AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization ("Agreement") dated September
8th, 1999, is by and between Xxxxxxxxxxxxxx.xxx Corporation, a Nevada
corporation ("Buyer"), and Dynamic Health Products, Inc., a Florida corporation
("Seller"), the sole stockholder of Becan Distributors, Inc., an Ohio
corporation (the "Company").
RECITALS:
Seller owns all of the outstanding shares of voting common stock, no par
value, of the Company, constituting all of the issued and outstanding capital
stock of the Company (the "Shares"). The Buyer desires to acquire all of the
Shares, and Seller desires to exchange all of the Shares for cash and shares of
voting common stock, par value $.01 per share, of the Buyer, in an exchange that
qualifies under Sections 354 and 368 of the Internal Revenue Code of 1986, as
amended.
This Agreement is being entered into for the purpose of implementing the
foregoing desires, and sets forth the terms and conditions pursuant to which
Seller is selling to the Buyer, and the Buyer is purchasing from Seller, solely
in exchange for cash and shares of voting common stock of the Buyer, all of the
642.85 issued and outstanding shares of the Company.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"APPLICABLE CONTRACT" - any Contract (a) under which the Company has or may
acquire any rights, (b) under which the Company has or may become subject to any
obligation or liability, or (c) by which the Company or any of the assets owned
or used by it is or may become bound.
"BALANCE SHEET" - as defined in Section 3.4.
"BEST EFFORTS" - the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to ensure that such result is achieved
as expeditiously as possible; provided, however, that an obligation to use Best
Efforts under this Agreement does not require the Person subject to that
obligation to take actions that would result in a materially adverse change in
the benefits to such Person of this Agreement and the Contemplated Transactions.
"BREACH" - a "Breach" of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.
"BUYER" - as defined in the first paragraph of this Agreement.
"BUYER'S SHARES" - as defined in Section 2.2.
"CLOSING" - as defined in Section 2.3.
"CLOSING DATE" - the date and time as of which the Closing actually takes
place.
"COMPANY" - as defined in the first paragraph of this Agreement.
"CONSENT" - any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" - all of the transactions contemplated by this
Agreement, including:
(1) the sale of the Shares by Seller to Buyer;
(2) the performance by Buyer and Seller of their respective covenants and
obligations under this Agreement; and
(3) Buyer's acquisition and ownership of the Shares and exercise of control
over the Company.
"CONTRACT" - any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"DAMAGES" - as defined in Section 7.2.
"DISCLOSURE LETTER" - the disclosure letter delivered by Seller to Buyer
concurrently with the execution and delivery of this Agreement.
"ENCUMBRANCE" - any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"ENVIRONMENT" - soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES" - any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions (including
on-site or off-site contamination, occupational safety and health, and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial, or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational Safety
and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or
response actions ("Cleanup") required by applicable Environmental Law
or Occupational Safety and Health Law (whether or not such Cleanup has
been required or requested by any Governmental Body or any other
Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types
of activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss.9601 et seq., as amended
("CERCLA").
3
"ENVIRONMENTAL LAW" - any Legal Requirement that requires or relates to:
(1) advising appropriate authorities, employees, and the public of intended
or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or
construction, that could have significant impact on the Environment;
(2) preventing or reducing to acceptable levels the release of pollutants
or hazardous substances or materials into the Environment;
(3) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(4) assuring that products are designed, formulated, packaged, and used so
that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(5) protecting resources, species, or ecological amenities;
(6) reducing to acceptable levels the risks inherent in the transportation
of hazardous substances, pollutants, oil, or other potentially harmful
substances;
(7) cleaning up pollutants that have been released, preventing the threat
of release, or paying the costs of such clean up or prevention; or
(8) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for
injuries done to public assets.
"ERISA" - the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ESCROW AGREEMENT" - as defined in Section 2.2.
"FACILITIES" - any real property, leaseholds, or other interests currently
or formerly owned or operated by the Company
4
and any buildings, plants, structures, or equipment (including motor vehicles,
tank cars, and rolling stock) currently or formerly owned or operated by the
Company.
"GAAP" - generally accepted United States accounting principles, applied on
a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4(b) were prepared.
"GOVERNMENTAL AUTHORIZATION" - any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" - any:
(1) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(2) federal, state, local, municipal, foreign, or other government;
(3) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(4) multi-national organization or body; or
(5) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"HAZARDOUS ACTIVITY" - the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the Company.
"HAZARDOUS MATERIALS" - any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
5
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"INTELLECTUAL PROPERTY ASSETS" - as defined in Section 3.22.
"INTERIM BALANCE SHEET" - as defined in Section 3.4.
"IRC" - the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" - the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
"KNOWLEDGE" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if.
(1) such individual is actually aware of such fact or other matter; or
(2) a prudent individual could be expected to discover or otherwise become
aware of such fact or other matter in the course of conducting a
reasonably comprehensive investigation concerning the existence of
such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving as a director,
officer, partner, executor, or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT" - any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"OCCUPATIONAL SAFETY AND HEALTH LAW" - any Legal Requirement in effect on
the date of this Agreement, designed to provide safe and healthful working
conditions and to reduce occupational safety and health hazards, and any
governmental program in effect on the date of this Agreement, designed to
provide safe and healthful working conditions.
"ORDER" - any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
6
"ORDINARY COURSE OF BUSINESS" - an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if
(1) such action is consistent with the past practices of such Person, and
is taken in the ordinary course of the normal day-to-day operations of
such Person;
(2) such action is not required to be authorized by the board of directors
of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be specifically authorized
by the parent company (if any) of such Person; and
(3) such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by any
Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons
that are in the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" - (a) the articles or certificate of
incorporation and the bylaws of a corporation; and (b) any amendment to any of
the foregoing.
"PERSON " - any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN" - as defined in Section 3.13.
"PROCEEDING" - any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PUBLIC FINANCING" - shall mean the public offering by Buyer of Buyer
common stock pursuant to a registration statement of Buyer currently on file
with the Securities and Exchange Commission.
"RELATED PERSON " - with respect to a particular individual:
(1) each other member of such individual's Family;
7
(2) any Person that is directly or indirectly controlled by such individual
or one or more members of such individual's Family;
(3) any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest; and
(4) any Person with respect to which such individual or one or more members
of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(1) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(2) any Person that holds a Material Interest in such specified Person;
(3) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(4) any Person in which such specified Person holds a Material Interest;
(5) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(6) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse (and former spouses), (iii) any
other natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 5% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity securities or
equity interests in a Person.
8
"RELEASE" - any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" - with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" - the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLER" - as defined in the first paragraph of this Agreement.
"SELLER'S RELEASE" - as defined in Section 2.4.
"SHARES" - as defined in the Recitals of this Agreement.
"SUBSIDIARY" - with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
"TAX RETURN" - any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE" - a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"THREATENED" - a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a
9
prudent Person to conclude that such a claim, Proceeding, dispute, action, or
other matter is likely to be asserted, commenced, taken, or otherwise pursued
in the future.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES. Subject to the terms and conditions of this Agreement, at the
Closing, Seller will sell and transfer the Shares to Buyer, and Buyer will
purchase the Shares from Seller.
2.2 CONSIDERATION. In consideration of the sale and transfer of the Shares,
the Buyer will deliver in full payment for the Shares, (a) $2,000,000 in cash
(b) 4,000,000 shares of common stock, $.001 par value, of Buyer ("Buyer's
Shares") and (c) 2,000,000 shares of common stock, $.001 par value, of Buyer,
which shares shall be placed in escrow pursuant to an escrow agreement, in the
form of Exhibit 2.2 (the "Escrow Agreement"). The number of shares in
subparagraphs (b) and (c) of this Section 2.2 shall be reduced by 50% after the
effective time of a one-for-two reverse split to be approved by Buyer's Board in
September 1999.
2.3 CLOSING. The purchase and sale (the "Closing") provided for in this
Agreement will take place at the same time and place as the closing of the
Public Financing, or at such other time and place as the parties may agree.
Subject to the provisions of Section 7, failure to consummate the purchase and
sale provided for in this Agreement on the date and time and at the place
determined pursuant this Section 2.3 will not result in the termination of this
Agreement and will not relieve any party of any obligation under this Agreement.
2.4 CLOSING OBLIGATIONS. At the Closing:
(1) Seller will deliver to Buyer:
(1) certificates representing the Shares, duly endorsed (or accompanied
by duly executed stock powers), for transfer to Buyer;
(2) releases in the form of Exhibit 2.4(a)(ii) executed by Seller
("Seller's Releases");
(2) Buyer will deliver to Seller:
(1) $2,000,000 by wire transfer to an account specified by Seller;
(2) certificates representing 4,000,000 shares of Buyer's common stock;
10
(3) Buyer will deliver to Escrow Agent certificates representing
2,000,000 shares of Buyer's common stock. The certificates to be
issued shall bear a customary restrictive legend applicable to
restricted securities issued privately; and
(2) Buyer and Seller will enter into the Escrow Agreement.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING.
(1) The Company is a corporation duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation,
with full corporate power and authority to conduct its business as it
is now being conducted, to own or use the properties and assets that
it purports to own or use, and to perform all its obligations under
Applicable Contracts. The Company is duly qualified to do business as
a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of
the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification.
(2) Seller has delivered to Buyer copies of the Organizational Documents of
the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT.
(1) This Agreement constitutes the legal, valid, and binding obligation of
Seller, enforceable against Seller in accordance with its terms.
Seller has the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and to perform its
obligations under this Agreement.
(2) Except as set forth in Part 3.2 of the Disclosure Letter, neither the
execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or
indirectly (with or without notice or lapse of time):
(1) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational
11
Documents of the Company, or (B) any resolution adopted by the board
of directors or the stockholder of the Company;
(2) contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any
relief under, any Legal Requirement or any Order to which the
Company, or any of the assets owned or used by the Company, may be
subject;
(3) contravene, conflict with, or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by the Company or that
otherwise relates to the business of, or any of the assets owned or
used by, the Company;
(4) cause Buyer or the Company to become subject to, or to become liable
for the payment of, any Tax;
(5) cause any of the assets owned by the Company to be reassessed or
revalued by any taxing authority or other Governmental Body;
(6) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable
Contract; or
(7) result in the imposition or creation of any Encumbrance upon or with
respect to any of the assets owned or used by the Company.
Except as set forth in Part 3.2 of the Disclosure Letter, neither Seller
nor the Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
(3) Seller is acquiring the Buyer's Shares for their own account and not
with a view to their distribution within the meaning of Section 2(11)
of the Securities Act.
3.3 CAPITALIZATION. The authorized equity securities of the Company consist
of 850 shares of common stock, no par value, of
12
which 642.85 shares are issued and outstanding and constitute the Shares.
Seller is the record and beneficial owner and holder of the Shares, free and
clear of all Encumbrances. No legend or other reference to any purported
Encumbrance appears upon any certificate representing equity securities of the
Company. All of the outstanding equity securities of the Company have been duly
authorized and validly issued and are fully paid and non-assessable. There are
no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of the Company. None of the outstanding equity
securities or other securities of the Company was issued in violation of the
Securities Act or any other Legal Requirement. The Company does not own, nor
does the Company have any Contract to acquire, any equity securities or other
securities of any Person (other than the Company) or any direct or indirect
equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS. Seller has delivered to Buyer:
(1) a balance sheet of the Company as at March 31, 1999 (including the
notes thereto, the "Balance Sheet"), and the related statements of
income, changes in stockholder's equity, and cash flow for the fiscal
year then ended, together with the report thereon of Brimmer, Burek,
Xxxxxx and XxXxxxx, LLP, independent certified public accountants; and
(2) an unaudited balance sheet of the Company as at June 30, 1999 (the
"Interim Balance Sheet") and the related unaudited statements of
income, changes in stockholders' equity, and cash flow for the six
months then ended, including in each case the notes thereto. Such
financial statements and notes fairly present the financial condition
and the results of operations, changes in stockholders' equity, and
cash flow of the Company as at the respective dates of and for the
periods referred to in such financial statements, all in accordance
with GAAP, subject, in the case of interim financial statements, to
normal recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ materially from
those included in the Balance Sheet); the financial statements
referred to in this Section 3.4 reflect the consistent application of
such accounting principles throughout the periods involved, except as
disclosed in the notes to such financial statements.
13
3.5 BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of the Company, all of which have been made available
to Buyer, are complete and correct and have been maintained in accordance with
sound business practices and the requirements of Section 13(b)(2) of the
Securities Exchange Act of 1934, as amended (regardless of whether or not the
Company is subject to that Section), including the maintenance of an adequate
system of internal controls. The minute book of the Company contains accurate
and complete records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of the Company, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. All of those books and records are in the
possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES. Part 3.6 of the Disclosure Letter
contains a complete and accurate list of leaseholds, or other interests therein
owned by the Company. Seller has delivered or made available to Buyer copies of
the deeds and other instruments (as recorded) by which the Company acquired such
interests, and copies of all title insurance policies, opinions, abstracts, and
surveys in the possession of Seller or the Company and relating to such property
or interests. The Company owns all the properties and assets (whether real,
personal, or mixed and whether tangible or intangible) that they purport to own
located in the facilities owned or operated by the Company or reflected as owned
in the books and records of the Company, including all of the properties and
assets reflected in the Balance Sheet and the Interim Balance Sheet (except for
assets held under capitalized leases disclosed or not required to be disclosed
in Part 3.6 of the Disclosure Letter and personal property sold since the date
of the Balance Sheet and the Interim Balance Sheet, as the case may be, in the
Ordinary Course of Business), and all of the properties and assets purchased or
otherwise acquired by the Company since the date of the Balance Sheet (except
for personal property acquired and sold since the date of the Balance Sheet in
the Ordinary Course of Business and consistent with past practice. All material
properties and assets reflected in the Balance Sheet and the Interim Balance
Sheet are free and clear of all Encumbrances except, with respect to all such
properties and assets, (a) mortgages or security interests shown on the Balance
Sheet or the Interim Balance Sheet as securing specified liabilities or
obligations, with respect to
14
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) mortgages or security interests incurred in
connection with the purchase of property or assets after the date of the Interim
Balance Sheet (such mortgages and security interests being limited to the
property or assets so acquired), with respect to which no default (or event
that, with notice or lapse of time or both, would constitute a default) exists,
(c) liens for current taxes not yet due, and (d) with respect to real property,
(i) minor imperfections of title, if any, none of which is substantial in
amount, materially detracts from the value or impairs the use of the property
subject thereto, or impairs the operations of the Company, and (ii) zoning laws
and other land use restrictions that do not impair the present or anticipated
use of the property subject thereto.
3.7 CONDITION AND SUFFICIENCY OF EQUIPMENT. The equipment owned by the
Company is structurally sound, is in good operating condition and repair, and is
adequate for the uses to which it is being put, and none of such equipment is in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. The equipment of the Company is
sufficient for the continued conduct of the Company's business after the Closing
in substantially the same manner as conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that are
reflected on the Balance Sheet or the Interim Balance Sheet or on the accounting
records of the Company as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be as
of the Closing Date current and collectible net of the respective reserves shown
on the Balance Sheet or the Interim Balance Sheet or on the accounting records
of the Company as of the Closing Date (which reserves are adequate and
calculated consistent with past practice and, in the case of the reserve as of
the Closing Date, will not represent a greater percentage of the Accounts
Receivable as of the Closing Date than the reserve reflected in the Interim
Balance Sheet represented of the Accounts Receivable reflected therein and will
not represent a material adverse change in the composition of such Accounts
Receivable in terms of aging). Seller has no knowledge of any 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. Seller has delivered to Buyer a
complete and accurate list of all Accounts Receivable as of the date of the
Interim Balance Sheet, which list sets forth the aging of such Accounts
Receivable.
3.9 INVENTORY. All inventory of the Company, whether or not reflected in
the Balance Sheet or the Interim Balance Sheet, consists of a quality and
quantity usable and salable in the
15
Ordinary Course of Business, except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value in the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date, as the case may be.
All inventories not written off have been priced at the lower of cost or market
on a first in, first out basis. The quantities of each item of inventory
(whether raw materials, work-in-process, or finished goods) are not excessive,
but are reasonable in the present circumstances of the Company.
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Part 3.10 of the
Disclosure Letter, the Company has no liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations reflected or reserved against
in the Balance Sheet or the Interim Balance Sheet and current liabilities
incurred in the Ordinary Course of Business since the respective dates thereof.
3.11 TAXES.
(1) The Company has filed or caused to be filed (on a timely basis since
1996) all Tax Returns that are or were required to be filed by or with
respect to it, pursuant to applicable Legal Requirements. Seller has
delivered or made available to Buyer copies of, all such Tax Returns
filed since 1996. The Company has paid, or made provision for the
payment of, all Taxes that have or may have become due pursuant to
those Tax Returns or otherwise, or pursuant to any assessment received
by Seller or the Company, except such Taxes, if any, as are listed in
Part 3.11 of the Disclosure Letter and are being contested in good
faith and as to which adequate reserves (determined in accordance with
GAAP) have been provided in the Balance Sheet and the Interim Balance
Sheet.
(2) The charges, accruals, and reserves with respect to Taxes on the books
of the Company are adequate (determined in accordance with GAAP) and
are at least equal to the Company's liability for Taxes. There exists
no proposed tax assessment against the Company except as disclosed in
the Balance Sheet or in Part 3.11 of the Disclosure Letter. No consent
to the application of Section 341 (f)(2) of the IRC has been filed
with respect to any property or assets held, acquired, or to be
acquired by the Company. All Taxes that the Company is or was required
by Legal Requirements to withhold or collect have been duly withheld
or collected and, to the extent
16
required, have been paid to the proper Governmental Body or other
Person.
(3) All Tax Returns filed by the Company are true, correct, and complete.
There is no tax sharing agreement that will require any payment by the
Company after the date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance Sheet, there
has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of the Company, and no event has
occurred or circumstance exists that may result in such a material adverse
change.
3.13 EMPLOYEE BENEFITS.
(1) As used in this Section 3.13, the following terms have the meanings set
forth below.
"COMPANY PLAN" means all Plans of which an the Company or an ERISA
Affiliate of the Company is or was a Plan Sponsor, or to which an the Company or
an ERISA Affiliate of the Company otherwise contributes or has contributed, or
in which an the Company or an ERISA Affiliate of the Company otherwise
participates or has participated. All references to Plans are to Company Plans
unless the context requires otherwise.
"ERISA AFFILIATE" means, with respect to an the Company, any other person
that, together with the Company, would be treated as a single employer under IRC
ss.414.
"OTHER BENEFIT OBLIGATIONS" means all obligations, arrangements, or
customary practices, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, or agents, other than obligations, arrangements, and
practices that are Plans. Other Benefit Obligations include consulting
agreements under which the compensation paid does not depend upon the amount of
service rendered, sabbatical policies, severance payment policies, and fringe
benefits within the meaning of IRC ss.132.
"PENSION PLAN" has the meaning given in ERISA ss.3(2)(A).
"PLAN" has the meaning given in ERISA ss.3(3).
"QUALIFIED PLAN " MEANS any Plan that meets or purports to meet the
requirements of IRC ss.401 (a).
17
"TITLE IV PLANS" means all Pension Plan's that are subject to Title IV of
ERISA, 29 U.S.C. ss.1301 et seq.
"VEBA " MEANS a voluntary employees' beneficiary association under IRC
ss.501 (c)(9).
"WELFARE PLAN" has the meaning given in ERISA ss.3(l).
(2) The Company has no Plan, Company Plan, Other Benefit Obligations,
Pension Plan, Qualified Plan, Title IV Plans, VEBA or Welfare Plan.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
(1) Except as set forth in Part 3.14 of the Disclosure Letter:
(1) the Company is, and at all times since March 31, 1999 has been, in
full compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business
or the ownership or use of any of its assets;
(2) no event has occurred or circumstance exists that (with or without
notice or lapse of time) (A) may constitute or result in a
violation by the Company of, or a failure on the part of the
Company to comply with, any Legal Requirement, or (B) may give
rise to any obligation on the part of the Company to undertake,
or to bear all or any portion of the cost of, any remedial action
of any nature; and
(3) the Company has received, at any time since March 31, 1999, any
notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential violation of, or failure to
comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
18
(2) Part 3.14 of the Disclosure Letter contains a complete and accurate
list of each Governmental Authorization that is held by the Company or
that otherwise relates to the business of, or to any of the assets
owned or used by, the Company. Each Governmental Authorization listed
or required to be listed in Part 3.14 of the Disclosure Letter is
valid and in full force and effect. Except as set forth in Part 3.14
of the Disclosure Letter:
(1) the Company is, and at all times since March 31, 1999 has been, in
full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be
identified in Part 3.14 of the Disclosure Letter;
(2) no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure to comply
with any term or requirement of any Governmental Authorization
listed or required to be listed in Part 3.14 of the Disclosure
Letter, or (B) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or
required to be listed in Part 3.14 of the Disclosure Letter;
(3) the Company has not received, at any time since March 31, 1999,
any notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of or failure
to comply with any term or requirement of any Governmental
Authorization, or (B) any actual, proposed, possible, or
potential revocation, withdrawal, suspension, cancellation,
terminatin of, or modification to any Governmental Authorization;
and
(4) all applications required to have been filed for the renewal of
the Governmental Authorizations listed or required to be listed
in Part 3.14 of the Disclosure Letter have been duly filed on a
timely basis with the
19
appropriate Governmental Bodies, and all other filings required to
have been made with respect to such Governmental Authorizations
have been duly made on a timely basis with the appropriate
Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the Disclosure
Letter collectively constitute all of the Governmental Authorizations necessary
to permit the Company to lawfully conduct and operate its business in the manner
it currently conducts and operates such business and to permit the Company to
own and use its assets in the manner in which it currently owns and uses such
assets.
3.15 LEGAL PROCEEDINGS; ORDERS.
(1) Except as set forth in Part 3.15 of the Disclosure Letter, there is no
pending Proceeding:
(1) that has been commenced by or against the Company; or
(2) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions.
To the Knowledge of Seller and the Company, (i) no such Proceeding has been
Threatened, and (ii) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding. Seller
has delivered to Buyer copies of all pleadings, correspondence, and other
documents relating to each Proceeding listed in Part 3.15 of the Disclosure
Letter. The Proceedings listed in Part 3.15 of the Disclosure Letter will not
have a material adverse effect on the business, operations, assets, condition,
or prospects of the Company.
(2) Except as set forth in Part 3.15 of the Disclosure Letter:
(1) there is no Order to which the Company, or any of the assets owned
or used by the Company, is subject;
(2) Seller is not subject to any Order that relates to the business of,
or any of the assets owned or used by, the Company; and
20
(3) to the Knowledge of Seller and the Company, no officer, director,
agent, or employee of the Company is subject to any Order that
prohibits such officer, director, agent, or employee from engaging
in or continuing any conduct, activity, or practice relating to the
business of the Company.
(3) Except as set forth in Part 3.15 of the Disclosure Letter:
(1) the Company is, and at all times since March 31, 1999 has been, in
full compliance with all of the terms and requirements of each
Order to which it, or any of the assets owned or used by it, is
or has been subject;
(2) no event has occurred or circumstance exists that may constitute or
result in (with or without notice or lapse of time) a violation
of or failure to comply with any term or requirement of any Order
to which the Company, or any of the assets owned or used by the
Company, is subject; and
(3) the Company has not received, at any time since March 31, 1999, any
notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual,
alleged, possible, or potential violation of, or failure to
comply with, any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is or
has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in Part
3.16 of the Disclosure Letter, since the date of the Balance Sheet, the Company
has conducted its business only in the Ordinary Course of Business and there has
not been any:
(1) change in the Company's authorized or issued capital stock; grant of
any stock option or right to purchase shares of capital stock of the
Company; issuance of any security convertible into such capital stock;
grant of any registration rights; purchase, redemption, retirement, or
other acquisition by the Company of any shares of any such capital
stock; or declaration or payment of any dividend or other distribution
or payment in respect of shares of capital stock;
(2) amendment to the Organizational Documents of the Company;
21
(3) payment or increase by the Company of any bonuses, salaries, or other
compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment,
severance, or similar Contract with any director, officer, or
employee;
(4) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any
employees of the Company;
(5) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or
prospects of the Company, taken as a whole;
(6) entry into, termination of, or receipt of notice of termination of (i)
any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (ii) any Contract or
transaction involving a total remaining commitment by or to the
Company of at least $25,000;
(7) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of the Company,
including the sale, lease, or other disposition of any of the
Intellectual Property Assets;
(8) cancellation or waiver of any claims or rights with a value to the
Company in excess of $25,000;
(9) material change in the accounting methods used by the Company; or (1)
(10) agreement, whether oral or written, by the Company to do any of the
foregoing.
3.17 CONTRACTS; NO DEFAULTS.
(1) Part 3.17(a) of the Disclosure Letter contains a complete and accurate
list, and Seller has delivered to Buyer true and complete copies, of
22
(1) each Applicable Contract that involves performance of services or
delivery of goods or materials by the Company of an amount or value
in excess of $25,000;
(2) each Applicable Contract that involves performance of services or
delivery of goods or materials to the Company of an amount or value in
excess of $25,000;
(3) each Contract that was not entered into in the Ordinary Course of
Business and that involves expenditures or receipts of one or more The
Company in excess of $25,000;
(4) each lease, rental or occupancy agreement, license, installment and
conditional sale agreement, and other Applicable Contract affecting
the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal
property leases and installment and conditional sales agreements
having a value per item or aggregate payments of less than $25,000 and
with terms of less than one year);
(5) each licensing agreement or other Applicable Contract with respect to
patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any
of the Intellectual Property Assets;
(6) each collective bargaining agreement and other Applicable Contract to
or with any labor union or other employee representative of a group of
employees;
(7) each joint venture, partnership, and other Applicable Contract (however
named) involving a sharing of profits, losses, costs, or liabilities
by the Company with any other Person;
(8) each Applicable Contract containing covenants that in any way purport
to restrict the business activity of the Company or limit the freedom
of the Company to engage in any line of business or to compete with
any Person;
23
(9) each Applicable Contract providing for payments to or by any Person
based on sales, purchases, or profits, other than direct payments for
goods;
(10) each power of attorney that is currently effective and outstanding;
(11) each Applicable Contract entered into other than in the Ordinary
Course of Business that contains or provides for an express
undertaking by the Company to be responsible for consequential
damages;
(12) each Applicable Contract for capital expenditures in excess of
$25,000;
(13) each written warranty, guaranty, and or other similar undertaking with
respect to contractual performance extended by the Company other than
in the Ordinary Course of Business; and
(14) each amendment, supplement, and modification (whether oral or written)
in respect of any of the foregoing.
Part 3.17(a) of the Disclosure Letter sets forth reasonably complete
details concerning such Contracts, including the parties to the Contracts, the
amount of the remaining commitment of the Company under the Contracts, and the
Company's office where details relating to the Contracts are located.
(2) Except as set forth in Part 3.17(b) of the Disclosure Letter:
(1) Seller (and no Related Person of either Seller) neither has nor
may acquire any rights under, and Seller neither has nor may
become subject to any obligation or liability under, any Contract
that relates to the business of, or any of the assets owned or
used by, the Company; and
(2) to the Knowledge of Seller and the Company, no officer, director,
agent, employee, consultant, or contractor of the Company is
bound by any Contract that purports to limit the ability of such
officer, director, agent, employee, consultant, or contractor to
(A) engage in or continue any conduct, activity, or practice
relating to the business of the Company, or (B) assign to the
24
Company or to any other Person any rights to any invention,
improvement, or discovery.
(3) Except as set forth in Part 3.17(c) of the Disclosure Letter, each
Contract identified or required to be identified in Part 3.17(a) of the
Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
(4) Except as set forth in Part 3.17(d) of the Disclosure Letter:
(1) the Company is, and at all times since March 31, 1999 has been, in
full compliance with all applicable terms and requirements of
each Contract under which the Company has or had any obligation
or liability or by which the Company or any of the assets owned
or used by the Company is or was bound;
(2) each other Person that has or had any obligation or liability
under any Contract under which an the Company has or had any
rights is, and at all times since March 31, 1999 has been, in
full compliance with all applicable terms and requirements of
such Contract;
(3) no event has occurred or circumstance exists that (with or without
notice or lapse of time) may contravene, conflict with, or result
in a violation or breach of, or give the Company or other Person
the right to declare a default or exercise any remedy under, or
to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; and
(4) the Company has not given to or received from any other Person,
at any time since March 31, 1999, any notice or other
communication (whether oral or written) regarding any actual,
alleged, possible, or potential violation or breach of, or
default under, any Contract.
(5) There are no renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts with any Person and, to
the Knowledge of Seller and the Company, no such Person has made
written demand for such renegotiation.
25
(6) The Contracts relating to the sale, design, manufacture, or provision
of products or services by the Company have been entered into in the
Ordinary Course of Business and have been entered into without the
commission of any act alone or in concert with any other Person, or
any consideration having been paid or promised, that is or would be in
violation of any Legal Requirement.
3.18 INSURANCE.
(1) Seller has delivered to Buyer:
(1) true and complete copies of all policies of insurance to which the
Company is a party or under which the Company, or any director of
the Company, is or has been covered at any time within the two
years preceding the date of this Agreement;
(2) true and complete copies of all pending applications for policies
of insurance; and
(3) any statement by the auditor of the Company's financial statements
with regard to the adequacy of such entity's coverage or of the
reserves for claims.
(2) Part 3.18(b) of the Disclosure Letter describes:
(1) any self-insurance arrangement by or affecting the Company,
including any reserves established thereunder;
(2) any contract or arrangement, other than a policy of insurance, for
the transfer or sharing of any risk by the Company; and
(3) all obligations of the Company to third parties with respect to
insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage
is provided.
(3) Part 3.18(c) of the Disclosure Letter sets forth, by year, for the
current policy year and each of the two preceding policy years:
(1) a summary of the loss experience under each policy;
26
(2) a statement describing each claim under an insurance policy for an
amount in excess of $25,000, which sets forth:
(1) the name of the claimant;
(2) a description of the policy by insurer, type of insurance,
and period of coverage; and
(3) the amount and a brief description of the claim; and
(3) a statement describing the loss experience for all claims that
were self-insured, including the number and aggregate cost of
such claims.
(4) Except as set forth on Part 3.18(d) of the Disclosure Letter:
(1) All policies to which the Company is a party or that provide
coverage to Seller, the Company, or any director or officer of the
Company:
(1) are valid, outstanding, and enforceable;
(2) are issued by an insurer that is financially sound and taken
together, provide adequate insurance coverage for the assets
and the operations of the Company for all risks to which the
Company is normally exposed; (1)
(3) are sufficient for compliance with all Legal Requirements and
Contracts to which the Company is a party or by which it is
bound;
(4) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(5) do not provide for any retrospective premium adjustment or
other experience-based liability on the part of the Company.
(2) Neither Seller nor the Company has received (A) any refusal of
coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full
force or effect or will not be renewed or that the
27
issuer of any policy is not willing or able to perform its
obligations thereunder.
(3) The Company has paid all premiums due, and has otherwise performed
all of its obligations, under each policy to which the Company is
a party or that provides coverage to the Company or a director
thereof.
(4) The Company has given notice to the insurer of all claims that may
be insured thereby.
3.19 ENVIRONMENTAL MATTERS. Except as set forth in part 3.19 of the
disclosure letter:
(1) The Company is, and at all times has been, in full compliance with, and
has not been and is not in violation of or liable under, any
Environmental Law. Neither Seller nor the Company has any basis to
expect, nor has any of them or any other Person for whose conduct they
are or may be held to be responsible received, any actual or
Threatened order, notice, or other communication from (i) any
Governmental Body or private citizen acting in the public interest, or
(ii) the current or prior owner or operator of any Facilities, of any
actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal, or mixed) in which
Seller or the Company has had an interest.
(2) There are no pending or, to the Knowledge of Seller and the Company,
Threatened claims, Encumbrances, or other restrictions of any nature,
resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or
affecting any of the Facilities or any other properties and assets
(whether real, personal, or mixed) in which Seller or the Company has
or had an interest.
(3) Neither Seller nor the Company has Knowledge of any basis to expect,
nor has any of them or any other Person for whose conduct they are or
may be held responsible, received, any citation, directive, inquiry,
notice, Order, summons, warning, or other communication from any
Governmental Body that relates to Hazardous Activity, Hazardous
Materials, or any alleged, actual, or potential
28
violation or failure to comply with any Environmental Law, or of any
alleged, actual, or potential obligation to undertake or bear the cost
of any Environmental, Health, and Safety Liabilities with respect to
any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Seller or the Company had an interest.
(4) To the knowledge of Seller, neither Seller nor the Company, or any
other Person for whose conduct they are or may be held responsible,
has any Environmental, Health, and Safety Liabilities with respect to
the Facilities or, to the Knowledge of Seller and the Company, with
respect to any other properties and assets (whether real, personal, or
mixed) in which Seller or the Company (or any predecessor), has or had
an interest, or at any property geologically or hydrologically
adjoining the Facilities or any such other property or assets.
(5) There has been no Release by the Company or, to the Knowledge of Seller
and the Company, Threat of Release, of any Hazardous Materials at or
from the Facilities or at any other locations where any Hazardous
Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by the Facilities, or
from or by any other properties and assets (whether real, personal, or
mixed) in which Seller or the Company has or had an interest, or to
the Knowledge of Seller and the Company any geologically or
hydrologically adjoining property, by Seller or the Company.
(6) Seller has delivered to Buyer true and complete copies and results of
any reports, studies, analyses, tests, or monitoring possessed or
initiated by Seller or the Company pertaining to Hazardous Materials
or Hazardous Activities in, on, or under the Facilities, or concerning
compliance by Seller, the Company, or any other Person for whose
conduct they are or may be held responsible, with Environmental Laws.
3.20 EMPLOYEES.
(1) Part 3.20 of the Disclosure Letter contains a complete and accurate
list of the following information for each employee or director of the
Company, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and
any change in compensation since March 31, 1999; vacation accrued; and
service credited for purposes of vesting and
29
eligibility to participate under the Company's pension, retirement,
profit-sharing, thrift-savings, deferred compensation, stock bonus,
stock option, cash bonus, employee stock ownership (including
investment credit or payroll stock ownership), severance pay,
insurance, medical, welfare, or vacation plan, other Employee Pension
Benefit Plan or Employee Welfare Benefit Plan, or any other employee
benefit plan or any Director Plan.
(2) No employee or director of the Company is a party to, or is otherwise
bound by, any agreement or arrangement, including any confidentiality,
non-competition, or proprietary rights agreement, between such
employee or director and any other Person ("Proprietary Rights
Agreement") that in any way adversely affects or will affect (i) the
performance of his duties as an employee or director of the Company,
or (ii) the ability of the Company to conduct its business, including
any Proprietary Rights Agreement with Seller or the Company by any
such employee or director. To Seller's Knowledge, no director,
officer, or other key employee of the Company intends to terminate his
employment with the Company.
(3) Part 3.20 of the Disclosure Letter also contains a complete and
accurate list of the following information for each retired employee
or director of the Company, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension benefit,
pension option election, retiree medical insurance coverage, retiree
life insurance coverage, and other benefits.
3.21 LABOR RELATIONS; COMPLIANCE. Since March 31, 1999, the Company has not
been a party to any collective bargaining or other labor Contract. Since March
31, 1999, there has not been, there is not presently pending or existing, and to
Seller's Knowledge there is not Threatened, (a) any strike, slowdown, picketing,
work stoppage, or employee grievance process, (b) any Proceeding against or
affecting the Company relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable Governmental
Body, organizational activity, or other labor or employment dispute against or
affecting any of the Company or its premises, or (c) any application for
certification of a collective bargaining agent. To Seller's Knowledge, no event
has occurred or circumstance exists that could provide the basis for any work
30
stoppage or other labor dispute. There is no lockout of any employees by the
Company, and no such action is contemplated by the Company. The Company has
complied in all respects with all Legal Requirements relating to employment,
equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes, occupational safety and health, and plant closing. The Company is liable
for the payment of any compensation, damages, taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of the foregoing
Legal Requirements.
3.22 INTELLECTUAL PROPERTY.
(1) Intellectual Property Assets - The term "Intellectual Property Assets"
includes:
(1) the name Becan Distributors, all fictional business names, trading
names, registered and unregistered trademarks, service marks, and
applications (collectively, "Marks");
(2) all patents, patent applications, and inventions and discoveries
that may be patentable (collectively, "Patents");
(3) all know-how, trade secrets, confidential information, customer
lists, software, technical information, data, process technology,
plans, drawings, and blue prints (collectively, "Trade Secrets");
owned, used, or licensed by the Company as licensee or licensor.
(2) Agreements - Part 3.22(b) of the Disclosure Letter contains a complete
and accurate list and summary description, including any royalties
paid or received by the Company, of all Contracts relating to the
Intellectual Property Assets to which the Company is a party or by
which the Company is bound, except for any license implied by the sale
of a product and perpetual, paid-up licenses for commonly available
software programs with a value of less than $10,000 under which an the
Company is the licensee. There are no outstanding and, to Seller's
Knowledge, no Threatened disputes or disagreements with respect to any
such agreement.
(3) Know-How Necessary for the Business.
(1) The Intellectual Property Assets are all those necessary for the
operation of the Company's
31
businesses as they are currently conducted. The Company is the
owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all liens,
security interests, charges, encumbrances, equities, and other
adverse claims, except for the lien held by The CIT Group/Credit
Finance, Inc., and has the right to use without payment to a third
party all of the Intellectual Property Assets.
(2) Except as set forth in Part 3.22(c) of the Disclosure Letter, all
former and current employees of the Company have executed written
Contracts with one or more of the Company that assign to one or
more of the Company all rights to any inventions, improvements,
discoveries, or information relating to the business of the
Company. No employee of the Company has entered into any Contract
that restricts or limits in any way the scope or type of work in
which the employee may be engaged or requires the employee to
transfer, assign, or disclose information concerning his work to
anyone other than the Company.
(4) Trade Secrets.
(1) With respect to each Trade Secret, the documentation relating to
such Trade Secret is current, accurate, and sufficient in detail
and content to identify and explain it and to allow its full and
proper use without reliance on the knowledge or memory of any
individual.
(2) Seller and the Company have taken all reasonable precautions to
protect the secrecy, confidentiality, and value of their Trade
Secrets.
(3) The Company has good title and an absolute (but not necessarily
exclusive) right to use the Trade Secrets. The Trade Secrets are
not part of the public knowledge or literature, and, to Seller's
Knowledge, have not been used, divulged, or appropriated either
for the benefit of any Person (other than the Company) or to the
detriment of the Company. No Trade Secret is subject to any
adverse claim or has been challenged or threatened in any way.
32
3.23 CERTAIN PAYMENTS. Since March 31, 1999, neither the Company nor any
director, officer, agent, or employee of the Company, or to Seller's Knowledge
any other Person associated with or acting for or on behalf of the Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company or any Affiliate
of an the Company, or (iv) in violation of any Legal Requirement, (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company.
3.24 DISCLOSURE.
(1) No representation or warranty of Seller in this Agreement and no
statement in the Disclosure Letter omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(2) No notice given pursuant to Section 7.5 will contain any untrue
statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances
in which they were made, not misleading.
(3) There is no fact known to Seller that has specific application to
either Seller or the Company (other than general economic or industry
conditions) and that materially adversely affects or, as far as Seller
can reasonably foresee, materially threatens, the assets, business,
prospects, financial condition, or results of operations of the
Company that has not been set forth in this Agreement or the
Disclosure Letter.
3.25 RELATIONSHIPS WITH RELATED PERSONS. Neither Seller nor any Related
Person of Seller or of the Company has, or since the first day of the next to
last completed fiscal year of the Company has had, any interest in any property
(whether real, personal, or mixed and whether tangible or intangible), used in
or pertaining to the Company's business, except for property used by Seller's
home office personnel to oversee the operations of the Company. Neither Seller
nor any Related Person of Seller or of the Company is, or since the first day of
the next to last completed fiscal year of the Company has owned (of record or as
a beneficial owner) an equity interest or any other financial or profit interest
33
in, a Person that has (i) had business dealings or a material financial interest
in any transaction with the Company other than business dealings or transactions
conducted in the Ordinary Course of Business with the Company at substantially
prevailing market prices and on substantially prevailing market terms, or (ii)
engaged in competition with the Company with respect to any line of the products
or services of the Company (a "Competing Business") in any market presently
served by the Company except for less than one percent of the outstanding
capital stock of any Competing Business that is publicly traded on any
recognized exchange or in the over-the-counter market. Except as set forth in
Part 3.25 of the Disclosure Letter, neither Seller nor any Related Person of
Seller or of the Company is a party to any Contract with, or has any claim or
right against, the Company.
3.26 BROKERS OR FINDERS. Seller and its agents have incurred no obligation
or liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada.
4.2 AUTHORITY; NO CONFLICT.
(1) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with
its terms. Buyer has the absolute and unrestricted right, power,
and authority to execute and deliver this Agreement and to
perform its obligations under this Agreement.
(2) Except as set forth in Schedule 4.2, neither the execution and
delivery of this Agreement by Buyer nor the consummation or
performance of any of the Contemplated Transactions by Buyer will
give any Person the right to prevent, delay, or otherwise
interfere with any of the Contemplated Transactions pursuant to:
(1) any provision of Buyer's Organizational Documents;
34
(2) any resolution adopted by the board of directors or the
stockholders of Buyer;
(3) any Legal Requirement or Order to which Buyer may be subject;
or
(4) any Contract to which Buyer is a party or by which Buyer may
be bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be required
to obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its own account
and not with a view to their distribution within the meaning of Section 2(11) of
the Securities Act.
4.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
4.5 BROKERS OR FINDERS. Buyer and its officers and agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold Seller harmless from any such payment
alleged to be due by or through Buyer as a result of the action of Buyer or its
officers or agents.
5. COVENANTS
5.1 COVENANTS OF THE COMPANY.
(2) Prior to and through the Closing Date, the Company shall
(1) conduct its business only in the Ordinary Course of Business;
(2) use its commercially reasonable efforts to preserve intact the
current business organization of the Company, keep available the
services of the current officers, employees and agents of the
Company, and maintain the relations and good will with suppliers,
customers, landlords, creditors,
35
employees, agents and others having business relationships with
the Company; and
(3) report periodically to Buyer concerning the status of the business
and operations of the Company.
(3) Commencing on the date of execution of this Agreement through the
Closing Date, the Company shall not, directly or indirectly (whether
through an employee, a representative, an agent or otherwise) solicit
or encourage any inquiries or proposals, engage in negotiations for or
consent to or enter into any agreement providing for the acquisition
of the business. The Company shall not, directly or indirectly
(whether through an employee, a representative, an agent or otherwise)
disclose any non-public information relating to the Company or afford
access to any of the books, records or other properties of the Company
to any person or entity that is considering, has considered or is
making any such acquisition inquiry or proposal relating to the
Company's business.
(4) Prior to the Closing Date, the Company shall use commercially
reasonable efforts to:
(1) promptly comply with all filing requirements which federal, state
or local law may impose on the Company with respect to the
transactions contemplated by this Agreement; and
(2) take all actions necessary to be taken, make any filing and obtain
any consent, authorization or approval of or exemption by any
governmental authority, regulatory agency or any other third
party (including without limitation, any landlord or lessor of
the Company and any party to whom notification s required to be
delivered or from whom any form of consent is required) which is
required to be filed or obtained by the Company in connection
with the transactions contemplated by this Agreement.
(5) Prior to the Closing Date, the Company shall make available to Buyer
any and all agreements, contracts, documents, other instruments and
personnel material to the Company's business, including without
limitation, those contracts to which the Company is a party and those
by which its business or any of the Company's assets are bound.
36
5.2 COVENANTS OF BUYER.
(1) Buyer shall use all reasonable efforts to obtain any consent,
authorization or approval of, or exemption by, any governmental
authority or agency or other third party required to be obtained or
made by it in connection with this Agreement or the consummation of the
transactions contemplated hereby.
(b) Prior to the Closing Date, with the cooperation of the Company where
appropriate, Buyer shall:
(1) promptly comply with all filing requirements which federal, state
or local law may impose on Buyer with respect to the transactions
contemplated by this Agreement; and (1)
(2) use its diligent efforts to take all actions necessary to be
taken, make any filing and obtain any consent, authorization or
approval of or exemption by any governmental authority,
regulatory agency or any other third party which is required to
be filed or obtained by Buyer in connection with the transactions
contemplated by this Agreement.
6. CONDITIONS
6.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
fulfillment of each of the following conditions, which may be waive in whole or
in part by Buyer to the extent permitted by applicable law:
(1) At the Closing, Seller shall have furnished Buyer with certified copies
of resolutions duly adopted by the board of directors and stockholders
of Seller authorizing the execution, delivery and performance of the
terms of this Agreement.
(2) Seller shall have furnished to Buyer, at the Closing, with an opinion
of counsel to Seller and the Company dated as of the Closing Date, in
a form to be agreed upon.
(3) Each of the representations and warranties of Seller set forth in this
Agreement was true, correct and complete in all material respects when
made and shall also be true, correct and complete in all material
respects at and as of the Closing Date, with the same force and effect
as if
37
made and as of the Closing Date. Seller shall have performed and
complied in all material respects with all agreements and covenants
required by this Agreement to be performed by Seller at or prior to the
Closing Date.
(4) Seller shall have delivered to Buyer a certificate, dated the Closing
Date, and signed by an executive officer of Seller affirming that the
representations and warranties made by Seller as set forth in Section
3 of this Agreement were and are true, correct and complete as
required by Section 6.1(c) above.
(5) At the Closing, any and all necessary consents, authorizations orders
or approvals shall have been obtained, except as the same shall have
been waived by Buyer.
(6) On the Closing Date, there shall be no effective injunction, writ or
preliminary restraining order or any order of any kind whatsoever with
respect to Seller issued by a court or governmental agency (or other
governmental or regulatory authority) of competent jurisdiction
restraining or prohibiting the consummation of the transactions
contemplated hereby or making consummation thereof unduly burdensome
to Buyer. On the Closing Date and immediately prior to consummation of
the transactions contemplated by this Agreement, no proceeding or
lawsuit shall have been commenced, be pending or have been threatened
by any governmental or regulatory agency or authority or any other
person with respect to the transactions contemplated by this
Agreement.
(7) Prior to the Closing Date, the Company shall have made available or
delivered to Buyer all of the agreements, contracts, documents and
other instruments required to be delivered pursuant to the provisions
of this Agreement.
(8) The Closing is conditioned upon the consummation of the Public
Financing.
6.2 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment of each of the following conditions, which may be waived in whole or
in part by the Company to the extent permitted by law:
(1) At the Closing, Buyer shall have furnished Seller with certified copies
of resolutions duly adopted by the board
38
of directors of Buyer authorizing the execution, delivery and
performance of the terms of this Agreement and all other necessary or
proper corporate action to enable to comply with the terms of this
Agreement.
(2) Buyer shall have furnished the Company at the Closing, with an opinion
of counsel to Buyer, dated as of the Closing Date, in a form to be
agreed upon.
(3) Each of the representations and warranties of Buyer was true, correct
and complete in all material respects when made and shall also be
true, correct and complete in all material respects at and as of the
Closing Date, with the same force and effect as if made at and as of
the Closing Date. Buyer shall have performed and complied in all
material respects with all agreements covenants required by this
Agreement to be performed by the Buyer at or prior to the Closing
Date.
(4) Buyer shall have delivered to the Company a certificate, dated the
Closing Date and signed by an executive officer of Buyer, affirming
that the representations and warranties of Buyer as set forth in
Section 4 of this Agreement were and are true, correct and complete as
required by Section 6.2(c).
(5) On or prior to the Closing Date, any and all necessary consents,
authorizations, orders or approvals shall have been obtained, except
as the same shall have been waived by the Company.
(6) On the Closing Date, there shall be no effective injunction, writ or
preliminary restraining order or any order of any kind whatsoever with
respect to the Company issued by a court or governmental agency (or
other governmental or regulatory authority) of competent jurisdiction
restraining or prohibiting the consummation of the transactions
contemplated herein or making the consummation thereof unduly
burdensome to the Company. On the Closing Date, no proceeding or
lawsuit shall have been commenced, threatened or be pending or by any
governmental or regulatory agency or authority or any other person
with respect to the transactions contemplated by this Agreement.
(7) Prior to the Closing Date, Buyer shall have made available or delivered
to the Company all of the agreements, contracts, documents and other
instruments
39
required to be delivered pursuant to the provisions or this Agreement.
(8) Buyer shall have consummated the Public Financing at a price of not
less than $8.00 per share.
(9) Buyer shall have entered into an agreement with Seller upon terms
satisfactory to Seller granting Seller, for a period of one year from
the Closing Date, the first right to manufacture private label
nutritional supplements sold or to be sold by the Company.
7. TERMINATION AND REMEDIES FOR BREACH OF THIS AGREEMENT
7.1 TERMINATION BY MUTUAL AGREEMENT. This Agreement may be terminated at
any time by mutual consent of the parties hereto, provided that such consent to
terminate is manifested in writing and is signed by each of the parties hereto.
7.2 TERMINATION FOR FAILURE TO CLOSE. This Agreement may be terminated by
any party hereto if the Closing shall not have occurred by October 31, 1999,
PROVIDED THAT, the right to terminate this Agreement pursuant to this Section
7.2 shall not be available to any party whose failure to fulfill any of its
obligations hereunder has been the cause of or resulted in the failure to
consummate the transactions contemplated hereby by the foregoing date.
7.3 TERMINATION BY OPERATION OF LAW. This Agreement may be terminated by
any party hereto if there shall be any statute, rule or regulation that renders
consummation of the transactions contemplated hereby illegal or otherwise
prohibited, or a court of competent jurisdiction or any government (or
governmental authority) shall have issued an order, decree or ruling, or has
taken any other action restraining, enjoining or otherwise prohibiting the
consummation of such transactions and such order, decree, ruling or other action
shall have become final and non-appealable.
7.4 TERMINATION FOR FAILURE TO PERFORM COVENANTS OR CONDITIONS. This
Agreement may be terminated prior to the Closing Date.
(10) by Buyer if: (i) any of the representations and warranties made in
this Agreement by the Seller shall not be materially true and correct,
when made or at any time prior to consummation of the transactions
contemplated hereby as if made at and as of such time; (ii) any of the
40
conditions set forth in Section 6.1 hereof have not been fulfilled by
the Closing Date; (iii) the Seller shall have failed to observe or
perform any of its material obligations under this Agreement; or
(iv) as otherwise set forth herein; or
(11) by Seller if: (i) any of the representations and warranties of Buyer
shall not be materially true and correct when made or at any time
prior to consummation of the transactions contemplated hereby as if
made at and as of such time; (ii) any of the conditions set forth in
Section 6.2 hereof have not been fulfilled by the Closing Date;
(iii) Buyer shall have failed to observe or perform any of their
material respective obligations under this Agreement; or (iv) as
otherwise set forth herein.
8. INDEMNIFICATION; REMEDIES
8.1 SURVIVAL, RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. All
representations, warranties, covenants, and obligations in this Agreement, the
Disclosure Letter, and any other document delivered pursuant to this Agreement
will survive the Closing. The right to indemnification, payment of Damages or
other remedy based on such representations, warranties, covenants, and
obligations will not be affected by any investigation conducted with respect to,
or any Knowledge acquired (or capable of being acquired) at any time, whether
before or after the execution and delivery of this Agreement or the Closing
Date, with respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based op. such
representations, warranties, covenants, and obligations.
8.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER. Seller will indemnify
and hold harmless Buyer, the Company, and their respective Representatives,
stockholders, controlling persons, and affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(12) any Breach of any representation or warranty made by Seller in this
Agreement (without giving effect to any
41
supplement to the Disclosure Letter), the Disclosure Letter, the
supplements to the Disclosure Letter, or any other certificate or
document delivered by Seller pursuant to this Agreement;
(13) any Breach of any representation or warranty made by Seller in this
Agreement;
(14) any Breach by Seller of any covenant or obligation of such Seller in
this Agreement;
(15) any product shipped or manufactured by, or any services provided by,
the Company prior to the Closing Date;
(16) any claim by any Person for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged
to have been made by any such Person with Seller or the Company (or
any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 8.2 will not be exclusive of or limit
any other remedies that may be available to Buyer or the other Indemnified
Persons.
8.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER - ENVIRONMENTAL
MATTERS. In addition to the provisions of Section 8.2, Seller will indemnify and
hold harmless Buyer, the Company, and the other Indemnified Persons for, and
will pay to Buyer, the Company, and the other Indemnified Persons the amount of,
any Damages (including costs of cleanup, containment, or other remediation)
arising, directly or indirectly, from or in connection with:
(1) any Environmental, Health, and Safety Liabilities arising out of or
relating to: (i) (A) the ownership, operation, or condition at any time
on or prior to the Closing Date of the Facilities or any other
properties and assets (whether real, personal, or mixed and whether
tangible or intangible) in which Seller or the Company has or had an
interest, or (B) any Hazardous Materials or other contaminants that
were present on the Facilities or such other properties and assets at
any time on or prior to the Closing Date; or (ii) (A) any Hazardous
Materials or other contaminants, wherever located, that were, or were
allegedly, generated, transported, stored, treated, Released, or
otherwise handled by Seller or the Company or by any other Person for
whose conduct they are or may be held responsible at any time on or
prior to the
42
Closing Date, or (B) any Hazardous Activities that were, or were
allegedly, conducted by Seller or the Company or by any other Person
for whose conduct they are or may be held responsible; or
(2) any bodily injury (including illness, disability, and death, and
regardless of when any such bodily injury occurred, was incurred, or
manifested itself), personal injury, property damage (including
trespass, nuisance, wrongful eviction, and deprivation of the use of
real property), or other damage of or to any Person, including any
employee or former employee of Seller or the Company or any other
Person for whose conduct they are or may be held responsible, in any
way arising from or allegedly arising from any Hazardous Activity
conducted or allegedly conducted with respect to the Facilities or the
operation of the Company prior to the Closing Date, or from Hazardous
Material that was (i) present or suspected to be present on or before
the Closing Date on or at the Facilities (or present or suspected to
be present on any other property, if such Hazardous Material emanated
or allegedly emanated from any of the Facilities and was present or
suspected to be present on any of the Facilities on or prior to the
Closing Date) or (ii) Released or allegedly Released by Seller or the
Company or any other Person for whose conduct they are or may be held
responsible, at any time on or prior to the Closing Date.
Buyer will be entitled to control any Cleanup, any related Proceeding, and,
except as provided in the following. sentence, any other Proceeding with respect
to which indemnity may be sought under this Section 8.3. The procedure described
in Section 8.8 will apply to any claim solely for monetary damages relating to a
matter covered by this Section 8.3.
8.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will indemnify
and hold harmless Seller, and will pay to Seller the amount of any Damages
arising, directly or indirectly, from or in connection with (a) any Breach of
any representation or warranty made by Buyer in this Agreement or in any
certificate delivered by Buyer pursuant to this Agreement, (b) any Breach by
Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in connection with any of
the Contemplated Transactions.
43
8.5 TIME LIMITATIONS. Seller will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, other than those in
Sections 3.3, 3.11, 3.13, and 3.19, unless on or before two years after the
Closing Date, Buyer notifies Seller of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by Buyer; a claim with
respect to Section 3.3, 3.11, 3.13, or 3.19, or a claim for indemnification or
reimbursement not based upon any representation or warranty or any covenant or
obligation to be performed and complied with prior to the Closing Date, may be
made at any time. Buyer will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, unless
on or before two years after the Closing Date, Seller notifies Buyer of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Seller.
8.6 LIMITATIONS ON AMOUNT - SELLER. Seller will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a), clause (b) or, to the extent relating to any failure to perform or comply
prior to the Closing Date, clause (c) of Section 8.2 until the total of all
Damages with respect to such matters exceeds $50,000, and then only for the
amount by which such Damages exceed $50,000. Seller will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(d) of Section 8.2 until the total of all Damages with respect to such matters
exceeds $50,000, and then only for the amount by which such Damages exceed
$50,000. However, this Section 8.6 will not apply to any 31 Breach of any of
Seller's representations and warranties of which Seller had Knowledge at any
time prior to the date on which such representation and warranty is made or any
intentional Breach by either Seller of any covenant or obligation, and Seller
will be jointly and severally liable for all Damages with respect to such
Breaches.
8.7 LIMITATIONS ON AMOUNT - BUYER. Buyer will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a) or (b) of Section 8.4 until the total of all Damages with respect to such
matters exceeds $50,000, and then only for the amount by which such Damages
exceed $50,000. However, this Section 8.7 will not apply to any Breach of any of
Buyer's representations and warranties of which Buyer had Knowledge at any time
prior to the date on which such representation and warranty is made or any
intentional Breach by Buyer of any covenant or obligation, and Buyer will be
liable for all Damages with respect to such Breaches.
8.8 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS.
44
(1) Promptly after receipt by an indemnified party under Section 8.2, 8.4,
or (to the extent provided in the last sentence of Section 8.3)
Section 8.3 of notice of the commencement of any Proceeding against
it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying
party of the commencement of such claim, but the failure to notify the
indemnifying party will not relieve the indemnifying party of any
liability that it may have to any indemnified party, except to the
extent that the indemnifying party demonstrates that the defense of
such action is prejudiced by the indemnifying party's failure to give
such notice
(2) If any Proceeding referred to in Section 8.8(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless
the claim involves Taxes, be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint representation
would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with
respect to such Proceeding), to assume the defense of such Proceeding
with counsel satisfactory to the indemnified party and, after notice
from the indemnifying party to the indemnified party of its election
to assume the defense of such Proceeding, the indemnifying party will
not, as long as it diligently conducts such defense, be liable to the
indemnified party under this Section 8 for any fees of other counsel
or any other expenses with respect to the defense of such Proceeding,
in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable
costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) it will be conclusively established for purposes
of this Agreement that the claims made in that Proceeding are within
the scope of and subject to indemnification; (ii) no compromise or
settlement of such claims may be effected by the indemnifying party
without the indemnified party's consent unless (A) there is no finding
or admission of any violation of Legal Requirements 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 (B) the sole relief
45
provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with
respect to any compromise or settlement of such claims effected
without its consent. If notice is given to an indemnifying party of
the commencement of any Proceeding and the indemnifying party does
not, within ten days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will be bound by
any determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.
(3) Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a Proceeding
may adversely affect it or its affiliates other than as a result of
monetary damages for which it 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 Proceeding, but the indemnifying party will not be
bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not
be unreasonably withheld).
(4) Seller hereby consents to the non-exclusive jurisdiction of any court
in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this
Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on Seller with respect
to such a claim anywhere in the world.
8.9 PROCEDURE FOR INDEMNIFICATION - OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
9. GENERAL PROVISIONS
9.1 EXPENSES. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants. Seller will cause the Company not to
incur any out-of-pocket expenses in connection with this Agreement.
46
9.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity with
respect to this Agreement or the Contemplated Transactions will be issued, if at
all, at such time and in such manner as Buyer determines. Unless consented to by
Buyer in advance or required by Legal Requirements, prior to the Closing Seller
shall, and shall cause the Company to, keep this Agreement strictly confidential
and may not make any disclosure of this Agreement to any Person. Seller and
Buyer will consult with each other concerning the means by which the Company's
employees, customers, and suppliers and others having dealings with the Company
will be informed of the Contemplated Transactions, and Buyer will have the right
to be present for any such communication.
9.3 NOTICES. All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent by
telecopier (with written confirmation of receipt), provided that a copy is
mailed by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Seller: Dynamic Health Products, Inc.
0000 Xxxxx Xxxxx Xxxx
Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Facsimile No.: (000)000-0000
with a copy to: Xxxxxx Xxxxxxxx, Esq.
Johnson, Blakely, Pope, Bokor, Xxxxxx & Xxxxx,
P.A.
000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx, XX 00000
Facsimile No.: (000)000-0000
Buyer: Xxxxxxxxxxxxx.xxx Corporation
0000 Xxxxx Xxxxx Xxxx
Xxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Facsimile No.: (000)000-0000
with a copy to: Xxxxxxx X. Xxxxxxxx, Esq.
Schifino & Xxxxxxxxx, P.A.
000 X. Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx, XX 00000
47
Facsimile No.: (000)000-0000
9.4 JURISDICTION, SERVICE OF PROCESS. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the State of Florida,
County of Pinellas, or, if it has or can acquire jurisdiction, in the United
States District Court for the Middle District of Florida, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
9.5 FURTHER ASSURANCES. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
9.6 WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or 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 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 such 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.
9.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter and
constitutes a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
49
9.8 DISCLOSURE LETTER. In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
9.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party may
assign any of its rights under this Agreement without the prior consent of the
other parties, which will not be unreasonably withheld, except that Buyer may
assign any of its rights under this Agreement to any Subsidiary of Buyer.
Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted
assigns of the parties. Nothing expressed or referred to in this Agreement will
be construed to give any Person other than the parties to this Agreement any
legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
9.10 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
9.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
9.12 TIME OF ESSENCE. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
9.13 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Florida without regard to conflicts of laws principles.
49
9.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER:
XXXXXXXXXXXXXX.XXX CORPORATION,
a Nevada corporation
By: /s/XXXXXXX XXXXXXX
/s/ XXXXX XXXX-XXXXXXX ----------------------
------------------------- Xxxxxxx Xxxxxxx, President
SELLER:
DYNAMIC HEALTH PRODUCTS, INC.
a Florida corporation
By:/s/KOTHA X. XXXXXXXX
---------------------------
President
50
EXHIBIT 2.4(A)(II)
RELEASE
This Release is being executed and delivered in accordance with Section
2.4(a)(ii) of the Agreement and Plan of Reorganization dated September ____ ,
1999 (the "Agreement") between Xxxxxxxxxxxxxx.xxx Corporation, a Nevada
corporation ("Buyer") and Dynamic Health Products, Inc. ("Seller"). Capitalized
terms used in this Release without definition have the respective meanings given
to them in the Agreement.
Seller acknowledges that execution and delivery of this Release is a
condition to Buyer's obligation to purchase the outstanding capital stock of the
Company pursuant to the Agreement and that Buyer is relying on this Release in
consummating such purchase.
Seller, for good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged and intending to be legally bound, in order to
induce Buyer to purchase the outstanding capital stock of the Company pursuant
to the Agreement, hereby agrees as follows:
Seller, on behalf of himself and each of its Related Persons, hereby
releases and forever discharges the Buyer and the Company, and each of their
respective individual, joint or mutual, past, present and future
Representatives, affiliates, stockholders, controlling persons, Subsidiaries,
successors and assigns (individually, a "Releasee" and collectively,
"Releasees") from any and all claims, demands, Proceedings, causes of action,
Orders, obligations, contracts, agreements, debts and liabilities whatsoever,
whether known or unknown, suspected or unsuspected, both at law and in equity,
which each of Seller or any of their respective Related Persons now has, have
ever had or may hereafter have against the respective Releasees arising
contemporaneously with or prior to the Closing Date or on account of or arising
out of any matter, cause or event occurring contemporaneously with or prior to
the Closing Date, including, but not limited to, any rights to indemnification
or reimbursement from the Company, whether pursuant to their respective
Organizational Documents, contract or otherwise and whether or not relating to
claims pending on, or asserted after, the Closing Date.
Seller hereby irrevocably covenants to refrain from, directly or
indirectly, asserting any claim or demand, or commencing, instituting or causing
to be commenced, any proceeding of any kind against any Releasee, based upon any
matter purported to be released hereby.
Without in any way limiting any of the rights and remedies otherwise
available to any Releasee, Seller shall indemnify and hold harmless each
Releasee from and against all loss, liability, claim, damage (including
incidental and consequential damages) or expense (including costs of
investigation and defense and reasonable attorney's fees) whether or not
involving third party claims, arising directly or indirectly from or in
connection with (i) the assertion by or on behalf of Seller or any of their
Related Persons of any claim or other matter purported to be released pursuant
to this Release and (ii) the assertion by any third party of any claim or demand
against any Releasee which claim or demand arises directly or indirectly from,
or in connection with, any assertion by or on behalf of Seller or any of their
Related Persons against such third party of any claims or other matters
purported to be released pursuant to this Release.
If any provision of this Release is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Release will
remain in full force and effect. Any provision of this Release held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
This Release may not be changed, except in a writing signed by the
person(s) against whose interest such change shall operate. This Release shall
be governed by and construed under the laws of the State of Florida without
regard to principles of conflicts of law.
All words used in this Release will be construed to be of such gender or
number as the circumstances require.
This Release may be executed in any number of counterparts, each of which
shall be deemed to be an original as against any party whose signature appears
thereon, and all of which shall together constitute one and the same instrument.
This Release shall become binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of all of the parties
reflected hereon as the signatories hereto.
IN WITNESS WHEREOF, each of the undersigned have executed and delivered
this Release as of this ___ day of September, 1999.
BUYER:
XXXXXXXXXXXXXX.XXX CORPORATION,
a Nevada corporation
By:
----------------------
Xxxxxxx Xxxxxxx, President
SELLER:
DYNAMIC HEALTH PRODUCTS, INC.
a Florida corporation
By: ___________________________
__________, President
