EXHIBIT 10.59
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT dated as of April 17, 2001, is made by and
between Goldshield Acquisitions Inc., a Florida corporation ("Buyer"), Changes
International, Inc., a Florida corporation ("Seller"), and Twinlab Corporation,
a Delaware Corporation ("Principal Shareholder"). Buyer, Seller and Principal
Shareholder are sometimes referred to herein collectively as the "Parties."
RECITALS
WHEREAS, Seller is engaged in the business of selling vitamins, herbs,
nutritional supplements and personal care products directly by means of
multi-level marketing through a network of independent distributors (the
"Seller's Business"); and
WHEREAS, Seller desires to sell, and Buyer desires to purchase, the
Acquired Assets upon the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, as an inducement to Buyer to enter into this Agreement, Principal
Shareholder desires to enter into this Agreement upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, and the
respective representations, warranties, covenants and agreements set forth
herein, and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I.
DEFINED TERMS
As used in this Agreement, and unless the context otherwise requires,
capitalized terms shall have the meanings set forth below.
1.1 "Acquired Assets" shall have the meaning set forth in Section 2.1.
1.2 "Action" shall mean any action, suit, or legal, administrative or
arbitral proceeding by or before any Governmental Authority.
1.3 "Affiliate" shall mean, with respect to any Person, the subsidiaries,
executive officers, directors, and partners of such Person and any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person.
1.4 "Affiliate Guaranty" shall have the meaning assigned to it in Section
3.2(i)(C).
1
1.5 "Agreement" shall mean this Agreement and all Schedules and Exhibits
hereto, as the same may from time to time be amended in accordance with Section
10.10.
1.6 "Assumed Contract Assignment" shall have the meaning set forth in
Section 3.2(ii)(C).
1.7 "Assumed Liabilities" shall have the meaning set forth in Section 2.5.
1.8 "Bankruptcy Exception" shall have the meaning set forth in Section
4.2.
1.9 "Xxxx of Sale" shall have the meaning set forth in Section 3.2(ii)(A).
1.10 "Book Value Resolution Date" shall have the meaning set forth in
Section 2.6(iii)(b).
1.11 "Business Day" means any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by Law to be closed in The
City of New York.
1.12 "Buyer" shall have the meaning set forth in the preamble.
1.13 "Buyer Contracts" shall have the meaning set forth in Section 5.3.
1.14 "Buyer Dispute Notice" shall have the meaning set forth in Section
2.6(iii)(b).
1.15 "Buyer Indemnities" shall have the meaning set forth in Section 7.1.
1.16 "Buyer's Affiliate" shall have the meaning set forth in Section
3.2(i)(C).
1.17 "Cash Payment" shall have the meaning set forth in Section 2.6(i).
1.18 "Claim Notice" shall have the meaning set forth in Section 7.3(a).
1.19 "Closing" shall have the meaning set forth in Article III.
1.20 "Confidential Information" shall have the meaning set forth in
Section 8.1(C)(1).
1.21 "Consent" shall mean any consent, approval, authorization or waiver
of, notice to, or designation, registration, declaration or filing with, any
Person.
1.22 "Contract" shall have the meaning set forth in Section 2.1(h).
2
1.23 "Copyrights" means United States registered copyrights and
registrations and applications for registration thereof, and all rights therein.
1.24 "Distributor Agreements" shall have the meaning set forth in Section
2.1(d).
1.25 "Employment Covenants" shall have the meaning set forth in Section
6.3.
1.26 "Escrow Agent" shall mean the escrow agent stipulated in the Escrow
Agreement.
1.27 "Escrow Agreement" shall mean the Escrow Agreement of even date
herewith, in the form annexed hereto as Exhibit A.
1.28 "Escrowed Amount" shall have the meaning set forth in Section
2.6(ii).
1.29 "Excluded Assets" shall have the meaning set forth in Section 2.2.
1.30 "Excluded Inventory" shall have the meaning set forth in Section
2.1(c).
1.31 "Financial Statements" shall have the meaning set forth in Section
4.10a).
1.32 "GAAP" shall mean generally accepted accounting principles
consistently applied as in effect in the United States as of the date hereof.
1.33 "Governmental Authority" means any United States federal, state or
local, or any foreign, government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
1.34 "Indemnified Party" shall have the meaning set forth in Section
7.3(a).
1.35 "Indemnifying Party" shall have the meaning set forth in Section
7.3(a).
1.36 "Indemnification Period" shall have the meaning set forth in Section
7.4(a).
1.37 "Intellectual Property Assignment" shall have the meaning set forth
in Section 3.2(ii)(B).
1.38 "Intellectual Property Rights" shall have the meaning set forth in
Section 2.1(e).
1.39 "Inventory" shall have the meaning set forth in Section 2.1(c).
1.40 "Key Employees" shall have the meaning set forth in Section 6.3.
1.41 "Knowledge" means the actual knowledge of an executive officer of the
Principal Shareholder or the Seller.
1.42 "Laws" shall mean all federal, state, local or foreign laws,
ordinances, rules and regulations.
3
1.43 "Leased Personal Property" shall have the meaning set forth in
Section 2.1(b).
1.44 "Legal Claim" shall have the meaning set forth in Section 7.3(b).
1.45 "Lien" shall mean any mortgage, pledge, hypothecation, lien, security
interest, financing statement, charge or other similar encumbrance.
1.46 "Losses" shall have the meaning set forth in Section 7.1.
1.47 "Marked Materials" shall have the meaning set forth in Section
6.1(b).
1.48 "Material Adverse Effect" means any circumstance, change in, or
effect on, the operations or financial condition of the Seller's Business that:
(a) is, or is reasonably likely to be, materially adverse to the results of
operations or the condition (financial or otherwise) of the Seller's Business,
taken as a whole, or (b) materially adversely affects, or is reasonably likely
to materially adversely affect, the operations or conduct of the Seller's
Business in the manner in which it is currently operated or conducted, except,
in each case, for such circumstances, changes or effects resulting from changes
in general economic or market conditions or changes that generally affect
businesses of the same type as the Seller's Business.
1.49 "Monthly Financial Statements" shall have the meaning set forth in
Section 4.10(b).
1.50 "Misdirected Funds" shall mean and include any collections or other
amounts received by Buyer or any of its Affiliates that constitute the proceeds
of or a collection in respect of any Excluded Assets.
1.51 "Order" shall mean any judgment, award, order, writ, injunction or
decree issued by any Governmental Authority or by any arbitrator.
1.52 "Parties" shall have the meaning set forth in the preamble.
1.53 "Permits" shall mean all permits, licenses, approvals, franchises,
notices, certifications or other authorizations or consents issued by any
Governmental Authority.
1.54 "Permitted Encumbrances" shall mean: (a) any Liens or taxes,
assessments or governmental charges or claims, the payment of which is not
required prior to the Closing; (b) statutory liens of landlords and liens of
carriers, warehousemen, mechanics, materialmen and other liens imposed by law
incurred in the ordinary course of business for sums not delinquent prior to the
Closing; (c) any and all Assumed Liabilities, and Liens arising under any of the
Assumed Liabilities; (d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, bonds and other obligations of a like
nature incurred in the ordinary course of business; and (e) Liens (including
rights of lessors) contained in or arising under the Contracts, including
leases.
4
1.55 "Person" shall mean any individual, partnership, joint venture,
association, limited liability company, corporation, trust, unincorporated
organization, Governmental Authority, or other entity.
1.56 "Personal Property Leases" shall have the meaning set forth in
Section 2.1(b).
1.57 "PR" shall mean PR Nutrition, Inc., a California corporation.
1.58 "PR Asset Purchase Agreement" shall mean the Asset Purchase Agreement
of even date herewith between PR, Principal Shareholder and Buyer.
1.59 "PR Transaction Documents" shall have the meaning set forth in the PR
Asset Purchase Agreement.
1.60 "Principal Shareholder" means the Principal Shareholder, as defined
in the preamble.
1.61 "Purchase Price" shall have the meaning set forth in Section 2.6.
1.62 "Retained Liabilities" shall have the meaning set forth in Section
2.4.
1.63 "Saleable Inventory" means that portion of the Seller's total
inventory as set forth in Exhibit G which has a remaining shelf life of not less
than three (3) months and which is projected to be sold within the twelve (12)
months following the date hereof based upon the projected sales volume of such
inventory as set forth in Exhibit G.
1.64 "Saleable Inventory Value" shall have the meaning set forth in
Section 2.6(iii)(a).
1.65 "Saleable Inventory Value Certificate" shall have the meaning set
forth in Section 2.6(iii)(b).
1.66 "Seller" shall have the meaning set forth in the preamble.
1.67 "Seller's Business" shall have the meaning set forth in the Recitals.
1.68 "Seller Indemnitees" shall have the meaning set forth in Section 7.2.
1.69 "Software" means computer software, including without limitation,
source code, operating systems and specifications, data, databases, files,
documentation and other materials related thereto, data and documentation other
than software which is generally commercially available for less than $50,000.
1.70 "Subsidiaries" means, as to Principal Shareholder or Seller, any and
all corporations, partnerships, joint ventures, associations or other entities
controlled by such entity, directly or indirectly through one or more
intermediaries.
1.71 "Trade Names" shall have the meaning set forth in Section 6.4(b).
5
1.72 "Trademarks" means United States and foreign registered trademarks
and service marks and United States and foreign trademark and service xxxx
applications, registrations and renewals.
1.73 "Transaction Documents" shall mean this Agreement, the Transition
Services Agreement, the Escrow Agreement, the Affiliate Guaranty and any other
agreement, document or instrument executed and/or delivered by Seller, Principal
Shareholder and/or Buyer pursuant to any of the foregoing documents or the
transactions contemplated thereby.
1.74 "Transition Services Agreement" means the Transition Services
Agreement between Buyer and Seller dated of even date herewith.
1.75 "Twinlab Identifier" shall have the meaning set forth in Section
6.1(b).
1.76 "Units" shall have the meaning set forth in Section 2.2(k).
1.77 "WARN" shall have the meaning set forth in Section 6.2.
ARTICLE II.
PURCHASE AND SALE OF ASSETS
2.1 Assets to be Purchased by Buyer. Upon and subject to the terms and
conditions of this Agreement (including the payment by Buyer of the Purchase
Price and the assumption by Buyer of the Assumed Liabilities), and based upon
the representations and warranties contained herein, at the Closing, Seller
shall sell, convey, transfer, assign and deliver to Buyer, and Buyer shall
purchase from Seller, all of Seller's right, title and interest in and to the
following assets free and clear of any Liens, except for Permitted Encumbrances
(collectively, the "Acquired Assets"):
(a) Tangible Personal Property. All machinery, operating equipment
and supplies, office equipment and supplies, furniture, computer hardware
and software and other tangible personal property owned by Seller on the
date hereof and used in the Seller's Business listed on Schedule 2.1(a)
hereto;
(b) Leased Tangible Personal Property. All rights and incidents of
interest on the date hereof of Seller in and to (i) the leases relating to
tangible personal property leased by Seller from third parties and used in
the Seller's Business (the "Personal Property Leases"), and (ii) the
tangible personal property leased pursuant thereto (the "Leased Personal
Property"), in the case of both clauses (i) and (ii), as listed on
Schedule 2.1(b);
(c) Inventory. All of the finished goods, purchased parts and raw
materials owned by Seller on the date hereof (the "Inventory"), including
the Saleable Inventory, held for sale or used in the Seller's Business,
other than those items of inventory which bear an expiration date prior to
the date hereof (collectively, the "Excluded Inventory").
6
(d) Distributor Agreements. All of Seller's right, title and
interest in and to the distributors listed on Schedule 2.1(d) (the
"Distributor Agreements");
(e) Intellectual Property. All of Seller's right, title and interest
in the following, including without limitation all tangible embodiments
thereof in whatever form or medium (collectively, the "Intellectual
Property Rights"):
(i) all Trademarks listed on Schedule 2.1(e)(i). In addition,
Seller hereby transfers all United States and foreign trade dress, logos, trade
names, corporate names and product names, utilizing the Changes Trademark,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith;
(ii) all Copyrights listed on Schedule 2.1(e)(ii);
(iii) all Software listed on Schedule 2.1(e)(iii);
(iv) all product formulations for products sold exclusively by
Seller as listed on Schedule 2.1(e)(iv); and
(v) Seller's web site, including the registered domain names
related to Seller's web site as listed on Schedule 2.1(e)(v).
(f) Governmental Permits. All Permits issued or granted to Seller by
any Governmental Authority relating to the Seller's Business listed on
Schedule 2.1(f) hereto, to the extent such rights, title and interests are
transferable or assignable to Buyer;
(g) Records and Lists. All books, files, documents, sales
literature, distributor lists, distributor records, operating records,
computer programs, telephone numbers, instructions, advertising materials,
dealer and distributor lists and other records of Seller, including
without limitation, all electronic lists and records, used in or relating
solely to the conduct of operation of the Seller's Business and the
Acquired Assets;
(h) Contractual Rights. All of Seller's right, title and interest in
and to the Contracts listed on Schedule 2.1(h) hereto; and
(i) Goodwill. All goodwill associated with the Acquired Assets and
all of Seller's rights (both legal and equitable), claims or causes of
action to protects its rights and interests with respect to the Acquired
Assets.
2.2 Excluded Assets. Notwithstanding Section 2.1 or any other provision of
this Agreement or any other Transaction Document to the contrary, the following
assets (collectively,
7
the "Excluded Assets") are not being sold, transferred, assigned, conveyed or
delivered by Seller to Buyer, shall not be included (or be deemed included) in
the Acquired Assets sold, transferred, assigned, conveyed and delivered to
Buyer, and shall be retained by Seller:
(a) Employee Plan Assets. The rights of Seller under, and any funds
and property held in trust or any other funding vehicle pursuant to, any
employee benefit plans and any Contracts relating to employee benefit
plans;
(b) Certain Corporate and Tax Records. The corporate minute books
and records, stock ledger, corporate seal and income and other tax records
and returns of Seller, and any worksheets, notes, files or documents
primarily related thereto, wherever located;
(c) Cash. All cash, cash equivalents and other current assets of
Seller on the date hereof (including checking and saving accounts, money
market accounts, other bank accounts, and employee advances, and all
amounts therein or reflected thereby and proceeds thereof);
(d) Deposits, Prepayments and Rights to Recovery. Any and all
deposits, security deposits, prepayments (including, without limitation,
prepaid insurance, prepaid expenses, prepaid taxes and prepaid fees),
bonds, surety bonds, performance bonds, accounts, notes and other
receivables and claims, causes of action, choses in action, rights of
recovery, rights of set off and rights of recoupment as of the date
hereof;
(e) Refunds. Any and all refunds for federal, state, local or
foreign franchise or other taxes or fees of any nature whatsoever for
periods prior to the Closing;
(f) Accounts Receivable. All of Seller's accounts receivable with
respect to the Seller's Business as of the date hereof and any unbilled
fees and costs for work in progress with respect to the Seller's Business
as of the date hereof as determined in accordance with GAAP, including,
without limitation, those set forth on Schedule 2.2(f) hereto;
(g) Excluded Inventory. Any and all Excluded Inventory;
(h) Leased Real Property. Any and all rights and incidents of
interest of Seller in and to (i) the leases relating to real property
leased by Seller from third parties and used in the Seller's Business (the
"Real Property Leases"), and (ii) the real property leased pursuant
thereto (the "Leased Real Property");
(i) Rights Under This Agreement. All rights of Seller or Principal
Shareholder under this Agreement and the Transaction Documents;
(j) Intellectual Property Rights. Any and all right, title and
interest in (i) Trademarks and all United States and foreign trade dress,
logos, trade names, corporate names, and product names utilized by
Principal Shareholder or any of its Affiliates, with the exception of
those listed on Schedule 2.1(e)(i), together with all translations,
adaptations, derivations and combinations thereof and including all
goodwill associated
8
therewith, (ii) underlying copyright interests of Seller in the inventory
set forth on Schedule 2.2(j), and (iii) the domain names
xxx.xxxxxxxxxxxxxxx.xxx and xxx.xxxxxxxxxxxxxxxxxxxxxx.xxx; and
(k) Other Contracts. All rights attributable to the agreement
between Novel Delivery Systems Pty Limited and Twin Laboratories Inc.
dated April 11, 2000; provided, however that Principal Shareholder agrees,
pursuant to customary commercial arrangements, to supply Buyer's inventory
needs on an "as is basis" with respect to the product Trusorb CoQ10
developed under the Novel Agreement until the twenty four month
anniversary of the date hereof at a cost to Buyer equal to $4.75 per Unit
(each "Unit" includes a unlabeled bottle containing 30 softgels).
2.3 Non-Assumption of Liabilities. This Agreement is intended as and shall
be deemed to be an agreement for the sale and purchase of assets and, except as
otherwise specifically provided herein shall not be deemed to create any
obligation or liability of Buyer to any person or entity that is not a party to
this Agreement, whether under a third-party beneficiary theory, successor
liability theory or otherwise. Except as otherwise specifically provided herein,
Buyer shall not, as a result of the execution of this Agreement and the
consummation of the transactions herein contemplated, assume, discharge or
become liable for any of the liabilities, obligations, debts, contracts or other
commitments of Seller of any kind or nature whatsoever, whether known or unknown
and whether fixed, absolute, approved, contingent or otherwise, existing on the
date hereof or arising out of any transaction entered into, or any state of
facts existing, prior to, at or subsequent to the date hereof.
2.4 Retained Liabilities. The liabilities and obligations not to be
assumed by Buyer and to be retained by Seller (the "Retained Liabilities")
include, without limiting the generality of the foregoing, and whether or not
incurred in the ordinary and usual course of business:
(a) any liability or obligation of Seller for federal, state, local
or foreign taxes which relate to the Acquired Assets or the Seller's
Business originating during or attributable to the period up to the date
hereof, including, without limitation, all sales and use taxes and taxes
on income or which are measured by income derived during or attributable
to the period up to the date hereof;
(b) any liability or obligation to an employee or former employee of
Seller compensable under any applicable workers' compensation or similar
state law arising from or relating to an accident, event or other
occurrence prior to the date hereof;
(c) any liability or obligation to an employee or former employee of
Seller under any employee benefit plans;
(d) any liability or obligation to an employee or former employee of
Seller for compensation, vacation pay, severance pay or other compensation
or benefits with respect to periods prior to the Closing; and
9
(e) the liabilities of Seller set forth on Schedule 2.4(e) hereto.
2.5 Agreement to Assume. Notwithstanding anything contained in Section 2.3
to the contrary, Buyer shall assume, discharge and perform only the liabilities
and obligations of Seller set forth on Schedule 2.5 attached hereto (the
"Assumed Liabilities").
2.6 Purchase Price. (a) Subject to the adjustments set forth in subsection
(b) of this Section 2.6, at Closing, Buyer shall pay an aggregate purchase price
of Four Million Four Hundred Five Thousand Three Hundred Forty-Three Dollars
($4,405,343) (the "Purchase Price"), for the Acquired Assets as set forth in
this Agreement. The Purchase Price shall be paid to Seller as follows:
(i) Cash Payment. At Closing, Buyer shall pay and deliver to Seller,
Three Million Five Hundred Twenty Four Thousand Two Hundred Seventy Five
Dollars ($3,524,275), in cash (the "Cash Payment"), payable by wire
transfer of immediately available U.S. federal funds to a bank account or
accounts designated in writing by Seller;
(ii) Escrowed Amount. At Closing, Buyer shall deposit and deliver to
Escrow Agent, Eight Hundred Eighty-One Thousand Sixty Eight Dollars
($881,068) in cash, (the "Escrowed Amount"), payable by wire transfer of
immediately available U.S. federal funds to a bank account or accounts
designated in writing by Escrow Agent, to be held by the Escrow Agent for
a period not to exceed twelve (12) months from the date hereof, and
released in accordance with the terms set forth in the Escrow Agreement.
(iii) Adjustments to the Purchase Price. (a) The Purchase Price
shall be subject to adjustment as follows: In the event the book value
(determined in accordance with GAAP applied on a basis consistent with the
preparation of the financial statements of Principal Shareholder) of the
Saleable Inventory on the date hereof is less than One Million Five
Hundred Thousand Dollars ($1,500,000) (the "Saleable Inventory Value"), an
amount equal to the difference between the actual book value of the
Saleable Inventory on the date hereof and the Saleable Inventory Value
shall be delivered to Buyer from the Escrowed Amount under the Escrow
Agreement.
(b) At Closing, Seller shall deliver to Buyer a certificate,
executed by an authorized officer of Seller, setting forth (i) the actual
book value of the Inventory, which shall not be less than One Million Nine
Hundred Fifty Thousand Dollars ($1,950,000) and (ii) the computation of
the Saleable Inventory Value as of the date hereof (the "Saleable
Inventory Value Certificate"). If Buyer reasonably disputes Seller's
computation of the Saleable Inventory Value set forth on the Saleable
Inventory Value Certificate, Buyer will give written notice to Seller
within five (5) Business Days of the Closing, setting forth the
computation of the Saleable Inventory Value that Buyer believes should be
reflected on the Saleable Inventory Value Certificate (the "Buyer Dispute
Notice"), and Seller and Buyer will attempt in good faith to promptly
agree on a revised Saleable Inventory Value. To the
10
extent the parties cannot resolve any disputed item within five (5)
Business Days after receipt of the Buyer Dispute Notice by Seller, the
items remaining in dispute shall be submitted to an independent accounting
firm of international reputation selected by, and mutually acceptable to,
and whose fees and expenses shall be shared equally by, Seller and Buyer.
Seller and Buyer shall be bound by the computation of such items as
determined by the independent accounting firm. The independent accounting
firm shall make any such determination within thirty (30) Business Days
after submission of the remaining disputed items (the "Book Value
Resolution Date").
2.7 Security Deposits, Prepayments and Bonds. Security deposits shall be
retained by Seller as Excluded Assets and Buyer shall cooperate with Seller and
perform all reasonable acts which may be necessary to procure the return of such
security deposits from the applicable third parties for the benefit of Seller,
including by paying, substituting or replenishing amounts equal to the security
deposits as required under the Contracts which are being assigned to Buyer
hereunder.
2.8 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Acquired Assets and Assumed Liabilities as set forth on Schedule 2.8
hereto and Buyer and Seller shall use the foregoing allocation for reporting the
purchase and sale of the Acquired Assets for federal, state, local and foreign
tax purposes.
ARTICLE III.
CLOSING
3.1 Time and Place of Closing. The closing of the purchase and sale
referred to in Article II (the "Closing") shall be held at 3:00 p.m., Eastern
Standard Time, on the date hereof, at the offices of Xxxxxx & Xxxxxxxxx, P.A.,
0000 Xxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxx, Xxxxxxx, or at such other time, date
or place as may be agreed upon by the Parties in writing.
3.2 Deliveries At Closing. At Closing, the parties shall deliver the
following:
(i) Buyer shall deliver to Seller:
(A) the Cash Payment;
(B) an executed counterpart to this Agreement, the Escrow
Agreement, the Transition Services Agreement and the PR
Transaction Documents;
(C) a guaranty (the "Affiliate Guaranty") of Buyer's
obligations under this Agreement on behalf of Goldshield
Group PLC, a United Kingdom corporation ("Buyer's
Affiliate"), in the form attached hereto as Exhibit F;
and
11
(D) resolutions adopted by the Boards of Directors of Buyer
and Buyer's Affiliate with respect to this Agreement,
the Affiliate Guaranty and the transactions contemplated
thereby.
(ii) Seller shall deliver to Buyer:
(A) the Xxxx of Sale, in the form attached hereto as Exhibit
E;
(B) an executed copy of the Intellectual Property
Assignment, in the form attached hereto as Exhibit C;
(C) an executed copy of the Assumed Contracts Assignment, in
the form attached hereto as Exhibit D;
(D) an executed counterpart to this Agreement, the Escrow
Agreement, the Transition Services Agreement and the PR
Transaction Documents;
(E) any Consents that have been obtained;
(F) resolutions adopted by the Boards of Directors of Seller
and Principal Shareholder with respect to this Agreement
and the transactions contemplated hereby; and
(G) the documents contemplated by Section 6.4(a) and Section
6.4(b).
(iii) Buyer shall deliver to the Escrow Agent:
(A) the Escrowed Amount.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER AND PRINCIPAL SHAREHOLDER
To induce Buyer to enter into this Agreement and to consummate the
transactions contemplated by this Agreement, Seller and Principal Shareholder,
jointly and severally, represent and warrant to Buyer as of the date hereof and,
where specifically made applicable to another date, such other date,
respectively, as follows:
4.1 Organization and Good Standing. Seller is a corporation duly formed,
validly existing and in good standing under the laws of the State of Florida.
Seller has full power and authority to own, operate and lease its properties and
assets and to carry on the Seller's Business as
12
now being conducted. To Seller's Knowledge, Seller is duly qualified or
registered, as the case may be, to do business in each jurisdiction except where
the failure to be so qualified or registered would not have a Material Adverse
Effect on the conduct of the Seller's Business. Seller has provided Buyer with a
list of the jurisdictions in which Seller is qualified or registered to do
business, as set forth on Schedule 4.1.
4.2 Authorization. Seller has full power, authority and legal right to
execute and deliver, and perform its obligations under, this Agreement and the
Transaction Documents to which it is a party, and has taken all necessary
corporate and stockholder actions to authorize and approve the execution,
delivery and performance of this Agreement and the Transaction Documents to
which it is a party. This Agreement has been duly executed by Seller and
constitutes a legal, valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, subject to bankruptcy, fraudulent
conveyance, insolvency, moratorium or similar laws affecting the rights of
creditors generally or general equitable principles (the "Bankruptcy
Exception").
4.3 Compliance with Laws and Validity of Contemplated Transactions. To
Seller's Knowledge, Seller is in material compliance with all Laws applicable to
it or the operation, ownership and use of the Acquired Assets or the Seller's
Business, except to the extent that such non-compliance would not have a
Material Adverse Effect on the Seller's Business. Except as set forth in
Schedule 4.3, neither the execution, delivery and performance of this Agreement
nor the consummation of the transactions contemplated hereby (a) conflicts with
or results in any violation of or constitutes a default under any term of the
Articles of Incorporation or Bylaws of Seller, (b) conflicts with or results in
any violation of or constitutes a material default under any Contract which is
applicable to Seller or by which Seller is bound or to which any of its
properties or the Acquired Assets are subject, except to the extent that such
conflict or violation would not have a Material Adverse Effect on the Seller's
Business, or (c) results in the creation or imposition of any Lien on any of the
Acquired Assets.
4.4 Condition and Sufficiency of Acquired Assets. (a) Seller is
transferring good and marketable title to all of the Acquired Assets, free and
clear of any Liens or other encumbrances, other than Permitted Encumbrances.
(b) With such exceptions, if any, as are not material to the
Seller's Business, the Acquired Assets constitute all the properties,
assets and rights used or held by Seller in, and all such properties,
assets and rights as are necessary to the conduct of, the Seller's
Business immediately after the Closing as presently conducted.
13
4.5 Contracts. True, correct and complete copies of all written material
Contracts have been provided to Buyer prior to the execution and delivery of
this Agreement. Except as set forth on Schedule 4.5 hereto, to the best of
Seller's Knowledge, Seller is not in default under any Contract listed in
Schedule 4.5. There are no disputes or forbearance programs in effect as to any
Contract. Except as set forth in Schedule 4.5, the continuation and validity of
the Contracts will in no way be affected by the transfer of the Contracts under
this Agreement or the transactions contemplated by this Agreement and no consent
from any third party is required for transfer and assignment of the Contracts to
Buyer pursuant to this Agreement.
4.6 Purchase Orders. The Purchase Orders set forth in Schedule 4.6 have
been entered into by Seller in the ordinary and normal course of the Seller's
Business, are in full force and effect, and Seller has not suffered any material
adverse change in, or loss of, any relationship between Seller and any of
Seller's suppliers. For purposes of this Agreement, the term "Purchase Orders"
means all the outstanding purchase orders in excess of $5,000 issued by Seller
for the purchase of goods which have not been fulfilled on the date hereof and
set forth on Schedule 4.6.
4.7 Sales Orders. All Sales Orders have been entered into by Seller in the
ordinary and normal course of the Seller's Business and, to the extent
applicable, are in full force and effect. For purposes of this Agreement, the
term "Sales Orders" means all the outstanding sales orders taken by Seller for
the sale of products where such sales have not been completed and delivered. To
the best of Seller's Knowledge, set forth in Schedule 4.7 hereto is a true,
correct and complete list and dollar amount of each outstanding Sales Order in
excess of $5,000 as of March 31, 2001.
4.8 Permits. Schedule 4.3 hereto lists all Permits issued to Seller by any
Governmental Authority relating to the Seller's Business, and, except as set
forth in Schedule 4.3, to the best of Seller's Knowledge, there are no other
Permits necessary for the conduct of the Seller's Business as currently
conducted except where the failure to have such Permits would not have a
Material Adverse Effect on the Seller's Business. Seller owns or has rights
under each Permit. Each Permit is in full force and effect. No proceeding is
pending or, to the best of Seller's Knowledge, threatened which seeks the
revocation or limitation of any such Permit and no other suspension or
cancellation of any such Permit is, to Seller's Knowledge, threatened. To
Seller's Knowledge, there is no basis for any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand that would have the result of
challenging the legality, validity or enforceability of any of the Permits that
could have a Material Adverse Effect on the Seller's Business. To Seller's
Knowledge, Seller is in material compliance with all Permits except where the
failure to be in compliance would not have a Material Adverse Effect on the
Seller's Business.
14
4.9 Consents. Except as set forth in Schedule 4.9 4.5, to the best of
Seller's Knowledge, no consent, approval or authorization of, or declaration,
filing or registration with, any Governmental Authority or any other Person is
required to be made or obtained by Seller for the execution, delivery and
performance of this Agreement and the Transaction Documents to which the Seller
is a party.
4.10 Financial Statements. (a) Schedule 4.10(a) hereto contains the
internally prepared and unaudited balance sheets of Seller relating to the
Seller's Business as of December 31, 2000 and March 31, 2001, and related
internally prepared and unaudited statements of income for the year and period
then ended (collectively, the "Financial Statements"). The Financial Statements
were prepared on a basis consistent with that of the preceding year (subject to
the absence of footnote disclosure and changes resulting from normal year-end
adjustments) and fairly present the financial position of Seller and the results
of operations of Seller for the periods then ended and have been prepared in
accordance with GAAP.
(b) Schedule 4.10(b) hereto contains the internally prepared
and unaudited monthly statements of operations and monthly balance sheets
of Seller for the fiscal year 2000 (collectively, the "Monthly Financial
Statements"). The Monthly Financial Statements fairly present the
financial position of Seller and the results of operations of Seller for
the periods then ended (subject to changes resulting from normal,
customary and immaterial year-end adjustments).
4.11 Litigation. Except as set forth in Schedule 4.11, there is no Action
pending, or to the best of Seller's Knowledge threatened, against Seller in any
court, by any Governmental Authority or before any arbitrator or other tribunal
that is related to the Seller's Business. Seller is not subject to any
outstanding action, order, writ, judgment, injunction or decree of any court or
governmental entity related to the Seller's Business.
4.12 Intellectual Property. (a) Except as set forth in Schedule 4.12, to
the best of Seller's Knowledge, Seller owns, licenses or otherwise possesses
legally enforceable rights to and has the right to use, sell and transfer, as
contemplated by this Agreement, the Intellectual Property Rights, free and clear
of all Liens or other encumbrances, other than Permitted Encumbrances.
(b) Except as set forth in Schedule 4.12, to the best of
Seller's Knowledge, there are no Actions pending or threatened against
Seller (A) challenging or seeking to deny or restrict the use by Seller of
any of the Intellectual Property Rights or (B) alleging that any products
sold by Seller are sold in violation of any Trademarks, or any other
intellectual property rights of any Person, except to the extent that such
Actions would not have a Material Adverse Effect on the Seller's Business.
4.13 Inventories. To the best of Seller's Knowledge, the Saleable
Inventory consists of, in all material respects, the product stated to be
contained therein on the label thereof.
15
4.14 Insurance. Buyer has been provided with a copy of Principal
Shareholder's primary comprehensive general liability insurance policy for the
years 2000 and 2001.
4.15 Brokers. No broker or finder has acted for Seller in connection with
the transactions contemplated by this Agreement, and no broker or finder is
entitled to any broker's or finder's fee or other commission in respect thereof
based in any way on agreements, understandings or arrangements with Seller.
4.16 Capital Structure of Seller. Principal Shareholder is the sole
stockholder of Seller.
4.17 Equipment. To the extent any equipment is being transferred to Buyer
under this Agreement as an Acquired Asset, such equipment is suitable for the
purpose(s) for which it is used and to the best of Seller's Knowledge, is in
good working order and condition and has been maintained in accordance with good
workmanlike practices.
4.18 Principal Shareholder Authority. Principal Shareholder has full power
and authority to enter into and perform this Agreement and the other
transactions contemplated herein in accordance with the terms of this Agreement.
Principal Shareholder is not otherwise a party to any contract or subject to any
other legal restriction that would prevent or restrict complete fulfillment of
all the terms and conditions of this Agreement for compliance with any of the
obligations under it. This Agreement has been duly executed and delivered by
Principal Shareholder and constitutes a legal, valid and binding obligation of
Principal Shareholder, enforceable against Principal Shareholder in accordance
with its terms, subject to the Bankruptcy Exception.
4.19 Voluntary Act. Principal Shareholder is executing this Agreement,
freely, knowingly and voluntarily, and is fully aware of the contents and legal
effects hereof, and such execution is not the result of any fraud, duress,
mistake or undue influence whatsoever.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER
To induce Seller to enter into this Agreement and the other Transaction
Documents and to consummate the transactions contemplated hereby and thereby,
Buyer represents and warrants to Seller as set forth below as of the date
hereof.
5.1 Organization and Good Standing. Buyer is a corporation duly formed,
validly existing and in good standing under the laws of the State of Florida and
has full power and authority and legal right to own, operate and lease its
properties and assets and to carry on its business as now being conducted. To
Buyer's knowledge, Buyer is duly qualified or registered, as the case may be, to
do business in each jurisdiction where the conduct of its business requires such
16
qualification or registration, except where the failure to be so qualified or
registered would not have a material adverse effect on the conduct of the
Buyer's business.
5.2 Authority. Buyer has full power, authority and legal right to execute
and deliver, and to perform its obligations under, this Agreement and the
Transaction Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby, and has taken all necessary action to authorize
the transactions contemplated hereby and thereby on the terms and conditions of
this Agreement and such Transaction Documents and to authorize the execution,
delivery and performance of this Agreement and such Transaction Documents. This
Agreement and the Transaction Documents to which Buyer is a party have been duly
executed by Buyer and constitute the legal, valid and binding obligations of
Buyer enforceable against Buyer in accordance with their respective terms,
subject to the Bankruptcy Exception.
5.3 Compliance with Laws and Validity of Contemplated Transactions. To
Buyer's knowledge, Buyer is in compliance with all Laws applicable to it or the
operation, ownership and use of its properties or assets or its business, except
to the extent that such non-compliance would not have a material adverse effect
on the Buyer's business. Neither the execution, delivery and performance of this
Agreement and the Transaction Documents to which Buyer is a party, nor the
consummation of the transactions contemplated hereby or thereby (a) conflicts
with or result in a breach of the organizational documents of Buyer, (b)
conflicts with or results in any violation of or constitutes a default under any
Law which is applicable to Buyer or by which Buyer is bound or to which any of
its properties or assets are subject, (c) conflicts with or results in any
violation of or constitutes a default under any contract, lease, agreement,
mortgage, license, commitment or understanding, written or oral, to which Buyer
is a party or by which Buyer is bound or to which Buyer's properties or assets
may be subject, except to the extent that such conflict or violation would not
have a material adverse effect on the Buyer's business (collectively, the "Buyer
Contracts"), or (d) result in the creation or imposition of any Lien upon or
with respect to any material property now owned by Buyer.
5.4 Consents. Except as set forth on Schedule 5.4 hereto, to the best of
Buyer's knowledge, no Consent of or with any Governmental Authority or any third
party is required to be obtained, satisfied or made pursuant to Buyer Contracts,
or to Buyer's knowledge, any Laws by or with respect to Buyer in connection with
the execution and delivery by Buyer of this Agreement or any of the Transaction
Documents to which Buyer is a party or the performance by Buyer of the
transactions contemplated by this Agreement or any of the Transaction Documents.
5.5 Disclosures. Neither this Agreement, nor any Transaction Document, nor
any certificate, document, written statement or other instrument furnished to
Seller by or on behalf of Buyer pursuant to this Agreement or any Transaction
Document, contains any untrue statement of material fact or omits any material
fact necessary in order to make the statements contained herein or therein not
misleading.
17
5.6 Funds Available. Buyer has and will have at the Closing adequate
resources available to pay and deliver the Purchase Price.
5.7 Brokers. No broker or finder has acted for Buyer in connection with
the transactions contemplated by this Agreement, and no broker or finder is
entitled to any broker's or finder's fee or other commission in respect thereof
based in any way on agreements, understandings or arrangements with Buyer.
ARTICLE VI.
COVENANTS OF SELLER, BUYER AND PRINCIPAL SHAREHOLDER
6.1 Associations with Seller and Principal Shareholder. (a) Except as set
forth in clause (b) of this Section 6.1, Buyer covenants with Seller that it has
not and will not hold itself, its Affiliates, directors, officers, employees or
agents out as partners, principals, employees, agents or associates of Seller or
Principal Shareholder or any of their Affiliates, including, without limitation,
in connection with the transactions contemplated by this Agreement or the other
Transaction Documents or any of the transactions related thereto.
(b) To the extent any Trademarks, trade names, product names, logos
or trade dress of Principal Shareholder (the "Twinlab Identifier") are used in
the Seller's Business on, or in connection with, stationery, signage, invoices,
receipts, forms, packaging, advertising and promotional materials, product,
training and service literature and materials, computer programs or other
materials (the "Marked Materials") or appear on Inventory on the date hereof,
Buyer may use such Marked Materials solely to sell such Inventory after the date
hereof for a period of twelve (12) months without altering or modifying such
Marked Materials or Inventory or removing such Twinlab Identifier, but Buyer
shall thereafter destroy all Marked Materials.
(c) Buyer agrees that on the twelve month anniversary of the date
hereof, Buyer shall deliver to Seller a certificate, signed by an authorized
officer of Buyer, certifying that Buyer is in compliance with the provisions set
forth in subsection (b) of this Section 6.1.
6.2 Compliance with WARN/Employee Termination. Seller assumes liability
for and shall timely give appropriate notices required to be given under the
Worker Adjustment and Retraining Notification Act ("WARN") and other similar
statutes or regulations of any jurisdiction relating to any plant closing or
mass layoff or as otherwise required by such statute for all employees employed
in connection with the Seller's Business prior to the date hereof.
6.3 Employee Confidentiality and Non-Disclosure Agreements. If requested
by Buyer, Seller shall use its commercially reasonable efforts to assist Buyer
in obtaining employee confidentiality and non-disclosure agreements
(collectively hereinafter referred to as "Employment Covenants") in form and
substance acceptable to Buyer from those employees of Seller identified
18
by Buyer as "Key Employees" of Seller; provided, however, that Seller is not
guaranteeing that it will be able to obtain such Employment Covenants from Key
Employees.
6.4 Assignment of Corporate Name and Trade Names.
(a) Corporate Name. Seller shall be entitled to use its corporate
name, "Changes International, Inc.", for the sole purposes of consummating
this transaction and collecting any and all accounts receivable pending as
of the date hereof. It is expressly understood and agreed by all the
Parties that Seller shall not undertake any new business or otherwise act
in its corporate name, except as aforesaid, following the execution date
hereof, and that Seller shall, on the date hereof, assign all rights to
use "Changes International, Inc.," "Changes International of Fort Xxxxxx
Beach, Inc." and "Changes, A Twinlab Company X.xx X.X" to Buyer pursuant
to an assignment in the form of Schedule "6.4A" attached hereto, and shall
thereafter change its corporate name within thirty (30) days following the
date hereof. If Seller fails to change its name as aforesaid, Buyer shall
be entitled immediately to file the Articles of Amendment to Seller's
Articles of Incorporation, substantially in the form of Composite Schedule
"6.4B" attached hereto and placed in escrow on the date hereof with Xxxxxx
Xxxxx Xxxxxxxx & Xxxxxxx LLP (pursuant to an escrow letter in the form of
Schedule "6.4C" attached hereto), with the Department of State of the
State of Florida. Purchaser warrants to Seller that, except as expressly
provided in this Paragraph, neither "Changes International, Inc.," nor any
name similar to or derived therefrom shall, at any time after the date
hereof, be used (officially, informally, as a corporate name or otherwise)
by Seller or any successor firm.
(b) Trade Names. Seller shall be entitled to use its
trade/fictitious names, "Changes International" and "Changes" (hereinafter
collectively called "Trade Names") for the sole purposes of consummating
this transaction and collecting any and all accounts receivable pending as
of the date hereof. It is expressly understood and agreed by all the
Parties that Seller shall not undertake any new business or otherwise act
in its Trade Names, except as aforesaid, following the execution date
hereof, and that Seller shall, on the date hereof, assign all rights to
use the Trade Names to Buyer pursuant to an assignment in the form of
Schedule "6.4D" attached hereto. Seller warrants to Buyer that, except as
expressly provided in this Paragraph, neither "Changes International" or
"Changes", nor any name similar to or derived from any of the Trade Names
shall, at any time after the date hereof, be used (officially, informally,
as a trade name or otherwise) by Seller or any successor firm, except for
reasonable use in connection with historical or other similar purposes.
The Parties also hereby agree that a warranty shall be executed and
delivered at the Closing in the form of Schedule "6.4E" hereto.
6.5 Further Assurances. At any time and from time to time after the
Closing, upon the request of Buyer, Seller, or Principal Shareholder to another
party hereto, such party shall use commercially reasonable efforts to execute,
acknowledge and/or deliver, and cause to be done, executed, acknowledged and/or
delivered, such further acts, deeds, assignments, transfers,
19
conveyances, powers of attorney, endorsements as may be reasonably required to
facilitate the consummation of this Agreement and the other Transaction
Documents.
6.6 Post-Closing Access.
(a) Buyer agrees that all books and records delivered to Buyer by
Seller pursuant to this Agreement shall be open for inspection by Seller
at any time during regular business hours upon reasonable notice for a
period of five (5) years (or for such longer period as may be required by
applicable Law) following the Closing and that during such period, Seller,
at its expense, may make such copies thereof as it may reasonably desire.
Without limiting the generality of the foregoing, Buyer shall not destroy
or give up possession of any original or final copy of any such books and
records delivered to Buyer hereunder (whether stored on electronic media
or otherwise) without first offering Seller the opportunity, at Seller's
expense, to obtain such original or final copy or a copy thereof.
(b) Seller agrees that all books and records relating to the
Seller's Business and retained by Seller shall be open for inspection by
Buyer at any time during regular business hours for a period of five (5)
years (or for such longer period as may be required by applicable Law)
following the Closing and that during such period, Buyer, at its expense,
may make such copies thereof as it may reasonably desire. Without limiting
the generality of the foregoing, Seller shall not destroy or give up
possession of any original or final copy of any such books and records
relating to the Seller's Business and retained by Seller hereunder
(whether stored on electronic media or otherwise) without first offering
Buyer the opportunity, at Buyer's expense, to obtain such original or
final copy or a copy thereof.
(c) Nothing contained in this Section 6.6 shall obligate any party hereto
to make available any books and records if to do so would violate the terms of
any Contract to which it is a party or to which it or its assets are subject.
6.7 Announcements. Neither Buyer, Seller nor Principal Shareholder shall
issue any press release or otherwise make any public statement with respect to
this Agreement and the transactions contemplated hereby without the prior
written consent of the other parties (which shall not be unreasonably withheld),
except as may be required by applicable law.
6.8 Misdirected Funds. Buyer shall on and after the Closing, execute and
deliver any documents and perform any acts as reasonably requested by Seller to
minimize the occurrence of Misdirected Funds, including but not limited to
notices to third parties. Any Misdirected Funds shall be received in trust for
the benefit of Seller, and shall be promptly delivered to Seller in the exact
form received (except for endorsement of instruments in favor of Seller as
directed by Seller).
20
6.9 Consents. Promptly, following the date hereof, Seller shall use its
commercially reasonable efforts to obtain any and all Consents required for the
transfer and assignment of Contracts set forth in Schedule 4.5 attached hereto.
6.10 Permits. Promptly following the Closing, Seller shall use its
commercially reasonable efforts to obtain any and all Permits not assigned or
transferred to Buyer on or before the Closing.
6.11 Insurance. (a) Principal Shareholder covenants and agrees that within
thirty (30) days following the date hereof, Principal Shareholder shall add
Buyer as a named insured under the Principal Shareholder's general liability
insurance policy.
(b) Buyer covenants and agrees that it shall cause Buyer's
Affiliate, to have Seller and Principal Shareholder added as a named insured,
within thirty (30) days following the date hereof, under Buyer's Affiliates'
general liability insurance policy.
ARTICLE VII.
INDEMNIFICATION
7.1 Seller's and Principal Shareholder's Indemnification Obligations.
During the Indemnification Period (as defined below), and except as otherwise
provided herein, Seller and Principal Shareholder jointly and severally shall
indemnify, defend and hold harmless Buyer and its officers, directors,
employees, agents, Affiliates, successors, and assigns (collectively with Buyer,
the "Buyer Indemnitees") from and against, and shall reimburse the Buyer
Indemnitees for, all suits, claims, demands, actions, causes of action, losses,
costs, assessments, judgments, damages, or expenses (including, without
limitation, reasonable fees and disbursements of counsel and other expenses
incurred investigating or defending any of the foregoing) (collectively,
"Losses") imposed upon or incurred by any of the Buyer Indemnitees, directly or
indirectly, to the extent resulting from or arising out of (a) the operation of
the Seller's Business or the Acquired Assets by Seller prior to the date hereof
(excluding the Assumed Liabilities, but including without limitation all Taxes
and other similar charges incurred or relating to periods prior to the date
hereof and any product liability asserted against Buyer with respect to products
sold by Seller prior to the date hereof), (b) any material inaccuracy in or
material breach of any of Seller's or Principal Shareholder's representations
and warranties in this Agreement or in any Schedule delivered by Seller or
Principal Shareholder pursuant hereto, (c) any material breach by Seller or
Principal Shareholder of its covenants and agreements in this Agreement, or (d)
the failure of Seller or Principal Shareholder to pay, perform or discharge any
of the Retained Liabilities. Without limiting the generality of the foregoing,
as additional security to Buyer in connection with these indemnification
obligations, the Parties acknowledge that Buyer shall have the right, in
addition to all rights and remedies available to Buyer pursuant to this Article
VII, to reduce the Escrowed Amount by the amount of actual Losses incurred by
Buyer Indemnitees under this Article VII as provided in the Escrow Agreement.
21
7.2 Buyer's Indemnification Obligations. During the Indemnification
Period, Buyer shall indemnify, defend and hold harmless Seller and Principal
Shareholder and each of their respective officers, directors, employees, agents,
Affiliates, successors and assigns (collectively with Seller, the "Seller
Indemnitees") from and against, and shall reimburse Seller Indemnitees for, all
Losses imposed upon or incurred by any of Seller Indemnitees, directly or
indirectly, resulting from or arising out of (a) the failure by Buyer to pay,
perform or discharge any of the Assumed Liabilities set forth in Schedule 2.5,
(b) the operation of the Seller's Business or the Acquired Assets by Buyer on
and following the date hereof (including, without limitation, any product
liability asserted against Seller with respect to products sold by Buyer on or
after the date hereof), (c) any material inaccuracy in or material breach of any
of Buyer's representations and warranties in this Agreement or in any Schedule
delivered by Buyer pursuant hereto, or (d) any material breach by Buyer of its
covenants and agreements in this Agreement
7.3 Notice and Opportunity to Defend.
(a) As soon as is reasonably practicable after any Seller Indemnitee
or Buyer Indemnitee becomes aware of any claim, event or circumstance that
has or might give rise to an indemnification obligation on the part of the
other party under Section 7.1 or 7.2 hereof, such Seller Indemnitee or
Buyer Indemnitee, as the case may be (the "Indemnified Party"), shall give
written notice thereof (a "Claim Notice") to the party from which
indemnification is sought (the "Indemnifying Party"). The Claim Notice
shall describe the claim in reasonable detail, and shall indicate the
amount (estimated, if necessary and to the extent feasible) of the Losses
that have been or may be suffered by the Indemnified Party. The failure of
any Indemnified Party to promptly give any Indemnifying Party a Claim
Notice shall not preclude such Indemnified Party from obtaining
indemnification under this Article VII, except to the extent, and only to
the extent, that such Indemnified Party's failure has actually prejudiced
the Indemnifying Party's rights or increased its liabilities and
obligations hereunder.
(b) With respect to any Claim Notice that involves legal proceedings
commenced by a third party (a "Legal Claim"), the Indemnifying Party shall
have the right by written notice to the Indemnified Party not later than
thirty (30) days after receipt of such Claim Notice to assume the control
of the defense, compromise or settlement of such Legal Claim, provided
that such assumption shall, by its terms, be without cost to the
Indemnified Party.
(c) Upon the assumption of control by the Indemnifying Party as
provided in Section 7.3(b), the Indemnifying Party shall, at its expense,
diligently proceed with defense, compromise or settlement of the Legal
Claim at Indemnifying Party's sole expense, including employment of
counsel reasonably satisfactory to the Indemnified Party and, in
connection therewith, the Indemnified Party shall cooperate fully, but at
the expense of the Indemnifying Party, to make available to the
Indemnifying Party all pertinent information and witnesses under the
Indemnified Party's control, and take such other steps
22
as in the reasonable opinion of counsel for the Indemnifying Party are
necessary to enable the Indemnifying Party to conduct such defense. After
notice from the Indemnifying Party to the Indemnified Party of its
election to assume the defense, compromise or settlement of the Legal
Claim, the Indemnifying Party will not, as long as it diligently conducts
such defense, be liable to the Indemnified Party under this Section 7.3
for any fees of other counsel or any other expenses with respect to the
defense, compromise or settlement of such Legal Claim, in each case
subsequently incurred by the Indemnified Party in connection with the
defense, compromise or settlement of such Legal Claim, other than
reasonable costs of investigation.
(d) The final, non-appealable determination of any Legal Claim,
including all related costs and expenses, shall be binding and conclusive
upon the Indemnifying Party and the Indemnified Party as to the amount of
the indemnification; provided, however, that in the Indemnifying Party's
defense of such Legal Claim, except with the written consent of the
Indemnified Party, the Indemnifying Party shall not consent to entry of
any judgment or enter into any settlement, which does not include as an
unconditional term thereof the provision by the claimant to the
Indemnified Party of a release from all liability in respect of such Legal
Claim.
(e) Should the Indemnifying Party fail to give notice to the
Indemnified Party as provided in Section 7.3(b), the Indemnified Party
shall be entitled to defend, settle or compromise the Legal Claim as in
its reasonable discretion may appear advisable, and such final
determination, settlement or compromise of the Legal Claim shall be
binding upon the Indemnifying Party.
7.4 Limitations on Indemnification.
(a) Time. The items of indemnification set forth in Sections 7.1 and
7.2 shall, for purposes of this Article VII, survive for a twelve (12)
month period following the date hereof (the "Indemnification Period");
provided, however, that the foregoing survival provisions shall not apply
to the Retained Liabilities, product liability matters, issues of title or
the Assumed Liabilities. Except with respect to the Retained Liabilities
or the Assumed Liabilities, the Indemnifying Party shall have no liability
for indemnification under Article VII of this Agreement unless on or
before the date that the Indemnification Period expires, the Indemnified
Party provides a Claim Notice to the Indemnifying Party, specifying the
factual basis of the claim in reasonable detail to the extent then known
by the Indemnified Party.
(b) Basket / Ceiling. Subject to the provisions of this Article VII,
with respect to any Losses incurred by Buyer Indemnitees and relating to
breaches by Seller or Principal Shareholder of representations or
covenants concerning Taxes, product liability matters and issues of title,
Seller and Principal Shareholder shall be liable for all actual Losses
incurred by such Buyer Indemnitees. Subject to the provisions of this
Article VII, with respect to any other Losses, Buyer Indemnities shall not
be entitled to indemnification under Section
23
7.1 until and only to the extent the aggregate claims against Seller and
Principal Shareholder shall have equaled or exceeded $250,000, it being
further agreed that Seller and Principal Shareholder shall not have any
liability for indemnification under Article VII in the aggregate in excess
of the Cash Payment. Subject to the provisions of this Article VII, with
respect to any Losses incurred by Seller Indemnities and relating to
product liability matters, Buyer shall be liable for all actual Losses
incurred by Seller Indemnities. Subject to the provisions of this Article
VII, with respect to any other Losses, Seller Indemnities shall not be
entitled to indemnification under Section 7.2 until and only to the extent
the aggregate claims against Buyer shall have equaled or exceeded $50,000,
it being further agreed that Buyer shall not have any liability for
indemnification under Article VII in the aggregate in excess of
$1,000,000.
7.5 Adjustment to Purchase Price. All payments for indemnification under
this Article VII shall be treated as adjustments to the Purchase Price.
7.6 Remedies. The Parties' respective rights and remedies under this
Article VII (including their respective indemnification rights) shall be their
exclusive and sole rights and remedies at law or in equity with respect to this
Agreement and the transactions contemplated hereby.
ARTICLE VIII.
COVENANT NOT TO COMPETE
8.1 Restrictive Covenants. Seller and Principal Shareholder each covenants
and agrees that for a period of eighteen (18) months from the date hereof,
neither Seller nor Principal Shareholder will, individually or collectively, do
any of the following acts:
A. No Competition.
Directly or indirectly (other than as an owner of not more than five
percent (5%) of the outstanding capital stock of any company whose
shares are traded on a national securities exchange or in the
over-the-counter market) own or operate any other corporation, firm
or business engaged in or carrying on, a business which is the same,
similar to, or competitive with the Seller's Business as conducted
by Seller on the date hereof.
B. No Solicitation.
Solicit or induce any employee or distributor of Buyer to either
leave the employment of Buyer or terminate his or her relationship
with Buyer, as the case may be.
24
C. No Disclosure of Confidential Information.
1) Seller and Principal Shareholder acknowledge and agree that
they may have access to non-public technical and non-technical
trade secrets and business information which are being
transferred to Buyer under this Agreement, including but not
limited to methods, procedures and devices used by Buyer to
service its customers and distributors and to conduct the
Seller's Business; names and addresses of Buyer's customers
and customer representatives and distributors and other
employees; customer leads or referrals; specific customer
needs; pricing; information regarding costs, profits, markets
and sales; mailing lists; trade secrets; (hereinafter
collectively referred to as "Confidential Information").
2) Seller and Principal Shareholder agree not to divulge to
anyone or use for Seller or Principal Shareholder's benefit or
the benefit of others, for any reason, any of the Confidential
Information. Seller and Principal Shareholder further agree
that damages may be an inadequate and inappropriate remedy
and, accordingly, Buyer shall be entitled, in addition to any
right or remedy available to it at law or in equity, to seek
an injunction enjoining or restraining Seller or Principal
Shareholder from any violation or threatened violation of the
covenants contained herein. Except as otherwise required by
legal process (e.g. subpoena), the Confidential Information
shall at all times be and remain the exclusive property of
Buyer.
8.2 Remedies. The Parties specifically acknowledge and agree that the
remedy at law for breach of this Article VIII will be inadequate and that Buyer,
in addition to any other relief available to it, shall be entitled to temporary
and permanent injunctive relief without the necessity of providing actual
damages.
ARTICLE IX.
TAXES
9.1 Transfer Taxes and Expenses. Buyer shall be solely responsible for and
shall pay all transfer taxes, license and registration fees and expenses, if
any, and all other taxes, fees or other charges of any Governmental Authority
required to be paid (regardless of who has the obligation to collect such tax,
fee or charge) on or after the date hereof as a result of the sale, assignment,
conveyance and delivery of the Acquired Assets and the Seller's Business to
Buyer and the transactions contemplated by this Agreement. Each party shall pay
any accounting, legal or similar expenses incurred by such party or to be
incurred by it in negotiating, closing and carrying out this Agreement and the
transactions contemplated hereby.
9.2 Sales and Personal Property Taxes. Any and all gross receipts, sales
or use taxes assessed, measured or payable with respect to the operation or
activities of the Seller's Business or
25
the Acquired Assets up to the date hereof shall be the sole responsibility of,
and shall be paid in full by, Seller. Any and all personal property taxes
assessed, measured or payable at any time up to the date hereof shall be the
sole responsibility of, and shall be paid in full by, Seller. Any and all gross
receipts, sales or use taxes assessed, measured or payable with respect to the
operation or activities of the Seller's Business or the Acquired Assets from and
after the date hereof shall be the sole responsibility of, and shall be paid in
full by, Buyer. Any and all personal property taxes assessed, measured or
payable at any time from and after the date hereof shall be the sole
responsibility of, and shall be paid in full by, Buyer.
ARTICLE X.
MISCELLANEOUS
10.1 Severability. If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement, or the application of such provision to such
Person or circumstance other than those to which it is so determined to be
invalid and unenforceable, shall not be affected thereby and shall be
enforceable to the fullest extent permitted by law, and in substitution for such
invalid or unenforceable provision there shall be substituted a provision of
similar import reflecting the original intent of the parties hereto to the
extent permissible under Law.
10.2 Waivers. Any failure by any party to this Agreement to comply with
any of its obligations, agreements or covenants hereunder may be waived by
Seller in the case of a default by Buyer and by Buyer in the case of a default
by Seller. Seller and Buyer will not be deemed, as a consequence of any act,
delay, failure, omission, forbearance or other indulgences granted from time to
time by Seller on the one hand, or Buyer on the other hand (a) to have waived,
or to be estopped from exercising, any of its rights or remedies under this
Agreement, or (b) to have modified, changed, amended, terminated, rescinded, or
superseded any of the terms of this Agreement, unless such waiver, modification,
amendment, change, termination, rescission, or supersession is express, in
writing and signed by a duly authorized officer of Seller or a duly authorized
officer of Buyer. No single or partial exercise by Seller or Buyer of any right
or remedy will preclude other or further exercise thereof or preclude the
exercise of any other right or remedy, and a waiver expressly made in writing on
one occasion will be effective only in that specific instance and only for the
precise purpose for which given, and will not be construed as a consent to or a
waiver of any right or remedy on any future occasion or a waiver of any right or
remedy against any other Person. Except as provided in this Section 10.2, no
action taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any of the
representations, warranties, covenants, conditions or agreements contained in
this Agreement.
10.3 Notices. Any notice or other communication required or permitted to
be given under the terms of this Agreement shall be mailed, telecopied or
delivered to the other party at the
26
address shown below and shall be effective and deemed received (i) if mailed,
three (3) days after placement in the United States mail postage prepaid, by
registered or certified mail, return receipt requested, (ii) if telecopied, when
received; (iii) if via overnight mail, on the day delivered, or (iii) if
personally delivered, when delivered:
If to Seller:
CHANGES INTERNATIONAL, INC.
000 Xxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxxx
Xxxxxx X. Xxxxx, Esq.
Telecopy: (000) 000-0000
If to Principal Shareholder:
TWINLAB CORPORATION
000 Xxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxxx
Xxxxxx X. Xxxxx, Esq.
Telecopy: (000) 000-0000
with a copy to:
XXXXXX XXXXX XXXXXXXX & XXXXXXX, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Telecopy: (000) 000-0000
if to Buyer:
GOLDSHIELD ACQUISITIONS INC.
NLA Tower
00-00 Xxxxxxxxxx Xxxx
Xxxxxxx
Xxxxxx CRO OXT
London, England
Attn: Xxxx Xxxxx, Chairman and Chief Executive
Telecopy: 00-0-000-000-0000
with a copy to:
Xxxxxx & Poliakoff, P.A.
27
Waterford Center Park
0000 Xxxx Xxxxxx Xx., Xxxxx 000
Xxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxx, Esq.
Telecopy: (000) 000-0000
or to such other Person(s) at such address or addresses as may be designated by
written notice to the other Parties hereunder.
10.4 Applicable Law. This Agreement shall be governed and construed and
interpreted in accordance with the internal substantive laws of the State of
Florida.
10.5 Venue. The parties acknowledge that a substantial portion of the
negotiations, anticipated performance and execution of this Agreement occurred
or shall occur in Miami-Dade County, Florida. Any civil action or legal
proceeding arising out of or relating to this Agreement shall be brought in the
courts of record of the State of Florida in Miami-Dade County or the United
States District Court, Southern District of Florida. Each party consents to the
jurisdiction of such court in any such civil action or legal proceeding and
waives any objection to the laying of venue of any such civil action or legal
proceeding in such court. Service of any court paper may be effected on such
party by mail, as provided in this Agreement, or in such other manner as may be
provided under applicable laws, rules of procedure or local rules.
10.6 Publicity. The Parties agree that no publicity release or
announcement concerning the transactions contemplated hereby shall be issued by
any party without the advance written consent of the others, except as such
release or announcement may be required by Law, in which case the party making
the release or announcement shall show such release or announcement in advance
to the other Parties.
10.7 Assignment. This Agreement shall inure to the benefit of and be
binding upon the Parties hereto and their respective successors and assigns.
Notwithstanding the foregoing, this Agreement and the Parties' rights and
obligations under this Agreement shall not be assigned by a party to another
Person without the prior written consent of the other Parties; provided,
however, that (i) Buyer shall be entitled to assign its rights and benefits
under this Agreement to any of its Affiliates or to any Person that acquires all
of the Acquired Assets or the Seller's Business whether by means of any asset
sale, merger or otherwise; and (ii) Seller shall have the right to assign its
rights and benefits under this Agreement to any of its Affiliates and to the
extent contemplated by the Collateral Assignment of Rights Under Purchase
Agreement dated as of April __17, 2001 between Seller, Principal Shareholder and
The CIT Group/Business Credit, Inc.; provided, further, that in the event of any
such assignment by Buyer or Seller, the assignor shall remain fully liable for
the performance of all of its obligations hereunder.
10.8 Entire Agreement. This Agreement, together with (i) the Schedules and
Exhibits attached hereto and the certificates delivered in connection herewith
and (ii) the other Transaction
28
Documents, embody the entire agreement and understanding of the Parties hereto
and supersedes any prior agreement or understanding between the Parties with
respect to the subject matter of this Agreement.
10.9 Rules of Construction.
(a) Unless the context otherwise requires: (a) "or" is not
exclusive; (b) words in the singular include the plural, and words in the
plural include the singular; (c) "herein," "hereof," "hereto" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision; (d) any gender used in
this Agreement shall be deemed to include the neuter, masculine and
feminine genders; and (e) any reference to an Article, Section, Schedule
or Exhibit is a reference to a Section of this Agreement or a Schedule or
Exhibit attached to this Agreement unless the context otherwise provides.
(b) The disclosure of any matter in any Schedule to this Agreement,
as may be amended or supplemented prior to the Closing, shall be deemed to
be a disclosure for all purposes of this Agreement to which such matter
would reasonably be expected to be pertinent, but shall expressly not be
deemed to constitute an admission by any party hereto, or to otherwise
imply, that any such matter is material for the purposes of this
Agreement. In addition, matters reflected on the Schedules are not
necessarily limited to matters required by this Agreement to be reflected
thereon and the inclusion of such matters shall not be deemed an admission
that such matters (or additional matters) were required to be reflected in
the applicable Schedules.
10.10 Amendment. This Agreement cannot be amended or terminated orally,
but only by a writing duly executed by the Parties.
10.11 Headings. Headings of the sections in this Agreement are for
reference purposes only and shall not be deemed to have any substantive effect.
10.12 Interpretation. Should any provision of this Agreement require
judicial interpretation, mediation or arbitration, it is agreed that the court,
mediator or arbitrator interpreting or construing the same shall not apply a
presumption that the terms hereof shall be more strictly construed against one
party by reason of the rule of construction that a document is to be construed
more strictly against the party who itself or through its agent prepared the
same, it being agreed that all Parties, directly or through their agents, have
participated in the preparation hereof.
10.13 Bulk Sales Law. Buyer waives compliance with any applicable "bulk
sales law" or similar law by Seller, and Seller shall indemnify and hold Buyer
harmless against any liability under any such law and any Losses resulting from
non-compliance therewith or any liability under any such law as a result of
Seller's application of the proceeds of the transactions contemplated by this
Agreement.
29
10.14 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
10.15 Counterparts; Facsimile Transmissions. This Agreement and all of the
Transaction Documents may be executed in any number of counterparts, each of
which when so executed, then delivered or transmitted by telefax, shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
30
IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement as of the date first above written.
BUYER:
GOLDSHIELD ACQUISITIONS INC.
By:____________________________
Name:__________________________
Title:___________________________
SELLER:
CHANGES INTERNATIONAL, INC.
By:____________________________
Name:__________________________
Title:___________________________
PRINCIPAL SHAREHOLDER:
TWINLAB CORPORATION
By:____________________________
Name:__________________________
Title:___________________________
31
EXHIBIT LIST
EXHIBIT A - ESCROW AGREEMENT
EXHIBIT B - TRANSITION SERVICES AGREEMENT
EXHIBIT C - INTELLECTUAL PROPERTY ASSIGNMENT
EXHIBIT D - ASSUMED CONTRACTS ASSIGNMENT
EXHIBIT E - XXXX OF SALE
EXHIBIT F - GUARANTY OF BUYER'S PARENT
EXHIBIT G - SALEABLE INVENTORY
32
LIST OF SCHEDULES
SCHEDULES TO ASSET PURCHASE AGREEMENT ("AGREEMENT")
DATED AS OF APRIL 17, 2001 BY AND BETWEEN
GOLDSHIELD ACQUISITIONS INC., CHANGES INTERNATIONAL INC. ,
AND TWINLAB CORPORATION
--------------------------------------------------------------------
These Schedules are an integral part of the Asset Purchase Agreement, are
incorporated therein by reference, and are not intended to be independent
documents. Unless defined otherwise in these Schedules, capitalized terms used
herein have the meanings given to them in the Agreement. Headings and italicized
language included herein are included solely for ease of reference, are not
intended to and shall not in any way limit the disclosures contained herein.
Disclosure of any item on any of the Schedules shall not constitute an admission
that such item is required to be disclosed. Any item or matter disclosed on any
of the Schedules shall be deemed to be disclosed for all purposes including all
other Schedules to the extent such other disclosure is reasonably apparent from
the context. The information contained herein shall be deemed to be an admission
by any party hereto to any third party of any matter whatsoever, including,
without limitation, any violation of law or breach of any agreement.
In the event that the description of any Acquired Asset on any Schedule is
not in sufficient detail to specifically identify such Acquired Asset, such
Acquired Asset will be deemed to be included in such description and to
constitute an Acquired Asset, provided that such Acquired Asset was owned
exclusively by Seller and used in the Seller's Business on the date hereof.
Schedule 2.1(a) - Tangible Personal Property
Schedule 2.1(b) - Leased Tangible Personal Property
Schedule 2.1(d) - Distributor Agreements
Schedule 2.1(e)(i) - Trademarks
Schedule 2.1(e)(ii) - Copyrights
Schedule 2.1(e)(iii) - Software
Schedule 2.1(e)(iv) - Product Formulations
Schedule 2.1(e)(v) - Web Site
Schedule 2.1(f) - Governmental Permits
Schedule 2.1(h) - Contractual Rights
Schedule 2.2(f) - Accounts Receivable
Schedule 2.2(j) - Excluded Intellectual Property Rights
Schedule 2.4(e) - Retained Liabilities
Schedule 2.5 - Assumed Liabilities
Schedule 2.8 - Allocation of Purchase Price
Schedule 4.1 - Organization and Good Standing
Schedule 4.3 - Compliance with Laws /Permits
33
Schedule 4.5 - Contracts/Consents
Schedule 4.6 - Purchase Orders and Significant Suppliers
Schedule 4.7 - Sales Orders and Significant Customers
Schedule 4.10(a) - Financial Statements
Schedule 4.10(b) - Monthly Financial Statements
Schedule 4.11 - Litigation
Schedule 4.12 - Intellectual Property
Schedule 5.4 - Buyer Consents
Schedule 6.4A - Assignment of Corporate Names
Schedule 6.4B - Articles of Amendment & Resolutions
Schedule 6.4C - Escrow Letter
Schedule 6.4D - Assignment of Trade Names
Schedule 6.4E - Trade Names Warranty
34
