EXHIBIT 2
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ASSET PURCHASE AGREEMENT
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BY AND BETWEEN
HEALTH & NUTRITION SYSTEMS INTERNATIONAL, INC., A FLORIDA CORPORATION,
AND
TEEZEE, INC., A FLORIDA CORPORATION
NOVEMBER 26, 2003
ASSET PURCHASE AGREEMENT
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This ASSET PURCHASE AGREEMENT is dated this 26th day of November, 2003
by and between Health & Nutrition Systems International, Inc., a Florida
corporation ("Seller") and TeeZee, Inc., a Florida corporation ("Purchaser").
RECITALS
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WHEREAS, Seller is engaged in developing, marketing and selling dietary
supplements;
WHEREAS, Xxxxxxxxxxx Xxxx ("Xxxx"), an officer and the sole shareholder
of Purchaser, is also the Chief Executive Officer and a member of the Board of
Directors of Seller and accordingly has intimate knowledge of Seller's
operations;
WHEREAS, Purchaser desires to purchase substantially all of Seller's
assets and assume certain of its liabilities;
WHEREAS, Seller has determined that it is advisable and in the best
interests of Seller and its shareholders that Purchaser purchase such assets and
assume certain of its liabilities all upon the terms and subject to the
conditions set forth herein; and
WHEREAS, Purchaser and Seller desire to make certain representations,
warranties, covenants and agreements in connection with, and establish various
conditions precedent to the consummation of the transactions contemplated under
this Agreement.
NOW, THEREFORE, in consideration of the recitals herein before stated
and the mutual representations, warranties, covenants and agreements hereinafter
set forth, the receipt and sufficiency of which are hereby acknowledged,
Purchaser and Seller do hereby represent, warrant, covenant and agree as
follows:
AGREEMENT
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SECTION 1. DEFINITIONS
1.1. Defined Terms. In addition to terms defined elsewhere in this
Agreement, the following terms when utilized in this Agreement, unless the
context otherwise requires, shall have the meanings indicated, which meanings
shall be equally applicable to both the singular and plural forms of such terms:
"Accounting Standards" means the accounting policies and procedures of
Seller as described in Seller's 2002 Annual Report on Form 10-K, which policies
and procedures comply with GAAP.
"Acquired Assets" is defined in Section 2.1 of this Agreement.
"Affiliate" with respect to any Person means any Person which, directly
or indirectly, through one or more intermediaries, controls the subject Person
or any Person which is controlled by or is under common control with a
Controlling Person. For purposes of this definition, "control" (including the
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correlative terms "controlling", "controlled by" and "under common control
with"), with respect to any Person, means possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise.
"Agreement" means this Asset Purchase Agreement together with all
exhibits and schedules contemplated hereby.
"Assumed Obligations" is defined in Section 2.1(c) of this Agreement
"Closing" is defined in Section 4.1 of this Agreement.
"Closing Date" is defined in Section 4.1 of this Agreement.
"Conveyance Documents" is defined in Section 2.1(b) of this Agreement.
"Drop Dead Date" means January 31, 2003 or such later date as the
parties may agree upon in writing.
"Excluded Assets" is defined in Section 2.1 of this Agreement.
"Excluded Obligations" is defined in Section 2.1 of this Agreement.
"Governmental Authorization" means any consent, license, registration
or permit issued, granted, given or otherwise made available by or under the
authority of any government, court, regulatory or administrative agency or
commission, or other governmental authority, agency or instrumentality, whether
federal, state or local (domestic or foreign) pursuant to any federal, state or
local law or ordinance.
"Intellectual Property Assets" is defined in Section 5.10 of this
Agreement.
"Lien" means any lien, charge, claim, restriction, encumbrance,
security interest or pledge of any kind whatsoever.
"Losses" is defined in Section 12.2 of this Agreement.
"Material Adverse Change" means (i) the loss of either Wal-Mart or GNC
as a customer; (ii) the occurrence of a product liability claim in excess of
Seller's product liability insurance limit; (iii) the occurrence of any of the
following (A) any general suspension of trading in securities on the New York
Stock Exchange, Inc. (the "NYSE") or there shall have been established by the
NYSE or by the Securities and Exchange Commission or by any federal or state
agency or by the decision of any court any limitation on prices for such trading
or any general restrictions on the distribution of securities, or trading in any
securities of Seller shall have been suspended or limited by any exchange
located in the United States or on the over-the-counter market located in the
United States or a general banking moratorium declared by New York or federal
authorities; (B) any new material outbreak of hostilities, including, but not
limited to, an escalation of hostilities which existed prior to the date of this
Agreement, any other national or international calamity or crisis, including an
act of terrorism, or any material adverse change in financial, political or
economic conditions affecting the United States; (C) any material interruption
in the Seller's operations due to an act of God; (iv) a material change in the
policy limits, or policy terms, of any of Seller's current insurance (including
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but not limited to products liability, worker's compensation, property and
crime, umbrella and D&O); or (v) an increase in the policy premiums on Seller's
current insurance policies such that the aggregate of all premiums is greater
than $180,000.
"Material Adverse Effect" means (i) a material adverse effect on the
business, assets, and properties, results of operations or financial condition
of Seller taken as a whole or (ii) a material adverse effect on Seller's ability
to enter into or perform their obligations under this Agreement.
"Permitted Liens" means (i) Liens for taxes not yet due and payable,
(ii) easements, covenants, conditions and restrictions of record, (iii)
easements, covenants, conditions and restrictions not of record as to which no
material violation or encroachment exists or, if such violation or encroachment
exists, as to which the cure of such violation or encroachment would not
materially interfere with the conduct of Seller's operations, (iv) any zoning or
other governmentally established restrictions or encumbrances, (v) workers or
unemployment compensation Liens arising in the ordinary course of business
securing amounts which are not delinquent, (vi) mechanic's, material man's,
supplier's, vendor's, landlord's or similar Liens arising in the ordinary course
of business securing amounts which are not delinquent, (vii) railroad trackage
agreements, utility, slope and drainage easements, right-of-way easements and
leases regarding signs which are not material to Seller's operations, and (viii)
other immaterial imperfections of title, easements, covenants, conditions,
restrictions or encumbrances.
"Person" means any natural person, corporation, limited liability
company, unincorporated organization, partnership, association, joint-stock
company, joint venture, trust or government, or any agency or political
subdivision of any government.
"Promissory Note" is defined in Section 3.1(c) of this Agreement
"Purchase Price" is defined in Section 3.1 of this Agreement.
"Purchaser" is defined in the preamble of this Agreement.
"Purchaser's Knowledge" means the actual knowledge, after reasonable
inquiry, of Tisi.
"Seller" is defined in the preamble of this Agreement.
"Seller's Knowledge" means the actual knowledge, after reasonable
inquiry, of one or more of the current members of the Board of Directors of
Seller, other than Tisi.
"Taxes" shall mean all taxes, assessments, charges, duties, fees,
levies or other governmental charges (including interest, penalties or additions
associated therewith) including federal, state, city, county, foreign or other,
franchise, capital stock, real property, personal property, tangible,
withholding, FICA, unemployment compensation, disability, transfer, sales, use,
excise, gross receipts and all other taxes of any kind for which any Seller may
have any liability imposed by the United States or any state, county, city,
country or foreign government or subdivision or agency thereof, whether disputed
or not.
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"Tisi" is defined in the preamble of this Agreement.
"Used" shall mean, with respect to the properties, contracts, permits
or licenses of Seller, those owned, leased, licensed or otherwise held by Seller
which were acquired for use or held for use by Seller in connection with
Seller's operations, whether or not reflected on Seller's books of account.
1.2. Other Definitional Provisions. Unless otherwise defined herein,
all terms defined in this Agreement shall have the defined meanings when used in
any certificate, schedule, report or other document made or delivered pursuant
hereto.
SECTION 2. SALE AND PURCHASE OF ASSETS
2.1. Sale and Purchase of Assets.
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(a) On the terms and subject to the conditions of this
Agreement, at the Closing referred to in Section 4.1 hereof, Seller shall sell,
convey, assign, transfer and deliver to Purchaser, and Purchaser shall purchase,
acquire and accept delivery of, all assets and properties owned or Used by
Seller in its operations, except for (i) cash and cash equivalents, the Purchase
Price, the Promissory Note and other rights of Seller under this Agreement, (ii)
Seller's corporate minute book and stock records, and (iii) those assets
specifically listed on Schedule 2.1(a) (such specifically listed assets in
clauses (i), (ii) and (iii) being referred to as the "Excluded Assets"),
including without limiting the generality of the foregoing:
(i) all accounts receivable;
(ii) all raw materials, works-in-process,
inventories and other materials of Seller wherever located and including all
inventory in transit or on order and not yet delivered, and all rights with
respect to the processing and completion of any orders of Seller, including the
right to collect and receive charges for such orders;
(iii) all supplies, equipment, vehicles,
machinery, furniture, fixtures, leasehold improvements, computer equipment and
peripherals, and other tangible property Used by Seller in connection with its
operations, and Seller's interest as lessee in any leases with respect to any of
the foregoing;
(iv) all of Seller's right, title and interest
in and to its Contracts, including the Contracts listed or required to be listed
on Schedule 5.6 hereto;
(v) all proprietary knowledge, Trade Secrets,
Confidential Information, computer software and licenses, formulae, designs and
drawings, quality control data, processes (whether secret or not), methods,
inventions and other similar know-how or rights Used in the conduct of Seller's
operations, including, but not limited to, the areas of manufacturing,
marketing, advertising and personnel training and recruitment, together with all
other Intangible Rights used in connection with Seller's operations, including
all files, data, back-up tapes, manuals, documentation and source and object
codes related thereto;
(vi) all utility, security and other deposits and
prepaid expenses;
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(vii) Seller's operations as a going concern and
its franchises, Governmental Authorizations (to the extent such Governmental
Authorizations are transferable) and third parties, licenses, telephone numbers,
telecopy numbers, email addresses, URL, internet web sites, internet domain
names, customer lists, vendor lists, referral lists and contracts, advertising
materials and data, restrictive covenants, choses in action and similar
obligations owing to Seller from its present and former shareholders, officers,
employees, agents and others, together with all books, operating data and
records (including financial, accounting and credit records), files, papers,
records and other data of Seller;
(viii) all rights of Seller in and to, Seller's
name, all assumed fictional business names, and all Intellectual Property
Assets;
(ix) all rights to real property Used by Seller;
(x) all claims of Seller against third parties
relating to the Acquired Assets or Seller's operations, whether xxxxxx or
inchoate, known or unknown, contingent or noncontingent; and
(xi) all other property and rights of every kind
or nature Used by Seller in its operations.
It is specifically understood and agreed by the parties hereto that
Purchaser is acquiring, and Seller is selling, all of the tangible and
intangible assets attributable to or Used by Seller in its operations, except
the Excluded Assets. The aforesaid assets and properties to be transferred to
Purchaser hereunder are hereinafter collectively referred to as the "Acquired
Assets." Notwithstanding anything to the contrary contained herein, the transfer
of the Acquired Assets pursuant to this Agreement shall not include the
assumption of any liability relating to the Acquired Assets unless Purchaser
expressly assumes that liability pursuant to Section 2.1(c) of this Agreement.
(b) Method of Conveyance. The sale, transfer, conveyance,
assignment and delivery by Seller of the Acquired Assets to Purchaser in
accordance with Section 2.1 hereof shall be effected on the Closing Date by
Seller's execution and delivery to Purchaser of one or more bills of sale,
assignments and other conveyance instruments with respect to Seller's transfer
of the Acquired Assets in form and scope reasonably satisfactory to Purchaser
(collectively the "Conveyance Documents"). At the Closing, all of Seller's
right, title or interest in and to all of the Acquired Assets shall be
transferred, conveyed, assigned and delivered by Seller to Purchaser pursuant to
the Conveyance Documents.
(c) Assumed Obligations. At the Closing, Purchaser shall
assume, and agree to satisfy and discharge as the same shall become due, (i) all
trade accounts payable and accrued expenses that have been incurred in the
ordinary course of Seller's business (excluding, for purposes of clarification
and not limitation, any and all professional fees, costs and other expenses
incurred by the Seller in connection with the negotiation, execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby after October 31, 2003, all of which shall be governed by Section 14.4
hereof), (ii) Seller's liabilities and other obligations arising subsequent to
the Closing under all contracts entered into by Seller in the ordinary course of
its business (including open purchase orders) after the date hereof, and (iii)
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the obligations listed on Schedule 2.1(c) hereto (collectively the "Assumed
Obligations").
Except as expressly set forth in this paragraph (c), Purchaser
shall not assume or be responsible at any time for any liability, obligation,
debt or commitment of Seller, whether absolute or contingent, accrued or
unaccrued, asserted or unasserted, or otherwise, including but not limited to
any liabilities, obligations, debts or commitments of Seller incident to,
arising out of or incurred with respect to, this Agreement and the transactions
contemplated hereby (except to the extent contemplated by Section 14.5 hereof).
Without limiting the generality of the foregoing, Seller expressly acknowledges
and agrees that Seller shall retain, and that Purchaser shall not assume or
otherwise be obligated to pay, perform, defend or discharge, (a) any liability
of Seller for Taxes, whether measured by income or otherwise, (b) any product
liability pertaining to products sold by Seller prior to the Closing Date, (c)
any liability or obligation of Seller relating to any default taking place
before the Closing Date under any of the Assumed Obligations to the extent such
default created or increased the liability or obligation, (d) any obligation of
Seller to its shareholders, any Affiliate of Seller or its shareholders, or any
Person claiming to have a right to acquire any capital stock or other securities
of Seller, or (e) the Distribution Agreement by and between KMS and Seller
effective as of September 26, 2002, together with any and all liabilities or
obligations (including professional fees) arising out of or relating thereto or
to any prior or subsequent agreements between the parties. All obligations which
are not Assumed Obligations, including but not limited to the foregoing, are
hereinafter referred to as the "Excluded Obligations."
SECTION 3. PURCHASE PRICE
3.1. Purchase Price. As payment in full for the Acquired Assets being
acquired by Purchaser hereunder, Purchaser shall pay to Seller, in the manner
set forth in this Section 3.1, the sum of (i) Four Hundred and Eleven Thousand
Dollars ($411,000), (the "Purchase Price"). Purchaser shall make payment of the
Purchase Price as follows:
(a) On the date of execution of this Agreement, Purchaser
shall deliver to Xxxxxxxxx Traurig P.A., as escrow agent (the "Escrow Agent'),
the sum of Twenty Five Thousand Dollars ($25,000), in next day funds (the
"Escrow Amount"). The Escrow Amount shall be held by the Escrow Agent pursuant
to the terms and conditions of an Escrow Agreement containing terms reasonably
satisfactory to Seller and Purchaser (the "Escrow Agreement");
(b) On the Closing Date, Purchaser shall deliver to Seller, by
official bank check or wire transfer (to an account specified by Seller in
writing at least three business days prior to Closing), in next day funds, the
sum of Three Hundred and Fifty Thousand Dollars ($350,000); and
(c) On the Closing Date, Purchaser shall deliver to Seller a
promissory note for Thirty-Six Thousand Dollars ($36,000) (the "Promissory
Note"); and
The Purchase Price shall be allocated, apportioned and adjusted among
the Acquired Assets as set forth on Schedule 3.1 and the parties agree to abide
by such allocations for all tax reporting purposes.
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SECTION 4. CLOSING
4.1. Closing. Subject to the conditions stated in Section 7 and Section
8 of this Agreement, the closing of the transactions contemplated herein (the
"Closing") shall be held no later than the fifth (5th) business day after all of
the conditions set forth in Section 7 and 8 have been satisfied, at the offices
of Xxxxxxxxx Xxxxxxx P.A. at 000 Xxxxx Xxxxxxx Xxxxx, Xxxxx 000X, Xxxx Xxxx
Xxxxx, Xxxxxxx 00000, unless the parties agree to another time, date or place.
Notwithstanding the foregoing, unless this Agreement has been previously
terminated pursuant to the provisions of Section 13.1, the Closing may be
delayed up to the tenth business day after all of the conditions set forth in
Section 7 and Section 8 have been satisfied. The term "Closing Date" shall mean
the date on which the Closing occurs. The Closing shall be deemed effective as
of 11:59 p.m. West Palm Beach time on the Closing Date. Except as otherwise
provided herein, all proceedings to be taken and all documents to be executed at
the Closing shall be deemed to have been taken, delivered and executed
simultaneously, and no proceeding shall be deemed taken nor documents deemed
executed or delivered until all have been taken, delivered and executed.
4.2 Deliveries at Closing by Seller. On the Closing Date, Seller shall
deliver (or cause delivery) to Purchaser all of the following:
(a) the Conveyance Documents;
(b) Seller's Officer's Certificate;
(c) a certified copy of the resolutions adopted by
Seller's Special Committee of the Board of Directors authorizing (i) the
appointment of Xxxxx Xxxxx as Interim Chief Executive Officer, (ii) the
execution, delivery and performance of this Agreement and (iii) the consummation
of all of the transactions contemplated by this Agreement;
(d) a certificate of good standing of Seller from the
Florida Secretary of State;
(e) an incumbency certificate of Seller;
(f) the books and records of the Business, other than
those which constitute Excluded Assets pursuant to the terms of this Agreement;
(g) the Opinion of Seller's Counsel in accordance with
Section 7.7. hereof;
(h) an affidavit of Seller stating that, effective as of
the Closing Date, Seller will no longer use the name "Health & Nutrition Systems
International, Inc." for any purpose and that, effective as of the Closing Date,
Seller relinquishes the exclusive use of that name to Purchaser for Purchaser's
sole use and benefit; and
(i) such other documents as Purchaser or its counsel may
reasonably request.
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4.3 Deliveries at Closing by Purchaser. On the Closing Date, Purchaser
shall deliver (or cause delivery) to Seller all of the following:
(g) the Purchase Price;
(h) Purchaser's Officer's Certificate;
(c) a certified copy of the resolutions adopted by Purchaser's
Board of Directors and sole shareholder authorizing the execution, delivery and
performance of this Agreement and the consummation of all of the transactions
contemplated by this Agreement;
(d) a certificate of good standing of Purchaser from the
Florida Secretary of State; and
(e) such other documents as Seller or its counsel may
reasonably request.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER
Except as otherwise disclosed to Purchaser in the schedules to this
Agreement, Seller hereby represents and warrants the following to Purchaser:
5.1. Organization, Power and Qualification. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Florida. Seller has the power and authority to own, lease, and operate
its properties and assets and to carry on its business and Seller has the
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby.
5.2. Corporate Action. All corporate action necessary on the part of
Seller to authorize the execution and delivery to Purchaser of this Agreement
and the performance or satisfaction of the obligations of Seller in connection
with the transactions contemplated by this Agreement has been or will have been
duly taken prior to the Closing. This Agreement constitutes the valid and
binding obligation of Seller and is enforceable against Seller in accordance
with its terms, except as such enforcement may be affected by bankruptcy,
moratorium or other laws relating to creditor's rights generally or general
principles of equity.
5.3. Consents; No Breach. Except as set forth on Schedule 5.3, no
material consent, approval or authorization of, or designation, declaration or
filing with, any Governmental Authority on the part of Seller is required in
connection with the valid execution and delivery of this Agreement
(collectively, the "Required Consents"). Except as set forth on Schedule 5.3,
the execution, delivery and performance of this Agreement by Seller and the
consummation of the transactions contemplated hereby will not: (i) violate any
provision of its Articles of Incorporation, Bylaws or any amendment thereto of
Seller; (ii) violate in any material manner any order, judgment, injunction,
award or decree of any court, arbitrator or governmental or regulatory body
against, or binding upon, Seller; or (iii) violate any statute, law or
regulation of any jurisdiction, applicable to the transactions contemplated
herein including without limitation, the Florida Business Corporation Act and
all applicable federal and state securities laws.
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5.4. No Brokers or Finders. No Person has or will have, as a result of
the transactions contemplated by this Agreement, any right, interest or claim
against or upon Seller for any commission, fee or other compensation as a finder
or broker as a result of the consummation of this Agreement.
5.5. Litigation. Except as disclosed on Schedule 5.5 there is no
outstanding order, judgment, injunction, award or decree of any court,
governmental or regulatory body or arbitration tribunal against or involving
Seller which could have a Material Adverse Effect. Except as disclosed on
Schedule 5.5, there is no action, suit, or claim or legal, administrative or
arbitration proceeding or any investigation (whether or not the defense thereof
or liabilities in respect thereof are covered by insurance) pending, or to
Seller's Knowledge threatened against or involving Seller which could have a
Material Adverse Effect.
5.6. Material Contracts. Schedule 5.6 sets forth all material contracts
of Seller (including without limitation any contracts for employment of the
Employees (as defined in Section 5.9 below)) (the "Material Contracts"). The
Material Contracts are valid, binding, enforceable and existing agreements, in
full force and effect against Seller, except as such enforcement may be affected
by bankruptcy, moratorium or other law affecting creditor's rights generally or
general principles of equity. To Seller's Knowledge, Seller is not in default in
any material respect under any of the Material Contracts (nor to Seller's
Knowledge, has it received notice of the default of any other party to any
Material Contracts), and to Seller's Knowledge, no condition exists which with
notice or lapse of time or both would constitute default thereunder.
5.7. Financial Statements. Attached to this Agreement as Schedule 5.7
are the unaudited consolidated balance sheet of Seller as of September 30, 2003
(the "Balance Sheet") and statements of earnings of Seller for the nine month
period ended September 30, 2003 (collectively, the "Financial Statements"). To
Seller's Knowledge, the Financial Statements (i) present fairly in all material
respects the financial condition of Seller and its results of operations for
such period in accordance with the Accounting Standards, and (ii) have been
prepared in accordance with the Accounting Standards (other than the absence of
notes to the Financial Statements) for the periods covered by such statements.
5.8. Undisclosed Liabilities. Except as and to the extent reflected in
the Financial Statements, to Seller's Knowledge, there are no material
liabilities, commitments or obligations of any nature, whether absolute,
accrued, contingent or otherwise, other than those incurred in the ordinary
course of Seller's business since September 30, 2003 which, (i) under the
Accounting Standards, are required to be disclosed in the Financial Statements,
and (ii) would have a Material Adverse Effect on Seller's operations.
5.9. Taxes. All federal, state and other tax returns relating to Seller
or its operations required by law to be filed have been duly filed, and except
as set forth on Schedule 5.9, all such tax returns were correct and complete in
all material respects. Except as set forth on Schedule 5.9, all such federal,
state and other taxes, assessments, fees and other federal governmental charges
shown to be due and payable on such returns have been paid, except such taxes
which are being contested in good faith or for which the dates for payment have
been extended, which contests and extensions are identified on Schedule 5.9
hereto.
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5.10. Intellectual Property Assets. Set forth on Schedule 5.10 is a
list and description of all material foreign and domestic patents, patent
rights, trademarks, service marks, trade names, brands and copyrights in both
published works and unpublished works (whether or not registered and, if
applicable, including pending applications for registration), and all rights in
mask works owned, Used, licensed or controlled by Seller and all going concern
value and goodwill associated therewith. To Seller's Knowledge, Seller has the
right to Use and shall as of the Closing Date own or have the right to Use any
and all information (whether confidential, proprietary or technical), know-how,
trade secrets, patents, copyrights, trademarks, tradenames, slogans software,
formulae, methods, processes and other intangible properties that are necessary
or customarily Used by Seller for the ownership, management or operation of its
Properties (collectively, the "Intellectual Property Assets") including, but not
limited to, the Intellectual Property Assets listed on Schedule 5.10.
5.11. Insurance.
(a) Insurance Policies. Schedule 5.11(a) hereto is a complete and
correct list of all insurance policies (including, without limitation, fire,
liability, product liability, workers' compensation and vehicular) presently in
effect that relate to Seller, its properties or operations (collectively, the
"Insurance Policies"), including the amounts of such insurance and annual
premiums with respect thereto, all of which have been in full force and effect
from and after the date(s) set forth on Schedule 5.11(a). To Seller's Knowledge,
none of the insurance carriers has indicated to Seller an intention to cancel
any such Insurance Policy or to materially increase any insurance premiums, or
that any insurance required to be listed on Schedule 5.11(a) will not be
available in the future on substantially the same terms as currently in effect.
(b) Insurance Claims. Except as set forth in Schedule 5.11(b), Seller
has no claim pending or anticipated against any of its insurance carriers under
any of such policies and, to Seller's Knowledge, there has been no actual or
alleged occurrence of any kind which could reasonably be expected to give rise
to any such claim.
5.12. Title to Property. At the Closing, to Seller's Knowledge,
Purchaser will have good title to all of the Acquired Assets, free and clear of
all Liens, subject only to (i) the Permitted Liens and (ii) those Liens set
forth on Schedule 5.12, which Liens are the sole Liens being assumed or taken
subject to by Purchaser pursuant to the terms of this Agreement.
5.13. Investment Intent. Seller is acquiring the Promissory Note for
its own account and not with a view to its distribution within the meaning of
Section 2(11) of the Securities Act. Seller confirms that Purchaser has made
available to Seller and its representatives the opportunity to ask questions of
the officers and management employees of Purchaser and to acquire such
additional information about the business and financial condition of Purchaser
as Seller has requested, and all such information has been received.
5.14 Solvency. Seller is not now insolvent and will not be rendered
insolvent by any of the transactions contemplated by this Agreement. As used in
this section, "insolvent" means that the sum of the debts and other probable
liabilities of Seller exceeds the present fair saleable value of Seller's
assets. Immediately after giving effect to the consummation of the transactions
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contemplated by this Agreement: (i) Seller will be able to pay its liabilities
as they become due in the usual course of its business; (ii) Seller will not
have unreasonably small capital with which to conduct its present or proposed
business; (iii) Seller will have assets (calculated at fair market value) that
exceed its liabilities; and (iv) taking into account all pending and threatened
litigation, final judgments against Seller in actions for money damages are not
reasonably anticipated to be rendered at a time when, or in amounts such that,
Seller will be unable to satisfy any such judgments promptly in accordance with
their terms (taking into account the maximum probable amount of such judgments
in any such actions and the earliest reasonable time at which such judgments
might be rendered) as well as all other obligations of Seller. The cash
available to Seller, after taking into account all other anticipated uses of the
cash, will be sufficient to pay all such debts and judgments promptly in
accordance with their terms.
5.15. No Additional Representations. Seller makes no representations or
warranties, express or implied, of any nature whatsoever, with respect to the
Business or the Acquired Assets except for the representations and warranties in
this Section 5.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller the following:
6.1. Binding Obligation. This Agreement constitutes the valid and
binding obligation of Purchaser and is enforceable against Purchaser in
accordance with its terms, except as such enforcement may be affected by
bankruptcy, moratorium and other laws relating to creditor's rights generally or
general principles of equity.
6.2. Consents; No Breach. No consent, approval or authorization of, or
designation, declaration or filing with, any Governmental Authority on the part
of Purchaser is required in connection with the valid execution and delivery of
this Agreement. Purchaser shall have on or before the Closing all necessary or
appropriate licenses, permits or others approvals from all applicable
Governmental Authorities which allow Purchaser to acquire the Acquired Assets
and to assume the Assumed Obligations. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
will not: (i) violate, conflict with or result in the breach of any of the
material terms of, result in a material modification of, otherwise give any
other contracting party the right to terminate, or constitute (or with notice or
lapse of time or both constitute) a default under, any material contract or
other agreement to which Purchaser is a party; (ii) violate in any material
manner any order, judgment, injunction, award or decree of any court, arbitrator
or governmental or regulatory body against, or binding upon, Purchaser; or (iii)
violate any statute, law or regulation of any jurisdiction applicable to the
transactions contemplated herein.
6.3. Litigation. There is no outstanding order, judgment, injunction,
award or decree of any court, governmental or regulatory body or arbitration
tribunal against or involving Purchaser. There is no action, suit or claim or
legal, administrative or arbitration proceeding or any investigation (whether or
not the defense thereof or liabilities in respect thereof are covered by
insurance) pending, or to Purchaser's Knowledge, threatened, against or
involving Purchaser.
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6.4. No Brokers or Finders. No Person has or will have, as a result of
the transactions contemplated by this Agreement, any right, interest or claim
against or upon Purchaser for any commission, fee or other compensation as a
finder or broker as a result of the consummation of this Agreement.
6.5. Organization, Power and Qualifications. Purchaser is a
corporation, duly organized, validly existing and in good standing under the
laws of its state of formation. Purchaser has full power to enter into this
Agreement and to consummate the transactions contemplated hereby.
6.6. Capitalization. As of the date hereof, (i) the authorized capital
stock of Purchaser consists of 100,000 shares of common stock, 900,000 of which
are issued and outstanding. All of the issued and outstanding shares of common
stock are owned by Tisi. There are no outstanding (a) securities convertible
into or exchangeable for such capital stock and membership interest; (b)
options, warrants, or other rights to purchase or subscribe to such capital
stock or securities convertible or exchangeable for such capital stock and
membership interest; or (c) contracts, commitments, agreements, understandings
or arrangements of any kind relating to the issuance of such capital stock and
membership interest.
6.7. Corporate Action. All action necessary on the part of Purchaser to
execute and deliver to Seller this Agreement and the performance or satisfaction
of the obligations of Purchaser in connection with the transactions contemplated
by this Agreement has been or will have been duly taken prior to the Closing.
This Agreement constitutes the valid and binding obligation of Purchaser and is
enforceable against Purchaser in accordance with its terms, except as such
enforcement may be affected by bankruptcy, moratorium and other laws relating to
creditor's rights generally or general principles of equity.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF PURCHASER TO CLOSE
The obligation of Purchaser to consummate this Agreement and the
transactions contemplated hereby is subject to the satisfaction at or before the
Closing of each and every one of the following conditions, any of which
Purchaser may, in its sole discretion, waive.
7.1. Representations and Warranties True. Each of the representations
and warranties of Seller contained in this Agreement shall be true and correct
in all material respects as of the Closing, as though made on and as of the
Closing. Purchaser shall have received a certificate from the Seller to such
effect (the "Seller's Officer's Certificate").
7.2. Performance of Obligations of Seller. Seller shall have performed
in all material respects all obligations and covenants required to be performed
by it under this Agreement prior to or as of the Closing Date.
7.3. No Obstructive Proceedings. No action or proceedings shall have
been instituted against, and no order, decree or judgment of any court, agency,
commission or Governmental Authority shall be existing against Purchaser or an
Affiliate of Purchaser which seeks to or would render it unlawful as of the
Closing to effect the sale of the Acquired Assets in accordance with the terms
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hereof, and no such action shall seek damages against Purchaser or an Affiliate
of Purchaser in a material amount by reason of the transactions contemplated
hereby.
7.4. No Adverse Change. Between the date hereof and the Closing Date,
there shall have not been any Material Adverse Change.
7.5. Insurance Matters. Seller shall have complied with the covenants
set forth in Section 11.6.
7.6. Required Consents. Seller shall have obtained the Required
Consents.
7.7 Opinion of Seller's Counsel. Purchaser shall have received the
opinion of Xxxxxxxxx Xxxxxxx P.A., counsel to Seller ("Company Counsel"), dated
as of the Closing Date, in form and substance reasonably satisfactory to
Purchaser. In rendering such opinion, Company Counsel may rely as to factual
matters on certificates of the comptroller and/or directors of Seller.
SECTION 8. CONDITIONS PRECEDENT TO OBLIGATION OF SELLER TO CLOSE
The obligation of Seller to consummate this Agreement and the
transactions contemplated hereby are subject to the satisfaction at or before
the Closing of each and every one of the following conditions, any of which
Seller may, in its sole discretion, waive.
8.1. Representations and Warranties True. Each of the representations
and warranties of Purchaser contained in this Agreement shall be true and
correct in all material respects as of the Closing, as though made on and as of
the Closing and Seller shall have received a certificate of the Chief Executive
Officer of Purchaser to that effect ("Purchaser's Certificate").
8.2. Performance of Obligations of Purchaser. Purchaser shall have
performed in all material respects all obligations and covenants required to be
performed by Purchaser under this Agreement prior to or as of the Closing Date.
8.3. No Obstructive Proceeding. No action or proceeding shall have been
instituted or threatened against and no order, decree or judgment of any court,
agency, commission or Governmental Authority shall be existing against Seller or
its business which seeks to or would render it unlawful as of the Closing to
effect the sale of the Acquired Assets in accordance with the terms hereof, and
no such action whether instituted or threatened shall seek damages against
Seller or the Business in a material amount by reason of the transactions
contemplated hereby.
8.4. Permits, Approvals and Consents. Any and all permits, releases,
approvals and consents from any Person required for the consummation of the
Closing set forth on Schedule 5.3.
8.5. Board Approval. The Board of Directors of Seller and the special
committee thereof formed on August 13, 2003 (the "Special Committee") in their
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sole and absolute discretion shall be satisfied with the terms and conditions of
this Agreement.
8.6. Independent Valuation. Seller shall have obtained a fairness
opinion from an independent investment banking firm, appraisal firm or
accounting firm (the "Valuation Firm"), satisfactory to the Special Committee,
to the effect that the transactions contemplated by this Agreement are fair,
from a financial point of view, to Seller and its stockholders.
8.7 Shareholder Approval. Seller shall have obtained the approval of
its shareholders in accordance with and as required by its organizational
documents and applicable law.
SECTION 9. TAX MATTERS
9.1. Filing of Returns. Seller shall properly and timely prepare, file
and deliver to the appropriate authorities or other persons all tax returns,
reports and forms with respect to Seller's operations required to be filed and
delivered, for any taxable period ending on or before the Closing Date, and
shall ensure that all Charges (as hereinafter defined) and other impositions
shown thereon to be due and payable have been paid prior to the date on which
any fine, penalty, interest, late charge or loss may be added thereto for the
nonpayment thereof, unless any such amounts are being contested in good faith by
appropriate proceedings, or any such fine, penalty, interest, late charge or
loss has been paid. For purposes of this Agreement, "Charges" shall mean all
federal, state, county, city, municipal, local, foreign or other governmental
taxes, levies, assessments and charges, liens, claims or encumbrances upon or
relating to Seller's employees, payroll, income, or gross receipts, Seller's
ownership or use of any of its assets, or any other aspect of Seller's business,
in each case including any and all interest and penalties. For any period not
ending prior to or on the Closing Date, Purchaser shall timely prepare and file
with or deliver to the appropriate authorities or other persons all tax returns,
reports and forms required to be filed or delivered.
9.2. Ad Valorem and Similar Taxes. Ad valorem, property and similar
taxes and assessments (other than taxes on income, gain or receipts, or transfer
taxes in respect of the Acquired Assets) based upon or measured by the value of
the Acquired Assets shall be divided or prorated between Purchaser and Seller as
of the Closing Date based on the amount of such taxes paid for the previous
year, unless a new tax statement is received prior to the Closing Date, in which
event the tax apportionment made as of the Closing Date shall be adjusted in
accordance with such new tax statement or as otherwise mutually agreed. In this
regard, Seller shall assume responsibility for such taxes attributable to the
period of time prior to the Closing Date and Purchaser shall assume
responsibility for the periods of time thereafter. A period not ending on the
Closing Date shall be referred to as a "Straddle Period". Real, personal and
intangible personal property Taxes allocable to Seller shall be equal to the
amount of such Taxes for the entire taxable period multiplied by a fraction, the
numerator of which is a number of days in a Straddle Period prior to and
including the Closing Date and the denominator of which is the number of days in
the Straddle Period. All other Taxes for the portion of the Straddle Period
ending on the Closing Date shall be computed as if such taxable period ended as
of the close of business on the Closing Date. Not later than 30 days after the
Closing Date, Purchaser and Seller shall determine and shall pay all amounts
required to be paid pursuant to such allocation.
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9.3. Audits. In the event of an audit by a taxing authority involving
Seller, the consent of Purchaser shall not be required unless Taxes are being
assessed against Purchaser and Seller has not provided funds to pay any such
Taxes.
SECTION 10. PRE-CLOSING COVENANTS
10.1. Efforts to Consummate Subject to the terms and conditions of this
Agreement, each party hereto shall use commercially reasonable efforts to take
or cause to be taken all actions and do or cause to be done all things required
under applicable law in order to consummate the transactions contemplated
hereby, including, without limitation, (i) obtaining all Governmental
Authorizations and other permits, authorizations, consents and approvals of any
other Person which are required for or in connection with the consummation of
the transactions contemplated hereby and by the other documents contemplated
hereby, (ii) taking any and all reasonable actions necessary to satisfy all of
the conditions to such party's obligations hereunder, and (iii) executing and
delivering all agreements and documents required by the terms hereof to be
executed and delivered by such party on or prior to the Closing. With regard to
all dates and time period set forth or referred to in this Agreement, time is of
the essence.
10.2. Publicity. Except as otherwise required by applicable law or the
disclosure rules and regulations of the Securities and Exchange Commission,
neither Purchaser nor Seller shall issue any press release or make any other
public statement (including statements to Employees) relating to this Agreement
or the transactions contemplated hereby without obtaining the prior written
approval of the other party hereto of the contents and manner of presentation
and publication thereof.
10.3. Conduct of Business. During the period from the date hereof to
the Closing Date, Seller will conduct its operations in the usual and ordinary
course of business and in substantially the same manner as previously conducted,
including without limitation that Seller will (i) to the extent of funds
available in the ordinary course of business, pay all accounts payable which are
due; and (ii) collect all accounts receivable in the ordinary course of business
consistent with past practices and shall not factor or finance any such
receivables.
10.4. Revision of Schedules. During the period from the date hereof to
the Closing Date, the parties shall be able to amend the schedules to this
Agreement to correct any factual inaccuracies or omissions including but not
limited to assumed obligations, obligations and material contracts contained in
such schedules at any time between the date hereof and the Closing Date,
provided, however, any contemplated change must be approved by all parties to
this Agreement, which approvals shall not be unreasonably withheld.
10.5. Solicitation of Transactions. From the date of this Agreement
until the occurrence of the Closing, Seller will not directly or indirectly
through the Valuation Firm or otherwise solicit or entertain offers from,
negotiate with or in any manner encourage, discuss, accept or consider any
proposal of any other person relating to the acquisition of the Seller, its
assets or business, in whole or in part, whether directly or indirectly, through
purchase, merger, consolidation or otherwise (other than sales of inventory in
the ordinary course of business).
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10.6 Name Change.
(a) Seller hereby represents, warrants and covenants to
Purchaser that the corporate name of Seller is as set forth on the signature
page hereof and further agrees and acknowledges that such name is included with
the Acquired Assets and that the exclusive right to use such name will be
transferred to Purchaser on the Closing Date. Seller shall, prior to the Closing
Date, (i) file an appropriate amendment to Seller's Articles of Incorporation
and take all other actions necessary to change its name to a name which is in no
way similar to the corporate name set forth on the signature page hereof, in
Purchaser's judgment; (ii) shall furnish any written consents and assignments as
Purchaser shall hereafter reasonably request in connection with such name
change. Seller further agrees to take all actions, after the Closing, which are
requested by Purchaser to enable Purchaser to immediately change its name to
Seller's present name.
(b) In connection with the same, Seller shall remove or cover,
or shall have caused to be removed or covered, no later than 30 days after the
Closing Date, the trademarks and/or trade names transferred pursuant to this
Agreement, or any derivative of such names or marks, from letterhead, envelopes,
labels, containers, signs, panels, signage and other material or matter
(regardless of medium).
SECTION 11. POST-CLOSING COVENANTS
11.1. Further Assurances. Following the Closing, Seller and Purchaser
shall execute and deliver such documents, and take such other action, as shall
be reasonably requested by the other party hereto to carry out the transactions
contemplated by this Agreement.
11.2. Access to Records. For a period of three years after the Closing
Date, Seller shall have the right, at its expense, and during normal business
hours upon prior written notification, to inspect and copy any of the records
relating to the operation of Seller's business delivered to Purchaser in
connection with this transaction, for the purposes of (a) preparing and/or
defending tax returns for the period prior to the Closing Date, (b) obtaining
information relating to claims arising from the operation of the Business prior
to the Closing Date or (c) any other commercially reasonable purpose. During
such seven year period, Purchaser shall not destroy or discard such records.
After such seven year period, Purchaser may destroy or discard such records, but
must provide Seller with at least 90 days' prior written notice of its
intentions and shall give Seller the right, at its expense, to remove from
Purchaser's premises any such records within such 90 day period.
11.3 Payment of Retained Liabilities. In addition to the payment of
Taxes pursuant to Section 10, Seller shall pay, or make adequate provision for
the payment, in full of all of the liabilities of Seller not assumed by
Purchaser hereunder. If any such liabilities are not so paid or provided for, or
if Purchaser reasonably determines that failure to make any payments will impair
Purchaser's use or enjoyment of the Acquired Assets, Purchaser may, at any time
after the Closing Date, elect to make all such payments directly (but shall have
no obligation to do so) and set off and deduct the full amount of all such
payments from the first maturing installments of the unpaid principal balance of
the Promissory Note. Purchaser shall receive full credit under the Promissory
Note and this Agreement for all payments so made.
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11.4. Non-Competition. Seller hereby agrees that it shall, for a period
from the Closing Date until the fifth anniversary thereof, (the "Covenant
Period"), refrain from, anywhere within the continental United States (the
"Restricted Location"), directly or indirectly, owning, managing, operating,
controlling or financing, any business that is engaged in the business of the
research, development, manufacturing, marketing or sale of dietary or
nutritional supplements, drinks, bars, or other similar products whether
web-based or otherwise; provided, however, that the foregoing shall not apply to
the ownership of not more than five percent of the outstanding capital stock of
any company listed by a national securities exchange or an over-the-counter
stock listed by the National Association of Securities Dealers.
11.5. Confidentiality.
(a) Definition of Confidential Information. As used in this
Section 11.5, the term "Confidential Information" includes any and all of the
following information of Seller or Purchaser that has been or may hereafter be
disclosed in any form, whether in writing, orally, electronically or otherwise,
or otherwise made available by observation, inspection or otherwise by either
party (Purchaser on the one hand or Seller on the other hand) or its
Representatives (collectively, a "Disclosing Party") to the other party or its
Representatives (collectively, a "Receiving Party"):
(i) all information that is a trade secret under
applicable trade secret or other law;
(ii) all information concerning product specifications,
data, know-how, formulae, compositions, processes,
designs, sketches, photographs, graphs, drawings,
samples, inventions and ideas, past, current and
planned research and development, current and planned
manufacturing or distribution methods and processes,
customer lists, current and anticipated customer
requirements, price lists, market studies, business
plans, computer hardware, Software and computer
software and database technologies, systems,
structures and architectures;
(iii) all information concerning the business and affairs
of the Disclosing Party (which includes historical
and current financial statements, financial
projections and budgets, tax returns and accountants'
materials, historical, current and projected sales,
capital spending budgets and plans, business plans,
strategic plans, marketing and advertising plans,
publications, client and customer lists and files,
contracts, the names and backgrounds of key personnel
and personnel training techniques and materials,
however documented), and all information obtained
from review of the Disclosing Party's documents or
property or discussions with the Disclosing Party
regardless of the form of the communication;
provided, however, all such information relating to
Seller's operations after the Closing Date (whether
such information was prepared before or after the
Closing Date) shall be excluded form the definition
of "Confidential Information"; and
(iv) all notes, analyses, compilations, studies, summaries
and other material prepared by the Receiving Party to
the extent containing or based, in whole or in part,
upon any information included in the foregoing.
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Any trade secrets of a Disclosing Party shall also be entitled
to all of the protections and benefits under applicable trade secret law and any
other applicable law. If any information that a Disclosing Party deems to be a
trade secret is found by a court of competent jurisdiction not to be a trade
secret for purposes of this Section 11.5, such information shall still be
considered Confidential Information of that Disclosing Party for purposes of
this Section 11.5 to the extent included within the definition. In the case of
trade secrets, each of Purchaser and Seller hereby waives any requirement that
the other party submit proof of the economic value of any trade secret or post a
bond or other security.
(b) Restricted Use of Confidential Information. Each Receiving
Party acknowledges the confidential and proprietary nature of the Confidential
Information of the Disclosing Party and agrees that such Confidential
Information (i) shall be kept confidential by the Receiving Party; (ii) shall
not be used for any reason or purpose other than to evaluate and consummate the
Contemplated Transactions; and (iii) without limiting the foregoing, shall not
be disclosed by the Receiving Party to any Person, except in each case as
otherwise expressly permitted by the terms of this Agreement or with the prior
written consent of an authorized representative of Seller with respect to
Confidential Information of Seller ("Seller Contact") or an authorized
representative of Purchaser with respect to Confidential Information of
Purchaser ("Purchaser Contact"). Each of Purchaser and Seller shall disclose the
Confidential Information of the other party only to its Representatives who
require such material for the purpose of evaluating the transactions
contemplated hereby and are informed by Purchaser or Seller, as the case may be,
of the obligations of this Section 11.5 with respect to such information. Each
of Purchaser and Seller shall (i) enforce the terms of this Section 11.5 as to
its respective Representatives; (v) take such action to the extent necessary to
cause its Representatives to comply with the terms and conditions of this
Section 11.5; and (vi) be responsible and liable for any breach of the
provisions of this Section 11.5 by it or its Representatives.
(c) Unless and until this Agreement is terminated, Seller
shall maintain as confidential any Confidential Information relating to any of
the Acquired Assets or the Assumed Obligations. From and after the Closing Date,
the provisions of Section 11.5(b) above shall not apply to or restrict in any
manner Purchaser's use of any Confidential Information of the Seller relating to
any of the Assets or the Assumed Liabilities.
(d) Exceptions. Sections 11.5(b) and (c) do not apply to that
part of the Confidential Information of a Disclosing Party that a Receiving
Party demonstrates (a) was, is or becomes generally available to the public
other than as a result of a breach of this Section 11.5 by the Receiving Party
or its Representatives; (b) was or is developed by the Receiving Party
independently of and without reference to any Confidential Information of the
Disclosing Party; or (c) was, is or becomes available to the Receiving Party on
a nonconfidential basis from a Third Party not bound by a confidentiality
agreement or any legal, fiduciary or other obligation restricting disclosure.
Seller shall not disclose any Confidential Information of Seller relating to any
of the Acquired Assets or the Assumed Obligations in reliance on the exceptions
in clauses (b) or (c) above.
(e) Legal Proceedings. If a Receiving Party becomes compelled
in any action, arbitration, audit, hearing, investigation, litigation or suit
19
(whether civil, criminal, administrative, judicial or investigative) by any
governmental body, court or administrative agency to make any disclosure that is
prohibited or otherwise constrained by this Section 11.5, that Receiving Party
shall provide the Disclosing Party with prompt notice of such compulsion or
request so that it may seek an appropriate protective order or other appropriate
remedy or waive compliance with the provisions of this Section 11.5. In the
absence of a protective order or other remedy, the Receiving Party may disclose
that portion (and only that portion) of the Confidential Information of the
Disclosing Party that, based upon advice of the Receiving Party's counsel, the
Receiving Party is legally compelled to disclose or that has been requested by
such court or governmental body, provided, however, that the Receiving Party
shall use reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded by any Person to whom any Confidential Information is
so disclosed. The provisions of this Section 11.5(e) do not apply to any
Proceedings between the parties to this Agreement.
(f) Return or Destruction of Confidential Information. If this
Agreement is terminated, each Receiving Party shall (a) destroy all Confidential
Information of the Disclosing Party prepared or generated by the Receiving Party
without retaining a copy of any such material; (b) promptly deliver to the
Disclosing Party all other Confidential Information of the Disclosing Party,
together with all copies thereof, in the possession, custody or control of the
Receiving Party or, alternatively, with the written consent of a Seller Contact
or a Purchaser Contact (whichever represents the Disclosing Party) destroy all
such Confidential Information; and (c) certify all such destruction in writing
to the Disclosing Party, provided, however, that the Receiving Party may retain
a list that contains general descriptions of the information it has returned or
destroyed to facilitate the resolution of any controversies after the Disclosing
Party's Confidential Information is returned.
(g) Attorney-Client Privilege. The Disclosing Party is not
waiving, and will not be deemed to have waived or diminished, any of its
attorney work product protections, attorney-client privileges or similar
protections and privileges as a result of disclosing its Confidential
Information (including Confidential Information related to pending or threatened
litigation) to the Receiving Party, regardless of whether the Disclosing Party
has asserted, or is or may be entitled to assert, such privileges and
protections. The parties (a) share a common legal and commercial interest in all
of the Disclosing Party's Confidential Information that is subject to such
privileges and protections; (b) are or may become joint defendants in
Proceedings to which the Disclosing Party's Confidential Information covered by
such protections and privileges relates; (c) intend that such privileges and
protections remain intact should either party become subject to any actual or
threatened proceeding to which the Disclosing Party's Confidential Information
covered by such protections and privileges relates; and (d) intend that after
the Closing Date, the Receiving Party shall have the right to assert such
protections and privileges. No Receiving Party shall admit, claim or contend, in
Proceedings involving either party or otherwise, that any Disclosing Party
waived any of its attorney work-product protections, attorney-client privileges
or similar protections and privileges with respect to any information, documents
or other material not disclosed to a Receiving Party due to the Disclosing Party
disclosing its Confidential Information (including Confidential Information
related to pending or threatened litigation) to the Receiving Party.
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11.6 Insurance Matters.
(a) Purchaser as "Additional Insured." Effective as of the Closing
Date, Seller shall have included Purchaser as an additional named insured on
Seller's Insurance Policies, including but not limited to, Seller's products
liability insurance with respect to Seller's products, and Seller shall assure
that such policies provide coverage for products sold by Seller prior to the
Closing Date.
(b) D&O Insurance for Tisi. Seller shall maintain its existing director
and officer liability insurance and shall maintain the availability of such
coverage to Tisi for a period of time that is not less than the statute of
limitations for state and federal liability claims, and shall use reasonable
efforts to preserve the existing scope and terms of such coverage during such
period of time.
(c) Indemnification of Tisi. Seller agrees to extend the term, if
necessary, and terms and conditions of its Indemnification Agreement with Tisi
dated January 1, 2002 for a period of time that is not less than the applicable
statute of limitations for state and federal liability claims.
SECTION 12. INDEMNIFICATION
12.1. Survival and Limitation on Liabilities.
(a) All representations and warranties of the parties
contained in this Agreement shall survive the Closing for 12 months following
the Closing Date other than the representations and warranties of Seller set
forth in Section 5.14 which shall survive until the expiration of the statute of
limitations in respect thereof. No action or proceeding may be brought with
respect to any of the representations or warranties set forth in this Agreement
(including any claim for indemnification made pursuant to Sections 12.2 and 12.3
below), unless written notice thereof, setting forth in reasonable detail the
claimed misrepresentation or breach of warranty shall have been delivered to the
party alleged to have breached such representation or warranty prior to the
expiration of the survival terms set forth in the preceding sentence.
Notwithstanding anything in this Agreement to the contrary, with respect to any
claim with respect to a breach of any representation or warranty (including any
indemnification claims relating thereto), (i) Purchaser or a Permitted Assignee
shall not be entitled to receive any damages or to indemnification from Seller
with respect to any breach of any representation or warranty under Section 5
hereof if Purchaser, any equity holder, officer or director of Purchaser, any
Permitted Assignee or any equity holder, officer or director of such Permitted
Assignee, knew at any time prior to the Closing Date of the facts or
circumstances constituting or resulting in such breach of representation or
warranty, and (ii) Seller shall not be entitled to receive any damages or to
indemnification from Purchaser with respect to any breach of any representation
or warranty under Section 6 hereof if any member of the Special Committee of the
Board of Directors of Seller knew at any time prior to the Closing of the facts
or circumstances constituting or resulting in such breach of representation or
warranty.
(b) The covenants and agreements contained in Sections 10.1
and 10.3 shall not survive the Closing. The remaining covenants and agreements
(including but not limited to the indemnities) contained in this Agreement shall
survive the execution and delivery hereof and the completion of the transactions
contemplated herein. The limitations set forth in subsection (a) above shall not
apply to any claim for breach of any covenants or agreements contained in this
Agreement.
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12.2. Indemnification by Seller. For 12 months from the date hereof,
Seller agrees to indemnify Purchaser, Tisi, or Permitted Assignee with respect
to, and hold Purchaser, Tisi, or Permitted Assignee harmless from, any loss,
liability, damage, cost or expense including, but not limited to, reasonable
legal fees and expenses and any tax liabilities of Seller for any period ending
on Closing Date or for any tax liability allocable to the portion of any
Straddle Period ending as of the Closing Date (collectively, the "Losses") which
Purchaser, Tisi, or any Permitted Assignee may incur or suffer which results
from or arises out of (i) the Excluded Obligations or (ii) the inaccuracy of any
representation or warranty made by Seller in this Agreement unless (1) such
inaccuracy is corrected by such Seller prior to Closing in a supplement to any
schedule hereto which is accepted by Purchaser in accordance with Section 10.4
hereof, or (2) Purchaser or any equity holder, officer or director of any
Purchaser, any Permitted Assignee, or any equity holder, officer or director of
any Permitted Assignee knew or should have known, at any time prior to the
Closing, of such inaccuracy.
12.3. Indemnification by Purchaser. For 12 months from the date hereof,
Purchaser agrees to indemnify Seller with respect to, and hold Seller harmless
from, any Losses which Seller may incur or suffer which results from or arises
out of the inaccuracy of any representation or warranty made by Purchaser in
this Agreement.
12.4. Procedures for Indemnification. Promptly after receipt by an
indemnified party under Section 12.2 or Section 12.3 of notice of the
commencement of any third party action or other event for which indemnification
may be available under Section 12.2 or 12.3, such indemnified party shall, if a
claim in respect thereof is to be made against an indemnifying party under such
Section, give notice to the indemnifying party of the commencement thereof, but
the failure so to notify that indemnifying party shall not relieve it of any
liability that it may have to any indemnified party, except to the extent the
indemnifying party demonstrates that the defense of such action is prejudiced
thereby. In case any such action shall be brought against an indemnified party
and it shall give notice to the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it shall elect, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party and, after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under such Section for any fees of other counsel or any other expenses, in
each case incurred by such indemnified party in connection with the indemnified
party's own defense thereof, other than reasonable costs of investigation and
costs and expenses of legal counsel if the indemnified party and the
indemnifying party are both parties to the action and the indemnified party has
been advised by counsel that there may be one or more defenses available to it
and not available to the indemnifying party which defenses result in a conflict
of interest. If an indemnifying party assumes the defense of such an action, (a)
such assumption will conclusively establish for purposes of this Agreement that
the claims made are within the scope of and subject to indemnification; (b) no
compromise or settlement thereof may be effected by the indemnifying party
without the indemnified party's consent unless (i) there is no finding or
admission or any violation of law or any violation of the rights of any Person
and no effect on any other claims that may be made against the indemnified
party, and (ii) the sole relief provided is monetary damages that are paid in
full by the indemnifying party; and (c) the indemnified party shall have no
liability with respect to any compromise or settlement thereof effected without
its consent. If notice is given to an indemnifying party of any claim for
indemnification hereunder and the indemnifying party does not, within ten (10)
days after the indemnified party's notice is given, give notice to the
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indemnified party of its election to assume the defense thereof, the
indemnifying party will be bound by any determination made in connection
therewith or any compromise or settlement effected by the indemnified party.
Notwithstanding the foregoing, if an indemnified party determines in good faith
that there is a reasonable probability that a third-party claim may adversely
affect it or its Affiliates other than as a result of monetary damages for which
if would be entitled to indemnification under this Agreement, the indemnified
party may, by notice to the indemnifying party, assume the exclusive right to
defend, compromise or settle such third-party claim. Both the indemnified party
and the indemnifying party shall keep the other fully informed of the status of
any claim for which indemnification has been sought at all stages thereof.
12.5. Punitive Damages. No party to this Agreement shall seek or be
entitled to punitive, exemplary and/or consequential damages with respect to any
claim under this Agreement.
12.6 Insurance Matters. In the event that Purchaser or any of its
officers or directors incur defense costs and damages arising out of or relating
to any liabilities retained by Seller hereunder or arising out of or relating to
matters for which Seller has agreed to indemnify Purchaser hereunder, Seller
shall use its best efforts to seek coverage under its Insurance Policies on
behalf of Purchaser to reimburse Purchaser for such costs or damages.
12.7 Right to Setoff. Upon notice to Seller specifying in reasonable
detail the basis therefore, Purchaser may set off any amount to which it may be
entitled under this Section 12 against amounts otherwise payable under the
Promissory Note. The exercise of such right of setoff by Purchaser in good
faith, whether or not ultimately determined to be justified, will not constitute
an event of default under the Promissory Note. Neither the exercise of nor the
failure to exercise such right of setoff will constitute an election of remedies
or limit Purchaser in any manner in the enforcement of any other remedies that
may be available to it.
SECTION 13. TERMINATION
13.1. Termination Events.
(a) Seller may terminate this Agreement by delivery of
notice of termination to Purchaser if at any time prior to the Closing Date:
(i) Purchaser fails or refuses to perform in any
material respect any obligation or covenant to be performed by it pursuant to
this Agreement prior to the Closing Date and the breach has not been cured
within ten business days following the receipt of notice by Purchaser of the
breach; or
(ii) Any of the conditions in Section 8 of this
Agreement has not been satisfied as of the Drop Dead Date or, if satisfaction of
such a condition is or becomes impossible (other than through the failure of
such Seller to comply with its obligations under this Agreement), Seller have
not waived such condition on or before Drop Dead Date.
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(b) Purchaser may terminate this Agreement by delivery of
notice of termination to Seller if any time prior to the Closing Date:
(i) Seller fails or refuses to perform in any
material respect any obligation or covenant to be performed by it pursuant to
this Agreement prior to the Closing Date which has not been cured within ten
business days following receipt of notice of the breach; or
(ii) Any of the conditions set forth in Section 7
of this Agreement has not been satisfied as of the Closing Date or, if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Purchaser to comply with its obligations under this Agreement),
Purchaser has not waived such condition on or before the Drop Dead Date.
(c) The parties may terminate this Agreement at any time
prior to the Closing Date by mutual written consent; or
(d) Any party may terminate this Agreement by delivery of
notice of termination to the other party if the Closing has not occurred on or
before the Drop Dead Date, or such later date as the parties may agree upon in
writing.
13.2. Effect of Termination. Each party's right of termination under
Section 13.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination shall not be an
election of remedies. If this Agreement is terminated pursuant to Section 13.1,
all further obligations of the parties under this Agreement shall terminate,
except that the rights and obligations in Sections 10.2 (Publicity), 11.5
(Confidentiality), 14.4 (Expenses), 14.6 (Governing Law), 14.7 (Indemnification
for Broker Fees), and 14.11 (Attorneys' Fees) of this Agreement shall survive;
provided, however, notwithstanding anything to the contrary contained in this
Agreement, that if this Agreement is terminated by a party because of the breach
of the Agreement by another party or because one or more of the conditions of
the terminating party's obligations under this Agreement are not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies shall
survive such termination unimpaired; and further, provided, if this Agreement is
terminated for any reason other than the breach by Purchaser of any of the terms
and conditions hereof, Seller agrees to cause the Escrow Amount to be
distributed from escrow to Purchaser.
SECTION 14. MISCELLANEOUS
14.1. Severability. Should any part of this Agreement for any reason be
declared invalid, such decision shall not affect the validity of any remaining
portion, which remaining portion shall remain in full force and effect as if
this Agreement had been executed with the invalid portion thereof eliminated and
it is hereby declared the intention of the parties hereto that they would have
executed the remaining portion of this Agreement without including thereon any
such part, parts, or portion which may, for any reason, be hereafter declared
invalid.
14.2. Counterparts; Facsimile. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one Agreement. The exchange of copies of this
Agreement and of signature pages by facsimile transmission shall constitute
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effective execution and delivery of this Agreement as to the parties and may be
used in lieu of the original for all purposes. Signatures of the parties
transmitted by facsimile shall be deemed to be their original signatures for all
purposes.
14.3. Headings. Section headings used in this Agreement have no
legal significance and are used solely for convenience of reference.
14.4. Expenses. Except as provided in Section 13.2 of this
Agreement, each party shall pay for its own legal, accounting and other similar
expenses incurred in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated.
14.5. Transfer Taxes; Recording Fees. Any income, sales, transfer, use
or excise taxes payable in connection with these transactions shall be paid by
the party responsible therefor under applicable local law. All costs incurred
(including professional fees) in connection with the recording of trademark
assignments with the U.S. Patent and Trademark Office, including the issuance of
new certifications of each trademark, shall be paid by Seller. All documentary
or other taxes due in connection with the issuance and delivery of the
Promissory Note shall be paid by Seller.
14.6. Law Governing. This Agreement shall be deemed to have been
entered into under the laws of the State of Florida, and the rights and
obligations of the parties hereunder shall be governed and determined according
to the laws of said state without giving any effect to conflict of laws.
14.7. Indemnification for Broker Fees. Seller agrees to indemnify and
save harmless Purchaser, and Purchaser agrees to indemnify and save harmless
Seller, from and against any and all actions, causes of action, suits, losses,
liabilities and damages, and expenses (including, without limitation, reasonable
attorneys' fees and disbursements in connection therewith) for any brokers or
finders fees arising with respect to brokers or finders engaged by the
non-indemnifying party.
14.8. 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 Purchaser without the prior written consent of Seller which may
be withheld in its sole discretion. Notwithstanding the foregoing, Purchaser
shall have the right prior to the Closing Date to assign its rights under this
Agreement to an entity of which Tisi directly or indirectly owns at least a
majority of the equity interests therein (a "Permitted Assignee"). Nothing in
this Agreement, express or implied, is intended to confer upon any person or
entity other than the parties hereto and Tisi, and their respective permitted
successors and assigns, any rights, benefits or obligations hereunder.
14.9. Entire Agreement. This Agreement and the schedules and documents
delivered pursuant hereto constitute the entire contract between the parties
hereto pertaining to the subject matter hereof and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether written or oral (including any letter of intent and any confidentiality
agreement between Seller and Purchaser). No supplement, modification or waiver
25
of this Agreement shall be binding unless executed in writing by the party or
parties to be bound thereby. No delay in the exercise of any rights by any party
hereunder shall operate as a waiver of any rights of such party.
14.10. Notices. All notices, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered in
person, mailed by national overnight courier, postage prepaid, or sent via
telecopier:
If to Purchaser: With a copy to:
TeeZee, Inc. Xxxxxx & Xxxxxx P.A.
0000 Xxxxxxxxxx Xxxx, Xxxxx 0 675 W. Indiantown Road, Suite 000
Xxxx Xxxx Xxxxx, XX 00000 Xxxxxxx, Xx 00000
Attn: Xxxxxxxxxxx Xxxx Attn: Xxxxxx Xxxxxx, Esq.
If to Seller: With a copy to:
Health & Nutrition Systems Xxxxxxxxx Xxxxxxx, P.A.
International, Inc.[new name] 000 Xxxxx Xxxxxxx Xxxxx
[insert address] Suite 300East
Attn: Xxxxx X. Xxxxx Xxxx Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
or to such other address as Seller or Purchaser may designate by notice to the
other.
14.11. Attorneys' Fees. In the event that a suit for the collection of
any damages resulting from, or for the injunction of any action constituting, a
breach of any of the terms or provisions of this Agreement, then the
non-prevailing party shall pay all reasonable costs, fees (including reasonable
attorneys' fees) and expenses of the prevailing party.
14.12. Jurisdiction; Service of Process. Any proceeding arising out of
or relating to this Agreement or any of the transactions contemplated hereby may
be brought in the courts of the State of Florida, County of Palm Beach, or, if
it has or can acquire jurisdiction, in the United States District Court for the
Southern District of Florida, and each of the parties irrevocably submits to the
exclusive jurisdiction of each such court in any such proceeding, waives any
objection it may now or hereafter have to venue or to convenience of forum,
agrees that all claims in respect of the proceeding shall be heard and
determined only in any such court and agrees not to bring any proceeding arising
out of or relating to this Agreement or any of the transactions contemplated
hereby in any other court. The parties agree that either or both of them may
file a copy of this paragraph with any court as written evidence of the knowing,
voluntary and bargained agreement between the parties irrevocably to waive any
objections to venue or to convenience of forum. Process in any proceeding
referred to in the first sentence of this section may be served on any party
anywhere in the world.
14.13 Enforcement of Agreement. Seller acknowledges and agrees that
Purchaser would be irreparably damaged if any of the provisions of this
Agreement are not performed in accordance with their specific terms and that any
breach of this Agreement by Seller could not be adequately compensated in all
26
cases by monetary damages alone. Accordingly, in addition to any other right or
remedy to which Purchaser may be entitled, at law or in equity, it shall be
entitled to enforce any provision of this Agreement by a decree of specific
performance and to temporary, preliminary and permanent injunctive relief to
prevent breaches or threatened breaches of any of the provisions of this
Agreement, without posting any bond or other undertaking.
14.14 Waiver; Remedies Cumulative. The rights and remedies of the
parties to this Agreement are cumulative and not alternative. Neither any
failure nor any delay by any party in exercising any right, power or privilege
under this Agreement or any of the documents referred to in this Agreement will
operate as a waiver of such right, power or privilege, and no single or partial
exercise of any such right, power or privilege will preclude any other or
further exercise of such right, power or privilege or the exercise of any other
right, power or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement or any of the documents
referred to in this Agreement can be discharged by one party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing signed
by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of that party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, all as of the day and year first above written.
PURCHASER:
TeeZee, Inc.
/s/Xxxxxxxxxxx Xxxx
----------------------------------------------------
By: Xxxxxxxxxxx Xxxx, President
SELLER:
HEALTH & NUTRITION SYSTEMS INTERNATIONAL, INC.
/s/Xxxxx X. Xxxxx
----------------------------------------------------
By: Xxxxx X. Xxxxx, Chairman
Special Committee, Board of Directors
27
List of Omitted Schedule
Schedule 2.1(a) Excluded Assets
Schedule 2.1(c) Assumed Obligations
Schedule 3.1 Purchase Price Allocation
Schedule 5.3 Required Consents
Schedule 5.5 Litigation
Schedule 5.6 Material Contracts
Schedule 5.7 Balance Sheet
Schedule 5.9 Taxes
Schedule 5.10 Intellectual Property Assets
Schedule 5.11(a) Insurance Policies
Schedule 5.11(b) Insurance Claims
Schedule 5.12 Liens
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