ASSET PURCHASE AGREEMENT
between
VACU-DRY COMPANY,
MIN ACQUISITION CORP.,
MADE IN NATURE, INC. and
XXXXXX X. XXXXXXX
June 11, 1998
TABLE OF CONTENTS
Page
ARTICLE 1 PURCHASE AND SALE OF ASSETS........................................1
1.1 Transferred Assets.....................................................1
1.2 Retained Assets........................................................2
1.3 Title..................................................................3
ARTICLE 2 PURCHASE PRICE.....................................................3
2.1 Purchase Price.........................................................3
2.2 Cash Purchase Price....................................................3
2.3 Limited Assumption of Liabilities......................................3
2.4 Common Stock Purchase Warrants.........................................4
2.5 Liabilities Not Assumed................................................4
2.6 Allocation of Purchase Price...........................................5
2.7 Transfer Taxes.........................................................5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER.......................5
3.1 Organization; Books and Records........................................5
3.2 Qualifications, etc....................................................5
3.3 Non-Contravention......................................................6
3.4 Regulatory Approvals...................................................6
3.5 Capitalization of the Seller...........................................6
3.6 Subsidiaries and Equity Interests; Transactions with Affiliates........7
3.7 Financial Statements...................................................7
3.8 Absence of Certain Changes or Events...................................7
3.9 Assets Other than Real Property Interests..............................8
3.10 Real Property Owned and Leased........................................8
3.11 Patents, Trademarks, etc..............................................9
3.12 Insurance............................................................10
3.13 Commitments..........................................................10
3.14 Legal Proceedings....................................................12
3.15 Taxes................................................................13
3.16 Compliance with Laws.................................................14
3.17 Environment..........................................................14
3.18 Employee Benefit Plans: Termination and Severance Agreements.........16
3.19 Employee and Labor Matters...........................................18
3.20 Capital Expenditures.................................................19
3.21 Powers of Attorney...................................................19
3.22 Customer Accounts Receivable; Inventories............................19
3.23 No Material Misstatement or Omission.................................20
3.24 No Undisclosed Material Liabilities..................................20
3.25 Authorization........................................................20
3.26 Title to Assets......................................................21
3.27 Condition of Assets..................................................21
3.28 Investment Representations..........................................22
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...................23
4.1 Corporate Organization................................................23
4.2 Authorization.........................................................23
4.3 Brokers...............................................................23
4.4 Litigation............................................................23
4.5 Conflicts With Other Agreements.......................................23
4.6 Consents..............................................................24
ARTICLE 5 SELLER'S AND PURCHASER'S OBLIGATIONS PRIOR TO THE CLOSING.........24
5.1 Conduct of Business...................................................24
5.2 Breach of Representations and Warranties..............................25
5.3 Exclusive Dealing.....................................................25
5.4 Access................................................................25
5.5 Violations of Law.....................................................26
5.6 Public Announcements..................................................26
ARTICLE 6 CONDITIONS PRECEDENT TO CLOSING BY THE PURCHASER..................26
6.1 Accuracy of Representations and Warranties............................26
6.2 Performance Agreements................................................26
6.3 Authorization.........................................................27
6.4 No Material Adverse Change............................................27
6.5 Restructuring of Debt.................................................27
6.6 Xxxx of Sale..........................................................27
6.7 Employment Agreement..................................................27
6.8 Pledge and Security Agreement.........................................27
6.9 Opinion of Counsel....................................................27
6.10 Third Party Consents and Governmental Authorizations.................28
6.11 Compliance with Bulk Sales Law.......................................28
6.12 Release of Lien......................................................28
6.13 Certificates; Assignments............................................28
6.14 Other Matters........................................................28
ARTICLE 7 CONDITIONS PRECEDENT TO CLOSING BY THE SELLER.....................28
7.1 Accuracy of Representations and Warranties............................29
7.2 Performance of Agreements.............................................29
7.3 Employment Agreement..................................................29
7.4 Opinion of Counsel....................................................29
7.5 Authorization.........................................................29
7.6 Other Matters.........................................................29
ARTICLE 8 FURTHER ASSURANCES................................................30
8.1 Execution of Other Instruments........................................30
8.2 Assignment of Contracts...............................................30
8.3 Power of Attorney.....................................................30
ARTICLE 9 EMPLOYEE RELATIONS AND BENEFITS...................................31
9.1 Offer of Employment...................................................31
9.2 Benefits..............................................................31
ARTICLE 10 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION......31
10.1 Survival of Representations and Warranties...........................31
10.2 Obligation of the Seller to Indemnify................................32
10.3 Obligation of the Purchaser to Indemnify.............................32
10.4 Procedure for Indemnification........................................33
10.5 Other Rights.........................................................33
ARTICLE 11 TERMINATION......................................................33
ARTICLE 12 CLOSING..........................................................34
12.1 Closing Date.........................................................34
12.2 Possession...........................................................34
ARTICLE 13 REMEDIES.........................................................34
13.1 Remedies.............................................................34
ARTICLE 14 COVENANTS OF THE SELLER AND THE PURCHASER AFTER THE CLOSING......35
14.1 Payment of Obligations...............................................35
14.2 Non-Competition......................................................35
14.3 Change of Name.......................................................35
14.4 Payment by the Purchaser of Current Liabilities......................36
14.5 Uniform Tax Treatment................................................36
ARTICLE 15 RIGHT OF SET-OFF.................................................36
15.1 Right of Set-Off.....................................................36
ARTICLE 16 EXPENSES OF THE PARTIES..........................................36
16.1 Expenses of the Parties..............................................36
ARTICLE 17 NOTICES..........................................................37
17.1 Notices..............................................................37
ARTICLE 18 DISPUTE RESOLUTION...............................................38
18.1 Mandatory Arbitration................................................38
18.2 Provisional Remedies and Self Help...................................38
ARTICLE 19 MISCELLANEOUS....................................................39
19.1 Entire Agreement; Waivers............................................39
19.2 Attorneys Fees.......................................................39
19.3 Governing Law........................................................39
19.4 Successors and Assigns...............................................39
19.5 Captions.............................................................39
19.6 Counterparts.........................................................39
19.7 Severability.........................................................39
SIGNATURE PAGE...............................................................40
LIST OF SCHEDULES AND EXHIBITS...............................................41
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of June 11,
1998 by and between Vacu-dry Company, a California corporation ("Parent"), MIN
Acquisition Corp., a California corporation (the "Purchaser"); Made In Nature,
Inc., a California corporation (the "Seller"); and Xxxxxx X. Xxxxxxx
("Shareholder").
R E C I T A L S:
WHEREAS, Seller is engaged in the business of developing and marketing of
organic foods and beverages; and
WHEREAS, Seller desires to sell, and the Purchaser, a wholly-owned
subsidiary of Parent, desires to buy, on the terms and conditions set forth in
this Agreement, certain of Seller's assets as set forth herein; and
WHEREAS, Seller desires to assign, and the Purchaser is willing to assume,
on the terms and conditions set forth in this Agreement, certain of the
liabilities of the Seller as set forth herein; and
WHEREAS, Parent is a party to this Agreement for the purpose of certain
covenants; and
WHEREAS, Shareholder is a party to this Agreement for the purpose of making
certain representations, warranties and covenants.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements hereinafter contained, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Transferred Assets.
Subject to and upon the terms and conditions of this Agreement, the Seller
agrees to sell, assign, transfer, convey and deliver to the Purchaser free and
clear of all liabilities and encumbrances except as hereinafter set forth, and
the Purchaser agrees to purchase from the Seller on the Closing Date (as defined
in Section 12.1) those certain assets, properties, and business of Seller
described below (all of which are sometimes collectively referred to as the
"Transferred Assets"), including, without limitation, all assets and property of
Seller reflected on its balance sheet as of April 17, 1998 (the Balance Sheet")
referred to in Section 3.7, and all assets and property thereafter acquired by
Seller before the Closing Date and not disposed of in the ordinary course of
business consistent with prior practice, including without limitation to, the
following:
(a) All cash on hand and in bank as of the Closing Date;
(b) All tangible personal property and assets (except as hereinafter
expressly provided otherwise), including, but not limited to, the inventory,
accounts receivable and other assets set forth on Schedule 1.1(b) hereto;
(c) All United States and foreign patents, registered and common law
trademarks and service marks, tradenames, copyrights, logos, slogans, and
permissions for the use of copyrighted materials owned by others owned by the
Seller (and all licenses with respect thereto), including but not limited to,
those which are listed on Schedule 1.1(c) hereto;
(d) All of Seller's claims and rights against third parties relating
to the Transferred Assets including, without limitation, insurance claims,
rights under vendors' warranties, rights of recovery, set-offs and credits;
(e) All contracts, including without limitation, manufacturing,
licensing, distribution, purchase or sale orders, leases and other executory
agreements, whether oral or written, of the Seller related to or useful in the
Seller's business, including but not limited to, those which are listed on
Schedule 1.1(e) hereto;
(f) All customer lists, supplier lists, mailing lists, advertising
promotional materials, catalogs, price and product lists, sales record and
files, papers, software, correspondence and computerized reports;
(g) All trade secrets, know-how, procedures, software files, market
surveys and marketing know-how;
(h) All accounts receivable, prepayments, deferred expenses, notes
receivable, rights to advances and deposits;
(i) Seller's goodwill;
(j) All of the insurance policies set forth in Schedule 1.2(e) hereto
to the extent such policies relate to liabilities assumed by Purchaser pursuant
to this Agreement; and
(k) All other tangible and intangible assets.
1.2 Retained Assets.
Notwithstanding anything to the contrary herein, the Seller shall retain
and not sell, assign, transfer, convey or deliver to the Purchaser any of the
following (hereinafter referred to as the "Retained Assets"):
(a) Seller's corporate books and records containing the minutes of
meetings of directors and stockholders;
(b) All federal, state, county and local income, excise, franchise,
property and other tax returns, reports and declarations of the Seller;
(c) All tax refunds due and owing to the Seller in respect of all
periods up to the Closing Date other than tax refunds reflected on the Effective
Date Balance Sheet;
(d) All amounts due or to become due under any insurance policies
covering the Seller or any of its business, properties or assets other than
pertaining to damage or loss to the Transferred Assets or pertaining to a
liability being assumed by the Purchaser hereunder; and
(e) All of the insurance policies set forth in Schedule 1.2(e) hereto
other than those policies covering liabilities assumed by Purchaser pursuant to
this Agreement.
1.3 Title.
Title and risk of loss to the Transferred Assets shall pass to the
Purchaser at the Closing and the Transferred Assets shall be deemed delivered to
the Purchaser at their respective locations.
ARTICLE 2
PURCHASE PRICE
2.1 Purchase Price.
The purchase price to be paid by Purchaser to Seller for the Transferred
Assets shall consist of (i) cash as set forth in Section 2.2 below, (ii) the
assumption of certain liabilities as provided in Section 2.3 below, and (iii)
the issuance and delivery of Parent's Common Stock Warrant as set forth in
Section 2.4 below.
2.2 Cash Purchase Price.
At the Closing, the Purchaser shall deliver to Seller's designated account
or accounts by wire transfer in immediately available funds Three Hundred
Thirty-six Thousand Dollars ($336,000.00)
2.3 Limited Assumption of Liabilities.
At the Closing, the Purchaser shall assume only the following obligations
and liabilities of the Seller and no others (the "Assumed Liabilities"):
(a) The liabilities of the Seller reflected on Schedule 2.3(a)hereto
that are outstanding on the Closing Date;
(b) The obligations and liabilities of the Seller under the contracts
and agreements listed on Schedule 1.1(e).
2.4 Common Stock Warrant.
At the Closing and subject to the provisions of Article 6, the Purchaser
shall deliver to Seller Parent's Common Stock Warrant (the "Warrants") in the
form of Exhibit A hereto entitling Seller to purchase 100,000 shares of Parent's
common stock ("Parent's Common Stock").
2.5 Liabilities Not Assumed.
(a) Notwithstanding the foregoing, neither the Purchaser nor any
Affiliate (as defined below) assumes any obligation or liability resulting from
or arising out of the existence of which constitutes (i) any breach by the
Seller of its obligations under any contract or agreement referred to in
Schedule 1.1(e), or (ii) any breach of any representation, warranty or agreement
of the Seller contained in this Agreement. As used in this Agreement, an
"Affiliate" shall mean with respect to any person (A) a person directly or
indirectly controlling, controlled by or under control with such person; (B) a
person owning or controlling 10% or more of the outstanding voting securities of
such person; or (C) an officer, director or partner of such person. When the
Affiliate is an officer, director or partner of such person, any other person
for which the Affiliate acts in that capacity shall also be considered an
Affiliate. For these purposes, control means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a person, whether by the ownership of voting securities, by contract or
otherwise.
(b) Neither the Purchaser nor any Affiliate undertakes any liability
of the Seller not expressly assumed including, without limitation, liability
with respect to environmental claims and suits; liability for the payment of the
Seller's outstanding loans and credit lines except as provided in this
Agreement; any liability for making payments of any kind (including, as a result
of the transactions contemplated hereby, for the termination of employment by
the Seller of employees, or as a result of union contracts, if any, grievances,
or other labor claims, or otherwise) to employees of the Seller; liability for
pensions or other benefits to employees of the Seller; liability for making
payments of any kind as a result of the termination of any agency; liability for
making payments of any kind pursuant to any agreements, arrangements or
understandings with employees or other persons out of the proceeds from the sale
of the Transferred Assets; liability for other accrued or deferred and unpaid
taxes, including income, sales, real estate and personal property taxes and any
interest and penalties with respect thereto; liabilities for all transfer,
income, franchise or similar taxes, sales and use taxes or fees resulting from
this agreement or the transactions contemplated hereby; for any fees or expenses
incurred by the Seller in connection with the transaction contemplated by the
Agreement, including but not limited to those referred to in Article 16; and any
obligations, charges or liabilities of the Seller, the existence of which
constitute a breach of any representation, warranty or agreement of the Seller
contained in this Agreement.
2.6 Allocation of Purchase Price.
The Purchase Price of the Transferred Assets shall be allocated as set
forth in Exhibit B hereto.
2.7 Transfer Taxes.
The Seller shall pay all income, franchise, or any similar tax resulting
from the transfer of the Transferred Assets or the transactions contemplated
hereby except any liability being (for so long as being) contested in good
faith. The Purchaser shall be responsible for all sales, use and transfer tax
resulting from the transfer of the Transferred Assets, provided, however, that
the Purchaser shall not be responsible for any business, occupation,
withholding, or similar tax, or any taxes of any kind related to any period
before the Closing Date except as disclosed in Schedule 2.3(c) and incurred in
the ordinary course of business between the Effective Date and the Closing Date.
The Seller agrees to furnish at the Closing any resale certificate or other
documents reasonably requested by the Purchaser to comply with the provisions of
the sales and use tax laws of the State of California.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller and the Shareholder hereby jointly and severally represent and
warrant to Purchaser as follows:
3.1 Organization; Books and Records.
The Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of California, with full corporate power
and authority to carry on its business as presently conducted by it and to own,
lease and operate its properties in the places where it maintains offices and
where its properties are owned, leased or operated. Copies of the Articles of
Incorporation and Bylaws, corporate minute books, stock certificate books and
stock transfer books of the Seller have heretofore been delivered to Purchaser
and are true, correct and complete as of the date hereof.
3.2 Qualifications, etc.
Schedule 3.2 attached hereto sets forth (a) each jurisdiction in which the
Seller is duly qualified to do business and in good standing, and (b) each
jurisdiction in which the Seller is duly licensed, authorized or registered to
conduct such business or businesses as are conducted by it and the type of
business or businesses for which it is so licensed, authorized or registered.
Each such qualification, license, authorization and registration (collectively,
"Qualification") is validly issued and is in full force and effect and neither
the character of the properties owned or held under lease or license by the
Seller nor the nature of the business conducted by the Seller requires any
additional Qualification in any such jurisdiction or any Qualification in any
other jurisdiction, except any such jurisdiction wherein the failure to be so
qualified, licensed, authorized or registered would not result in a material
adverse change in the business or financial condition of the Seller ("Material
Adverse Change"). No approval, consent or notification in connection with any
Qualification is necessary in connection with the transactions contemplated by
this Agreement to prevent the termination or withdrawal of any such
Qualification as a result of such transactions.
3.3 Non-Contravention.
Except as set forth in Schedule 3.3 attached hereto, the execution,
delivery and performance of this Agreement by Sellers and the consummation of
the transactions contemplated do not and will not, with or without the giving of
notice or the lapse of time, or both, violate, conflict with, result in the
breach of or accelerate the performance required by any of the terms, conditions
or provisions of the charter documents or by-laws or other governing documents
of the Seller or any covenant, agreement or understanding to which the Seller is
a party or any order, ruling, decree, judgment, arbitration award, law, rule,
regulation or stipulation to which the Seller is subject or constitute a default
thereunder or result in the creation of any lien, charge or encumbrance upon any
of the properties or assets of the Seller.
3.4 Regulatory Approvals.
Except as set forth in Schedule 3.4 attached hereto, the Seller is not
required to file, seek or obtain any governmental notice, filing, authorization,
approval, order or consent, or any bond in Satisfaction of any governmental
regulation, in connection with the execution, delivery and performance of this
Agreement by Sellers or in order to prevent termination of any material right,
privilege, license or agreement of the Seller.
3.5 Capitalization of the Seller.
The Seller's authorized capital stock consists of 2,000,000 shares of
Preferred Stock of which no shares are issued and outstanding (the "Preferred
Stock") and 15,000,000 shares of common stock, without par value, of which 1,000
shares are issued and outstanding (the "Common Stock"). The Preferred Stock and
the Common Stock are referred to as the "Capital Stock". All the issued and
outstanding shares of Capital Stock are duly authorized, validly issued, fully
paid and nonassessable, and the issued and outstanding shares of Capital Stock
are held of record by the respective shareholders and in the amounts as set
forth in Schedule 3.5 hereto. Except as set forth in Schedule 3.5 hereto, there
are no outstanding options, warrants or other rights to purchase, obtain or
acquire, or any outstanding securities or obligations convertible into or
exchangeable for, or any voting agreements with respect to, any shares of
capital stock of the Seller or any other securities of the Seller and the Seller
is not obligated, now or in the future, continently or otherwise, to issue,
purchase or redeem capital stock of the Seller or any other securities of the
Seller to or from any person.
3.6 Subsidiaries and Equity Interests; Transactions with Affiliates.
(a) Except as set forth in Schedule 3.6, the Seller owns no capital
stock of or other equity interest in, or has any obligation to form or
participate in, any corporation, partnership or other person, or is a member of
or participant in any partnership, joint venture or similar person.
(b) Except as set forth in Schedule 3.6, there is no lease, sublease,
indebtedness, contract, agreement, commitment, understanding, or other
arrangement of any kind entered into by the Seller with respect to the Seller
with any officer, director, or shareholder of the Seller or any "affiliate" or
"associate" of any of them (as those terms are defined in the Securities
Exchange Act of 1934, as amended), except, in each case, for management fees and
other compensation paid to officers consistent with previously established
policies (including normal merit increases in such compensation in the ordinary
course of business), reimbursements of ordinary and necessary expenses incurred
in connection with their employment, and amounts paid pursuant to existing
employee benefit plans listed on Schedule 3.18.
3.7 Financial Statements.
The Seller has heretofore furnished to Purchaser unaudited financial
statements for the Seller consisting of (a) balance sheets at April 17, 1998 and
for years ended December 31, 1997, 1996 and 1995 and (b) statements of income,
retained earnings and cash flows for the period ended ___________1998 and for
fiscal years ended December 31, 1997 and 1996 (the foregoing consolidated
financial statements, reports and notes thereto are hereinafter collectively
referred to as the "Financial Statements"). The Financial Statements present
fairly the financial position of the Seller at the dates thereof and the results
of operations and cash flows of the Seller for the periods then ended. Except as
and to the extent reflected or reserved against in the unaudited consolidated
balance sheet of the Seller at April 17, 1998 (the "Balance Sheet") or otherwise
set forth on Schedule 3.7 attached hereto, the Seller had no material liability
or obligation (whether absolute or contingent, or accrued or unaccrued) required
to be disclosed in the Financial Statements, or in the notes thereto. The books
of account and financial records of the Seller have been prepared and are
maintained in accordance with good accounting practice.
3.8 Absence of Certain Changes or Events.
Except as set forth in Schedule 3.8 attached hereto, since April 17, 1998
there has not been, with respect to the Seller or its businesses or properties:
(a) any Material Adverse Change;
(b) any material obligations or liabilities incurred, except trade and
other obligations or liabilities in usual amounts and on terms consistent with
past practices incurred by the Seller in the ordinary course of business;
(c) any indebtedness for borrowed money incurred by the Seller, except
indebtedness under existing facilities incurred in the ordinary course of
business;
(d) any destruction, damage by fire, accident or other casualty or act
of God of or to any of the material properties or assets of the Seller, whether
or not covered by insurance; or
(e) any action that, if taken after the date hereof, would constitute
a breach of any of the covenants set forth in Section 5.1 of this Agreement.
3.9 Assets Other than Real Property Interests.
(a) The Seller has good and valid title to the Transferred Assets free
and clear of all mortgages, liens, security interests, pledges, encumbrances,
charges, agreements, claims, restrictions and defects of title of any kind
except (i) as are set forth in Schedule 3.9, (ii) mechanics, carriers',
workmen's, repairmen's or other like liens arising or incurred in the ordinary
course of business and liens for Taxes (as defined in Section 3.15) which are
not due and payable or being contested in good faith by appropriate proceedings,
or (iii) other imperfections of title or encumbrances, if any, which mortgages,
liens, security interests and encumbrances do not, individually or in the
aggregate, materially impair the continued use and operation of the assets to
which they relate in the business of the Seller as presently conducted.
(b) All the tangible personal property of the Seller has been
maintained in all material respects in accordance with the past practice of the
Seller and generally accepted industry practice. Each item of tangible personal
property of the Seller is in all material respects in good operating condition
and repair, ordinary wear and tear excepted. All leased personal property of the
Seller is in all material respects in the condition required of such property by
the terms of the lease applicable thereto during the term of the lease and upon
the expiration thereof.
(c) There are no developments affecting such property or assets
pending, or to the knowledge of the Seller, threatened, which might materially
detract from the value, materially interfere with any present or intended use,
or materially adversely affect the marketability of any such property or assets.
This Section 3.9 does not relate to real property or interests in real
property, such items being the subject of Section 3.10 below.
3.10 Real Property Owned and Leased.
Schedule 3.10 attached hereto contains a complete and accurate list and
full description of all real property (including without limitation plants,
warehouses, interests in real property, distribution centers, structures and
other buildings) owned or leased by the Seller (the "Real Property"). The Seller
has good and valid title to the leasehold estates in all real property and
interests in real property leased by it, in each case, free and clear of all
mortgages, liens, security interests, pledges, leases, subleases, encumbrances,
charges, assignments, easements, claims or other restrictions and defects of
title, except (i) as are set forth in Schedule 3.10, (ii) liens for Taxes not
yet due and payable or being contested in good faith by appropriate proceedings,
and (iii) which do not impair the current or intended use or diminish the value
of the property affected to any material extent. All plants, warehouses,
interests in real property, distribution centers, structures and other buildings
of the Seller are currently used in the operation of the business of the Seller
and are adequately maintained and are in good operating condition and repair for
the requirements of the business as presently conducted by the Seller.
3.11 Patents, Trademarks, etc.
(a) Schedule 3.11 attached hereto sets forth a complete and accurate
listing of all United States and foreign patents, trademarks, trade names,
service marks and copyrights (collectively, the "Intellectual Property") owned,
licensed, used or held for use in the conduct of the businesses of the Seller,
whether registered or unregistered, and any applications or registrations
therefor. Except as set forth in Schedule 3.11, the Seller solely owns and has
the exclusive right to use, free and clear of any payments or encumbrances which
in the aggregate are material to the conduct of the business of the Seller, all
such Intellectual Property. Except as set forth in Schedule 3.11, there is no
claim or demand of any person pertaining to, or any proceedings which are
pending or, to the knowledge of the Seller, threatened, which challenge the
exclusive rights of the Seller in respect of any Intellectual Property whether
registered or unregistered. Except as set forth in Schedule 3.11, no
Intellectual Property is subject to any agreement restricting the use thereof or
any outstanding order, ruling, decree, judgment or stipulation by or with any
court, arbitrator or administrative agency, and none of the Intellectual
Property infringes the intellectual property rights of others or, to the
knowledge of the Seller, is being infringed by others or is used by others
(whether or not such use constitutes infringement). There are no agreements or
licenses between the Seller and any other person or entity which may have been
terminated or expired prior to the date hereof and under which the Seller has
granted rights or licenses in the Intellectual Property to such other persons or
entities or granted an option to acquire such rights or licenses, which rights
or licenses or the option to acquire the same survived such termination or
expiration. Except as set forth in Schedule 3.11, no person or entity has any
licenses under any of the Intellectual Property. Notwithstanding the foregoing,
the Seller makes no representation or warranty as to the registrability or
enforceability of any Intellectual Property for which registration has not been
sought or for which registration has not been granted, or which is not presently
being used by the Seller in conducting its business. Moreover, the Seller makes
no representation or warranty with regard to the use of the Intellectual
Property with goods and services not presently provided by or not presently
proposed to be provided by the Seller in its business as it is now conducted.
(b) The Seller owns and has the unlimited right to use, execute,
reproduce, display, perform, modify, enhance, distribute, prepare derivative
works of or sublicense any of the Business know-how (as defined below) possessed
by Seller or its affiliates relating to goods and services presently provided by
or presently proposed to be provided by the Seller. The Seller has not granted
any licenses or otherwise disclosed nor has it agreed to disclose any of its
Business know-how except as set forth in Schedule 3.11. As used in this
paragraph, "Business know-how" shall mean all trade secrets and confidential
business and technical information, including ideas, skills, methods,
experience, research and development, know-how, formulas, manuscripts, artwork,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, engineering notebooks, industrial models, software and
specifications.
3.12 Insurance.
Schedule 3.12 attached hereto sets forth a complete and accurate list of
all casualty, directors and officers liability, general liability (including
product liability) and all other types of insurance maintained by the Seller,
together with the carriers and liability limits for each such policy. Each
policy is duly in force, and no notice has been received by the Seller from any
insurance carrier purporting to cancel or reduce coverage under any such policy.
The Seller is current in all premiums or other payments due thereunder. Schedule
3.12 identifies which insurance policies are "occurrence" or "claims made." All
insurance coverage held for the benefit of the Seller is in such amounts, with
such deductibles and against such risks and losses as are reasonable for the
business and assets of the Seller. The activities and operations of the Seller
have been conducted in a manner so as to conform in all material respects to all
applicable provisions of such insurance policies.
3.13 Commitments.
(a) Except as set forth in Schedule 3.13, the Seller is not a party to
or bound by any:
(i) employment agreement or employment contract;
(ii) employee collective bargaining agreement or other contract
with any labor union;
(iii) covenant of the Seller not to compete or other covenant of
the Seller restricting the development, manufacture, marketing or distribution
of the products and services of the Seller;
(iv) agreement, contract or other arrangement with (A) Seller or
any affiliate of Seller or (B) any current or former officer, director, employee
or independent contractor of the Seller (other than employment agreements
covered by clause (i) above);
(v) lease, sublease or similar agreement with any person under
which the Seller is a lessor or sublessor of, or makes available for use to any
person (other than the Seller), (A) any Real Property or (B) any portion of any
premises otherwise occupied by the Seller;
(vi) lease or similar agreement with any other person underwhich
(A) the Seller is lessee of, or holds or uses, any machinery, equipment, vehicle
or other tangible personal property owned by any person or (B) the Seller is a
lessor or sublessor of, or makes available for use by any person, any tangible
personal property owned or leased by the Seller, in any such case which has an
aggregate future liability or receivable, as the case may be, in excess of
$5,000;
(vii) (A) continuing agreement or contract for the future
purchase of materials, supplies or equipment (other than purchase contracts and
orders for inventory in the ordinary course of business consistent with past
practice; provided that any such contract or order, when taken together with all
other purchase contracts and orders for inventory relating to the ordered item,
would not require the Seller to acquire a quantity of such item that could not
reasonably be expected to be used in the ordinary course of business of the
Seller within six months after the date of execution or entry of purchase
contract or order for inventory) or (B) service, consulting, management or other
similar type of agreement or contract, in either such case which has an
aggregate future liability in excess of $5,000;
(viii) continuing agreement or contract for the distribution of
any products manufactured by the Seller, including by franchise arrangement;
(ix) continuing agreement or contract for the purchase of any
products manufactured by parties other than the Seller;
(x) continuing agreement or contract for products manufactured by
the Seller on behalf of parties other than the Seller;
(xi) agreement, contract or arrangement for the placement of
advertising or other promotional activities which has an aggregate future
liability in excess of $25,000;
(xii) except as set forth in Schedule 3.11, any material license,
option or other agreement relating in whole or in part to the Intellectual
Property set forth in Schedule 3.11 (including any license or other agreement
under which the Seller is licensee or licensor of any such Intellectual
Property) or to trade secrets, confidential information or proprietary rights
and processes of the Seller or any other person;
(xiii) agreement, contract or other instrument under which the
Seller has borrowed any money from, or issued any note, bond, debenture or other
evidence of indebtedness to, any person or any other note, bond, debenture or
other evidence of indebtedness issued to any person;
(xiv) agreement, contract or other instrument (including
so-called take-or-pay or keepwell agreements) under which (A) any person has
directly or indirectly guaranteed indebtedness, liabilities or obligations of
the Seller or (B) the Seller has directly or indirectly guaranteed indebtedness,
liabilities or obligations of any person (in each case other than endorsements
for the purpose of collection in the ordinary course of business);
(xv) agreement, contract or other instrument under which the
Seller has, directly or indirectly, made any advance, loan, extension of credit
or capital contribution to, or other investment in, any person;
(xvi) mortgage, pledge, security agreement, deed of trust or
other instrument granting a lien or other encumbrance upon any Real Property,
which lien or other encumbrance is not set forth in Schedule 3.10;
(xvii) agreement, contract or instrument providing for
indemnification of any person with respect to liabilities relating to any
current or former business of the Seller, or any predecessor person; or
(xviii) other agreement, contract, lease, license, commitment or
instrument to which the Seller is a party or by or to which it or any of its
assets or business is bound or subject which has an aggregate future liability
to any person in excess of $5,000.
(b) Except as set forth in Schedule 3.13, all agreements, contracts,
leases, licenses, commitments or instruments of the Seller listed in the
Schedules hereto (collectively, the "Contracts") are valid and binding, in full
force and effect and are enforceable by the Seller in accordance with their
respective terms, other than such failures to be so valid and binding, in full
force and effect or enforceable which would not, either individually or in the
aggregate, result in a Material Adverse Change. Except as set forth in Schedule
3.13, the Seller has performed all material obligations required to be performed
by it to date under the Contracts and it is not (with or without the lapse of
time or the giving of notice, or both) in breach or default in any material
respect thereunder. The Seller has provided to Purchaser a true and correct copy
of each of the Contracts.
3.14 Legal Proceedings.
Except as set forth in Schedule 3.14, the Seller is not engaged in or a
party to, or, to the knowledge of the Seller, threatened with, any suit,
investigation, legal action or other proceeding before any court, administrative
agency, arbitration panel or other similar authority which (a) involves
(individually, or in the aggregate for cases arising out of the same or
substantially similar facts or circumstances) the possibility of liability of
the Seller (whether or not covered by insurance), (b) seeks injunctive relief or
(c) relates to the transactions contemplated by this Agreement, and the Seller
knows of no basis for any such suit, investigation, legal action or proceeding.
There are no outstanding orders, rulings, decrees, judgments or stipulations by
or with any court, administrative agency, arbitration panel or other similar
authority which are applicable to the properties, assets, operations or business
of the Seller or which challenge or otherwise relate to the transactions
contemplated by this Agreement. Except as set forth in Schedule 3.14, there is
no lawsuit or claim by the Seller pending, or which the Seller intends to
initiate, against any other person.
3.15 Taxes.
Except as set forth in Schedule 3.15, all federal, state and local and all
foreign tax Returns (as defined below), required to be filed by or with respect
to the Seller and any predecessor corporations in respect of Taxes (as defined
below) have been filed with the appropriate tax authorities and each such Return
is true, accurate and complete. The Seller has delivered to Purchaser correct
and complete copies of all material Returns of the Seller that have been filed
for taxable periods ending within the past five years. Except as and to the
extent reflected or reserved against in the Balance Sheet or as described in the
notes thereto, as of the date hereof, the Seller had no liability for Taxes. All
Taxes for periods after the date of the Balance Sheet that should be reserved on
the books of the Seller in accordance with the Seller's past practice have been
so reserved, and all estimated tax payments required to be made have been made.
Except as set forth in Schedule 3.15, there have been no audits or examinations
by any taxing authority relating to Taxes of the Seller during the past six
years, no taxing authority has given notice that it will commence any such audit
or examination and no taxing authority is asserting (either orally or in
writing) or, to the knowledge of the Seller, threatening to assert any
deficiency or claim relating to Taxes of the Seller, and no liens for Taxes have
been filed and are currently outstanding with respect to any of the assets or
properties of the Seller. There is no agreement or waiver currently in effect
extending the period for assessment or collection of any Taxes. The Seller is
not a party to any agreement which would require it to make any payment which
would constitute a "parachute payment" for purposes of Xxxxxxx 000X xx xxx
Xxxxxx Xxxxxx Internal Revenue Code of 1986, as amended (the "Code"). The Seller
has complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid to any employee, independent contractor, creditor, or other
third party. None of the assets of the Seller are treated as "tax exempt use
property" within the meaning of Section 168(h) of the Code. The Seller is not,
nor has it ever been, a party to a tax sharing, tax indemnity or tax allocation
agreement, and the Seller has not assumed the tax liability of any other person
under contract. The Seller is not, nor has it ever been, a member of an
affiliated group filing a consolidated federal income tax Return, and the Seller
has no any liability for the Taxes of any individual or entity under section
1.1502-6 of the Treasury regulations (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract, or otherwise. As
used herein, (A) "Taxes" shall mean all federal, state, county, local,
municipal, foreign and other taxes, assessments, duties or similar charges of
any kind whatsoever, including all corporate franchise, income, sales, use, ad
valorem, receipts, value added, profits, license, withholding, payroll,
employment, excise, premium, property, customs, net worth, capital gains,
transfer, stamp, documentary, social security, payroll, environmental,
alternative minimum, occupation, recapture and other taxes, and including any
interest, penalties and additions imposed with respect to such amounts, and (B)
"Return" or "Returns" shall mean all returns, declarations of estimated tax
payments, reports, estimates, information returns and statements, including any
related or supporting information with respect to any of the foregoing, filed or
to be filed with the United States or any state, county, local, foreign or other
governmental authority or subdivision or agency thereof in connection with the
determination, assessment, collection or administration of any Taxes.
3.16 Compliance with Laws.
Except as set forth in Schedule 3.16 attached hereto (a) the Seller has
complied, and is now in compliance, with all federal, state, local and foreign
laws, ordinances and regulations (including, without limitation, those relating
to employment and employment practices, and occupational safety and health)
applicable to the Seller, except where noncompliance would not have a material
adverse effect; (b) no claims or complaints from any governmental authorities or
other parties have been asserted or received by the Seller which are still
pending or outstanding and, to the knowledge of the Seller, none is threatened,
that the Seller is in material violation of any applicable building, zoning,
occupational safety and health, or similar law, ordinance or regulation in
relation to its plants, warehouses, distribution centers, structures or other
buildings or equipment, or the operation thereof, or of any applicable fair
employment, equal opportunity or similar law, ordinance or regulation; and (c)
the Seller has not received notice from any governmental authorities of any
pending proceedings to take all or any part of the properties of the Seller
(whether leased or owned) by condemnation or right of eminent domain and, to the
knowledge of the Seller, no such proceedings are threatened. Schedule 3.16 sets
forth all governmental permits, licenses and authorizations necessary or
desirable for the operation or occupancy of the properties and the conduct of
the business of the Seller as presently conducted. All such licenses, permits
and authorizations are validly held by the Seller, the Seller has complied in
all material respects with all terms and conditions thereof and the same will
not be subject to suspension, modification, revocation or nonrenewal as a result
of the execution and delivery of this Agreement or the consummation of the
transactions contemplated thereby. All such licenses, permits and authorizations
which are held in the name of any employee, officer, director, stockholder,
agent or otherwise on behalf of the Seller shall be deemed included under this
warranty.
3.17 Environment.
Except as set forth in Schedule 3.17 attached hereto, (a) no Hazardous
Material (as defined below) is located on, at, in, under or about any real
property, including any buildings, structures, fixtures, improvements,
interests, privileges, easements and appurtenances related thereto, owned,
leased or operated by the Seller ("Premises") in a manner which violates any
Environmental Requirement (as defined below), or for which clean-up or
corrective action of any kind could be required or is otherwise authorized under
any Environmental Requirement; (b) no risk to human health or the environment
exists as a result of any Hazardous Material previously or currently located on,
at, in, under or about the Premises; (c) no releasing, emitting, discharging,
leaching, dumping, disposing of any Hazardous Material from the Premises onto or
into any other property or from any other property onto or into the Premises has
occurred or is occurring in violation of any Environmental Requirement, or for
which clean-up or corrective action of any kind could be required or is
otherwise authorized under any Environmental Requirement, or which could pose a
risk to human health or the environment; (d) no notice of violation, lien,
complaint, suit, order or other notice with respect to the environmental
condition of the Premises or regarding the disposal or release of Hazardous
Materials from the Premises onto any other property is outstanding, threatened
or otherwise anticipated, nor has any such notice been issued which has not been
fully satisfied and complied with in a timely manner so as to bring the Premises
into full compliance with every Environmental Requirement; (e) the Seller does
not currently own or operate, nor in the past has owned or operated, any
property that is on the "National Priorities List" or the CERCLA list of the
U.S. Environmental Protection Agency ("EPA"), or any similar state list, or is
the subject of any federal, state or local investigation evaluating whether any
remedial action is needed to respond to a release of any Hazardous Material into
the environment; (f) the Seller or any of its predecessors has filed or
otherwise provided any notice under any federal, state or local law indicating
past or present treatment, storage or disposal of a Hazardous Material into the
environment; (g) the Seller has no contingent liability in connection with the
generation, treatment, storage, disposal or any release of any Hazardous
Material into the environment; (h) none of the operations of the Seller involves
or has ever involved the treatment, storage or disposal of a Hazardous Material;
(i) neither the Seller, nor any lessee, prior owner or other person, has
disposed of or arranged for the disposal of any Hazardous Material on any
premises which are currently or have in the past been owned, leased or operated
by the Seller; (j) the Seller has not disposed of, or arranged for the disposal
of, any Hazardous Material on any premises not owned by the Seller that is on
EPA's National Priorities List or the CERCLA list or any similar state list, or
which is or reasonably could be the subject of any clean-up action by a federal
or state agency, or by a third party who could seek reimbursement of clean-up
expenses from the Seller under federal or state law; (k) no underground storage
tanks or surface impoundments are on any Premises; (l) no information exists
indicating that any person (including past or present employees) may have his
health impaired as a result of exposure to any Hazardous Materials located on,
at, in, under or about the Premises; and (m) the Seller and all third parties,
with respect to any conduct of such parties that might result in liability to
the Seller, are currently and have at all times in the past been in full
compliance with all applicable Environmental Requirements. For the purpose
hereof, the following terms shall have the following meanings:
(A) The term "Hazardous Materials" means any material,
substance or constituent, including any PCBs, pollutants,
solid wastes, explosive or regulated radioactive materials or
substances, hazardous or toxic materials, substances, wastes
or chemicals, petroleum (including crude oil or any fraction
thereof) or petroleum distillates, asbestos or asbestos
containing materials, materials listed in 49 C.F.R. Section
172.101 and materials defined as hazardous substances pursuant
to Section 101(14) of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C.
xx.xx. 9601 et seq.), as amended ("CERCLA"), that, whether by
its nature or its use, is subject to regulation under, or
forms the basis for liability under, any Environmental
Requirement.
(B) The term "Environmental Requirement" means current or
future obligations, duties or requirements arising out of or
related to any laws, ordinances, statutes, codes, rules,
regulations, orders, judicial decisions, judgments, decrees,
governmental restrictions, directives, policies, guidelines,
permits or licenses addressing environmental, health or safety
issues or requirements of or by any federal, state or local
government agency, including but not limited to, CERCLA, the
Hazardous Materials Transportation Act (49 U.S.C. xx.xx. 1801
et seq.), the Resource Conservation and Recovery Act (42
U.S.C. xx.xx. 6901 et seq.), the Toxic Substances Control Act
(15 U.S.C. Sss. 2601 et she.) the Clean Air Act (42 U.S.C.
xx.xx. 7401 et seq.), the Federal Water Pollution Control Act
(32 U.S.C. xx.xx. 1251 et seq.) and the Safe Drinking Water
Act (32 U.S.C. xx.xx. 300f et seq.), in each care as may be
amended from time to time, any regulation pursuant to any of
the above laws, and including, but not limited to, any
obligations, duties or requirements arising out of or related
to Hazardous Materials under common law or foreign law.
3.18 Employee Benefit Plans: Termination and Severance Agreements.
(a) (i) Schedule 3.18 attached hereto sets forth a complete and
accurate list of each pension, retirement, savings, profit sharing, deferred
compensation, medical, dental or health plan, or life insurance plan, bonus,
incentive and special compensation or other plan or other employee benefit plan,
program, contract, arrangement, agreement or understanding (hereinafter referred
to individually as a "Plan" and collectively as the "Plans") to which the Seller
is required to contribute, or which the Seller sponsors or which is otherwise
applicable to employees or retirees or categories of employees or retirees of
the Seller generally; (ii) Schedule 3.18 correctly identifies each Plan that is
an "employee benefit plan" ("ERISA Plan") as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
categorizes each ERISA Plan as an "employee welfare benefit plan" ("ERISA
Welfare Plan") as defined in Section 3(1) of ERISA or an "employee pension
benefit plan" ("ERISA Pension Plan") as defined in Section 3(2) of ERISA; (iii)
except as otherwise described in Schedule 3.18, no "prohibited transaction"
within the meaning of Section 406 of BRISA or Section 4975 of the Code has
occurred with respect to any Plan sponsored or administered by the Seller; (iv)
all ERISA Plans sponsored or administered by the Seller comply currently, and
have complied in the past in form and in operation, with the provisions of
ERISA, the Code, the rules and regulations promulgated under these statutes, all
other applicable federal, state or local laws and with their respective plans of
benefits and trust agreements; (a) there are no actions, suits or claims pending
(other than routine claims for benefits) or any actions, suits or claims (other
than routine claims For benefits) which could reasonably be expected to be
asserted, against any Plan or the assets or fiduciaries of any Plan sponsored or
maintained by the Seller or any ERISA Plan established or maintained by (A) a
corporation which is a member of a controlled group of corporations with the
Seller within the meaning of Section 414(b) of the Code, (B) a trade or business
(including a sole proprietorship which is under common control with the Seller
within the meaning of Section 414(c) (C) a member of an affiliated service group
with the Seller within the meaning of Section 414(m) of the Code, or (D) an
entity or arrangement described in Section 414(o) of the Code (each entity
described in (A), (B), (C)) and (D) is referred to as an "ERISA Affiliate"),
which would have a material adverse effect on the Seller or any of its or their
assets; (vi) no civil or criminal action under Title I, Subtitle B. Part 5 of
ERISA is pending or threatened against any fiduciary of any Plan sponsored or
maintained by the Seller; (vii) no Plan nor any fiduciary of a Plan sponsored or
maintained by the Seller has been the direct or indirect subject of an audit,
investigation or examination by any governmental or quasi-governmental agency;
(viii) each ERISA Pension Plan and its respective trust sponsored or maintained
by the Seller which is intended to be a qualified plan and an exempt trust under
the Code and any applicable regulations has received a current determination
letter from the IRS indicating that such plan and trust are so qualified and
exempt, in form, under the Code, and nothing has occurred since the date of such
determination letter that would affect adversely such qualification or exemption
and the IRS has not taken any action to revoke any favorable determination with
respect to the qualified status of each such ERISA Pension Plan; (ix) neither
the Seller nor any ERISA Affiliate has maintained or contributed to (or had an
obligation to maintain or contribute to) any ERISA Pension Plan that is a
"defined benefit pension plan" within the meaning of Section 3(35) of ERISA, and
with respect to which the Seller has no liability, whether direct or indirect,
current or contingent; (x) neither the Seller nor any ERISA Affiliate has
participated in, made contributions to, or has had an obligation to contribute
to, a "multiemployer plan" within the meaning of Section 3(37) or 4001 of ERISA;
(xi) Schedule 3.18 lists and categorizes every ERISA Pension Plan terminated by
the Seller within the six years immediately before the date of this agreement
and each such ERISA Pension Plan so listed and categorized was terminated in
compliance with the Internal Revenue Code of 1954 as amended (if applicable),
the Code (if applicable), and ERISA, (xii) except for ERISA Pension Plans listed
and categorized in Schedule 3.18 as having been merged, no ERISA Pension Plan of
the Seller or any ERISA Affiliate has been merged during the six years
immediately before the date of this Agreement; (xiii) each ERISA Pension Plan
listed and categorized in Schedule 3.18 was merged in compliance with the
Internal Revenue Code of 1954, as amended (if applicable), the Code (if
applicable) and ERISA; (xiv) every ERISA Welfare Plan of the Seller or any ERISA
Affiliate that is a "group health plan" within the meaning of Section
4980B(g)(2) of the Code has been administered in accordance with Title I,
Subtitle B. Part 6 of ERISA and has met the requirements of Section 4980B of the
Code; and (xv) apart from benefits from ERISA Pension Plans, benefits described
under Section 4980B of the Code and health benefits provided to retirees under
ERISA Welfare Plans listed and categorized in Schedule 3.18 as plans providing
retiree health benefits, the Seller has no any obligation to provide benefits
under any Plan except to its active employees.
(b) Schedule 3.18 also accurately lists each employment, termination
and severance agreement, contract, arrangement and understanding (whether
written or oral) with employees of the Seller. Except as set forth in Schedule
3.18, the Seller is not a party to any employment, termination or severance
agreement, contract, arrangement or understanding with any employee or former
employee of the Seller that is not terminable by its terms at will by the
applicable employer without cost or penalty. Except as set forth in Schedule
3.18, the Closing will not result in any obligation to pay any employee of the
Seller severance pay or termination benefits so long as such employee remains
employed by the Seller or Purchaser after the Closing.
(c) The Seller has heretofore delivered to Purchaser correct and
complete copies of each of the following:
(i) All written, and descriptions of all oral, employment,
termination and severance agreements,contracts, arrangements and understandings
listed in Schedule 3.18.
(ii) Each Plan and all amendments thereto; the trust instrument
and/or insurance contracts, if any, forming a part of such Plan and all
amendments thereto; and the resolutions and agreements, if any, by which the
Seller adopted such Plan.
(iii) The most recent IRS Form 5500 and all schedules thereto, if
any.
(iv) The most recent determination letter issued by the IRS
regarding the qualified status of each such Plan that it is an ERISA Pension
Plan.
(v) The most recent accountant's report, if any.
(vi) The most recent summary plan description, if any.
(vii) The bond required by Section 412 of ERISA, if any.
3.19 Employee and Labor Matters.
(a) Except as set forth in Schedule 3.19 attached hereto, the Seller
is not a party to any collective bargaining agreement or other contract with or
commitment to any labor union or association representing any employee of the
Seller, nor does any labor union or collective bargaining agent represent any
employees of the Seller. No such agreement, contract or other commitment has
been requested by, or is under discussion by management of the Seller (or any
management group or association of which the Seller is a member or otherwise a
participant) with, any group of employees or others, nor are there any other
current activities known to the Seller to organize any employees of the Seller
into a collective bargaining unit. There are no pending, or to the knowledge of
the Seller, threatened, union grievances against the Seller as to which there is
a reasonable possibility of a material adverse determination. The Seller is not
engaged in any unfair labor practice. There is no unfair labor practice
complaint pending or, to the knowledge of the Seller, threatened against the
Seller. Except as disclosed in Schedule 3.19, there is, and during the past two
years there has been, no labor strike, dispute, slow-down or work stoppage
pending, or, to the knowledge of the Seller, threatened against the Seller.
Except as set forth in Schedule 3.19, there are no pending, or, to the knowledge
of the Seller, threatened, charges against the Seller, or any current or former
employee, officer or director of the Seller before the Equal Employment
Opportunity Commission or any state or local agency responsible for the
prevention of unlawful employment practices.
(b) All employees working in the United States hired by the Seller on
or after November 7, 1986 are authorized for employment by the Seller in the
United States in accordance with the Immigration and Naturalization Act, as
amended, and regulations promulgated under that statute. No allegations of
immigration-related unfair employment practices have been made with the Equal
Employment Opportunity Commission or the Special Counsel for Immigration-Related
Unfair Employment Practices. The Seller has completed and retained in accordance
with the Immigration and Naturalization Service regulations a Form I-9 for all
employees working in the United States hired on or after November 7, 1986,
except those employees whose employment terminated on or before June 1, 1987.
None of the employees currently employed by the Seller is authorized for
employment in the United States pursuant to a nonimmigrant visa which authorizes
the employee to be employed by the Seller.
(c) Schedule 3.19 sets forth a complete list of all the Seller's
officers, directors and employees together with the monthly salary of each.
3.20 Capital Expenditures.
The aggregate contractual commitments of the Seller for new capital
expenditures shall not exceed $2,500 on the Closing Date.
3.21 Powers of Attorney.
Schedule 3.21 attached hereto contains a complete and accurate list of all
outstanding powers of attorney or similar authorizations given by the Seller.
3.22 Customer Accounts Receivable; Inventories.
(a) All customer accounts receivable of the Seller, whether reflected
on the Balance Sheet or subsequently created, have arisen from bona fide
transactions in the ordinary course of business and are good and collectible
upon the terms agreed upon at delivery of the goods and at the aggregate
recorded amounts thereof, net of any applicable reserves or allowances for
doubtful accounts which are reflected on the Balance Sheet or accrued after the
date of the Balance Sheet in the ordinary course of business consistent with
past practice. Except as set forth in Schedule 3.22, the Seller has good and
marketable title to its accounts receivable, free and clear of all liens. During
the two year period prior to the date hereof, the Seller has not sold, pledged
or otherwise disposed of any of its accounts receivable in connection with any
receivable-type financing or factoring-type financing or similar transaction.
(b) The inventories of the Seller, whether reflected on the Balance
Sheet or subsequently acquired and except for any reserves for obsolete
inventory which are reflected on the Balance Sheet or accrued after the date of
the Balance Sheet in the ordinary course of business consistent with past
practice, are not obsolete and are of a quality and quantity usable and/or
salable at customary gross margins in the ordinary course of business. The
inventories of the Seller are reflected on the Balance Sheet and in its books
and records applied on a basis consistent with past practice (except as
described in the notes to the Balance Sheet). Except as set forth in Schedule
3.22, the Seller has good and valid title to its inventories, free and clear of
all liens.
(c) Schedule 3.23 accurately identifies all consigned inventory of the
Seller and the consignee thereof. To the knowledge of the Seller, each consignee
maintains adequate insurance coverage against losses with respect to the
consigned inventory of the Seller.
3.23 No Material Misstatement or Omission.
No representation or warranty of the Seller in this Asset Purchase
Agreement nor any information contained in any Schedule, certificate or other
writing delivered pursuant to this Agreement or at the Closing, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading. There is no fact relating to the Seller which the Seller has not
disclosed to Purchaser in writing which has resulted in, or would reasonably be
expected to result in, a Material Adverse Change.
3.24 No Undisclosed Material Liabilities.
There are no liabilities of the Seller of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, and there
is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such liability, other than:
(a) liabilities provided for in the Balance Sheet or disclosed
in the notes thereto;
(b) liabilities disclosed on Schedule 3.24 attached hereto; and
(c) other undisclosed liabilities which, individually or in the
aggregate, are not material to the Seller.
3.25 Authorization.
The execution and delivery by the Seller of this Agreement, the Xxxx of
Sale (defined in Section 6.6), and the Pledge and Security Agreement (defined in
Section 6.8) (the Xxxx of Sale and the Pledge and Security Agreement are
hereinafter sometimes collectively referred to as the "Related Agreements"), and
the consummation of the transaction contemplated hereby and thereby, will, on
the Closing Date, have been, duly and validly authorized by all necessary
corporate action on the Seller's part, and this Agreement and the Related
Agreements and all other such instruments and agreements delivered or to be
delivered by the Seller and the Shareholder in connection herewith will be, on
the closing Date, the valid and binding obligations of the Seller and the
Shareholder, enforceable against it or him in accordance with their respective
terms.
3.26 Title to Assets.
Except as set forth in Schedule 3.9, Seller has good and marketable title
to all the Transferred Assets. All these assets are free and clear of
restrictions on or conditions to transfer or assignment, and free and clear of
mortgages, liens, pledges, charges, encumbrances, equities, claims, covenants,
conditions, or restrictions, except for (i) the disclosures contained in the
Schedules hereto; and (ii) possible minor matters that, in the aggregate, are
not substantial in amount and do not materially detract from or interfere with
the present or intended use of any of these assets or materially impair business
operations. The Seller is not in default or in arrears in any material respect
under any lease.
3.27 Condition of Assets.
The Transferred Assets have been properly maintained and are in good
operating condition and there exists no outstanding notice of any violation of
any statute or regulation relating to the Transferred Assets. Except with
respect to the Retained Assets, the Transferred Assets include all assets and
properties and all rights reasonably necessary to permit the Purchaser to carry
on the Seller's business as presently conducted by the Seller.
3.28 Investment Representations.
(a) Purchaser and Parent have given Seller and Shareholder the
opportunity to have answered all of Seller's and Shareholder's questions
concerning Parent and its business and has made available to Seller and
Shareholder all information requested by Seller and Shareholder which is
reasonably necessary to verify the accuracy of other information furnished by
Purchaser and Parent. Seller and Shareholder have received and evaluated all
information about Parent and its business which Seller and Shareholder deem
necessary to formulate an investment decision and do not desire any further
information. Seller and Shareholder understand that no federal or state agency
has passed on or made any recommendation or endorsement of the Warrants or the
shares of Parent's Common Stock issuable upon exercise or exchange. Seller and
Shareholder have the knowledge and experience in financial and business matters
to evaluate the merits and risks of the proposed investment.
(b) Seller and Shareholder understand that the Warrants are being
offered and sold to it in reliance on specific exemptions from or
non-application of the registration requirements of federal and state securities
laws and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments, and understandings of
Seller and Shareholder set forth herein in order to determine the applicability
of such exemptions or non-applications and the suitability of Seller and
Shareholder to acquire the Warrants.
(c) Seller and Shareholder are aware that the Warrants have not been
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act pursuant to Section 4(2) and Regulation D thereof, and that they
must be held by Seller and Shareholder for an indeterminate period and Seller
and Shareholder must therefore bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from registration.
(d) Each instrument representing the Warrants may be endorsed with the
following legends:
(i) THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
(ii) Any other legend required by California or other state
securities laws.
(e) The Company need not register a transfer of legended Warrants and
may instruct its transfer agent not to register the transfer of the Warrants,
unless one of the conditions specified in the foregoing legends is satisfied.
(f) Any legend endorsed on an instrument pursuant to Section 3.28(f)
hereof and the stop transfer instructions with respect to such Warrants shall be
removed, and the Company shall issue an instrument without such legend to the
holder of such Warrants if such Warrants are registered under the Securities Act
and a prospectus meeting the requirements of Section 10 of the Securities Act is
available or if such holder provides the Company with an opinion of counsel for
such holder of the Warrants, reasonably satisfactory to the Company, to the
effect that a sale, transfer or assignment of such Warrants may be made without
registration.
(g) Seller and Shareholder is acquiring the Warrants for Seller and
Shareholder's own account, for investment, and without any present intention to
engage in a distribution thereof, except that Parent understands that Seller
intends to wind up and dissolve and distribute the Warrants to its shareholders
each of whom will execute, as a condition to the transfer of the Warrants, an
investment representation in substantially the form of this Section 3.28.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows:
4.1 Corporate Organization.
The Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of California with full corporate power and
authority to consummate the transactions contemplated hereby.
4.2 Authorization.
The execution and delivery by the Purchaser of this Agreement and each of
the other instruments and agreements of the Purchaser provided for herein, and
the performance of its obligations hereunder and thereunder, have been duly and
validly authorized by all necessary corporate action on the part of the
Purchaser and this Agreement, and any other instruments and agreements delivered
to or to be delivered in connection herewith are or will be the valid and
binding obligations of the Purchaser enforceable against it in accordance with
their respective terms.
4.3 Brokers.
No agent, broker, person or firm acting on behalf of the Purchaser or under
its authority is or will be entitled to a financial advisory fee, brokerage
commission, finder's fee or like payment in connection with any of the
transactions contemplated hereby.
4.4 Litigation.
There are no suits, actions, or administrative, arbitration or other
proceedings or governmental investigations pending or, to the knowledge of the
Purchaser, threatened against the Purchaser with respect to any of the
transactions contemplated hereby.
4.5 Conflicts With Other Agreements.
The execution and delivery by the Purchaser of this Agreement and each of
the Related Agreements to which the Purchaser is a party and the performance by
the Purchaser of its respective obligations hereunder or thereunder will not, or
with the giving of notice or the lapse of time or both, would not
(a) conflict with or result in a breach of or constitute a default
under any provision of the Articles of Incorporation or By-laws of the Purchaser
or any contract, indenture, lease, sublease, loan agreement, restriction, lien,
encumbrance or other obligation or liability to which the Purchaser is a party
or by which it is affected or bound or result in or create in any party the
right to accelerate, terminate, modify or cancel any contract, license,
indenture, lease, sublease or loan agreement to which the Purchaser is a party
or by which it is affected or bound; or
(b) violate any order, writ, injunction, decree, law, statute, rule or
regulation applicable to the Purchaser.
4.6 Consents.
No consent, approval or agreement of any person, party, court, government
or entity is required to be obtained by the Purchaser in connection with the
execution and delivery of this Agreement or the Related Agreements, or the
consummation of the transactions contemplated hereby and thereby.
ARTICLE 5
SELLER'S AND PURCHASER'S OBLIGATIONS PRIOR TO THE CLOSING
The Seller covenants and agrees with the Purchaser and the Purchaser
covenants and agrees with the Seller, as follows:
5.1 Conduct of Business.
From the date hereof until the Closing Date, except as the Purchaser may
otherwise consent in writing, the Seller shall conduct the Seller's business
only in the ordinary and usual course, and use all reasonable efforts to
preserve intact the Seller's business organization and good will, including,
without limitation, the following:
(a) using all reasonable efforts to retain the services of its
management and employees;
(b) using all reasonable efforts to maintain its relationships with
its suppliers and others having business relationships with it;
(c) paying when due all taxes, assessments, fees or charges applicable
to it except if being diligently contested in good faith by appropriate
proceedings;
(d) not purchasing, selling or disposing of any of the Transferred
Assets other than in the ordinary course of business or mortgaging, pledging,
subjecting of a lien or security interest or otherwise encumbering any of the
Transferred Assets;
(e) not incurring any indebtedness or liability, contingent or
otherwise, other than in the ordinary course of business consistent with past
practice;
(f) except as may be required under any employment or other agreements
currently in effect, all of which are listed on Schedule 3.18, not changing the
compensation payable or to become payable to any of its officers, employees or
agents or entering into any new employment contract with respect to the Seller's
business unless it is terminable at will and without penalty;
(g) not modifying or terminating any contract or agreement listed on
Schedule 1.1(e) or entering into any other contract or agreement or modifying or
terminating any such contract or agreement, other than in the ordinary course of
business; and
(h) maintaining at all times the insurance listed on Schedule 1.2(e)
hereto, or equivalent insurance with substitute insurers reasonably satisfactory
to the Purchaser.
5.2 Breach of Representations and Warranties.
From the date hereof until the Closing Date, promptly upon either party
becoming aware of the occurrence of, or the impending or threatened occurrence
of, any event which would cause or constitute a breach, or would have caused or
constituted a breach had such event occurred or been known to such party prior
to the date hereof, of any of the representations and warranties of such party
contained in this Agreement or in any schedule attached hereto, such party shall
give the other party notice thereof in reasonable detail and such party shall
use its best efforts to prevent or promptly remedy the same.
5.3 Exclusive Dealing.
From the date hereof until the Closing Date, the Seller shall not, directly
or indirectly, encourage or initiate discussions or negotiations with, or
provide any information to or cooperate with, or participate in any discussions
or negotiations relating to any offers by, any corporation, partnership, person,
or other entity or group, other than the Purchaser, concerning the purchase of
all or substantially all of the assets of, or similar transaction involving, the
Seller's business or the sale of all or substantially all of the capital stock
of the Seller, or any merger or other business combination of the Seller with
any such other entity or group.
5.4 Access.
Purchaser or Affiliates and its employees, agents, attorneys, accountants
and other representatives have been given full access to the Seller's
properties, assets, facilities, and books and records and have been furnished
with such additional information with respect to the business and properties of
the Sellers business or the Seller as the Purchaser or such representative has
requested. The Seller shall provide to the Purchaser such additional information
with respect to the Transferred Assets between the date hereof and the Closing
Date as the Purchaser or its representatives may reasonably request. The
Purchaser and Parent shall hold, and shall cause its representatives to hold, in
strict confidence, and shall not disclose, and shall cause its representatives
not to disclose, any information given to it or its representatives regarding
the Seller or the Seller's business, except that the Purchaser may disclose such
information (i) to employees, representatives, attorneys or accountants in order
to complete the Purchaser's due diligence investigation, (ii) if such
information is in the public domain, or comes into the public domain through no
fault of the Purchaser or its representatives, or (iii) if such information is
required to be disclosed by the Purchaser in order to comply with law, but only
upon prior notice to the Seller. In the event of termination of this Agreement,
the Purchaser, Parent and their representatives shall return to the Seller all
copies of statements, documents, schedules or other written information obtained
in connection therewith and shall promptly turn over or destroy all reports or
analyses prepared by the Purchaser, Parent or their representatives based
thereon.
5.5 Violations of Law.
If, prior to the Closing Date, the Seller receives an administrative or
other order relating to any violation of any law, rule or regulation of any
federal, state, local or other regulatory or administrative body, including
rules regarding the employment of labor and equal employment opportunity, the
Seller may elect to remove or correct all such violations and to be responsible
for the costs of removing or correcting the same, including the payment of any
fines or back pay that may be assessed for any such violation.
5.6 Public Announcements.
No party hereto shall make, or permit any of its affiliates or
representatives to make, any news release or other public disclosure of this
Agreement or the transactions contemplated hereby without the prior approval of
the other parties hereto, which approval shall not be unreasonably withheld.
ARTICLE 6
CONDITIONS PRECEDENT TO CLOSING BY THE PURCHASER
The obligation of the Purchaser to purchase the Transferred Assets and to
consummate the transactions contemplated hereby, is subject to the fulfillment
and satisfaction by the Seller or waiver in writing by the Purchaser prior to or
at the Closing Date of each of the following conditions:
6.1 Accuracy of Representations and Warranties.
The representations and warranties of the Seller contained in this
Agreement and in any Schedule attached hereto shall be true and correct in all
material respects on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such date and the
Purchaser shall have received a certificate, executed by the President and the
Secretary of the Seller, dated the closing Date, to such effect.
6.2 Performance Agreements.
Each and all of the agreements of the Seller to be performed on or before
the Closing Date pursuant to the terms hereof shall have been duly performed in
all material respects, and the Purchaser shall have received a certificate,
executed by the President and the Secretary of the Seller, dated the Closing
Date, to such effect.
6.3 Authorization.
All corporate and shareholder action necessary to authorize the execution,
delivery and performance by the Seller of this Agreement and the transactions
contemplated hereby shall have been duly and validly taken.
6.4 No Material Adverse Change.
There shall not have occurred any Material Adverse Change taken as a whole
since the date of this Agreement.
6.5 Restructuring of Debt.
Effective upon the Closing under the Asset Purchase Agreement, the Seller
shall have restructured its long and short term obligations, including but not
limited to those obligations to Xxxx Food Company, Inc. and Global Walk, Inc.
(Takanashi)) on terms and conditions acceptable to the Purchaser in its sole
discretion.
6.6 Xxxx of Sale.
The Seller shall have executed and delivered to the Purchaser a xxxx of
sale conveying to the Purchaser all of the tangible and intangible personal
assets to be acquired by the Purchaser, substantially in the form attached
hereto as Exhibit C (the "Xxxx of Sale").
6.7 Employment Agreement.
The Shareholder shall have executed and delivered to the Purchaser an
Employment Agreement, substantially in the form attached hereto as Exhibit D
(the "Employment Agreement").
6.8 Pledge and Security Agreement.
The Seller shall have executed and delivered to the Purchaser a Pledge and
Security Agreement, substantially in the form attached hereto as Exhibit E (the
"Pledge and Security Agreement").
6.9 Opinion of Counsel.
The Purchaser shall have received opinions from Xxxxxxxx & Xxxxxxxx LLP,
counsel to the Seller dated the Closing Date, substantially in the form attached
hereto as Exhibit F.
6.10 Third Party Consents and Governmental Authorizations.
All consents and approvals of third parties required to permit the Seller
to consummate the transactions contemplated hereby, shall have been obtained by
the Seller.
6.11 Compliance with Bulk Sales Law.
The parties shall have complied with all requirements of the California
Bulk Sales Law (Commercial Code ss.ss.6000 et seq.).
6.12 Release of Lien.
Any lien upon the Transferred Assets, including but not limited to the
liens securing the Seller's obligations under its existing credit agreements,
shall have been released.
6.13 Certificates; Assignments.
(a) The Purchaser shall have received from the Seller certificates,
(i) as of the most recent practicable date, as to the legal existence of the
Seller issued by the Secretary of State of the State of California and the tax
status of the Seller issued by the California Franchise Tax Board and (ii) dated
the Closing Date by the Secretary of the Seller, as to the incumbency and
signatures of those officers of the Seller authorized to execute this Agreement
and the Related Agreements and resolutions of the Board of Directors and
Shareholders of the Seller authorizing this Agreement and the transactions
contemplated hereby.
(b) The Purchaser shall have received written certificates of
assignment, notarized and otherwise in form and content acceptable to the
Purchaser, confirming the assignment to the Purchaser of the copyrights and
trademarks which are included within the Transferred Assets.
6.14 Other Matters.
All proceedings to be taken in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Purchaser and its counsel,
and the Purchaser shall have received copies of all such documents and other
evidences as it or its counsel may reasonably request.
ARTICLE 7
CONDITIONS PRECEDENT TO CLOSING BY THE SELLER
The obligation of the Seller to sell the Transferred Assets and to
consummate the transactions contemplated hereby, is subject to the fulfillment
and satisfaction by the Purchaser or waiver in writing by the Seller prior to or
at the Closing Date of each of the following conditions:
7.1 Accuracy of Representations and Warranties.
The representations and warranties of the Purchaser contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of such date, and the Seller shall have received a certificate,
executed by an Executive Officer of the Purchaser, dated the Closing Date to
such effect.
7.2 Performance of Agreements.
Each and all of the agreements of the Purchaser to be performed on or
before the Closing Date pursuant to the terms hereof shall have been duly
performed in all material respects, and the Seller shall have received a
certificate, executed by an Executive Officer of the Purchaser, dated the
Closing Date, to such effect.
7.3 Employment Agreement.
The Purchaser shall have executed and delivered to the Shareholder the
Employment Agreement.
7.4 Opinion of Counsel.
The Seller shall have received an opinion from Xxxxxxxx & Werson, a
Professional Corporation, counsel to the Purchaser, dated the Closing Date,
addressed to the Seller, substantially in the form attached hereto as Exhibit G.
7.5 Authorization.
All corporate and shareholder action necessary to authorize the execution,
delivery and performance by the Purchaser of this Agreement and the transactions
contemplated hereby shall have been duly and validly taken, and Seller shall
have received a certificate executed by an executive officer of the Purchaser,
dated the Closing Date, to such effect.
7.6 Other Matters.
All proceedings to be taken in connection with the transactions by this
Agreement and all documents incident thereto shall be reasonably satisfactory in
form and substance to the Seller and its counsel, and the Seller shall have
received copies of all such documents and other evidences as it or its counsel
may reasonably request.
ARTICLE 8
FURTHER ASSURANCES
8.1 Execution of Other Instruments.
From time to time after the Closing, at the Purchaser's request and without
further consideration or additional cost to Seller, the Seller will execute and
deliver such other and further instruments of conveyance, assignment, transfer
and consent, and take such other action, as the Purchaser may reasonably request
for the more effective conveyance and transfer of ownership of the Transferred
Assets.
8.2 Assignment of Contracts.
Notwithstanding anything in this agreement to the contrary, if the Closing
occurs, no properties, assets or rights, including without limitation, any
contract, lease, license or commitment, shall be transferred or assigned hereby
if any attempt to transfer or make an assignment thereof without the consent of
a third party would constitute a breach thereof or in any way adversely affect
the rights of the Purchaser thereunder and the consent of such third party has
not been obtained, or if any attempt to transfer or make an assignment would be
ineffective or would affect any of the Seller's rights thereunder so that the
Purchaser would not in fact receive the same. The Seller, at its reasonable
expense, will use its best efforts and take any and all action the Purchaser
deems reasonably necessary to make any non-assignable property assignable or
otherwise to provide the Purchaser with the benefits thereof. Notwithstanding
such efforts, the Seller covenants and agrees that in any such case where a
consent has not been obtained or a transfer would be ineffective or affect the
Seller's rights, the Seller will, at the Purchaser's option, hold the same in
trust for the Purchaser in all respects subject to the Purchaser's direction and
control and will transfer and assign the same to the Purchaser or the
Purchaser's designee only on demand by the Purchaser.
8.3 Power of Attorney.
The Seller hereby appoints the Purchaser, effective upon the Closing, its
agent and attorney to receive, collect, enforce and xxx for any and all the
Transferred Assets and to endorse any check or other instrument payable to the
Seller or to the order of the Seller received in payment therefor, either in the
name of the Purchaser or in the name of the Seller in connection with the
Transferred Assets, all as the Seller's agent and attorney thereunto duly
authorized, but, in any event, for the use and benefit of the Purchaser, the
powers set forth herein being irrevocable and powers given for security. The
foregoing powers are coupled with an interest and are and shall be irrevocable
whether by the Seller or by reason of the Seller's dissolution or in any manner
or for any reason whatsoever. Subsequent to the Closing, Seller will not use any
of the Transferred Assets for its own use or benefit or that of anyone else or
make any effort to receive, collect, enforce or xxx for any of the Transferred
Assets at any time after the Closing, other than for the benefit of the
Purchaser. If any proceeds of any of the Transferred Assets or any payments
thereon are for any reason received by the Seller subsequent to the Closing, the
Seller will remit the same to the Purchaser immediately and in the form in which
received together with all necessary assignments and endorsements.
ARTICLE 9
EMPLOYEE RELATIONS AND BENEFITS
9.1 Offer of Employment.
Purchaser will offer employment, commencing on the Closing Date, at such
salary levels as are in effect on the Closing Date, to all salaried and hourly
employees who are employed by Seller on the last business day preceding the
Closing Date except as set forth on Schedule 9.1 hereto. Those employees to whom
offers of employment are made shall be collectively referred to as the
"Transferred Employees".
9.2 Benefits.
From and after the Closing, the Purchaser shall offer each Transferred
Employee the same benefits as from time to time are made available to the
Purchaser's United States employees generally, subject to the Purchaser's right
at any time or from time to time to alter the terms of or terminate the
provision of such benefits in whole or in part.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
10.1 Survival of Representations and Warranties.
A claim for any loss, liability, cost, damage or expense relating to the
representations and warranties set forth in this Agreement shall survive the
Closing and the consummation of the transactions contemplated hereby for a
period of one (1) year after the Closing Date, except for those claims that do
not involve third parties of which the survival period shall be six (6) months;
provided, however, that all such representations and warranties shall survive
after the applicable survival period with respect to any claim made by Purchaser
or Affiliates prior to the expiration thereof until, and shall expire when, such
claim is finally resolved. The parties hereto shall be entitled to rely upon
such representations and warranties whether or not either party relied on the
representations and warranties or had knowledge, acquired before or after the
date hereof, from its own investigation or otherwise, of any fact at variance
with or any breach of any such representation or warranty.
The liability of Shareholder is limited to the value of the collateral
pledged pursuant to the Pledge and Security Agreement defined in Section 6.8.
10.2 Obligation of the Seller to Indemnify.
The Seller will indemnify and hold the Purchaser and Affiliates harmless
from and against any liability, loss, cost, damage or expense sustained by the
Purchaser or an Affiliate based upon, arising out of or resulting from any of
the following; provided, however, that such indemnification shall not be
effective until the aggregate dollar amount of all such liabilities, losses,
costs, damages and expenses (including reasonable attorneys' fees) exceeds
$25,000:
(a) any misrepresentation, breach of warranty or non-fulfillment of
any agreement on the part of the Seller under this Agreement or any of the
Related Agreements or any misrepresentation in, or omission from, any
certificate or other instrument furnished or to be furnished to the Purchaser
hereunder or thereunder;
(b) liabilities of the Seller not specifically assumed by the
Purchaser, including, without limiting the foregoing, any claim for payment of
any kind from an employee of the Seller made as a result of or in connection
with the transactions contemplated herein;
(c) any bodily injury or property damage or other damages resulting
from the production, sale or use of products of the Seller shipped by or on
behalf of the Seller prior to the Closing Date or that are not covered by the
Seller's insurance; and
(d) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including attorneys' fees, incident
to any of the foregoing.
10.3 Obligation of the Purchaser to Indemnify.
The Purchaser will indemnify and hold the Seller and the Shareholder
harmless from and against any liability, loss, cost, damage or expense sustained
by the Seller based upon, arising out of, or resulting from any of the
following:
(a) any misrepresentation, breach of warranty or non-fulfillment of
any agreement on the part of the Purchaser under this Agreement or any of the
Related Agreements or from any misrepresentation in, or omission from, any
certificate or other instrument furnished or to be furnished to Seller hereunder
or thereunder;
(b) any liability of the Seller specifically assumed by the Purchaser
in connection with the transactions contemplated herein;
(c) any bodily injury or property damage or other damages resulting
from the production, sale or use of products of the Seller included as part of,
or produced from inventory forming a portion of, the Transferred Assets shipped
by or on behalf of the Purchaser on or after the Closing Date; and
(d) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including attorneys' fees, incident
to any of the foregoing.
10.4 Procedure for Indemnification.
Each party hereto agrees to give the other party prompt written notice of
any claim, assertion, event or proceeding by or in respect to a third party of
which it has knowledge concerning any liability or damage as to which it may
request indemnification hereunder; provided, however, that failure to give such
notice shall not affect a party's right to be indemnified hereunder.
10.5 Other Rights.
The rights of each party under this Article 10 shall be in addition to any
other rights or remedies that might otherwise be available to such party.
ARTICLE 11
TERMINATION
This Agreement may be terminated and the transactions contemplated hereby
abandoned at any time prior to the Closing Date as follows:
(a) by mutual consent of the Seller and the Purchaser;
(b) by the Purchaser if any of the conditions set forth in Article 6
hereof shall have become impossible of fulfillment and shall not have been
waived by the Purchaser;
(c) by the Seller if any of the conditions set forth in Article 7
hereof shall have become impossible of fulfillment and shall not have been
waived by the Seller;
(d) by either the Seller or the Purchaser if any action, suit or
proceeding before any court or other governmental body or agency shall have been
instituted to restrain, modify or prohibit the transactions contemplated hereby,
unless contested in good faith or unless the party against whom the action, suit
or proceeding is commenced agrees to indemnify the other party against all
liability arising therefrom, and the other party agrees to accept such
indemnification; and
(e) by either the Purchaser or the Seller if the transactions
contemplated hereby are not consummated on or before June 30, 1998 for any
reason other than the failure of the party seeking termination to fulfill the
conditions set forth in Article 6 hereof, if the Seller, or Article 7 hereof, if
the Purchaser.
If this Agreement is terminated pursuant hereto, this Agreement shall
become void and of no further force and effect except that such termination
shall be without prejudice to the rights of any party because of the
non-satisfaction of conditions set forth in Articles 6 and 7 hereof resulting
from the intentional or willful breach or violation of the representations,
warranties, covenants or agreements of another party under this Agreement.
ARTICLE 12
CLOSING
12.1 Closing Date.
The closing of the purchase and sale of the Transferred Assets hereunder
shall be held at the offices of Xxxxxxxx & Werson, Xxx Xxxxxxxxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx at 10:00 a.m., local time, on June 11, 1998
(the "Anticipated Closing Date") or at such other time and place as shall be
mutually agreed upon by the Purchaser and the Seller. Provided such party is not
in default of any of its obligations pursuant to this Agreement, either party
upon notice to the other party given in the manner provided for herein may
extend the closing for a period or for periods up to and including June 30,
1998. The time and place of closing is herein referred to as the "Closing" and
the date of the Closing is herein referred to as the "Closing Date".
12.2 Possession.
Simultaneously with the consummation of the transfer, Seller, through its
officers, agents, and employees, will put Purchaser into full possession and
enjoyment of all properties and assets to be conveyed and transferred by this
Agreement.
ARTICLE 13
REMEDIES
13.1 Remedies.
The Seller agrees that the Transferred Assets are unique and that the
Purchaser will be irreparably harmed in the event this Agreement is not
specifically enforced. The parties further agree that it is impossible to
measure in money the damage that will accrue by reason of a refusal by the
Seller to perform its obligations under this Agreement. Therefore, the Seller
hereby acknowledges that, in the event that the Purchaser shall institute any
action to enforce the provisions of this Agreement, the Purchaser will not have
an adequate remedy at law and that injunctive or other equitable relief will not
constitute any hardship upon the Seller.
ARTICLE 14
COVENANTS OF THE SELLER AND THE PURCHASER AFTER THE CLOSING
The Seller covenants and agrees with the Purchaser and the Purchaser
covenants and agrees with the Seller provided the Closing occurs hereunder:
14.1 Payment of Obligations.
On the Closing Date and thereafter, as promptly after becoming due as
practicable, the Seller will pay and discharge all debts, liabilities and
obligations not expressly assumed hereby by the Purchaser except any liability
being (for so long as being) contested in good faith.
14.2 Non-Competition.
For a period ending five (5) years after the Closing Date, the Seller will
not, directly or indirectly, (i) engage or become interested in, as owner,
partner, through stock ownership, investment of capital, lending of money or
property, rendering of services or otherwise, either alone or in association
with others, in the operation of any business which competes in, or is connected
with, the business of developing and marketing of organic foods and beverages,
(ii) induce or attempt to induce any customer of the Purchaser or the Seller's
business to reduce such customer's purchases of products from the Purchaser or
the Seller's business, (iii) use for its own benefit or disclose to any other
person or persons, natural or corporate, the name and/or requirements of any
such customer to any other person or persons, natural or corporate, or (iv)
solicit any employee or sales representative of the Purchaser or the Seller's
business to leave the employ of the Purchaser. The obligations of the Seller
under this Section 14.2 shall extend to those countries of the world, states of
the United States and those counties in the State of California set forth in
Exhibit H hereto (the "Territory"). After the Closing Date, the Seller shall
refer to the Purchaser all inquiries which it may receive, whether from
customers or otherwise, relating to Seller's business and shall forward to the
Purchaser any written orders which it may receive for Seller's products.
For a period ending three (3) years after the Closing Date, the Shareholder
shall be bound by the non-competition provisions of that that certain Employment
Agreement defined in Section 6.7, which provisions are herein incorporated by
reference.
14.3 Change of Name.
The Seller agrees that on or before the Closing Date it will take such
action and sign, seal, acknowledge, deliver, file and record such instruments as
shall be necessary to change its name to a name not including the words "Made In
Nature" or any variation or derivative thereof or any name confusingly similar
thereto.
14.4 Payment by the Purchaser of Current Liabilities.
Within ninety (90) days after becoming due, the Purchaser shall satisfy in
full all of the Assumed Liabilities of the Seller assumed by it hereunder except
any liability being (for so long as being) contested in good faith.
14.5 Uniform Tax Treatment.
The parties agree that the allocation of consideration set forth herein
shall be used by them for all federal and state income tax purposes, including,
but not limited to, reporting pursuant to Section 1060 of the Internal Revenue
Code of 1986, as amended. In preparing and filing IRS Form 8594 ("Asset
Acquisition Statement Under Section 1060"), the parties shall report that the
allocation of consideration set forth herein and the fair market value of the
assets to which such consideration is allocated is the same. Prior to filing
Form 8594 with respect to the transactions described herein, the parties shall
provide to each other a true and correct copy of the Form 8594 which each
intends to file with respect to these transactions.
ARTICLE 15
RIGHT OF SET-OFF
15.1 Right of Set-Off.
Subject to the limitations on Seller's liability as set forth in Section
10.2 above, with respect to any amounts that may be due to any party from any
other party hereunder or otherwise, such party shall have the right to set-off
such amounts against and to apply them to any amount otherwise payable by such
party to the other party pursuant to this Agreement or otherwise. The right of
set-off provided for in this Section shall be in addition to any other rights or
remedies that may be otherwise available to such party and the exercise of such
right of set-off shall not operate as a waiver of any such other rights.
ARTICLE 16
EXPENSES OF THE PARTIES
16.1 Expenses of the Parties.
Each party will pay its respective expenses incurred in connection with the
negotiation, execution and performance of this Agreement, and in the case of the
Seller, such expenses shall be paid out of the proceeds of the Purchase Price
paid hereunder.
ARTICLE 17
NOTICES
17.1 Notices.
Any notice to any party hereto given pursuant to this Agreement shall be in
writing addressed as follows:
if to the Seller and Shareholder: Made In Nature, Inc.
0000 Xxxxxxx Xxxxxxx
Xxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to: Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxx, III, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
if to the Purchaser and Parent: Vacu-dry Company
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxx, President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to: Xxxxxxxx & Werson
Xxx Xxxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Any such address may be changed by any party by written notice to the other
party. Any notice shall be deemed delivered (i) if transmitted by electronic
facsimile transmission, when the appropriate number and answerback are
transmitted, (ii) if delivered personally, when received, or (iii) if mailed by
registered or certified mail, postage prepaid, return receipt requested, when
received.
ARTICLE 18
DISPUTE RESOLUTION
18.1 Mandatory Arbitration.
Any controversy or claim between or among the parties, their agents,
employees and affiliates, including but not limited to those arising out of or
relating to this Agreement or the Related Agreements, including without
limitation any claim based on or arising from an alleged tort, shall, at the
option of any party, be resolved through mandatory arbitration in accordance
with the rules then in effect of the American Arbitration Association ("AAA")
and Title 9 of the U. S. Code, notwithstanding any other choice of law provision
in the Agreement or the Related Agreements. All statutes of limitations or any
waivers contained herein which would otherwise be applicable shall apply to any
arbitration proceeding under this Section 18.1. The parties agree that related
arbitration proceedings may be consolidated. The arbitrator shall prepare
written reasons for the award. The location of the arbitration shall be in San
Francisco, California. The arbitrator or arbitrators shall be generally skilled
in the legal and business aspects of the subject matter at issue. If the parties
so agree, a single arbitrator shall be selected jointly by the Purchaser and the
Seller to settle the dispute. If the parties cannot agree upon the selection of
an arbitrator within fifteen (15) days after the receipt by one party from the
other of a notice of arbitration, then each party shall within fifteen (15) days
after the expiration of said fifteen (15) day period select one arbitrator. If
either party fails to appoint an arbitrator within that fifteen (15) days
period, the other party may designate an arbitrator for the party who failed to
make such appointment. The two arbitrators shall select a third arbitrator
within fifteen (15) days after their appointment; if the two arbitrators
selected by the parties cannot agree upon a third arbitrator, the third
arbitrator shall be appointed by the AAA. The arbitrators shall promptly
determine whether and in what amount a payment should be made to the prevailing
party and shall submit a written report of their decision to the Purchaser and
the Seller. The decision of the majority of the arbitrators shall be binding
upon all parties. The arbitrators shall not be entitled to award punitive
damages. Judgment upon the award rendered may be entered in any court having
jurisdiction.
18.2 Provisional Remedies and Self Help.
No provision of, or the exercise of any rights under, Section 18.1 shall
limit the right of any party to exercise self help remedies such as set-off, or
to obtain provisional or ancillary remedies such as injunctive relief or the
appointment of a receiver from a court having jurisdiction before, during or
after the pendency of any arbitration.
ARTICLE 19
MISCELLANEOUS
19.1 Entire Agreement; Waivers.
This Agreement (including all attachments hereto) comprises the entire
agreement between the parties hereto as to the subject matter hereof and
supersedes all prior agreements and understandings between them relating
thereto. Each party may extend the time for, or waive the performance of, any of
the obligations of the other, waive any inaccuracies in the representations or
warranties of the other, or waive compliance by the other with any of the
covenants or conditions contained in this Agreement, but only by an instrument
in writing signed by the party granting such extension or waiver.
19.2 Attorneys Fees.
If any legal action, arbitration, mediation or other proceeding is brought
for the enforcement of this Agreement or the Related Agreements, or because of
an alleged dispute, breach, default, or misrepresentation in connection with any
of the provisions of this Agreement or the Related Agreements, the successful or
prevailing party or parties shall be entitled to recover reasonable attorneys'
fees and other costs incurred in that action or proceeding, in addition to any
other relief to which it or they may be entitled.
19.3 Governing Law.
This Agreement is made and shall be construed in accordance with the laws
of the State of California.
19.4 Successors and Assigns.
This Agreement shall inure to the benefit of, and be binding upon and
enforceable against, the respective successors and assigns of the parties hereto
but may not be assigned by any party without the prior written consent of the
other parties.
19.5 Captions.
Captions are supplied herein for convenience only and shall not be deemed a
part of this Agreement for any purpose.
19.6 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original for all purposes.
19.7 Severability.
If any term or provision of this Agreement or the application thereof to
any person or circumstances shall to any extent be invalid or unenforceable, the
remainder of this Agreement or the application of such terms or provisions to
persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby and each term and provision of this
Agreement shall be valid and enforced to the fullest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written by their duly authorized officers.
Seller:
MADE IN NATURE, INC.
By: /S/ Xxxxxx X. Xxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxx, President
Attest:
/s/ Xxxxxxxxx Xxxxxx
-------------------------------
------------------------, Secretary
Shareholder:
XXXXXX X. XXXXXXX
/s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxx
Purchaser:
MIN ACQUISITION CORP.
By: /s/ Xxxx X. Xxxx
------------------------------------
Xxxx X. Xxxx, President
Attest:
/s/ Xxxxx X. Xxxxx
---------------------------------
Assistant Secretary
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 1.1(b) Tangible Personal Property and Assets
Schedule 1.1(c) Patents, Trademarks, Tradenames, Etc.
Schedule 1.1(e) Contracts
Schedule 1.2(e) Insurance Policies
Schedule 2.3(a) Seller's Liabilities to be Assumed
Schedule 3.2 Qualifications, etc.
Schedule 3.3 Non-Contravention
Schedule 3.6 Transactions with Affiliates
Schedule 3.7 Financial Statements
Schedule 3.8 Absence of Changes - Exceptions
Schedule 3.9 Liens and Encumbrances
Schedule 3.10 Real Property
Schedule 3.11 Patents, Trademarks, etc.
Schedule 3.12 Insurance
Schedule 3.13 Commitments
Schedule 3.14 Legal Proceedings
Schedule 3.15 Taxes
Schedule 3.16 Compliance with Laws - Exceptions
Schedule 3.17 Environmental Matters
Schedule 3.18 Employee Benefit Plans, etc.
Schedule 3.19 Employee and Labor Matters; Directors,
Officers and Employees
Schedule 3.21 Powers of Attorney
Schedule 3.22 Accounts Receivable and Accounts Payable
- Exceptions
Schedule 3.23 Permits, Licenses, etc.
Schedule 3.25 Other Liabilities
Schedule 9.1 Offer of Employment
EXHIBITS
Exhibit A Common Stock Warrant
Exhibit B Allocation of Purchase Price
Exhibit C Xxxx of Sale
Exhibit D Employment Agreement
Exhibit E Pledge and Security Agreement
Exhibit F Form of Opinion of Seller's and
Shareholder's Counsel
Exhibit G Form of Opinion of Purchaser's Counsel
Exhibit H Territory
