the amount of insurance, if any, covering such Assets and the
amount, if any, which Seller is otherwise entitled to receive as a
consequence. Prior to the Closing, Buyer shall have the option, which shall
be exercised by written notice to Seller within ten (10) calendar days after
receipt of Seller's notice or if there are not ten (10) calendar days prior to
the Closing Date, as soon as practicable prior to the Closing Date, of
(i) accepting such Assets in their destroyed or damaged condition, in which
event Buyer shall be entitled to the proceeds of any insurance or other
proceeds payable with respect to such loss without any reduction or increase
in the Purchase Price on account of the damage or destruction or the insurance
proceeds payable to Buyer; or (ii) excluding such Asset from this Agreement,
in which event Seller shall remain entitled to any insurance or other proceeds
payable with respect to such loss. In the event Buyer elects to accept any
such damaged or destroyed Asset, the Purchase Price shall be reduced by an
amount equal to the costs and expenses of restoring the damaged asset to
materially the same condition it was in prior to the damage, less the
insurance proceeds payable to Buyer on account of the damage; or in the case
of a destroyed asset, an amount equal to the cost of replacing the destroyed
asset with a materially similar asset, less the insurance proceeds payable to
Buyer on account of the destruction.
5.9 Investigation by Buyer. Beginning on execution hereof, Seller shall,
and shall cause its officers, directors, employees and agents to, afford the
representatives of Buyer complete access at all reasonable times to the
Assets, and Books and Records of Seller, for the purpose of inspecting the
same, and to the officers, employees, agents, attorneys, accountants,
properties, and beginning on March 5, 2001 to the lessors, customers,
suppliers, and brokers of Seller. Seller shall cooperate with and assist
Buyer in holding such customer meetings as Buyer reasonably requests for
purposes of Buyer's investigation. Seller shall furnish Buyer and its
representatives all financial, operating and other data and information as
Buyer or through its representatives, may reasonably request, including an
unaudited consolidated balance sheet and the related statements of income,
retained earnings and cash flow for each month, which financial statements
shall (i) be true, correct and complete, (ii) be in accordance with the Books
and Records of Seller, and (iii) accurately set forth the Assets, liabilities
and financial condition, results of operations and other information purported
to be set forth therein in accordance with GAAP, consistently applied.
ARTICLE VI
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
6. Conditions Precedent to Buyer's Obligations. The obligations of Buyer
hereunder are subject to fulfillment, prior to or on the Closing Date (or if
so provided, upon the execution of this Agreement), of the following
conditions, any of which may be waived by Buyer:
6.1 Representations, Warranties and Covenants. All representations and
warranties of Seller and Shareholder contained in this Agreement shall be true
and correct at and as of the date of this Agreement and at and as of the
Closing Date, except as and to the extent that the facts and conditions upon
which such representations and warranties are based are expressly required or
permitted to be changed by the terms hereof, and Seller shall have performed
and satisfied all agreements and covenants required hereby to be performed by
it prior to or on the Closing Date.
6.2 Consents; Regulatory Compliance and Approval. All Permits, consents,
approvals and waivers from governmental authorities and other parties
necessary to the consummation of the transactions contemplated hereby and for
the operation of the Business by Buyer (including, without limitation, all
required third party consents to the assignment of the Personal Property
Leases and Assigned Contracts to be assumed by Buyer) shall have been
obtained.
6.3 Opinion of Seller's and Shareholder's Counsel. Buyer shall have
received a favorable opinion dated the Closing Date of counsel to Seller and
Shareholder, in form and scope of Exhibit "G."
6.4 Restraints. No suit, action or proceeding before any federal, state
or local governmental agency or body, court or arbitrator shall be pending or
threatened or which questions the validity or legality of the Sale Transaction
or which could reasonably be expected to damage Buyer, the Assets or the
Business, or which will restrain or prohibit the consummation of the Sale
Transaction contemplated hereby.
6.5 Creditors. Seller shall have obtained executed releases in the form
of UCC-3 Financing Statements from any and all secured creditors and in such
other forms as are necessary to release all Assets from all Encumbrances
thereon, which statements shall be acceptable for recording or filing in the
appropriate locations.
6.6 Estoppel Certificates. Buyer shall have received estoppel
certificates from each of the landlords of the Leased Premises set forth on
Schedule 3.9, in form and substance as attached hereto as Exhibit "H," and
documentary confirmation from Seller that Seller has prepaid rent on the
Leased Premises through April 30, 2001.
6.7 Certificates. Seller shall furnish Buyer with such certificates of
its officers and others to evidence compliance with the conditions set forth
in this Article VI as may be reasonably requested by Buyer.
6.8 Material Changes. Since January 21, 2001, there shall not have been
any material adverse change with respect to the Business or the Assets. For
purposes of this Section 6.8 and Section 6.11, in the context of a potential
or actual change in the willingness of customers to continue to conduct
business in the Business, or a loss of customer volume in the Business,
"material adverse change" shall mean a loss of $4,000,000 or more in net sales
to Seller's existing customers, as measured over the 12 month period
immediately preceding the date of execution of this Agreement, provided,
however, that the loss has not resulted solely from a change in a customer's
Sales Plan (as defined in Section 3.19(a)) as communicated by Buyer to that
customer.
6.9 Corporate Documents. Buyer shall have received from Seller
resolutions adopted by the board of directors and the Shareholder of Seller
approving this Agreement and all ancillary agreements and the transactions
contemplated hereby and thereby, certified by Seller's corporate secretary.
6.10 Approval of Board of Directors and Shareholder. Buyer shall have
received the approval of its Board of Directors to enter this Agreement and
any ancillary agreements hereto and consummate the transactions contemplated
herein and therein.
6.11 Due Diligence Review. Buyer and its legal and financial
representatives shall have conducted a due diligence review regarding the
Assets, Business, Books and Records, Financial Statements, the customers and
other records and accounts of the Business, and there shall have been no
material adverse change in either the Business or the Assets as Seller and
Shareholder have represented and warranted to Buyer herein, and, specifically
there shall have been no significant loss of customer volume in the Business.
Buyer's due diligence review shall have no effect whatsoever on the liability
of Seller and Shareholder to Buyer under this Agreement or otherwise for
breach of any representations, warranties, or covenants of Seller or
Shareholder hereunder.
6.12 Conveyancing Documents. Seller shall have executed and delivered
each of documents described in Section 2.4 hereof so as to effect the transfer
and assignment to Buyer of all right, title and interest in and to the Assets.
6.13 Name Change. Seller shall have filed an amendment to its Articles
of Incorporation to change its corporate name so as not to include the words
"Food for Health" or any other name or xxxx that has such a near resemblance
thereto as may be likely to cause confusion or mistake to the public, or to
otherwise deceive the public. Such amendment shall be in a form acceptable
for filing with the Secretaries of State of the State of Arizona and the State
of Florida.
6.14 Permits. Buyer shall have obtained or been granted the right to use
all Permits necessary to its operation of the Business.
6.15 Other Agreements. Seller or the signatory other than Buyer shall
have executed and delivered all ancillary agreements hereto in the forms
attached as Exhibits hereto or otherwise agreed by Buyer and Seller.
6.16 Tax Clearance Certificate. Seller shall provide Buyer with a
clearance certificate or similar document(s) that may be required by any state
taxing authority with respect to payment of taxes by Seller in Arizona and
Florida and other states in which the Assets may be located.
6.17 Nonforeign Affidavit. Seller shall furnish Buyer an affidavit
stating, under penalty of perjury, the transferor's United States taxpayer
identification number and that the transferor is not a foreign person,
pursuant to Section 1445(b)(2) of the Code.
6.18 Letter of Credit. Seller shall deliver to Buyer an issued
irrevocable standby letter of credit in the amount of $500,000 with a term of
twelve (12) months from the Closing Date in the form attached hereto as
Exhibit "F."
6.19 Supply Contract. Buyer shall receive an executed Supply Contract
with FFH's subsidiaries, Xxxxxxxxxx Natural Foods, Inc., and Health Food
Associates, Inc. upon mutually agreeable terms and conditions.
6.20 Restrictive Covenant. Buyer shall receive a Restrictive Covenant
executed by both Seller and Shareholder, in the form attached hereto as
Exhibit "A."
6.21 Disclosure Schedules. Buyer and Seller shall have reached mutual
agreement as to all Disclosure Schedules which are required to be prepared and
updated jointly by Buyer and Seller by Closing.
ARTICLE VII
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
7. Conditions Precedent to Seller's Obligations. The obligations of Seller
and Shareholder hereunder are subject to the fulfillment, prior to or at the
Closing Date, of the following conditions, any of which may be waived by
Seller:
7.1 Representations, Warranties and Covenants. All representations and
warranties of Buyer contained in this Agreement shall be true and correct at
and as of the date of this Agreement and at and as of the Closing Date, except
as and to the extent that the facts and conditions upon which such
representations and warranties are based are expressly required or permitted
to be changed by the terms hereof, and Buyer shall have performed and
satisfied all agreements and covenants required hereby to be performed by it
prior to or on the Closing Date.
7.2 Consents; Regulatory Compliance and Approval. All consents,
approvals and waivers from governmental authorities and other parties
necessary to permit Seller to transfer the Assets to Buyer as contemplated
hereby shall have been obtained.
7.3 Restraints. No suit, action or proceeding before any federal, state
or local governmental agency or body, court or arbitrator shall be pending or
threatened which questions the validity or legality of the Sale Transaction or
which could reasonably be expected to damage Buyer, the Assets or the
Business, or which will restrain or prohibit the consummation of the
transactions contemplated hereby.
7.4 Certificates. Buyer shall furnish Seller with such certificates of
its officers and others to evidence compliance with the conditions set forth
in this Article VII as may be reasonably requested by Seller.
7.5 Assumption Document. Buyer shall have executed the Assumption
Documents.
7.6 Disclosure Schedules. Buyer and Seller shall have reached mutual
agreement as to all Disclosure Schedules which are required to be prepared and
updated jointly by Buyer and Seller by Closing.
7.7 Agreement with Hawaiian Water. Buyer and Shareholder shall have
executed an agreement to purchase from Hawaiian Natural Water, Inc. a minimum
of $500,000 per year of products for a two year period after the Closing, and
upon other mutually agreeable terms and conditions, provided such products are
competitively priced and acceptable performance service levels are maintained.
ARTICLE VIII
INDEMNIFICATION
8. Indemnification. For the purposes of this Article VIII, the terms "Loss"
and "Losses" mean any and all penalties, additions to taxes, demands, claims,
actions or causes of action, assessments, losses, damages, liabilities, costs,
and expenses, including, without limitation, interest, penalties, and
reasonable attorneys' and other professional fees and expenses. All
statements contained in any certificate, Exhibit or Schedule delivered by or
on behalf of Buyer, Seller or the Shareholder pursuant to and coincident with
the signing or Closing of this Agreement shall be deemed representations and
warranties hereunder by Buyer, Seller or Shareholder, as the case may be.
8.1 Indemnification by Seller and Shareholder. Notwithstanding anything
Buyer may discover in the course of its due diligence investigations of
Seller, Seller and Shareholder, jointly and severally, agree to indemnify,
defend, and hold harmless Buyer, its Affiliates and their respective officers,
directors, employees and agents from, against, and in respect of any and all
Losses asserted against, relating to, imposed upon, or incurred by Buyer, its
Affiliates or their respective officers, directors, employees and agents by
reason of, resulting from or arising out of:
(a) any untruth, inaccuracy or breach of any representation or warranty
of Seller or the Shareholder herein, in any Disclosure Schedule, or in any
related document delivered pursuant to this Agreement (notwithstanding any
Knowledge or materiality qualifier or scheduled exception relating to any
representation or warranty made regarding title to Assets, Tax matters,
undisclosed liabilities, ERISA and Environmental matters);
(b) any Accounts Receivable or Vendor Receivables that remains
uncollected on the 90th day following the Closing Date;
(c) the conduct of the Business by Seller on or before the Closing Date;
(d) any failure by Seller to discharge or comply with fully and
faithfully its obligations or covenants hereunder or under any applicable law,
rule or regulation relating to the Sale Transaction;
(e) all liabilities of Seller, direct or indirect, fixed, contingent or
otherwise, not expressly assumed by Buyer under this Agreement, including
without limitation, the Retained Liabilities;
(f) a breach of the Exhibit "A" Restrictive Covenant referred to in
Section 5.4;
(g) personal injury or death to any person, or damage to any property,
arising out of the use of or contact with any product sold or distributed by
Seller prior to the Closing Date;
(h) any and all claims made pursuant to Article 6 of the Uniform
Commercial Code ("Bulk Transfers Act") as enacted in the states applicable to
this transaction, resulting from non-compliance therewith, excepting claims
representing Assumed Liabilities;
(i) any and all liabilities or obligations arising from accounts payable
of the Business not listed on Schedule 1.3(b);
(j) any claim or liability arising from or due to any Excluded Inventory,
including, without limitation, liability for storage charges or other charges,
fees or taxes related thereto;
(k) any claim, litigation, arbitration or proceeding pending or
threatened against Seller or arising out of any action, or failure to act when
an obligation to act existed, by Seller at any time prior to the Closing; and
(l) [MATERIAL REDACTED]
(m) all liability arising under WARN;
(n) all Taxes charged to grantors, transferors or assigners in connection
with the transactions contemplated by the Agreement, except for sales and use
taxes to be paid by Buyer pursuant to Section 1.6;
(o) any agreement between Seller and Shareholder and U.S. Health
Distributors, Inc., American Direct, Inc., Xxxx Xxxx, Xxxxxxxxx Xxxx and/or
MSR Management Group; and
(p) with respect to litigation between the parties hereto, if Buyer
prevails in the litigation, all costs and expenses, including reasonable
counsel fees incurred in such litigation or otherwise, incurred by Buyer in
connection with any of the matters contemplated above.
8.2 Indemnification by Buyer. Buyer agrees to indemnify, defend and hold
harmless Seller, Shareholder and their Affiliates and their respective
officers, directors, employees and agents from, against, and in respect of any
and all Losses asserted against, relating to, imposed upon, or incurred by
Seller, Shareholder, their Affiliates or their respective officers, directors,
employees and agents by reason of, resulting from or arising out of:
(a) any untruth, inaccuracy or breach of any representation or warranty
of Buyer herein, in any Disclosure Schedule prepared solely by Buyer, or in
any related document delivered by Buyer pursuant to this Agreement
(notwithstanding any Knowledge or materiality qualifier or scheduled
exception);
(b) the conduct of the Business by Buyer after the Closing Date;
(c) any failure by Buyer to discharge or comply with fully and faithfully
its obligations or covenants hereunder or under any applicable law, rule or
regulation relating to the Sale Transaction (excepting any obligation under
any applicable bulk transfer acts);
(d) any claim, litigation, arbitration or proceeding pending or
threatened against Buyer or arising out of any action, or failure to act when
an obligation to act existed, by Buyer at any time after the Closing; and
(e) with respect to litigation between the parties hereto, if Seller or
Shareholder prevails in the litigation, all costs and expenses, including
reasonable counsel fees incurred in such litigation or otherwise, incurred by
Seller or Shareholder in connection with any of the matters contemplated
above.
8.3 Survival. The representations and warranties of Seller, Shareholder
and Buyer in this Agreement or in any Disclosure Schedule, agreement,
instrument or similar document delivered pursuant hereto shall survive after
the Closing.
8.4 Limitations.
[MATERIAL REDACTED]
8.5 Procedures for Indemnification. As used herein, the term
"Indemnitor" means the party against whom indemnity hereunder is sought, and
the term "Indemnitee" means the party seeking indemnification hereunder.
(a) A claim for indemnification hereunder ("Indemnification Claim") shall
be made by the Indemnitee by delivery of a written declaration to the
Indemnitor requesting indemnification and specifying the basis on which
indemnification is sought and the amount of asserted Losses, if known, and, in
the case of a Third Party Claim (as defined in Section 8.6 hereof), containing
such other information as the Indemnitee shall have concerning such Third
Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim, the
procedures set forth in Section 8.5 hereof shall be observed by the Indemnitee
and Indemnitor.
(c) If the Indemnification Claim involves a matter other than a Third
Party Claim, the Indemnitor shall have thirty (30) Business Days to object to
such Indemnification Claim by delivery of a written notice of such objection
to the Indemnitee specifying in reasonable detail the basis for such
objection. Failure to timely so object shall constitute acceptance of the
Indemnification Claim by the Indemnitor and the Indemnification Claim shall be
paid in accordance with Section 8.5(d) hereof.
(d) Upon a final determination of the amount of an Indemnification Claim,
whether by agreement between the Indemnitor and Indemnitee or by judgment,
decree or final order, the Indemnitor shall pay the amount of such
Indemnification Claim within thirty (30) days of the date such amount is
determined.
8.6 Defense of Third Party Claims. Should any claim be made, or suit or
proceeding (including, without limitation, a binding arbitration or an audit
by any taxing authority) be instituted against the Indemnitee which, if
prosecuted successfully, would be a matter for which the Indemnitee is
entitled to indemnification under this Agreement (a "Third Party Claim"), the
obligations and liabilities of the parties hereunder with respect to such
Third Party Claim shall be subject to the following terms and conditions:
(a) The Indemnitee shall give the Indemnitor written notice of any such
claim promptly after receipt by the Indemnitee of actual notice thereof, and
the Indemnitor shall undertake the defense thereof by representatives of its
own choosing reasonably acceptable to the Indemnitee. If, however, the
Indemnitor fails or refuses to or cannot due to a conflict of interest,
undertake the defense of such claim within ten (10) days after written notice
of such claim has been given to the Indemnitor by the Indemnitee, the
Indemnitee shall have the right to undertake the defense, compromise and,
subject to Section 8.7, settlement of such claim with counsel of its own
choosing as part of its Indemnification Claim.
(b) The Indemnitee and Indemnitor shall cooperate with each other in all
reasonable respects in connection with the defense of any Third Party Claim,
including making available records relating to such claim and furnishing,
without expense to the Indemnitor, management employees of the Indemnitee as
may be reasonably necessary for the preparation of the defense of any such
claim or for testimony as a witness in any proceeding relating to such claim.
8.7 Settlement of Third Party Claims. No settlement of a Third Party
Claim involving the asserted liability of the Indemnitor under this Article
VIII shall be made without the prior written consent by or on behalf of the
Indemnitor, which consent shall not be unreasonably withheld or delayed.
Consent shall be presumed in the case of settlements of $15,000 or less where
the Indemnitor has not responded within ten (10) Business Days of notice of a
proposed settlement. In the event of any dispute regarding the reasonableness
of a proposed settlement, the party that will ultimately bear the larger
financial loss resulting from such settlement shall make the final
determination in respect thereto, which determination shall be final and
binding on all involved parties.
8.8 Finder's Fees. Seller and Shareholder hereby agree to indemnify and
hold harmless the Buyer against any claim by any person for any fee or
commission for the services of any broker, finder or intermediary regarding
the Sale Transaction.
8.9 Press Releases. Neither party will issue any press release nor shall
(except for such disclosure to such party's parent, as applicable, or to its
officers, attorneys, consultants, accountants and other agents who are
involved in the contemplated transaction) otherwise disclose any details of
the Transaction, including the identity of the operations to be sold to Buyer,
without the other party's prior written consent, except as may be required by
law or permitted pursuant to Section 5.9. Neither party shall notify its
employees (other than employees on a need-to-know basis) or the media prior to
the joint approval of a press release on a mutually agreed upon date of any
details of the Sale Transaction.
ARTICLE IX
TERMINATION.
9.1 Termination
(a) This Agreement may be terminated at any time prior to Closing:
(i) By mutual written consent of Buyer and Seller;
(ii) By Buyer or Seller if the Closing shall not have occurred on or
before March 23, 2001 subject to a mutually agreeable extension for any
consents, notice periods or authorizations required to consummate the
transaction; provided, however, that this provision shall not be available to
Buyer if Seller has the right to terminate this Agreement under clause (iv) of
this Section 9.1, and this provision shall not be available to Seller if Buyer
has the right to terminate this Agreement under clause (iii) of this Section
9.1;
(iii) By Buyer if there is a material breach of any representation or
warranty set forth in Article III hereof or any covenant or agreement to be
complied with or performed by Seller pursuant to the terms of this Agreement
or the failure of a condition set forth in Article VI to be satisfied (and
such condition is not waived in writing by Buyer) on or prior to the Closing
Date, or the occurrence of any event which results or would result in the
failure of a condition set forth in Article VI to be satisfied on or prior to
the Closing Date, provided that Buyer may not terminate this Agreement prior
to the Closing if Seller has not had an adequate opportunity to cure such
failure; or
(iv) By Seller if there is a material breach of any representation or
warranty set forth in Article IV hereof or of any covenant or agreement to be
complied with or performed by Buyer pursuant to the terms of this Agreement or
the failure of a condition set forth in Article VII to be satisfied (and such
condition is not waived in writing by Seller) on or prior to the Closing Date,
or the occurrence of any event which results or would result in the failure of
a condition set forth in Article VII to be satisfied on or prior to the
Closing Date; provided that Seller may not terminate this Agreement prior to
the Closing Date if Buyer has not had an adequate opportunity to cure such
failure.
(b) In the event of termination of this Agreement:
(i) Each party will redeliver or destroy all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same; and
(ii) No party hereto shall have any liability to any other party to this
Agreement, except as stated in subsections (i) and (ii) of this Section
9.1(b), except for any willful breach of this Agreement occurring prior to the
proper termination of this Agreement. The foregoing provisions shall not
limit or restrict the availability of specific performance or other injunctive
relief to the extent that specific performance or such other relief would
otherwise be available to a party hereunder.
ARTICLE X
MISCELLANEOUS
10. Miscellaneous.
10.1 Expenses. Seller and Buyer shall each pay all of their respective
expenses relating to the transactions contemplated by this Agreement and the
performance of their respective obligations and fulfillment of conditions
hereunder, including, without limitation, the fees and expenses of their
respective counsel, accountants and investment bankers.
10.2 Captions. The Section captions used herein, including in any
Disclosure Schedule or Exhibit, are for reference purposes only, and shall not
in any way affect the meaning or interpretation of this Agreement.
10.3 Confidentiality. Buyer, Shareholder and Seller shall, and shall
cause their Affiliates to, treat confidentially all information received from
each other in connection with this Agreement, and shall not use such
information for any purpose other than consummating the transactions
contemplated by this Agreement. It is understood that the foregoing
reciprocal obligations shall not bar any party from disclosing information
required to be disclosed to any person by applicable law or as may be required
to receive necessary approvals to consummate the purchase; provided, that the
disclosing party makes every reasonable effort to obtain confidential
treatment by the person to whom the information is disclosed. Such
obligations shall not apply to (i) information which is now or which hereafter
becomes available to the public or other persons not affiliated with Buyer or
Seller through no fault of the recipient or (ii) information which the
recipient possessed without restriction prior to disclosure to it by parties
involved in the transactions contemplated by this Agreement, or (iii)
information which becomes available to a party on a non-confidential basis
from a source other than the other party, which source is not prohibited from
disclosing such information by a legal, contractual or fiduciary obligation
owed to the other party. The foregoing shall not apply, however, to the
release of any information required by law or by any rules of any stock
exchange, in which case the disclosing party must consult the non-disclosing
party in good faith in advance concerning the text of the release.
10.4 Notices. Any notice or other communications required or permitted
hereunder shall be sufficiently given if delivered in person or sent by
registered or certified mail, return receipt requested, postage prepaid, or by
nationally recognized overnight courier, or by telecopy, electronic or digital
transmission, addressed as follows: If to Buyer, to Tree of Life, Inc., 0000
Xxxx Xxxxxxxxx, X.X. Xxx 000, Xx. Xxxxxxxxx, XX 00000-0000, Attention: Xxxxxxx
X. Xxxxxx, Chairman, and X.X. Xxxxxx, President, with a copy to McGuireWoods,
LLP, 00 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxxx, Xxxxxxx 00000,
Attention: Xxxxxxx X. Xxxxxxxx, Esquire, and if to Seller or Shareholder, to
AMCON Distribution Company, 0000 Xxxxxxxxx Xxxxx, Xxx Xxx, Xxxxxxxxxx 00000,
Attention: Xxxxxxx Xxxxxx, with a copy to Xxxxx and Roca LLP, 00 Xxxxx
Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000-0000, Attention: Xxxxx XxXxxx, Esq., or
such other address as shall be furnished in writing by any such party, and
such notice or communication shall be deemed to have been given as of the date
so received, mailed or couriered.
10.5 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto other than by operation
of law; provided, however, Buyer may assign or transfer this Agreement to any
of its wholly-owned subsidiaries or Affiliates, or to a successor-in-interest
to Buyer which shall assume all obligations and liabilities of Buyer
hereunder. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
10.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one instrument.
10.7 Entire Agreement. This Agreement, including the other documents
referred to herein and Disclosure Schedules and Exhibits which form a part
hereof, contains the entire understanding of the parties hereto with respect
to the subject matter contained herein and therein. This Agreement supersedes
all prior agreements and understandings between the parties with respect to
such subject matter.
10.8 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by Buyer, Shareholder and Seller.
10.9 Severability. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions hereof will not in any way be affected or impaired
thereby.
10.10 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto.
10.11 Further Assurances. Seller and Shareholder, at any time after the
Closing Date, shall execute, acknowledge, and deliver any further assignments,
conveyances, and other assurances, documents, and instruments of transfer
reasonably requested by Buyer and shall take any other action consistent with
the terms of this Agreement that may reasonably be requested by Buyer for the
purpose of assigning, transferring, granting, conveying, and confirming to
Buyer, or reducing to possession, any or all of the Assets. If requested by
Buyer, Seller further agree to prosecute or otherwise enforce in its own name
for the benefit of Buyer, at Buyer's expense, any claims, rights, or benefits
that are transferred to Buyer by this Agreement and that require prosecution
or enforcement in Seller's name.
10.12 Recovery of Litigation Costs. In any legal action or any
arbitration or other proceeding arising out of or related to, or for the
enforcement of this Agreement, or misrepresentation in connection with this
Agreement, the successful or prevailing party or parties shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action,
arbitration or proceeding, in addition to any other relief to which it or they
may be entitled.
10.13 Governing Law. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Florida, without reference
to the choice of law provisions of Florida law.
10.14 Hired Employees. Subject to the results of Buyer's due diligence
investigations and to the requirements of the marketplace and Buyer's
customary employment practices, Buyer will offer employment effective as of
the Closing to those of Seller's employees of the Business set forth on
Schedule 10.14 as "at will" employees of Buyer. Any employee of the Business
offered a position with Buyer will be offered a position consistent with
Buyer's current employment practices and benefits, including continuous health
care coverage. Each employee who accepts such offer shall be deemed a "Hired
Employee." Effective as of the Closing Date, Seller shall release any
employee hired by Buyer from any employment, non-compete, secrecy or
confidentiality agreement theretofore entered into between such employee and
Seller except as it is not related to the Business. Seller will give such
notices and perform such other obligations as may be required in connection
therewith and the transactions contemplated by this Agreement. It is
understood and agreed that employment by, or an offer of employment to,
employees of Seller by Buyer shall not constitute any commitment, contract,
obligation or understanding (express or implied) on the part of Buyer to a
post-Closing Date employment relationship of any fixed term or duration or to
any terms or conditions other than those Buyer may establish, and that any
such employees hired by Buyer shall be "at-will" employees of Buyer. Any
employment with Buyer may be terminated by Buyer at any time for any reason.
Seller shall provide for, and will be responsible for any and all COBRA
compliance, and all separation pay for those of Seller's employees who do not
become Hired Employees, and shall indemnify, defend and hold Buyer harmless
therefrom. Seller shall remain responsible for the cost of all accrued but
unused vacation and any and all other benefits owed to all of its employees
through the Closing Date.
10.15 Post-Closing Actions.
(a) Collection of Accounts Receivable. At the Closing, Buyer will
acquire hereunder, and thereafter Buyer or its designee shall have the right
and authority to collect for Buyer's or its designee's account, all
receivables and other items which constitute a part of the Assets, and Seller
shall within forty-eight (48) hours after receipt of any payment in respect of
any of the foregoing, properly endorse and deliver to Buyer any documents,
cash or checks received on account of or otherwise relating to any such
receivables or other items. Seller shall promptly transfer or deliver to
Buyer or its designee any cash or other property that Seller may receive in
respect of any deposit, prepaid expense, claim, contract, license, lease,
commitment, sales order, purchase order, letter of credit or receivable of any
character, or any other item, constituting a part of the Assets.
(b) Books and Records; Tax Matters. Each party agrees that it will
cooperate with and make available to the other party, during normal business
hours, all Books and Records, information and employees (without substantial
disruption of employment) retained and remaining in existence after the
Closing which are necessary or useful in connection with any tax reporting,
tax inquiry, audit, investigation or dispute, any litigation or investigation
or any other matter requiring any such Books and Records, information or
employees for any reasonable business purpose. The party requesting any such
Books and Records, information or employees shall bear all of the out of
pocket costs and expenses (including without limitation attorneys' fees, but
excluding reimbursement for salaries and employee benefits) reasonably
incurred in connection with providing such Books and Records, information or
employees.
(c) Payment of Liabilities. Following the Closing Date, Seller shall pay
promptly when due all of the debts and liabilities of Seller, including any
liability for Taxes, other than Assumed Liabilities; provided, however, this
covenant shall not apply to that portion (or all) of any debt that Seller is
contesting in good faith.
(d) Consulting Services of Seller. From the Closing until the earlier of
September 21, 2001 or such other time that Buyer may upon notice cancel the
obligations of the parties under this subsection (d), Seller shall cause its
officers and key employees (including without limitation, Xxxxx Xxxxxxx, Xxx
Xxxxxxx, Xxxx Xxxxxxx and Xxxx Xxxx) to consult with and advise Buyer on
matters relating to the Business, including, without limitation, matters
relating to the customers, suppliers and generally the operations and
development of the Business, as may be reasonably requested by Buyer from time
to time (the "Consulting Services"). All Consulting Services shall be
requested by Buyer through the President of Seller and shall be subject in all
cases to reasonable restrictions on scope, timing and consideration of the
demands of Seller's ongoing operations. In connection with the performance of
Consulting Services pursuant to this subsection (d), Seller will be an
independent contractor of Buyer and not a partner or joint venturer with, or
an agent or employee of, Buyer. All employees, agents or representatives
employed by or used by Seller in its performance of this subsection (d) shall
be the employees, agents and representative of Seller and not of Buyer, except
if Buyer expressly hires such persons as its employees, agents or
representatives. All provisions of this Agreement applicable to confidential
information regarding the Business shall apply to the Consulting Services
insofar as such services involve such information and Seller and Shareholder
shall be responsible for any breach of such provisions by the officers and
employees providing such Consulting Services to Buyer.
(e) License for Access Relating to Transferred Assets. Buyer and Seller
acknowledge that Buyer may elect not to take immediate possession of the
tangible Assets sold to Buyer under this Agreement (the "Transferred Assets"),
which are now located in the premises leased by Seller at Reywest Building
#29, Maricopa County, Phoenix, Arizona and at 0000 Xxxxx Xxxx, Xxxxxxxxx,
Xxxxxxx 00000 (collectively, the "Premises"). In order to take possession of
the Transferred Assets at some time after the Closing, Seller agrees to
provide Buyer with access to the Transferred Assets, and for that purpose
grants to Buyer, its agents, employees and contractors a license, according to
the terms of this Section 10.15(e), to maintain all or any part of the
Transferred Assets at the Premises for as long as reasonably practical for
Buyer to remove the Transferred Assets from the Premises, which shall not
exceed six (6) months from the Closing (the "License").
The License includes the right to enter upon the Premises for the purpose of
causing the crating, loading, and removal of the Transferred Assets from the
Premises (i) in accordance with any reasonable day and time limitations
imposed by Seller, provided that the Premises shall be available no less than
8 hours a day, Monday through Saturday each week, excluding national holidays,
and (ii) in such a manner as not to unreasonably interfere with the use of the
Premises by Seller or any of its invitees, guests or lessees. The License is
not an assignment or assumption of Seller's leases of the Premises and is not
a sublease of the Premises, and Seller shall retain the right to access and
occupy the Premises, and Seller shall retain full liability for the
performance of its covenants under the leases of the Premises.
In connection with the License, Seller shall perform the following services
(the "Access Services"), with due care and diligence in a workmanlike, timely
manner in accordance with prevailing industry standards. Buyer shall have the
right to inspect and supervise the performance of the Access Services at any
and all times; provided that Buyer is solely interested in the results of
Seller's performance thereof and shall leave to Seller sole control over the
manner and means with which Seller delivers the Access Services. Seller shall
hold the Transferred Assets in the Premises in a safe, neat and orderly
condition subject to the terms and conditions set forth in this Section
10.15(e) and, upon reasonable notice from Buyer as set forth herein, shall
cause items of the Transferred Assets to be prepared for loading and loaded
onto Buyer's trucks and other carriers provided by Buyer at the docks at the
Premises. Upon receipt of Buyer's reasonable shipping instructions, Seller
shall prepare such items of Transferred Assets for shipment and loading,
including the retrieval, shrink-wrapping, crating, palletizing, packing and
removal of such Transferred Assets from the Premises. Seller shall be ready
to load and deliver the indicated Transferred Assets onto the Carriers within
a reasonable time following receipt of Buyer's shipping instructions. Upon
the arrival of a carrier at the Premises' docks, Seller shall timely load such
items of Transferred Assets onto such carrier. Seller shall maintain staff
and equipment sufficient to perform the Access Services, subject to reasonable
notice by Buyer of the needed Access Services. Buyer's employees or agents
may inspect the loading of the Transferred Assets onto the carriers, but such
persons shall not be considered employees or agents of Seller for any
purposes. In connection with the performance of Access Services pursuant to
this Section 10.15(e), Seller will be an independent contractor of Buyer and
not a partner or joint venturer with, or an agent or employee of, Buyer. All
employees, agents or representatives employed by or used by Seller in its
performance of this Section 10.15(e) shall be the employees, agents and
representative of Seller and not of Buyer, except if Buyer expressly hires
such persons as its employees, agents or representatives, and Seller shall
continue to comply with all obligations owed to its employees incident to any
and all applicable laws, including the WARN Act. As consideration for the
Access Services, Buyer shall pay Seller in the amounts and in the manner
described in Schedule 10.15(e) attached hereto and incorporated herein by
reference, which schedule shall be updated at Closing by Seller and Buyer.
Buyer and Seller shall be solely responsible for the actions (or failure to
act) of their respective agents, employees or independent contractors while on
or about the Premises; provided, however, that nothing herein shall cause
either party to be responsible for the other party's actions or omissions as
an independent contractor.
At all times on and after the Closing, Buyer shall own all of the Transferred
Assets. So long as any of the Transferred Assets are located on the Premises,
Seller shall at its expense maintain commercial general and public liability
insurance with limits of $5,000,000 individually and in the aggregate, as well
as worker's compensation insurance as required by law and insurance on the
Premises in such amounts as are required under the terms of the leases
governing the Premises, naming Buyer as an additional insured thereunder; and
maintain utility services and security services to the Premises in accordance
with customary past usage. Upon or before execution hereof, Seller shall
furnish Buyer with proper certificates of insurance indicating such coverage.
Seller waives any statutory, equitable or common law lien which it may have as
a result of the Transferred Assets being or having been stored on the
Premises. Seller shall not cause a default or breach of any provision of any
lease of the Premises that would result in the disturbance of Buyer's rights
pursuant to this Section 10.15(e). All provisions of this Agreement
applicable to confidential information regarding the Business shall apply to
the Access Services insofar as the Access Services involve such information.
Buyer shall not: (i) have access to the Premises for any reason other than
that permitted by this Section 10.15(e); (ii) knowingly permit upon the
Premises anything that would invalidate any policies of insurance now or
hereafter carried on the Premises or that will increase the rate of insurance
of the Premises; (iii) commit or suffer to be committed any waste upon the
Premises by Buyer or its employees or contractors; and (iv) violate any
recorded restriction or covenant affecting the Premises of which Buyer has
prior written notice. Buyer agrees to remove from the applicable Premises any
of the Transferred Assets within 30 days of receiving Seller's written notice,
if any, that Seller has subleased or assigned any lease governing the
Premises.
In the event that any item of the Transferred Assets is lost, stolen, damaged
or destroyed by reason of a force majeure event or otherwise (other than the
negligence of Buyer or its employees) and the loss from such theft, damage or
destruction exceeds any applicable insurance proceeds actually paid to and
received by Buyer therefor or is within the deductible of Buyer's insurance
policy, the purchase price of such items, as calculated pursuant to the terms
hereof, shall be payable to Buyer by Seller. In the event the shortage is not
paid within ten (10) days of notice to Seller of its existence, Buyer shall be
entitled to recover such amount by drawing upon the Letter of Credit as
permitted therein. Notwithstanding anything herein to the contrary, recovery
under the Letter of Credit shall not be an exclusive remedy to Buyer in the
recovery of such amounts if the Letter of Credit is insufficient to satisfy
Seller's indebtedness to Buyer in full.
10.16 Exclusivity. From the date hereof through the Closing or until
such time, if any, as this Agreement is terminated pursuant to Article IX,
neither Seller, Shareholder, nor any Affiliate of either will (nor shall they
permit their respective representatives) to directly or indirectly solicit,
initiate or encourage any inquiries or proposals from, discuss or negotiate
with, provide any nonpublic information to, or consider the merits of any
unsolicited inquiries or proposals from, any person or entity (other than
Buyer and its representatives) relating to any transaction involving the sale
of the Assets, the Business or the stock of Seller (other than the sale of
inventory and assets in the ordinary course) or a merger, consolidation,
business combination or similar transaction involving Seller, provided that
nothing in the foregoing shall limit Seller, Shareholder or any Affiliate from
any transaction that does not involve or affect the Business.
ARTICLE XI
DEFINITIONS
11. Definitions. When used in this Agreement, the following terms shall have
the respective meanings specified therefor below (such meanings to be equally
applicable to both the singular and the plural forms of the terms defined).
"Access Services" shall have the meaning specified in Section 10.15(e).
"Accountants" shall mean the accounting firm of KPMG LLP of Phoenix,
Arizona.
"Accounts Payable" shall have the meaning specified in Section 1.3(b).
"Accounts Receivable" shall have the meaning specified in Section 1.1(b).
"Adjustment Amount" shall have the meaning specified in Section 2.2(b).
"Affiliate" of any Person shall mean any other Person controlling,
controlled by, or under common control with, such Person. For purposes of this
definition, "control" means the possession, directly or indirectly, of the
power to direct or to cause the direction of the management and policies of a
Person, whether by ownership of voting securities, by contract or otherwise.
"Agreement" and "this Agreement" shall have the meaning specified in the
preamble to this Agreement, as amended, modified or supplemented from time to
time.
"Assets" shall have the meaning specified in Section 1.1.
"Assigned Contracts" shall mean those contracts specified in Sections
1.1(f)(i)-(iv).
"Assumed Liabilities" shall have the meaning specified in Section 1.3.
"Assumption Document" shall have the meaning specified in Section 2.4.
"Balance" shall have the meaning specified in Section 2.4(f).
"Books and Records" shall mean, without limitation, all books, records,
computer-stored information, files and data, certificates and other documents
related to the conduct of the Business of the Seller or the ownership of the
Assets, or the Assumed Liabilities, including, without limitation, accounting
and financial records relating to receivables and inventory of the Seller and
all sales and promotional literature of the Seller used or held for use in
connection with the conduct of the Business of the Seller.
"Broker" shall mean any Person compensated by Seller as an independent
contractor for procuring the sale of products of the Business on behalf of
Seller.
"Broker List" shall have the meaning specified in Section 3.19(c).
"Business" shall have the meaning specified in the preamble hereto.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
national holiday.
"Buyer" shall have the meaning set forth in the preamble to this
Agreement.
"Closing" shall have the meaning specified in Section 2.1.
"Closing Date" shall have the meaning specified in Section 2.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Consulting Services" shall have the meaning specified in Section
10.15(d).
"Customer List" shall have the meaning specified in Section 3.19(a).
"Deductible" shall have the meaning specified in Section 8.3(a).
"Disclosure Schedules" shall mean a schedule executed and delivered by
Seller to Buyer as of the date hereof which sets forth the exceptions to the
representations and warranties contained in Article III hereof and certain
other representations called for by this Agreement.
"800 Code Inventory" shall mean such inventory which is in the possession
or control of Seller as of the Closing Date not owned by Seller, but owned by
one or more customers of Seller.
"Employee Benefit Plans" shall mean all present and prior (including
terminated and transferred) plans, programs, agreements, arrangements, and
methods of contributions or compensation of Seller's and Seller's employees
(including all amendments to and components of the same, such as a trust with
respect to a plan) providing any remuneration or benefits, other than current
cash compensation, to any current or former employee of Seller or to any other
person who provides services to Seller, whether or not such plan or plans,
programs, agreements, arrangements, and methods of contribution or
compensation are subject to ERISA, and whether or not such plan or plans,
programs, agreements, arrangements and methods of contribution or compensation
are qualified under the Code. The term Employee Benefit Plans also includes,
but is not limited to, pension, retirement, profit-sharing, stock option,
stock bonus and non-qualified deferred compensation plans and disability,
medical, vision, dental, workers' compensation, health insurance, life
insurance or other death benefits, incentive, severance plans, vacation
benefits, and fringe benefits, as well as any employee plan that is a
multiemployer plan as defined in Section 3(37) of ERISA.
"Encumbrances" shall mean liens, security interests, options, rights of
first refusal, easements, mortgages, charges, indentures, deeds of trust,
rights-of-way, restrictions on the use of real property, encroachments,
licenses to third parties, leases to third parties, security agreements, or
any other encumbrances and other restrictions or limitations on use of real or
personal property, whether voluntarily incurred or arising by operation of
law.
"Environmental Claim" shall mean any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations or proceedings relating in any way
to any Environmental Law or any permit issued under any such law (hereafter
"Claims"), including, without limitation, (a) any and all Claims by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Law" shall mean any Federal, state or local statute, law,
rule, regulation, ordinance, code or written policy, in each case as amended
through the Closing Date, or rule of common law now in effect and any judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to the environment,
health, safety or Hazardous Materials, including, without limitation, the
Occupational Safety and Health Act, 29 U.S.C. 651 et seq.; the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended,
42 U.S.C. 9601 et seq.; the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. 6901 et seq.; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C.
2601 et seq.; the Clean Air Act, as amended, 42 U.S.C. 7401 et seq.; the Safe
Drinking Water Act, 42 U.S.C. 3808 et seq.; the Emergency Planning and
Community Right-to-Know Act, as amended 42 U.S.C. 11002 et seq.; Hazardous
Materials Transportation Act, as amended 49 U.S.C. 5101 et seq; Federal
Insecticide, Fungicide, Rodenticide Act, 7 U.S.C. 136 et seq; the Oil
Pollution Act of 1990, 33 U.S.C. 270 et seq.; and equivalent state and local
laws.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended and the rules and regulations thereunder.
"Estimated Closing Balance Sheet" shall mean the balance sheet of Seller
prepared by Seller using the most up to date information available at the
time of Closing and in a manner consistent with Seller's historic practices.
"Excluded Assets" shall have the meaning specified in Section 1.2.
"Excluded Inventory" shall have the meaning specified in Section 1.1(a).
"Excluded Proprietary Marks" shall have the meaning specified in Section
1.2(l).
"Excluded Accounts Receivables" shall have the meaning specified in
Section 1.1(b).
"Excluded Vendor Receivables" shall have the meaning specified in Section
1.1(c).
"Excluded Prepaid Expenses" shall have the meaning specified in Section
1.1(e).
"Final Closing Balance Sheet" shall have the meaning specified in Section
2.2(a).
"Final Purchase Price Schedule" shall have the meaning specified in
Section 2.2(a).
"Financial Statements" shall have the meaning specified in Section 3.7.
"Fixed Assets" shall have the meaning specified in Section 1.1(d).
"GAAP" shall mean generally accepted accounting principles in the United
States.
"Hazardous Materials" shall mean (i) any petroleum or petroleum product,
radioactive materials, asbestos in any form that is friable, asbestos-
containing material, urea formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls, and radon gas; (ii) any chemicals, materials or substances defined
as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or
"pollutants," or words of similar import, under any applicable Environmental
Law; and (iii) any other chemical, material or substance, exposure to which is
currently prohibited, limited or regulated by any governmental authority.
"Intangible Assets" shall have the meaning specified in Section 1.1(f).
"Intellectual Property" shall have the meaning specified in Section
1.1(f)(vi).
"Interim Financial Statements" shall have the meaning specified in Section
3.7.
"Inventory" shall have the meaning specified in Section 1.1 (a).
"IRS" shall mean the Internal Revenue Service.
"Knowledge" shall mean the knowledge of the officers, directors, and
executive employees of Seller and Shareholder, including Knowledge that would
be gained by a review of Seller's files and records.
"Leased Real Property" shall have the meaning specified in Section 3.11.
"Letter of Credit" shall have the meaning specified in Section 2.4(f).
"License" shall have the meaning specified in Section 10.15(e).
"Losses" shall have the meaning specified in Section 8.
"PBGC"" shall have the meaning specified in Section 3.17(c).
"Permits" shall have the meaning specified in Section 3.24.
"Permitted Encumbrances" shall mean Encumbrances for current taxes,
assessments or governmental charges or levies on property not yet due and
delinquent, any other Encumbrance accepted and specified in writing by Buyer
prior to Closing in its sole and absolute discretion to be permissible, but
shall not include Retained Liabilities.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or other department or agency thereof.
"Preliminary Purchase Price" shall have the meaning specified in Section
1.4.
"Preliminary Purchase Price Schedule" shall have the meaning specified in
Section 1.4.
"Premises" shall have the meaning specified in Section 10.15(e).
"Purchase Price" shall have the meaning specified in Section 2.2(b).
"Real Property Leases" shall have the meaning specified in Section 3.9.
"Retained Liabilities" shall have the meaning specified in Section 1.3.
"Return" shall have the meaning specified in Section 3.11.
"Sale Transaction" shall have the meaning specified in the preamble to this
Agreement.
"Sales Plan" shall have the meaning specified in Section 3.19(a).
"Seller" shall have the meaning specified in the preamble to this Agreement.
"Shareholder's Representative" shall mean Xxxxxxx X. Xxxxxx, who shall have
full right, title and authority to represent the Shareholder with respect to all
matters under this Agreement. Any agreement or resolution made by Shareholder's
Representative with Buyer shall be binding on Shareholder without further notice
or action and Shareholder manifests its agreement thereto by execution of this
Agreement.
"Shareholder" shall have the meaning specified in the preamble to this
Agreement.
"Subsidiaries" or "Subsidiary" shall have the meaning specified in Section
3.4.
"Supporting Documentation" shall have the meaning specified in Section
1.1(b).
"Tax" shall mean, without limitation, any federal, state, local or foreign
income, alternative or add on minimum tax, advance corporation, gross income,
gross receipts, sales, use, transfer, severance, ad valorem, personal property,
franchise, profits, windfall profits, license, value added, estimated
withholding, payroll, employment, excise, stamp or occupation tax, customs
duties, governmental fee or other like assessment or charge of any kind
whatsoever (whether payable directly or by withholding and whether or not
requiring the filing of a Return), together with any interest, penalty or
additions thereto imposed by any governmental authority with respect thereto,
and any liability for such amounts as a result either of being a member of an
affiliated group or of a contractual obligation to indemnify any other entity.
"Transaction Documents" shall mean this Agreement and all related agreements
contemplated hereby required to consummate the Sale Transaction.
"Transfer Taxes" shall have the meaning specified in Section 1.6.
"Transferred Assets" shall have the meaning specified in Section 10.15(e).
"Transferred Books and Records" shall have the meaning specified in Section
1.1(f)(x).
"Vendor List" shall have the meaning specified in Section 3.19(b).
"WARN" shall have the meaning specified in Section 3.16(a).
"WARN Wage Expenses" shall have the meaning specified in Section 3.16(b).
IN WITNESS WHEREOF, Buyer, Seller and Shareholder have caused their signatures
to be hereunto subscribed, all as of the day and year first above written.
TREE OF LIFE, INC.
By: Xxxxxx Xxxxxxxxx
------------------------
Xxxxxx Xxxxxxxxx, Senior Vice President
Finance and Chief Financial Officer
("BUYER")
FOOD FOR HEALTH CO., INC.
By: Xxxxx Xxxxxxx
--------------------------
Xxxxx Xxxxxxx, President
("SELLER")
AMCON DISTRIBUTING COMPANY, INC.
By: Xxxxxxx X. Xxxxxx
--------------------------
Xxxxxxx X. Xxxxxx
("SHAREHOLDER")
