EXHIBIT 10.6
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ASSET PURCHASE AGREEMENT
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BY AND AMONG
SYMCO, INCORPORATED,
SYMBIOTICS, INC.
AND
QUINCY INVESTMENTS CORP.
JULY 22, 2005
TABLE OF CONTENTS
Page
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ARTICLE I SALE AND TRANSFER OF ASSETS........................................... 1
1.01 Purchased Assets................................................... 1
1.02 Excluded Assets.................................................... 2
1.03 Assumption of Liabilities.......................................... 3
1.04 Purchase Price and Payment for Assets.............................. 3
1.05 Earn Out Amount.................................................... 3
1.06 Payment of Earn Out Amount......................................... 4
1.07 Disputes of Earn Out Calculation................................... 4
1.08 Purchase Price Allocation.......................................... 5
ARTICLE II CLOSING.............................................................. 5
2.01 Closing............................................................ 5
2.02 Deliveries by the Company.......................................... 5
2.03 Buyer's Deliveries at Closing...................................... 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................... 7
3.01 Corporate Existence and Qualification.............................. 7
3.02 Authority, Approval and Enforceability............................. 7
3.03 Conflicts.......................................................... 7
3.04 No Proceedings..................................................... 8
3.05 Financial Statements............................................... 8
3.06 Compliance with Laws............................................... 8
3.07 Litigation......................................................... 8
3.08 Assets of the Business............................................. 8
3.09 Commitments........................................................ 8
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3.10 Insurance.......................................................... 9
3.11 Inventories........................................................ 10
3.12 Suppliers and Customers............................................ 10
3.13 Products........................................................... 10
3.14 Transactions With Affiliates....................................... 10
3.15 Operations Since May 31, 2005...................................... 10
3.16 Taxes.............................................................. 11
3.17 Intentionally Omitted.............................................. 12
3.18 Intellectual Property.............................................. 12
3.19 Environmental; Health; Safety...................................... 12
3.20 No Undisclosed Liabilities......................................... 12
3.21 Accounts Receivable................................................ 13
3.22 Investment Representations......................................... 13
3.23 Other Information.................................................. 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.............................. 14
4.01 Corporate Existence and Qualification.............................. 14
4.02 Authority, Approval and Enforceability............................. 15
4.03 No Proceedings..................................................... 15
4.04 No Conflict........................................................ 15
4.05 Financing.......................................................... 15
ARTICLE V CONDITIONS TO THE COMPANY'S AND BUYER'S OBLIGATIONS................... 16
5.01 Conditions to Obligations of the Company........................... 16
5.02 Conditions to Obligations of Buyer................................. 16
5.03 Disclosure Supplement.............................................. 17
5.04 Name Change........................................................ 17
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ARTICLE VI ADDITIONAL AGREEMENTS................................................ 17
6.01 Further Assurances................................................. 17
6.02 Publicity.......................................................... 17
6.03 Conduct of the Business Prior to the Closing Date.................. 18
6.04 Confidential Information........................................... 18
6.05 Transition......................................................... 18
6.06 Intentionally Omitted.............................................. 18
6.07 Exclusivity........................................................ 18
6.08 Covenant Not to Compete............................................ 19
ARTICLE VII INDEMNITY........................................................... 19
7.01 Indemnification.................................................... 19
7.02 Notice of Asserted Liability....................................... 20
7.03 Opportunity to Defend.............................................. 20
7.04 Limitations........................................................ 21
7.05 Right of Set-Off................................................... 21
ARTICLE VIII MISCELLANEOUS...................................................... 21
8.01 Brokers............................................................ 21
8.02 Costs and Expenses................................................. 22
8.03 Notices............................................................ 22
8.04 Governing Law, Jurisdiction, Venue, Waiver and Jury Trial.......... 23
8.05 Entire Agreement; Amendments and Waivers........................... 23
8.06 Binding Effect and Assignment...................................... 23
8.07 Remedies........................................................... 24
8.08 Exhibits and Schedules............................................. 24
8.09 Multiple Counterparts.............................................. 24
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8.10 References and Construction........................................ 24
8.11 Survival........................................................... 24
8.12 Attorneys' Fees.................................................... 24
8.13 Termination........................................................ 25
8.14 Bulk Sales Laws.................................................... 25
ARTICLE IX DEFINITIONS.......................................................... 25
9.01 Action............................................................. 25
9.02 Affiliate.......................................................... 25
9.03 Assets............................................................. 25
9.04 Business Day....................................................... 26
9.05 Closing Date....................................................... 26
9.06 Code............................................................... 26
9.07 Collateral Agreements.............................................. 26
9.08 Contract........................................................... 26
9.09 Court Order........................................................ 26
9.10 Encumbrances....................................................... 26
9.11 Financial Statements............................................... 26
9.12 GAAP............................................................... 26
9.13 Governmental Authorities........................................... 26
9.14 Intellectual Property.............................................. 26
9.15 Inventory.......................................................... 27
9.16 Knowledge.......................................................... 27
9.17 Legal Requirements................................................. 27
9.18 Liabilities........................................................ 27
9.19 Naturade........................................................... 27
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9.20 Permits........................................................................................ 27
9.21 Person......................................................................................... 28
9.22 Taxes.......................................................................................... 28
9.23 Tax Returns.................................................................................... 28
LIST OF SCHEDULES
Schedule 1.01(a)............................................................ Business Contracts
Schedule 1.01(b)............................................................ Intellectual Property
Schedule 1.01(d)............................................................ Telephone Lines
Schedule 1.01(e)............................................................ Inventory
Schedule 1.01(f)............................................................ Business Documents
Schedule 1.01(g)............................................................ Other Rights
Schedule 1.01(h)............................................................ Accounts Receivable
Schedule 1.02............................................................... Excluded Assets
Schedule 1.03(a)............................................................ Assumed Liabilities
Schedule 1.04(c)............................................................ Net Working Capital
Schedule 1.08............................................................... Purchase Price Allocation
Schedule 3.01............................................................... Qualifications as Foreign Corporation
Schedule 3.05............................................................... Financial Statements
Schedule 3.07............................................................... Litigation
Schedule 3.09(a)............................................................ Contracts
Schedule 3.10............................................................... Insurance
Schedule 3.12............................................................... Suppliers and Customers
Schedule 3.13............................................................... Products
Schedule 3.14............................................................... Affiliate Transactions
Schedule 3.18............................................................... Intellectual Property
Schedule 3.20............................................................... Indebtedness
Schedule 3.21............................................................... Accounts Receivable
LIST OF EXHIBITS
Exhibit A - Form of Note
Exhibit B-1 - Consulting Agreement with Xxxxxxx Xxxxx
Exhibit B-2 - Consulting Agreement with Xxxxx Xxxxx
Exhibit C Transition Services Agreement
Exhibit D - Trademark License Agreement
Exhibit E Form of Guaranty
Exhibit F Form of Assignment and Assumption Agreement (Assumed
Liabilities)
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of July __, 2005 ("Agreement Date"), by and among Quincy Investments
Corp., a Bahamas International Business Company (the "Buyer"), Symco,
Incorporated, a Nevada corporation ("Symco") and Symbiotics, Inc., an Arizona
corporation ("Symbiotics" and together with Symco, the "Company").
RECITALS
A. The Company is engaged in the business of selling its line of
health-related products to retailers (the "Business").
B. Buyer desires to purchase, and Company desires to sell, the
operating assets of the Company, upon the terms and subject to the conditions
set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
ARTICLE I
ARTICLE I
SALE AND TRANSFER OF ASSETS
1.01 Purchased Assets. On the terms and subject to the conditions of
this Agreement, on the Closing Date (as defined in Section 2.01 hereof), the
Company shall sell, convey, transfer and deliver to the Buyer, and the Buyer
shall purchase, acquire and accept as of the Closing Date, all of the right,
title and interest of the Company in and to the Business and all of the assets,
properties and rights of the Company of every kind and description wherever
located, tangible and intangible, related to the Business, except for the
Excluded Assets (collectively, the "Assets"), other than the Excluded Assets,
free and clear of all Encumbrances. The Assets shall include, but not be limited
to:
(a) All rights under any purchase orders and Contracts
(collectively, the "Business Contracts") relating to the Business and
related exclusively or primarily to the Assets, including, but not limited
to, those that are identified in Schedule 1.01(a), including, without
limitation, the right to all of the revenue therefrom related to any
Products sold before the Closing Date;
(b) All goodwill and other general intangibles associated with
the Business and related exclusively or primarily to the Assets, and all
copyrights, patents, trade names, trademarks, service marks, logos, domain
names, whether registered or unregistered, applications for the foregoing,
including, but not limited to, those as more fully identified in Schedule
1.01(b), and other trade secrets, processes, formulae, inventions,
research and development work, technical information, production data,
blueprints and specifications, licenses, permits, governmental approvals,
authorizations and operation contracts, license agreements, know-how and
similar property, customer lists, lists of suppliers, cost sheets, bills
of material and any other intellectual property
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and intangible assets that are owned by the Company or to which the
Company possesses rights that are used in the Business including all
Intellectual Property;
(c) All books, files, operating data and records of the
Company relating to the Business (the "Books and Records"), excluding
accounting and tax books and records, including, but not limited to,
federal, state and local tax filings and records, general ledgers, general
journals, books of original entry, and further excluding corporate
administrative books and records, including minute books and stock
certificate books;
(d) All telephone lines, telephone numbers and telephone
listings used by the Company in the Business, including, but not limited
to, those more fully identified on Schedule 1.01(d) (the "Telephone
Lines");
(e) The Company's Inventory as more fully identified on
Schedule 1.01(e) hereto, which Schedule shall be updated as of the Closing
Date to reflect changes in the ordinary course of business;
(f) The benefit of all confidentiality, non-competition,
non-solicitation, non-disclosure and similar protective agreements or
instruments, all manufacturers' warranties on tangible personal property,
and all other agreements relating to the Business which inure to the
Company's benefit, including, but not limited to, those more fully
identified on Schedule 1.01(f) (the "Business Documents");
(g) All known and unknown, liquidated or unliquidated,
contingent or fixed rights, choses in action or causes of action of every
nature and kind which the Company has or may have against any third party
relating to the Assets, including, but not limited to, those more fully
identified in Schedule 1.01(g) (the "Other Rights");
(h) All accounts receivable of the Company, including, but not
limited to, those more fully identified on Schedule 1.01(h) hereto, which
Schedule shall be updated as of the Closing Date to reflect changes from
the Agreement Date through the Closing Date (the "Accounts Receivable");
(i) All Actions, credits, rights of setoff of any kind, and
all rights under and pursuant to all indemnities, warranties,
representations and guarantees made by suppliers, manufacturers,
contractors or other third parties arising before, on or after the Closing
Date and relating exclusively or primarily to the Assets or any Assumed
Liabilities, and the right to collect damages or proceeds in connection
therewith;
(j) All goods and services and all other economic benefits to
be received subsequent to the Closing Date which arise out of prepayments
and payments by Seller prior to the Closing Date and relating exclusively
or primarily to the Business.
1.02 Excluded Assets. Those assets of Company specifically
identified on Schedule 1.02, including cash and the Purchase Price, are excluded
from the term "Assets" and therefore from the sale contemplated hereby.
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1.03 Assumption of Liabilities.
(a) Buyer will assume (a) the current accounts payable of the
Company set forth on Schedule 1.03(a) and existing on the Closing Date and
(b) the obligations of the Company under the contracts set forth on
Schedule 1.03(a) (the "Assumed Liabilities").
(b) Except with respect to the Assumed Liabilities, Buyer
shall in no event assume or be responsible for any Liabilities of the
Company or relating to the Business, contingent or otherwise, known or
unknown. The Assets shall be sold and conveyed to Buyer free and clear of
all Encumbrances. Without limiting the generality of the foregoing, in no
event shall Buyer assume or be responsible for: (i) any income, property,
franchise, sales, use or other tax of the Company or any filing
requirements or obligations with respect thereto arising out of or
resulting from the sale of the Assets hereunder (all such taxes to be paid
by the Company) or any transaction of the Company prior to or subsequent
to the execution of this Agreement; and (ii) any liabilities, obligations,
or costs resulting from any claim or lawsuit or other proceeding relating
to the Assets or naming the Company or any successor thereof as a party
and arising out of events, transactions, or circumstances occurring or
existing prior to the Closing Date.
1.04 Purchase Price and Payment for Assets. As payment in full for
the Assets:
(a) Buyer will, at Closing, pay all outstanding amounts owed
under those credit facilities set forth on Schedule 3.20 and shall deliver
to the Company a promissory note in the form attached hereto as Exhibit A
(the "Note"), payable to the Company in the principal amount of
$2,000,000, (i) minus the amount necessary to repay such credit facilities
set forth on Schedule 3.20, and (ii) subject to adjustment pursuant to
Section 1.04(c).
(b) In addition, the Buyer will pay the Company the sum of
$60,000 in cash on the date that is fifteen (15) days after the Closing
Date and an additional $60,000 in cash every thirty (30) days thereafter
until the Note is paid in full, in accordance with Exhibit A (the "Cash
Payment") (the principal amount of the Note (as adjusted pursuant to
Section 1.04(c)), the Cash Payment and the Earnout Amount (as defined in
Section 1.05) are collectively referred to herein as the "Purchase
Price").
(c) The principal amount of the Note may be adjusted at
Closing based upon changes in the Company's Inventory, accounts payable
and accounts receivable in accordance with Schedule 1.04(c).
(d) In addition to the Purchase Price, Buyer shall pay to the
Company the Earn Out Amount set forth in Section 1.05.
1.05 Earn Out Amount. For a three (3) year period following the
Closing Date, (the "Earn Out Period"), Buyer shall pay to the Company (in
accordance with Exhibit A) ten percent (10%) of the amount of the increase in
contribution profit of the Business over the Baseline Amount based on the sale
of the Company's products (the "Earn Out Amount") commencing on the first day of
the month following the Closing Date and ending on the last day
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of the twelfth (12th) month thereafter and continuing on each consecutive twelve
(12) month period thereafter for a period of three (3) years (the "Yearly Earn
Out Period"). The contribution profit shall be determined by calculating the
gross sales of the Company's products less cost of goods sold, direct product
promotional expenses, discounts, allowances, product returns, coupons, rebates,
commissions and freight (the "Earn Out Calculation"). The "Baseline Amount" is
$2,000,000. In determining the contribution profit of the Company, there shall
be no allocation of Buyer's general and administrative expenses.
1.06 Payment of Earn Out Amount. Not later than 60 days after the
end of each Yearly Earn Out Period, Buyer shall pay the Earn Out Amount to the
Company and provide to the Company (i) a report setting forth the Earn Out
Calculation, including such schedules and data as may be appropriate to support
such calculation. The Company and its accountants shall be entitled to review
the Earn Out Calculation and any working papers, trial balances and similar
materials relating to the Earn Out Calculation prepared by Buyer or its
accountants. Buyer shall also provide the Company and its accountants with
timely access, during Buyer's normal business hours, to Buyer's personnel,
properties, books and records to the extent related to the determination of the
Earn Out Calculation.
1.07 Disputes of Earn Out Calculation.
(a) Within 30 days after the Company's receipt of the Earn Out
Calculation pursuant to Section 1.06, the Company may notify Buyer in
writing that it disagrees with the Earn Out Calculation. Within 30 days
after notification by the Company that it disagrees with the Earn Out
Calculation, the Company must provide Buyer with such reports and
calculations that set forth the basis for any disputed amounts in the Earn
Out Calculation (the "Company's Report"). Except as otherwise provided in
this Section 1.07(a), all costs and expenses associated with the Company's
Report shall be borne by the Company. If Buyer concurs with the
adjustments proposed by the Company, or if Buyer does not object thereto
in a writing delivered to the Company within 30 days after Buyer's receipt
of the Company's Report, the calculations set forth in such Company's
Report shall become final and shall not be subject to further review,
challenge or adjustment, absent fraud, and Buyer will immediately pay to
the Company the difference between the Earn Out Amount and the amount
determined in the Company's Report. Further, if such adjustments are equal
to or greater than Five Thousand Dollars ($5,000.00), Buyer shall
reimburse the Company for its reasonable, out-of-pocket costs in preparing
the Company's Report. If the Company does not submit a Company's Report
within the 30-day period provided herein, then the Earn Out Calculation as
calculated by Buyer shall become final and shall not be subject to further
review, challenge or adjustment, absent fraud.
(b) In the event that the Company and Buyer do not resolve the
disagreements set forth in the Company's Report within 30 days after the
date of the Company's Report, then such disagreements shall be referred to
a recognized firm of independent certified public accountants selected by
mutual agreement of the Company and Buyer (the "Settlement Accountants"),
and the determination of the Settlement Accountants shall be final and
shall not be subject to further review, challenge or adjustment, absent
fraud, and Buyer or the Company, where appropriate, will
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immediately pay the difference between the Earn Out Amount and the amount
determined by the Settlement Accountants. The Settlement Accountants shall
use their best efforts to reach a determination not more than 45 days
after such referral.
(c) The costs and expenses of the Settlement Accountants shall
be paid by the Company if the Earn Out Calculation, as determined by the
Settlement Accountants, is greater than the Earn Out Calculation set forth
in the Buyer's Earn Out Calculation, and the difference is less than Five
Thousand Dollars ($5,000.00), or if Buyer's Earn Out Calculation was
greater than the Earn Out Calculation finally determined by the Settlement
Accountants. If the Earn Out Calculation, as determined by the Settlement
Accountants, is greater than the Earn Out Calculation set forth in the
Buyer's Earn Out Calculation and the difference is equal to or greater
than Five Thousand Dollars ($5,000.00), such costs and expenses of the
Settlement Accountants shall be paid by Buyer.
1.08 Purchase Price Allocation. The Purchase Price shall be
allocated among the Assets as set forth on Schedule 1.08 within ten (10) days of
the Closing Date. The parties acknowledge that such allocation fairly reflects
the fair market value of the Assets, and will use such allocation in reporting
for all federal, state and local tax purposes.
ARTICLE II
CLOSING
2.01 Closing. The closing of the transactions contemplated hereby
(the "Closing") shall be held within 14 days of the execution of this Agreement
at the offices of Naturade, Inc., 00000 Xxxxxx Xx., Xxxxx 000, Xxxxxx, XX 00000.
The date upon which the Closing occurs is hereinafter referred to as the
"Closing Date." The Closing shall be deemed effective as of the close of
business of the Business on the Closing Date.
2.02 Deliveries by the Company. At or prior to the Closing, the
Company shall deliver to Buyer:
(a) certified copies of the resolutions of the Board of
Directors and the stockholders of the Company authorizing the transactions
set forth herein;
(b) all licenses, bills of sale, assignments and other
documents, if any, conveying to Buyer and vesting in Buyer good, clear and
marketable title of record to all of the Assets;
(c) possession of all originals and copies of agreements,
instruments, documents, books, records, files and other data and
information within the possession of the Company that constitute part of
the Assets (collectively, the "Records"); provided, however, that the
Company may retain (1) copies of any Records that the Company is
reasonably likely to need for complying with requirements of law; and (2)
copies of any Records that in the reasonable opinion of the Company will
be required in connection with the performance of its obligations under
Legal Requirements;
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(d) executed copy of a Consulting Agreement between the Buyer
and Xxxxxxx Xxxxx in the form attached as Exhibit B-1 (the "Xxxxx
Consulting Agreement");
(e) executed copy of a Consulting Agreement between the Buyer
and Xxxxx Xxxxx in the form attached as Exhibit B-2 (the "Xxxxx Consulting
Agreement", and together with the Xxxxx Consulting Agreement, the
"Consulting Agreements");
(f) executed copy of a Transition Services Agreement between
the Buyer and the Company in the form attached as Exhibit C (the
"Transition Services Agreement");
(g) executed copy of a Trademark License Agreement between the
Buyer and the Company in the form attached as Exhibit D (the "License
Agreement");
(h) a certificate of good standing of the Company issued as of
a recent date by the Secretary of State of the State of Nevada and
Arizona; and
(i) such other documents and instruments as may be necessary
to effect the transactions contemplated by this Agreement.
2.03 Buyer's Deliveries at Closing. On the Closing Date, the Buyer
shall deliver to the Company the following:
(a) an executed Note in the form attached as Exhibit A;
(b) executed Guaranty of the obligations under the Note by
Xxxxx X. Xxxxxxxxxxx, in the form attached as Exhibit E;
(c) an executed counterpart of the Consulting Agreement;
(d) an executed counterpart of the Transition Services
Agreement;
(e) an executed counterpart of the License Agreement;
(f) evidence of the repayment of the credit facilities set
forth on Schedule 3.20;
(g) evidence of the assumption of the Assumed Liabilities
pursuant to an Assignment and Assumption Agreement in the form attached as
Exhibit F;
(h) an executed Assignment and Assumption Agreement, pursuant
to which the Buyer will assign all of its rights and obligations under
this Agreement and the Collateral Agreements to Naturade; and
(i) such other documents and instruments as may be necessary
to effect the transactions contemplated by this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer that:
3.01 Corporate Existence and Qualification. Symco is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada. Symbiotics is a corporation duly organized, validly existing
and in good standing under the laws of the State of Arizona. The Company has the
corporate power to own, manage, lease and hold its properties and to carry on
its Business as and where such properties are presently located and such
business is presently conducted. The Company is duly qualified as a foreign
corporation to do business, and is in good standing in each jurisdiction where
the character of the Company's Assets or the nature of the Company's business
requires such qualification, except where the failure to so qualify or to be in
good standing would not have a material adverse effect on Company's business,
operations, properties, prospects, the Assets or condition (financial or
otherwise) (a "Material Adverse Effect"). The Company is qualified as a foreign
corporation and is in good standing in each jurisdiction set forth in Schedule
3.01 attached hereto.
3.02 Authority, Approval and Enforceability. This Agreement has been
duly executed and delivered by the Company and the Company has all requisite
power and legal capacity to execute and deliver this Agreement and all
Collateral Agreements executed and delivered or to be executed and delivered in
connection with the transactions provided for hereby, to consummate the
transactions contemplated hereby and by the Collateral Agreements, and to
perform its obligations hereunder and under the Collateral Agreements. This
Agreement and each Collateral Agreement to which the Company is a party
constitutes, or upon execution and delivery will constitute, the legal, valid
and binding obligation of such party, enforceable in accordance with its terms,
except as such enforcement may be limited by general equitable principles or by
applicable bankruptcy, insolvency, moratorium, or similar laws and judicial
decisions from time to time in effect which affect creditors' rights generally.
3.03 Conflicts. The execution and delivery by the Company of this
Agreement and each Collateral Agreement, and the performance by it of its
obligations hereunder and thereunder, does not and will not:
(a) Violate any provision of the certificate of incorporation
or bylaws of the Company;
(b) Violate any provision of any Legal Requirement relating to
the Business, the Assets or the Assumed Liabilities, or require a
registration, filing, application, notice, consent, approval, order,
qualification, authorization, designation, declaration or waiver with, to
or from any Governmental Authority;
(c) Require a consent, approval or waiver from, or notice to,
any party to a Contract, or result in a breach of, constitute (with or
without due notice or lapse of time or both) a default under, result in
the acceleration of material obligations, loss of material benefit or
increase in any material Liabilities or fees under, or create in any party
the right to terminate, cancel or modify, any Contract; or
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(d) Result in the creation of any Encumbrance upon any
material Asset.
3.04 No Proceedings. No suit, action or other proceeding is pending
or, to the Knowledge of the Company, threatened before any Governmental
Authority seeking to restrain the Company or prohibit its entry into this
Agreement or prohibit the Closing, or seeking damages against the Company or its
properties as a result of the consummation of this Agreement.
3.05 Financial Statements. Schedule 3.05 sets forth (a) unaudited
statements of certain assets and certain Liabilities of the Business as of
December 31, 2004, together with related statements of revenues, costs and
expenses of the Business for the twelve-month period ending December 31, 2004
(the "Annual Financial Statements"), (b) unaudited statements of certain assets
and Liabilities of the Business as of May 31, 2005 (the "Interim Balance
Sheet"), and (c) unaudited income statements of the Business for the five-month
period ending on May 31, 2005 (collectively, with the Annual Financial
Statements and the Interim Balance Sheets, the "Financial Statements"). The
Financial Statements (i) are in accordance with the books and records of the
Company in all material respects; (ii) present fairly, in all material respects,
the financial position of the Business for the respective periods there ended;
and (iii) have been prepared in accordance with the Company's normal practices
for the Business (which practices are in accordance with GAAP, except for (A)
the absence of footnotes and other disclosures required by GAAP and (B) with
respect to the Interim Balance Sheet and the unaudited income statements of the
Business for the five-month period ending on May 31, 2005, normal year end
adjustments, consistently applied with prior periods).
3.06 Compliance with Laws. The Company is and has been in compliance
in all material respects with any and all Legal Requirements applicable to the
Company.
3.07 Litigation. Except as otherwise set forth on Schedule 3.07,
there is no Action against the Company pending or, to the Knowledge of the
Company, threatened in any court or before or by any Governmental Authority, or
before any arbitrator, and to the Knowledge of the Company, there is no basis
for any such Action and there is no Court Order to which the Business is
subject.
3.08 Assets of the Business. The Company has and will have as of the
Closing Date good and marketable title to the Assets, free and clear of any and
all Encumbrances, except for those Encumbrances which will be released on or
before the Closing Date. Except with respect to the Excluded Assets, the Assets
comprise all of the properties, assets (including, without limitation, computer
software and licenses therefor) and rights of the Company which relate to the
conduct of the Business as presently conducted and are adequate to conduct the
Business as presently conducted by the Company.
3.09 Commitments.
(a) With respect to the Assets, except as otherwise set forth
on Schedule 3.09(a), the Company is not a party to or bound by any of the
following, whether written or oral:
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(i) any Contract that cannot by its terms be terminated
by the Company with 90 days' or less notice without penalty or whose
term continues beyond one year after the date of this Agreement;
(ii) any contract or commitment for capital expenditures
by the Company in excess of $10,000 per calendar quarter in the
aggregate;
(iii) any lease or license, whether as landlord, tenant,
licensor or licensee;
(iv) any agreement, contract, indenture or other
instrument relating to the borrowing of money or the guarantee of
any obligation or the deferred payment of the purchase price of any
asset;
(v) any partnership, joint venture or other similar
agreement;
(vi) any contract with any Affiliate of the Company
relating to the provision of goods or services by or to the Company;
(vii) any agreement that purports to limit the Company's
freedom to compete freely in any line of business or in any
geographic area;
(viii) any asset purchase agreements, stock purchase
agreements, and other acquisition or divestiture agreements and
similar Contracts, including any Contracts relating to the sale,
lease or disposal of any Assets relating to the Business (other than
sales of Inventory in the ordinary course of business); and
(ix) any other Contract that is material to the business
of the Company.
(b) All of the Contracts listed or required to be listed in
Schedule 3.09(a) and all of the Business Contracts are valid, binding and
in full force and effect; the Company has not been notified or advised by
any party thereto of such party's intention or desire to terminate or
modify any such Contract in any respect and neither the Company nor, to
the Knowledge of the Company, any other party thereto is in breach of any
of the terms or covenants of any such Contract. Following the Closing,
Buyer will be entitled to all of the benefits of the Company under each
Business Contract that constitutes part of the Assets.
(c) The Company is not a party to or bound by any Contract or
Contracts, the terms of which were arrived at by or otherwise reflect less
than arm's-length negotiations or bargaining.
3.10 Insurance. Schedule 3.10 sets forth a complete and correct list
of all insurance policies presently in effect that relate to the Company or its
Assets, all of which are in full force and effect.
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3.11 Inventories. The Company has good and marketable title to the
Inventory, free and clear of all Encumbrances except for those Encumbrances
which will be released on or before the Closing Date. Except as otherwise
reserved against, as reflected in the financial information disclosed on
Schedule 3.05, all Inventory reflected in such financial information consists of
a quality and quantity usable and saleable in the ordinary course of business at
a commercial value at least equal to the value shown on such financial
information and is valued in accordance with GAAP net of reserves consistent
with the past practices of the Company at the lesser of current book value or
fair market value. All Inventory purchased since May 31, 2005 consists of a
quality and quantity usable and saleable in the ordinary course of business. All
Inventory is located on premises owned or leased by the Company. All
work-in-process of the Business is of a quality ordinarily produced in
accordance with the requirements of the order to which such work-in-process is
identified.
3.12 Suppliers and Customers. Schedule 3.12 sets forth (a ) the ten
(10) largest suppliers of the Company during each of calendar years 2003 and
2004; and (b) the ten (10) largest customers of the Company during each of
calendar years 2003 and 2004. There exists no actual or threatened termination,
cancellation or limitation of, or any modification or change in, the Company's
business relationship with any customer or supplier, which termination,
cancellation, limitation, modification or change could, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect.
3.13 Products. Schedule 3.13 lists each product under development,
developed, manufactured, licensed, distributed or sold by the Company and any
other products in which the Company has any proprietary rights or beneficial
interest (collectively, the "Products").
3.14 Transactions With Affiliates. Except as set forth on Schedule
3.14, the Company has not purchased, acquired or leased any property or services
from, or sold, transferred or leased any property or services to, or loaned or
advanced any money to, or borrowed any money from, or entered into or been
subject to any management, consulting or similar agreement with, or engaged in
any other significant transaction with any officer, director or shareholder of
the Company or any of their respective Affiliates. Except as set forth on
Schedule 3.14, no shareholder or other Affiliate of the Company is indebted to
the Company for money borrowed or other loans or advances, and the Company is
not indebted to any shareholder or any such Affiliate.
3.15 Operations Since May 31, 2005.
(a) Since May 31, 2005, there has not been any change,
circumstance or effect in or with respect to the Assets, financial
condition or results of operations of the Business, other than any
changes, circumstances and effects arising in the ordinary course of
business that have not had and would not be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect.
(b) Since May 31, 2005, the Company has conducted the
Business, in all material respects, in the ordinary course, and the
Company has not:
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(i) Conveyed, exchanged, sold, assigned, abandoned,
leased (as lessor or lessee), transferred, licensed, or otherwise
disposed of, in whole or in part, in a single transaction or series
of related transactions, any Assets (including Intellectual
Property) except in the ordinary course of business;
(ii) Suffered any damage, destruction or casualty loss
with respect to the Assets (whether or not covered by insurance)
material to the Business;
(iii) Incurred or guaranteed any indebtedness;
(iv) Made any material change in the accounting
principles, methods, practices or policies relating to the Business,
unless such change was required by GAAP;
(v) With respect to the Business, acquired or purchased
any properties or assets that are, individually or in the aggregate,
material to the Business (other than in the ordinary course of
business), merged or consolidated with, or acquired all or
substantially all of the assets of, or otherwise acquired, any
Person, or made any material investment in any Person;
(vi) Executed, terminated, cancelled, materially
modified or permitted to materially modify, terminate, cancel or
expire any Business Contract;
(vii) Created or suffered the imposition of any
Encumbrance on any of the Assets;
(viii) Forgiven or cancelled any material debt or
material claim of the Business or voluntarily waived any right of
material value, other than compromises of accounts receivable in the
ordinary course of business;
(ix) Entered into any intercompany transactions relating
to the Assets with any Affiliate of the Company; or
(x) Authorized, approved, agreed or committed to do any
of the actions described in clauses (i)-(ix) above.
3.16 Taxes. The Company has filed or will have filed on a timely
basis all material Tax Returns relating to the Business in connection with any
Tax required to be filed by it, and the Company has or will have timely paid all
such Taxes shown thereon to be due. None of the Assets is subject to any lien in
favor of the United States pursuant to Section 6321 of the Code for nonpayment
of federal Taxes, or any lien in favor of any state or locality pursuant to any
comparable provision of state or local law, under which transferee liability
might be imposed upon Buyer as a buyer of such Assets pursuant to Section 6323
of the Code or any comparable provision of state or local law. None of the
Assets is tax-exempt use property within the meaning of Section 168(h) of the
Code. There is no Action, audit or claim now pending with respect to any Tax
with respect to the Assets. There are no outstanding agreements extending the
statutory period of limitation applicable to any claim for, or the period for
the collection or
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assessment of, Taxes with respect to the Assets. With respect to the Business,
the Company has duly and timely withheld from employee salaries, wages and other
compensation and paid over to the appropriate taxing authorities all amounts
required to be so withheld and paid over for all periods under all applicable
laws. With respect to the Business, the Company has collected all material sales
and use Taxes required to be collection and has remitted, or will remit on a
timely basis, such amounts to the appropriate taxing authority, or has been
furnished properly completed exemption certificates and has maintained all such
records and supporting documents in the manner required by all applicable sales
and use Tax statutes and regulations.
3.17 Intentionally Omitted.
3.18 Intellectual Property.
(a) Schedule 3.18 contains a list of all Marks owned or used
by the Company as of the date of this Agreement which relate to the
Business as presently conducted.
(b) Except as set forth on Schedule 3.18, the Company either:
(i) owns the entire right, title and interest in and to all Intellectual
Property that is used in the Business as presently conducted (the
"Business Intellectual Property"), free and clear of Encumbrances or
adverse claims of ownership from current or former employees and
contractors; or (ii) has the right and license to use the Business
Intellectual Property in the conduct of the Business.
(c) To the Knowledge of the Company, except as set forth on
Schedule 3.18, all items set forth on Schedule 3.18 are valid and in
force, or to the extent such items are applications, are pending without
challenge.
(d) (i) During the previous three (3) years, no material
Action has been taken or, to the Knowledge of the Company, threatened, (A)
alleging that the conduct of the Business or any Business Intellectual
Property infringes on or misappropriates the Intellectual Property of
another Person; or (B) challenging the ownership or validity of the
Business Intellectual Property; (ii) no material Action is pending with
respect to any Business Intellectual Property; and (iii) to the Knowledge
of the Company, there is no valid basis for any Action described in this
Section 3.18.
3.19 Environmental; Health; Safety. To the Knowledge of the Company,
the Company is in compliance in all material respects with all applicable
environmental laws. There is no environmental litigation, administrative or
judicial proceeding or order, consent decree, or investigation pending or
threatened against the Company related to the Business.
3.20 No Undisclosed Liabilities.
(a) The Business does not have any Liabilities of any nature
except for (i) Liabilities disclosed, reflected or reserved against in the
Interim Balance Sheet, (ii) Liabilities incurred since May 31, 2005 in the
ordinary course of business and which have not and will not result in a
Material Adverse Effect, (iii) Liabilities incurred in
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connection with this Agreement and the transactions contemplated hereby
and (iv) Liabilities which would not have a Material Adverse Effect on the
Assets.
(b) Except as set forth on Schedule 3.20, the Business does
not have any Indebtedness.
3.21 Accounts Receivable. All accounts receivable of the Company
(collectively, the "Accounts Receivable") represent or shall represent valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business. The Accounts Receivable are or will be as of
the Closing Date fully collectible, net of the reserves shown on the Interim
Balance Sheets or on the accounting records of the Company as of the Closing
Date (which reserves are adequate and calculated consistent with past practice).
To the Knowledge of the Company, there is no contest, claim, or right of set
off, other than returns in the ordinary course of business, under any Contract
with any obligor of an Accounts Receivable relating to the amount or validity of
such Accounts Receivable. Schedule 3.21 contains a complete and accurate list of
all Accounts Receivable as of May 31, 2005, which list sets forth the aging of
such Accounts Receivable.
3.22 Investment Representations. Each of Symco and Symbiotics (each,
a "Holder") represents and warrants to Buyer that:
(a) Investment Representations. Holder understands that the
Note has not been registered under the Securities Act of 1933, as amended
(the "Securities Act"). Holder also understands that the Note is being
offered and sold pursuant to an exemption from registration contained in
the Securities Act based in part upon Holder's representations contained
in the Agreement.
(b) Experience; Risk. Holder has such knowledge and experience
in financial and business matters that Holder is capable of evaluating the
merits and risks of the purchase of the Note and of protecting Holder's
interests in connection therewith. Holder is able to fend for itself in
the transactions contemplated by this Agreement and has the ability to
bear the economic risk of the investment, including complete loss of the
investment. The foregoing does not, however, limit or modify (i) the
representations, warranties, agreements or covenants of the Buyer set
forth in this Agreement (or those of Naturade set forth in, or assumed
pursuant to, the Assignment and Assumption Agreement); (ii) the right of
the Company to rely thereon or (iii) the obligation of Buyer to perform
its obligations under this Agreement and the Note and other Collateral
Agreements (including by way of illustration and not by way of limitation
to comply with the payment requirements of the Note) (or the obligation of
Naturade to perform such obligations and those in the Assignment and
Assumption Agreement upon and following Naturade's execution of the
Assignment and Assumption Agreement).
(c) Investment. Holder is acquiring the Note for investment
for its own account, not as a nominee or agent, and not with a view to, or
for resale in connection with, any distribution thereof, and Holder has no
present intention of selling, granting any participation in, or otherwise
distributing the same. Holder understands that the Note has not been
registered under the Securities Act and applicable state securities
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laws (collectively, the "Acts") by reason of a specific exemption from the
registration provisions of the Acts which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of
Holder's representations as expressed herein.
(d) Restricted Note. Holder understands that the Note will be
a "restricted security" under applicable securities laws inasmuch as it is
being acquired from the Company in a transaction not involving a public
offering and that under such laws and applicable regulations the Note may
be resold without registration under the Acts only in certain limited
circumstances. Holder acknowledges that the Note must be held indefinitely
unless subsequently registered under the Acts or an exemption from such
registration is available.
(e) Accredited Investor. Holder is an "accredited investor"
within the meaning of Rule 501 promulgated under the Securities Act. The
Holder has considered the federal and state income tax implications of an
investment in the Note and has consulted with his own advisors with
respect thereto.
(f) Further Limitations on Disposition. Without in any way
limiting the representations set forth above, Holder further agrees not to
make any disposition of all or any portion of the Note unless and until:
(i) there is then in effect a registration statement
under the Acts covering such proposed disposition and such
disposition is made in accordance with such registration statement;
or
(ii) Holder shall have notified the Company of the
proposed disposition, and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition,
and, at the expense of Holder or its transferee, with an opinion of
counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such securities under
any of the Acts.
3.23 Other Information. The information furnished by the Company to
Buyer pursuant to this Agreement (including, without limitation, information
contained in the exhibits hereto, the Schedules identified herein, the
instruments referred to in such Schedules and the certificates and other
documents to be executed or delivered pursuant hereto by the Company at or prior
to the Closing) is not, nor at the Closing will be, false or misleading in any
material respect, or contains, or at the Closing will contain, any misstatement
of material fact, or omits, or at the Closing will omit, to state any material
fact required to be stated in order to make the statements therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company that:
4.01 Corporate Existence and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
Bahamas; has the
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corporate power to own, manage, lease and hold its properties and to carry on
its business as and where such properties are presently located and such
business is presently conducted; and is duly qualified to do business and is in
good standing as a foreign corporation in each of the jurisdictions where the
character of its properties or the nature of its business requires it to be so
qualified.
4.02 Authority, Approval and Enforceability. This Agreement has been
duly executed and delivered by Buyer and Buyer has all requisite corporate power
and legal capacity to execute and deliver this Agreement and all Collateral
Agreements executed and delivered or to be executed and delivered by Buyer in
connection with the transactions provided for hereby, to consummate the
transactions contemplated hereby and by the Collateral Agreements, and to
perform its obligations hereunder and under the Collateral Agreements. The
execution and delivery of this Agreement and the Collateral Agreements and the
performance of the transactions contemplated hereby and thereby have been duly
and validly authorized and approved by all corporate action necessary on behalf
of Buyer. This Agreement and each Collateral Agreement to which Buyer is a party
constitutes, or upon execution and delivery will constitute, the legal, valid
and binding obligation of Buyer, enforceable in accordance with its terms,
except as such enforcement may be limited by general equitable principles or by
applicable bankruptcy, insolvency, moratorium, or similar laws and judicial
decisions from time to time in effect which affect creditors' rights generally.
4.03 No Proceedings. No suit, action or other proceeding is pending
or, to Buyer's knowledge, threatened, before any Governmental Authority seeking
to restrain Buyer or prohibit its entry into this Agreement or prohibit the
Closing.
4.04 No Conflict. The execution and delivery by Buyer of this
Agreement and each Collateral Agreement, and the performance by it of its
obligations hereunder and thereunder, does not and will not:
(a) Violate any provision of the certificate of incorporation
or bylaws of Buyer;
(b) Violate any provision of any Legal Requirement relating to
Buyer, or require a registration, filing, application, notice, consent,
approval, order, qualification, authorization, designation, declaration or
waiver with, to or from any Governmental Authority; or
(c) Require a consent, approval or waiver from, or notice to,
any party, or result in a breach of, constitute (with or without due
notice or lapse of time or both) a default under, or create in any party
the right to terminate, cancel or modify, any contract.
4.05 Financing. Buyer has, or will have as of the Closing Date,
sufficient financial resources to fulfill all of its obligations due under this
Agreement and all Collateral Agreements as of the Closing Date.
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ARTICLE V
CONDITIONS TO THE COMPANY'S AND BUYER'S OBLIGATIONS
5.01 Conditions to Obligations of the Company. The obligations of
the Company to carry out the transactions contemplated by this Agreement are
subject, at the option of the Company, to the satisfaction or waiver of the
following conditions:
(a) All representations and warranties of Buyer contained in
this Agreement shall be true and correct in all material respects at and
as of the Closing, and Buyer shall have performed and satisfied in all
material respects all covenants and agreements required by this Agreement
to be performed and satisfied by Buyer at or prior to the Closing, and the
Company shall have received a certificate to such effect from an officer
of Buyer.
(b) As of the Closing Date, no Action shall be pending or
threatened before any Governmental Authority seeking to restrain the
Company or prohibit the Closing or seeking Damages against Buyer or the
Company as a result of the consummation of this Agreement.
(c) All of Buyer's deliveries (described in Section 2.03)
shall be tendered to the Company at or prior to Closing.
(d) The Buyer shall have furnished the Company with a
certified copy of all necessary corporate action on its behalf approving
the Buyer's execution, delivery and performance of this Agreement and any
Collateral Agreement.
(e) All proceedings to be taken by Buyer in connection with
the transactions contemplated hereby and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Company and
its counsel, and the Company and said counsel shall have received all such
counterpart originals or certified or other copies of such documents as it
or they may reasonably request.
(f) No proceeding in which Buyer shall be a debtor, defendant
or party seeking an order for its own relief or reorganization shall have
been brought or be pending by or against Buyer under any United States or
state bankruptcy or insolvency law.
5.02 Conditions to Obligations of Buyer. The obligations of Buyer to
carry out the transactions contemplated by this Agreement are subject, at the
option of Buyer, to the satisfaction, or waiver by Buyer, of the following
conditions:
(a) All representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects at and as of the Closing, the Company shall have performed and
satisfied in all material respects all agreements and covenants required
by this Agreement to be performed and satisfied by it at or prior to the
Closing, and Buyer shall have received a certificate of such effect from
an officer of the Company.
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(b) As of the Closing Date, no Action shall be pending or
threatened before any Governmental Authority seeking to restrain Buyer or
prohibit the Closing or seeking Damages against Buyer or the Company or
the Assets as a result of the consummation of this Agreement.
(c) The Company shall have furnished Buyer with a certified
copy of all necessary corporate action on its behalf approving the
Company's execution, delivery and performance of this Agreement and each
Collateral Agreement.
(d) All proceedings to be taken by the Company in connection
with the transactions contemplated hereby and all documents incident
thereto shall be satisfactory in form and substance to Buyer and its
counsel, and Buyer and said counsel shall have received all such
counterpart originals or certified or other copies of such documents as it
or they may reasonably request.
(e) No proceeding in which the Company shall be a debtor,
defendant or party seeking an order for its own relief or reorganization
shall have been brought or be pending by or against the Company under any
United States or state bankruptcy or insolvency law.
(f) All of the Company's deliveries (described in Section
2.02) shall be tendered to Buyer at or prior to the Closing.
5.03 Disclosure Supplement. The Company shall have the right to
supplement its disclosure to Buyer with respect to any matter arising after the
date of this Agreement that, if existing or occurring on or prior to the date of
this Agreement, would have been required to be set forth or described in any
schedule hereto. If such additional information set forth in such supplement
(together with any additional information set forth in the disclosure schedules
and any prior supplement) reveal facts, events or circumstances that Buyer
reasonably believes will have, individually or in the aggregate, a Material
Adverse Effect, then the condition stated in Section 5.02(a) shall be deemed not
to have been satisfied and this Agreement may be terminated by Buyer.
5.04 Name Change. On or before September 30, 2005, the Company shall
change its name at Closing and discontinue all use of the name "Symbiotics" and
"Symco."
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Further Assurances. Following the Closing, the Company and the
Buyer shall execute and deliver such documents, and take such other action, as
shall be reasonably requested by any other party hereto to carry out the
transactions contemplated by this Agreement.
6.02 Publicity. None of the parties hereto shall issue or make, or
cause to have issued or made, any public release or announcement concerning this
Agreement or the transactions contemplated hereby, without the advance approval
in writing of the form and substance thereof by each of the other parties,
except as required by law or by the rules of the
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National Association of Securities Dealers or the United States Securities and
Exchange Commission (in which case, so far as possible, there shall be
consultation among the parties prior to such announcement), and the parties
shall endeavor jointly to agree on the text of any announcement or circular so
approved or required.
6.03 Conduct of the Business Prior to the Closing Date. From the
date hereof until the Closing Date, the Company shall operate the Business only
in the ordinary course of business, and shall not engage in any of the actions
described in Section 3.15 without the written consent of Buyer.
6.04 Confidential Information. The Company acknowledges that all
customer, supplier and distributor lists, manufacturing techniques, formulas,
sales, marketing and expansion strategies, technology, processes of the Company
and Buyer relating to the business conducted with the Assets, and all related
information concerning the products, services, production, development,
technology and all related technical information, procurement, and sales
activities and procedures, promotion, and pricing techniques, and credit
financial data relating to the business conducted with the Assets concerning
customers of the Company and Buyer are valuable, special, and unique assets
(collectively, "Confidential Information"). The parties agree that all
Confidential Information of the Company shall be transferred to Buyer as part of
the Assets pursuant to the terms of this Agreement. In recognition of this,
Company represents and agrees that during the three (3) year period following
the date of this Agreement, Company will not (i) disclose any Confidential
Information to any Person or entity, or (ii) make use of any Confidential
Information for its own purposes or for the benefit of any Person or entity
other than Buyer, except for disclosures required by any Legal Requirement, in
which event Buyer shall be given prompt notice of any such compelled disclosure,
and, if possible, opportunity to defend its rights hereunder prior to any such
compelled disclosure being made. The Company acknowledges that this covenant to
maintain Confidential Information is necessary to protect the goodwill and
proprietary interest of the Company and that restriction against disclosure of
Confidential Information is reasonable in light of the consideration and other
value the Company has accepted pursuant to this Agreement. Notwithstanding the
foregoing, nothing in this Section 6.04 shall apply to activities of the Company
or its Affiliates which are expressly permitted under Section 6.08.
6.05 Transition. Immediately after the Closing Date, Buyer and the
Company shall agree in writing upon a process for handling orders and product
shipments during a reasonable transition period following the Closing Date.
Buyer and the Company shall also agree in writing upon a process for introducing
Buyer to the Company's customers and notifying the Company's customers of
Buyer's purchase of the Assets. Any and all of the Company's press releases to
the public regarding the transaction contemplated by this Agreement, and
communications to vendors and customers regarding the transaction reasonably
contemplated by this Agreement shall be approved by Buyer in writing.
6.06 Intentionally Omitted.
6.07 Exclusivity. From the date hereof until the earlier of the
Closing Date or the termination of this Agreement pursuant to Section 8.13, the
Company shall not, and shall use reasonable commercial efforts to cause its
officers, directors, employees, representatives and
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agents not to, (a) initiate, solicit or encourage any proposal, offer or
discussion with any Person (other than Buyer) concerning any merger, business
combination, sale of stock or sale of assets (other than sales of assets in the
ordinary course of business) involving the Business or (b) engage in discussions
or negotiations with any Person (other than Buyer) concerning any such
transaction.
6.08 Covenant Not to Compete.
(a) With respect to retail sales channels, for a period of
three years from and after the Closing Date, the Company shall not,
directly or indirectly through any of its Affiliates or otherwise, engage
in the manufacture, sale, provision or distribution of any Products, or
enter into any arrangement (contractual or otherwise) pursuant to which
any other Person agrees on behalf of the Company or any of its Affiliates
to do any of the foregoing. Buyer and the Company expressly agree that
nothing in this Section 6.08 shall apply to the Company or its Affiliates
with respect to business operations in network or multi-level marketing
channels.
ARTICLE VII
INDEMNITY
7.01 Indemnification.
(a) Each of Symco and Symbiotics shall jointly and severally
indemnify, defend and hold harmless Buyer its Affiliates, and its
partners, shareholders, directors, officers, employees, agents and
representatives (collectively, the "Buyer Indemnified Parties") from and
against any and all Liabilities, judgments, claims, settlements, losses,
damages, costs, fees (including reasonable attorneys' fees, court fees and
expenses), liens, taxes, penalties, obligations and expenses incurred or
suffered (collectively, "Losses") by any such Buyer Indemnified Party
arising from (collectively, the "Buyer Indemnifiable Claims"):
(i) any misrepresentation or breach of any
representation, warranty or agreement of the Company contained in
this Agreement;
(ii) the non-fulfillment by the Company of any covenant
or agreement made by such party in this Agreement;
(iii) any obligation arising from the conduct of the
Business on or prior to the Closing;
(iv) Liability that is not an Assumed Liability;
(v) without limiting the foregoing, all Liabilities for
Taxes incurred by the Company related to or arising as a result of
the conduct of the Company or the Business on or prior to the
Closing Date;
(vi) the failure of the Company or Buyer to comply with
any bulk sales law; and
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(vii) any and all Losses incident to any of the matters
referred to in clauses (i) through (vi) of this Section 7.01(a).
(b) Buyer shall indemnify, defend and hold harmless the
Company, its Affiliates and its partners, shareholders, directors,
officers, employees and other agents and representatives (collectively
"Company Indemnified Parties"), from and against any and all Losses
incurred or suffered by any Company Indemnified Party, arising from:
(i) any misrepresentation or breach of any
representation, warranty or agreement of Buyer contained in this
Agreement;
(ii) the non-fulfillment by Buyer of any covenant or
agreement made by it in this Agreement;
(iii) any and all Assumed Liabilities;
(iv) any obligation arising from the conduct of the
Business after the Closing by Buyer; and
(v) any and all Losses incident to any of the matters
referred to in clauses (i) through (iv) of this Section 7.01(b).
7.02 Notice of Asserted Liability. Promptly after a Buyer
Indemnified Party or Company Indemnified Party (in this context, an
"Indemnitee") become aware of any fact, condition or event that may give rise to
Losses for which indemnification may be sought under this Article VII, the
Indemnitee shall give notice thereof in the manner provided in Section 8.03 of
this Agreement (the "Claims Notice") to the party (in this context, the
"Indemnitor"). The Claims Notice shall include a description in reasonable
detail of any claim or the commencement (or threatened commencement) of any
action, proceeding or investigation (an "Asserted Liability") against
Indemnitee, and shall indicate the amount (estimated, if necessary) of the
Losses that have been or may be suffered by Indemnitee. Failure of Indemnitee to
promptly give notice hereunder shall not affect rights to indemnification
hereunder, except to the extent that Indemnitor demonstrates actual damage
caused by such failure. Upon Indemnitor's request, Indemnitee shall provide
Indemnitor with such reasonable documentation as Indemnitor shall request
pertaining to any claim(s) made by Indemnitee.
7.03 Opportunity to Defend. Indemnitor may elect to compromise or
defend, at its own expense and by its own counsel reasonably acceptable to
Indemnitee, any Asserted Liability; provided, however, that Indemnitor may not
compromise or settle any Asserted Liability without the consent of Indemnitee,
such consent not to be unreasonably withheld, unless such compromise or
settlement requires no more than a monetary payment for which Indemnitee and any
other indemnifiable parties hereunder are fully indemnified or involves other
matters not binding upon Indemnitee or such other indemnifiable parties. If
Indemnitor elects to compromise or defends such Asserted Liability, it shall
within 15 business days (or sooner, if the nature of the Asserted Liability so
requires) notify Indemnitee of its intent to do so and Indemnitee shall
cooperate in the compromise of, or defense against, such Asserted Liability. If
Indemnitor elects not to compromise or defend any Asserted Liability, fails to
notify Indemnitee of its election as herein provided or contests its obligation
to indemnify, Indemnitee may pay,
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compromise or defend such Asserted Liability, at the sole cost and expense of
Indemnitor, without prejudice to any rights Indemnitee may have hereunder. In
such event, Indemnitor may participate, at its own expense, in the defense of
any Asserted Liability in respect of which it may have an indemnification
obligation under Section 7.01, provided that Indemnitee shall control such
defense. If either party chooses to defend or participate in the defense of any
Asserted Liability, it shall have the right to receive from the other party any
books, records or other documents within such party's control that are necessary
or appropriate for such defense.
7.04 Limitations. The indemnification and reimbursement obligations
hereunder, and the representations and warranties contained in this Agreement,
shall expire eighteen (18) months after the Closing Date (the "Expiration
Date"), except (a) as to any claims for, or any claims made or specifically
threatened by a third party that may result in, any liability, judgment, claim,
settlement, loss, damage, fee, lien, Tax, penalty, obligation or expense for
which indemnity has been (or may be in the case of third party specifically
threatened claims) sought hereunder of which the Indemnitor has received written
notice consistent with Section 7.02 from the Indemnitee on or before the
Expiration Date and (b) with respect to Taxes, the Expiration Date shall be 90
days after expiration of the latest statute of limitations applicable to such
Taxes. No Indemnitee shall be entitled to indemnification pursuant to this
Article VII if the Indemnitor shall have delivered in the aggregate funds equal
to Two Million Dollars ($2,000,000) in satisfaction of claims under this Article
VII.
7.05 Right of Set-Off. Except as specifically permitted in this
Section 7.05, Buyer shall not have any right to withhold, reduce or set-off
against any amounts otherwise payable under the Note any amount owed, or claimed
to be owed, to Buyer by the Company. Buyer agrees to assert any claim, demand,
or other right against the Company not specifically permitted in this paragraph
only by an independent proceeding. Upon notice to the Company given not later
than ninety (90) days after the Closing Date specifying in reasonable detail the
basis for such set-off, Buyer may set off the amount to which it may be entitled
under this Section 7 against amounts otherwise payable under the Note provided
that the amount of such set-off claim is not less than $175,000 and provided
further that cash equal to the amount of the claimed set-off is delivered to an
independent third party reasonably acceptable to Buyer and the Company to be
held by such third party until the set-off claim is finally resolved in a
proceeding permitted under this Agreement. The exercise of such right of set-off
by Buyer in good faith, whether or not ultimately determined to be justified,
will not constitute an event of default under the Note. Neither the exercise of
nor the failure to exercise such right of set-off will constitute an election of
remedies or limit Buyer in any manner in the enforcement of any other remedies
that may be available to it.
ARTICLE VIII
MISCELLANEOUS
8.01 Brokers. Regardless of whether the Closing shall occur, (i) the
Company shall indemnify and hold harmless Buyer from and against any and all
liability for any brokers or finders' fees arising with respect to brokers or
finders retained or engaged by the Company in respect of the transactions
contemplated by this Agreement, and (ii) Buyer shall indemnify and hold harmless
the Company from and against any and all liability for any brokers' or finders'
fees
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arising with respect to brokers or finders retained or engaged by Buyer in
respect of the transactions contemplated by this Agreement.
8.02 Costs and Expenses. Each of the parties to this Agreement shall
bear his or its own expenses incurred in connection with the negotiation,
preparation, execution and closing of this Agreement and the transactions
contemplated hereby.
8.03 Notices. Any notice, request, instruction, correspondence or
other document to be given hereunder by any party hereto to another (herein
collectively called "Notice") shall be in writing and delivered personally or
mailed by registered or certified mail, postage prepaid and return receipt
requested, or sent by national commercial courier service, return receipt
requested for next day delivery to be confirmed in writing by such courier, or
by telecopier, as follows:
BUYER: Quincy Investments Corp.
309 Terraces North
00-000 Xxxxxxx Xxxxx Xxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxxxx
Telecopier No.: 000-000-0000
With a Copy (which shall not constitute
notice) to:
Xxxxxx, Saleson & Xxxxxx LLP
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxx
Telecopier No.: 000-000-0000
COMPANY: Symco, Inc. and/or Symbiotics, Inc.
0000 Xxxx Xxxxxxx 00X, Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Telecopier No.: 000-000-0000
With a Copy (which shall not constitute
notice) to:
00000 Xxxxxxxxx Xxxx
Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxx
Telecopier No.: 000-000-0000
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Each of the above addresses for notice purposes may be changed by providing
appropriate notice hereunder. Notice given by personal delivery or registered
mail shall be effective upon actual receipt. Notice given by telecopier shall be
effective upon actual receipt if received during the recipient's normal business
hours, or at the beginning of the recipient's next normal business day after
receipt if not received during the recipient's normal business hours. All
Notices by telecopier shall be confirmed by the sender thereof promptly after
transmission in writing by registered mail or personal delivery.
8.04 Governing Law, Jurisdiction, Venue, Waiver and Jury Trial. The
provisions of this agreement and the documents delivered pursuant hereto shall
be governed by and construed in accordance with the laws of the State of
California (excluding any conflict of law rule or principle that would refer to
the laws of another jurisdiction). Each party hereto irrevocably submits to the
jurisdiction of the State of California, Los Angeles or Orange County, in any
action or proceeding arising out of or relating to this Agreement or any of the
Collateral Agreements, and each party hereby irrevocably agrees that all claims
in respect of any such action or proceeding must be brought and/or defended in
such court; provided, however, that matters which are under the exclusive
jurisdiction of the Federal courts shall be brought in the Federal District
Court for the Central District of California. Each party hereto consents to
service of process by any means authorized by the applicable law of the forum in
any action brought under or arising out of this Agreement or any of the
Collateral Agreements, and each party irrevocably waives, to the fullest extent
each may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court. EACH PARTY HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY
LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING
ARISING HEREUNDER.
8.05 Entire Agreement; Amendments and Waivers. This Agreement,
together with all exhibits and schedules attached hereto, constitutes the entire
agreement between and among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof except as set forth specifically
herein or contemplated hereby. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (regardless of whether
similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.
8.06 Binding Effect and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns; but neither this Agreement nor any of the
rights, benefits or obligations hereunder shall be assigned, by operation of law
or otherwise, by either party without the prior written consent of the other
party. The Company understands and consents to Buyer's assignment of all of its
rights and obligations under this Agreement to Naturade pursuant to the
Assignment and Assumption Agreement in the form attached as Exhibit F-2, and,
acknowledges that Naturade is an express third party beneficiary under this
Agreement. Except as set forth in the immediately prior sentence, nothing in
this Agreement, express or implied, is intended to confer upon any person or
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entity other than the parties hereto and their respective permitted successors
and assigns, any rights, benefits or obligations hereunder.
8.07 Remedies. The rights and remedies provided by this Agreement
are cumulative, and the use of any one right or remedy by any party hereto shall
not preclude or constitute a waiver of its right to use any or all other
remedies. Such rights and remedies are given in addition to any other rights and
remedies a party may have by law, statute or otherwise.
8.08 Exhibits and Schedules. The exhibits and Schedules referred to
herein are attached hereto and incorporated herein by this reference. Disclosure
of a specific item in any one Schedule shall be deemed restricted only to the
Sections to which it is reasonably apparent on its face that it specifically
relates.
8.09 Multiple Counterparts. This Agreement may be executed in one or
more counterparts and via facsimile, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
8.10 References and Construction.
(a) Whenever required by the context, and is used in this
Agreement, the singular number shall include the plural and pronouns and
any variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular or plural, as the identification the person may
require. References to monetary amounts, specific named statutes and
generally accepted accounting principles are intended to be and shall be
construed as references to United States dollars, statutes of the United
States of the stated name and United States generally accepted accounting
principles, respectively, unless the context otherwise requires.
(b) The provisions of this Agreement shall be construed
according to their fair meaning and neither for nor against any party
hereto irrespective of which party caused such provisions to be drafted.
Each of the parties acknowledge that it has been represented by an
attorney in connection with the preparation and execution of this
Agreement.
8.11 Survival. Any provision of this Agreement which contemplates
performance or the existence of obligations after the Closing Date, and any and
all representations and warranties set forth in this Agreement, shall not be
deemed to be merged into or waived by the execution and delivery of the
instruments executed at the Closing, but shall expressly survive Closing and
shall be binding upon the party or parties obligated thereby in accordance with
the terms of this Agreement, subject to any limitations expressly set forth in
this Agreement.
8.12 Attorneys' Fees. In the event any suit or other legal
proceeding is brought for the enforcement of any of the provisions of this
Agreement, the parties hereto agree that the prevailing party or parties shall
be entitled to recover from the other party or parties upon final judgment on
the merits reasonable attorneys' fees (and sales taxes thereon, if any),
including attorneys' fees for any appeal, and costs incurred in bringing such
suit or proceeding.
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8.13 Termination.
(a) This Agreement shall terminate on the earlier to occur of
any of the following events:
(i) the mutual written agreement of Buyer and the
Company;
(ii) by written notice of Buyer or the Company to the
other party hereto, if the Closing shall not have occurred prior to
12:00 midnight, Pacific Daylight time, on the 30th day after the
date of this Agreement;
(iii) by written notice of Buyer to the Company, if the
Company shall have materially breached any of their representations,
warranties or agreements contained herein or pursuant to Section
5.03; or
(iv) by written notice of the Company to Buyer, if Buyer
shall have materially breached any of its representations,
warranties or agreements contained herein.
(b) Nothing in this Section shall relieve any party of any
liability for a breach of this Agreement prior to the termination hereof.
Upon the termination of this Agreement, all other rights and obligations
of the parties under this Agreement shall terminate, except their
obligations under Sections 6.02, 6.04, 7.05, 8.02-8.05, 8.07 and
8.10-8.12.
8.14 Bulk Sales Laws. The parties hereby waive compliance with the
bulk sales laws of any state in which the Assets are located or in which
operations relating to the Business are conducted.
ARTICLE IX
DEFINITIONS
Capitalized terms used in this Agreement are used as defined in this
Article IX or elsewhere in this Agreement.
9.01 Action. The term "Action" shall mean any lawsuit, claim,
proceeding, litigation, arbitration, action, investigation, inquiry, cause of
action, right of recovery or chose in action.
9.02 Affiliate. The term "Affiliate" shall mean, with respect to any
Person, any other Person controlling, controlled by or under common control with
such Person. The term "Control" as used in the preceding sentence means, with
respect to a corporation, the right to exercise, directly or indirectly, more
than 50% of the voting rights attributable to the shares of the controlled
corporation and, with respect to any Person other than a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person.
9.03 Assets. Shall have the meaning set forth in Section 1.01.
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9.04 Business Day. The term "Business Day" shall mean any day that
national banks are open to conduct business in Irvine, California.
9.05 Closing Date. Shall have the meaning set forth in Section 2.01.
9.06 Code. The term "Code" shall mean the Internal Revenue Code of
1986, as amended.
9.07 Collateral Agreements. The term "Collateral Agreements" shall
mean any or all of the exhibits to this Agreement and any and all other
agreements, instruments or documents required or expressly provided under this
Agreement to be executed and delivered in connection with the transactions
contemplated by this Agreement.
9.08 Contract. The term "Contract" shall mean any written contract,
agreement, license, lease, guaranty, indenture, sales or purchase order or other
legally binding commitment in the nature of a contract to which the Company is a
party.
9.09 Court Order. The term "Court Order" means any judgment, order,
writ, decision, injunction, award or decree of any foreign, federal, state,
local or other court or tribunal and any ruling or award in any arbitration
proceeding.
9.10 Encumbrances. The term "Encumbrances" shall mean any lien,
encumbrance, claim, charge, security interest, mortgage, deed of trust, pledge,
easement, conditional sale or other title retention agreement, defect in title
or other restriction of a similar kind.
9.11 Financial Statements. The term "Financial Statements" shall
have the meaning set forth in Section 3.05.
9.12 GAAP. The term "GAAP" shall mean generally accepted accounting
principles, consistently applied.
9.13 Governmental Authorities. The term "Governmental Authorities"
shall mean any nation or country (including but not limited to the United States
and the Bahamas) and any commonwealth, territory or possession thereof and any
political subdivision of any of the foregoing, including but not limited to
courts, departments, commissions, boards, bureaus, agencies, ministries or other
instrumentalities.
9.14 Intellectual Property. The term "Intellectual Property" shall
mean any and all of the following which is owned by, licensed by, licensed to,
used or held for use by the Company (including all copies and embodiments
thereof, in electronic, written or other media): (a) all registered and
unregistered U.S. and foreign trade names, trademarks, trade dress and service
marks, together with any applications related thereto and the goodwill of the
Business symbolized thereby ("Marks"); (b) all inventions (whether patentable or
unpatentable), all improvements thereto, and all patent, patent applications and
disclosures related thereto, together with all reissuances, continuations,
continuations in part, revisions, extensions and re-examinations thereof and all
issued U.S. and foreign patents and pending patent applications, patent
disclosures and improvements thereto (collectively, the "Patents"); (c) all
registered and
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unregistered U.S. and foreign works of authorship, fixed in any tangible medium
of expressions regardless of the availability of copyright protection, but
including all copyrights and moral rights recognized by law and all applications
to register and renewals of any of the foregoing ("Copyrights"); (d) all
categories of ideas, trade secrets, know-how, inventions (whether or not
patentable and whether or not reduced to practice), improvements, processes,
procedures, drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing, and business data, pricing and cost
information, business and marketing plans, customer and supplier lists and
information, other confidential and proprietary information, manufacturing and
production processes and techniques, molds, dies, casts and product
configurations ("Proprietary Rights"); (e) all licenses and other Contracts
pursuant to which the Person has acquired rights in or to any of the Marks,
Patents, Copyrights, or Proprietary Rights ("In-Licenses"); and (f) all licenses
and other Contracts to which the Person has sold, licensed, leased or otherwise
transferred or granted any interest or rights to any Marks, Patents, Copyrights,
or Proprietary Rights ("Out-Licenses").
9.15 Inventory. The term "Inventory" shall mean all goods,
merchandise and other personal property owned and held for sale, and all raw
materials, works-in-process, materials and supplies of every nature which
contribute to the finished products of the Company in the ordinary course of its
business, specifically excluding, however, damaged, defective or otherwise
unsaleable items.
9.16 Knowledge. The term "Knowledge" with respect to any particular
matter, shall mean the actual knowledge of Xxxxxxx Xxxxx, after reasonable due
inquiry of the employees of the Company who could be reasonably expected to be
knowledgeable about the facts relating to such matter.
9.17 Legal Requirements. The term "Legal Requirements," when
described as being applicable to any Person, shall mean any and all laws
(statutory, judicial or otherwise), ordinances, regulations, judgments, orders,
directives, injunctions, writs, decrees or awards of, and any Contracts with,
any Governmental Authority, in each case as and to the extent applicable to such
Person or such Person's business, operations or properties.
9.18 Liabilities. The term "Liabilities" shall mean all
indebtedness, obligations, damages, fines, fees, penalties, and other
liabilities (or contingencies that have not yet become liabilities), whether
absolute, accrued, matured, contingent (or based upon any contingency), known or
unknown, fixed or otherwise, or whether due or to become due, including without
limitation, any fines, penalties, judgments, awards or settlements respecting
any judicial, administrative or arbitration proceedings or any damages, losses,
claims or demands with respect to any Legal Requirement.
9.19 Naturade. The term "Naturade" shall mean Naturade, Inc., a
Delaware corporation.
9.20 Permits. The term "Permits" shall mean any and all permits,
rights, approvals, licenses, authorizations, legal status, orders or Contracts
under any Legal Requirement or otherwise granted by any Governmental Authority.
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9.21 Person. The term "Person" shall mean any individual,
partnership, joint venture, firm, corporation, association, limited liability
company, trust or other enterprise or any governmental or political subdivision
or any agency, department or instrumentality thereof.
9.22 Taxes. The term "Taxes" shall mean any federal, state, local or
foreign income, gross receipts, estimated, profits, windfall profits, intangible
property, occupation, production, emergency excess, capital gains, capital
stock, stamp, goods and services, value-added property, sales, use, license,
excise, franchise, employment, payroll, withholding, alternative or add-on
minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, imposed by any Governmental Authority.
9.23 Tax Returns. The term "Tax Returns" shall mean any return,
report or similar statement required to be filed with respect to any Tax
(including any attached schedules), including, without limitation, any
information return, claim for refund, amended return or declaration of estimated
Tax and any affiliated, consolidated, combined, unitary or similar return.
[SIGNATURES ON FOLLOWING PAGE]
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[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
EXECUTED as of the date first written above.
BUYER:
Quincy Investments, Corp.,
a Bahamas International Business Company
By: /s/Xxxxx X. Xxxxxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxxxxx
Title: Chairman
COMPANY:
Symco, Incorporated,
a Nevada corporation
By: /s/Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: CEO
Symbiotics, Inc.,
an Arizona corporation
By: /s/Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: CEO
S-1
[Schedules and Exhibits have been omitted but are
available to the staff of the Commission upon request]
