AGREEMENT OF PURCHASE AND SALE OF ASSETS
THIS AGREEMENT OF PURCHASE AND SALE OF ASSETS is entered into as of January
21, 1998, between ORGANIC FOOD PRODUCTS, INC., a California corporation ("OFP"),
and SUNNY FARMS CORP., a California corporation ("Sunny Farms"), under the
following circumstances:
RECITALS
A. Sunny Farms owns and operates a natural juice and bottled water
business.
B. OFP desires to purchase certain assets from Sunny Farms, and Sunny Farms
desires to sell such assets to OFP, pursuant to the terms hereof.
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
1. PURCHASE AND SALE OF ASSETS
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1.1 Sale and Transfer of Assets. Subject to the terms and conditions set
forth in this agreement and on the Closing Date, as defined in Section 1.7,
Sunny Farms shall sell, assign, and deliver to OFP, and OFP shall purchase from
Sunny Farms all of:
1.1.1 Sunny Farms' Napa Valley Springs bottled water product line, the
Pacific Rim fruit flavored drinks product line, the Sunny Farms packaged fruit
juice product line, including, without limitation, Sunny Farms' juice and fruit
flavored drinks business as to its glass, can, and plastic product lines,
related inventory at the lower of cost or fair market value (wholesale price")
("Inventory"), and all related trademarks, recipes, customer lists, supplier
information, records, contracts listed in Exhibit 1, goodwill, and related
assets, both tangible and intangible; and
1.1.2 The equipment listed on Exhibit 1 and such other equipment as
the parties may mutually agree at or prior to the Closing (as defined in Section
1.7) (the "Equipment"). The foregoing items are referred to as the "Assets."
1.1.3 Sunny Farms will retain its beverage base (including Sugar
Sweet), fountain syrup, specialty syrup/concentrate and snacks product lines.
1.2 Purchase Price. As payment for the Assets, OFP shall deliver the
consideration as provided in this Section 1.2.
1.2.1 Purchase Price. The base purchase price for the Assets ("the
"Base Purchase Price") shall be $1,700,000 plus (i) the fair market value of the
Equipment as mutually determined by the parties at or prior to the Closing, and
(ii) the lower of cost or fair market value (wholesale) of the Inventory (the
"Inventory Value").
1.2.2 Payment. At the Closing, OFP shall (i) issue 425,000 shares of
its Common Stock (the "Shares") as payment for the Base Purchase Price, and (ii)
pay by check for the value of the Equipment. As payment for the Inventory, (a)
OFP shall assume Sunny Farms' debt obligations owing to Xxxxx Fargo Bank, N.A.
(the "Assumed Debt"), not to exceed the lesser of $700,000 or the Inventory
Value, and (b) OFP shall pay any remaining amounts owing for the Inventory from
the proceeds received from sales of the Inventory by OFP after OFP has received
proceeds equal to the amount of the Assumed Debt, with such payments to be made
by OFP within 15 days after the end of each month as to sales made during the
immediately preceding month.
1.2.3 Issuance of Additional Shares. If the average closing price of
Common Stock as quoted on NASDAQ for the five (5) trading days immediately prior
to August 11, 1998 (the "Adjusted Share Price"), is less than $4.00 per share,
OFP shall issue additional shares as payment for the Base Purchase Price. The
number of additional shares shall be determined by dividing the Base Purchase
Price by the Adjusted Share Price and subtracting from that amount the 425,000
Shares issued under Section 1.2.2(i) hereof (the "Additional Shares"); provided,
however, that for the purpose of calculating the Additional Shares, the Adjusted
Share Price shall not be less than $3.00 per share.
1.2.4 Registration of Shares. Promptly after August 11, 1998, OFP
shall make reasonable best efforts to register the Shares and the Additional
Shares with the Securities and Exchange Commission. Sunny Farms may not transfer
or encumber the Shares prior to August 11, 1998, except as otherwise provided in
this Agreement.
1.2.5 Payment of Interest. OFP shall pay Sunny Farms interest on the
Shares equal to 6% of the Base Purchase Price for the period commencing on the
date of this Agreement and continuing through August 11, 1998 (the "Coupon
Amount"). OFP shall pay the Coupon Amount in two equal installments, the first
payment on August 11, 1998, and the second payment on the later of the first
anniversary of the Closing Date or upon the calculation of the gross profits
derived from the acquired Assets, as described in Section 4. At its Option, OFP
may pay the Coupon Amount, or any portion thereof, in cash or in additional OFP
Common Stock valued at the average closing price as quoted on NASDAQ for the
five trading days immediately prior to August 11, 1998.
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1.2.6 Assumption of Liabilities. OFP agrees to assume (i) the Assumed
Debt, not to exceed the lesser of $700,000 or the Inventory Value, and (ii) only
those liabilities, obligations, or contracts listed on Exhibit 2. OFP shall not
be liable for any of the obligations or liabilities of Sunny Farms of any kind
and nature other than those specifically assumed by OFP under this paragraph.
1.3 Allocation of Purchase Price. The purchase price of the Assets shall be
paid and allocated as follows:
Inventory ..................................................TBD
Equipment ..................................................TBD
Product Lines, trademarks, trade secrets
and goodwill $1,700,000
TOTAL $1,700,000
(plus Inventory
Value and value of the Equipment)
Both parties agree to report this transaction for federal tax purposes,
including the timely filing of Form 8594, in accordance with this allocation of
the purchase price.
1.4 Calculation of Inventory Value. Immediately prior to the Closing or at
such time as the parties may agree, Sunny Farms and OFP shall conduct a physical
count of the Inventory. OFP's outside auditors shall be permitted to audit the
results of the physical count and the Inventory Value, whose reasonable
determination shall control.
1.5 Sales, Excise and Property Taxes. OFP shall pay all sales and use
taxes, if any, arising out of the transfer of the Assets. Sunny Farms shall pay
its portion, prorated as of the date of this Agreement, of state and local
property taxes, if any, relating to the Assets. OFP shall not be responsible for
any business, occupation, withholding, or similar tax, or any taxes of any kind
related the acquired Assets as to any period before the date of this Agreement.
1.6 Bulk Sales Notice. Upon the execution and delivery of this Agreement,
Sunny Farms shall give notice of bulk sale in accordance with Section 6105 of
the California Commercial Code.
1.7 Closing and Closing Date. The closing (the "Closing") of the
transactions set forth in this Section 1 shall occur on the later of (a)
February 3, 1998, (b) the date immediately following the end of the required
period for the notice of bulk sales, or (c) at such later date as the parties
may otherwise agree (the "Closing Date"). The Closing shall be held at the
offices of OFP.
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2. OFP'S REPRESENTATIONS AND WARRANTIES
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OFP represents and warrants to Sunny Farms as follows:
2.1 Organization, Standing, and Qualification of OFP. OFP is a corporation
duly organized, validly existing, and in good standing under the laws of
California and has all necessary corporate powers to own its properties and to
operate its business as now owned and operated by it; and neither the ownership
of its properties nor the nature of its business requires it to be qualified in
any jurisdiction other than the state of its incorporation.
2.2 Capital Structure. The authorized capital stock of OFP consists of
20,000,000 shares of common stock, of which there are 6,770,113 share
outstanding (the "OFP Shares"), and 5,000,000 shares of preferred stock, of
which there are no shares outstanding. All the OFP Shares are validly issued,
fully paid, and nonassessable, and have been so issued in full compliance with
all federal and state securities laws.
2.3 Absence of Specified Changes. Since September 30, 1997, the date of
OFP's latest quarterly financial statements filed with the SEC under form
10-QSB, there has been no:
2.3.1 Material adverse change in the financial condition, liabilities,
assets, business, or prospects of OFP taken as a whole;
2.3.2 Destruction, damage to, or loss of any asset of OFP (whether or
not covered by insurance) that materially and adversely affects the financial
condition, business, or prospects of OFP;
2.3.3 Labor trouble or other event or condition of any character
materially and adversely affecting the financial condition, business, assets, or
prospects of OFP; or
2.3.4 Other event or condition of any character of which OFP has
actual knowledge that has or might reasonably have a material and adverse effect
on the financial condition, business, or prospects of OFP's business or the
assets or properties used in the operation of OFP's business.
2.4 Agreement Will Not Cause Breach or Violation. The consummation of the
transactions contemplated by this Agreement will not result in or constitute any
of the following: (i) a default or an event that, with notice or lapse of time
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or both, would be a default, breach, or violation of the articles of
incorporation or bylaws of OFP or any lease, license, promissory note,
conditional sales contract, commitment, indenture, mortgage, deed of trust, or
other agreement, instrument, or arrangement to which OFP is a party or by which
OFP or its property is bound; (ii) an event that would permit any party to
terminate any agreement or to accelerate the maturity of any indebtedness or
other obligation of OFP; or (iii) the creation or imposition of any lien,
charge, or encumbrance on any of the properties of OFP.
2.5 Authority and Consents. OFP has the right, power, legal capacity, and
authority to enter into, and perform its respective obligations under, this
Agreement, and no approvals or consents of any persons are necessary in
connection with it. The execution and delivery of this Agreement by OFP has been
duly authorized by all necessary corporate action. This Agreement has been, and
the other agreements contemplated hereby, when executed, will be duly executed
and delivered by OFP and, assuming the due authorization, execution and delivery
hereof and thereof by the other parties hereto and thereto, this Agreement
constitutes and, when executed, each of the other agreements contemplated hereby
will constitute, a valid and binding obligation of OFP enforceable against OFP
in accordance with its terms subject to applicable bankruptcy, reorganization,
insolvency, moratorium, fraudulent conveyance and similar laws affecting
creditors' rights generally from time to time and to general principles of
equity.
2.6 Full Disclosure. None of the representations and warranties made by OFP
or made in any certificate or memorandum furnished or to be furnished by it or
on its behalf, contains or will contain any untrue statement of a material fact,
or omits any material fact the omission of which would be misleading.
3. SUNNY FARMS' REPRESENTATIONS AND WARRANTIES
----------------------------------------------
Sunny Farms represents and warrants to OFP as follows:
3.1 Organization, Standing, and Qualification of Sunny Farms. Sunny Farms
is a corporation duly organized, validly existing, and in good standing under
the laws of California and has all necessary corporate powers to own its
properties and to operate its business as now owned and operated by it; and
neither the ownership of its properties nor the nature of its business requires
it to be qualified in any jurisdiction other than the state of its
incorporation.
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3.2 Shareholders. The sole shareholder of Sunny Farms is Ellerise Company,
Inc.
3.3 Financial Statements. Sunny Farms has delivered to OFP (i) balance
sheets of Sunny Farms as of December 31, 1996, and December 31, 1995, and the
related unaudited statements of income and retained earnings for the 12-month
periods ending on those dates, and (ii) balance sheets of Sunny Farms as of
September 30, 1997, and the unaudited statements of income for the interim
periods ending on such dates (the "Sunny Farms Interim Financial Statements").
The foregoing financial statements are referred to as the "Sunny Farms
Financial Statements." The Sunny Farms Financial Statements are true and correct
in all material respects, have been prepared in accordance with principles
consistently followed by Sunny Farms throughout the periods indicated, and
fairly present the financial position of Sunny Farms as of the respective dates
of the balance sheets included in the Sunny Farms Financial Statements, and the
results of its operations for the respective periods indicated.
Sunny Farms has delivered or shall deliver or make available to OFP all
other financial records in its possession.
3.4 Absence of Specified Changes. Except as set forth in the Sunny Farms
Disclosure Schedule attached hereto (the "Sunny Farms Disclosure Schedule"),
since September 30, 1997, there has been no:
3.4.1 Material adverse change in the financial condition, liabilities,
assets, business, or prospects of Sunny Farms taken as a whole;
3.4.2 Destruction, damage to, or loss of any asset of Sunny Farms
(whether or not covered by insurance) that materially and adversely affects the
financial condition, business, or prospects of Sunny Farms;
3.4.3 Labor trouble or other event or condition of any character
materially and adversely affecting the financial condition, business, assets, or
prospects of Sunny Farms;
3.4.4 Change in accounting methods or practices (including, without
limitation, any change in depreciation or amortization policies or rates) by
Sunny Farms;
3.4.5 Revaluation by Sunny Farms of any of its assets;
3.4.6 Sale or transfer of any asset (with a book value in excess of
$25,000) of Sunny Farms, except in the ordinary course of business;
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3.4.7 Amendment or termination of any contract, agreement, or license
to which Sunny Farms is a party, except in the ordinary course of business;
3.4.8 Mortgage, pledge, or other encumbrance of any asset of Sunny
Farms;
3.4.9 Waiver or release of any right or claim of Sunny Farms, except
in the ordinary course of business;
3.4.10 Commencement or notice or threat of commencement of any civil
litigation or any governmental proceeding against or investigation of Sunny
Farms or its affairs;
3.4.11 Other event or condition of any character of which Sunny Farms
has actual knowledge that has or might reasonably have a material and adverse
effect on the financial condition, business, or prospects of Sunny Farms's
business or the assets or properties used in the operation of Sunny Farms's
business; or
3.4.12 Agreement by Sunny Farms to do any of the things described in
the preceding clauses 3.4.1 through 3.4.11.
3.5 Debts, Obligations and Liabilities. Sunny Farms has no debts,
liabilities, or obligations of any nature, whether accrued, absolute,
contingent, or otherwise, and whether due or to become due, that are not set
forth in the Sunny Farms Disclosure Schedule, except for routine obligations
incurred in the ordinary course of business since the date of the Sunny Farms
Interim Financial Statements.
3.6 Tax Returns and Audits. Within the times and in the manner prescribed
by law, Sunny Farms has filed all federal, state, and local tax returns required
by law and has paid all taxes, assessments, and penalties due and payable. There
are no present disputes as to taxes of any nature payable by Sunny Farms. For
any and all prior periods, whether or not disputed, Sunny Farms's provisions for
taxes are adequate as reflected on the Sunny Farms Financial Statements.
3.7 Inventory. The Inventory consists of items of a quality and quantity
merchantable, usable and saleable in the ordinary course of Sunny Farms's
business at normal xxxx-ups and none of such items is obsolete or below standard
quality. All items included in the Inventory are the property of Sunny Farms. No
items included in the Inventory have been pledged as collateral or are held by
Sunny Farms on consignment from others. The Inventory is based on quantities
determined by physical count or measurement.
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3.8 Trade Names, Trademarks, and Copyrights. To Sunny Farms's best
knowledge and belief, Sunny Farms has not infringed, and is not now infringing,
on any trade name, trademark, service xxxx or copyright belonging to any other
person, firm, or corporation. A schedule of all trade names, trademarks, service
marks and copyrights and their registrations, owned by Sunny Farms and used in
its business related to the Assets and in which it has any rights or licenses,
together with a brief description of each, is set forth in the Sunny Farms
Disclosure Schedule. Except as set forth in that schedule, Sunny Farms is not a
party to any license, agreement or arrangement, whether as licensor, licensee or
otherwise, with respect to any trademarks, service marks, trade names and
copyrights necessary for Sunny Farms' business as now conducted by it (including
without limitation those listed in that schedule), and that use does not, and
will not, conflict with, infringe on or otherwise violate any rights of others.
3.9 Title to Assets. Sunny Farms has good and marketable title to the
Assets, whether personal, mixed, tangible, or intangible. All of the Assets are
free and clear of mortgages, liens, pledges, charges, encumbrances, equities,
claims, easements, rights of way, covenants, conditions, or restrictions, except
for the lien of current taxes not yet due and payable. and those exceptions
disclosed in the Sunny Farms Disclosure Schedule. All tangible personal property
included in the Assets is in good operating condition and repair, ordinary wear
and tear excepted.
3.10 Insurance Policies. Sunny Farms has maintained and now maintains (i)
insurance on all the assets and business of Sunny Farms of a type customarily
insured, covering property damage and loss of income by fire or other casualty,
and (ii) adequate insurance protection against all liabilities, claims, and
risks against which it is customary to insure. Sunny Farms is not in default
with respect to payment of premiums on any such policy. Except as set forth in
the Sunny Farms Disclosure Schedule, no claim is pending under any such policy.
3.11 Other Contracts. Except for the agreements listed in the Sunny Farms
Disclosure Schedule, copies of which agreements have been furnished or made
available to OFP, Sunny Farms is not a party to, nor is its property bound by,
any distributor's, manufacturer's representative or agency agreement, any
co-packing agreement, and purchase agreement for raw materials, or any agreement
not entered into in the ordinary course of business, any indenture, mortgage,
deed of trust, lease, or any agreement that is unusual in nature, duration, or
amount (including, without limitation, any agreement requiring the performance
by Sunny Farms of any obligation for a period of time extending beyond one year
from the date hereof or calling for consideration of more than $10,000. There is
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no default or event that with notice or lapse of time, or both, would constitute
a default by any party to any of these agreements. Sunny Farms has received no
notice that any party to any of these agreements intends to cancel or terminate
any of these agreements or to exercise or not exercise any options under any of
these agreements. Sunny Farms is not a party to, nor is it or its property bound
by, any agreement that is materially adverse to Sunny Farms's business,
properties, or financial condition.
3.12 Compliance With Laws. To Sunny Farms's best knowledge and belief, and
except as set forth in the Sunny Farms Disclosure Schedule, Sunny Farms has
complied with and is not in violation of applicable federal, state, or local
statutes, laws, and regulations the noncompliance or violation of which would
have a material adverse effect on their properties or the operation of the
business of Sunny Farms.
3.13 Litigation. There is no suit, action, arbitration, or legal,
administrative, or other proceeding, or governmental investigation pending, or,
to the best knowledge of Sunny Farms, threatened against or affecting Sunny
Farms or its business, assets, or financial condition, except as set forth in
the Sunny Farms Disclosure Schedule. Sunny Farms is not in default with respect
to any order, writ, injunction, or decree of any federal, state, local, or
foreign court, department, agency, or instrumentality. Sunny Farms is not
presently engaged in any legal action to recover moneys due to it or damages
sustained by it.
3.14 Agreement Will Not Cause Breach or Violation. The consummation of the
transactions contemplated by this Agreement will not result in or constitute any
of the following: (i) a default or an event that, with notice or lapse of time
or both, would be a default, breach, or violation of the articles of
incorporation or bylaws of Sunny Farms or any lease, license, promissory note,
conditional sales contract, commitment, indenture, mortgage, deed of trust, or
other agreement, instrument, or arrangement to which Sunny Farms is a party or
by which Sunny Farms or its property is bound; (ii) an event that would permit
any party to terminate any agreement or to accelerate the maturity of any
indebtedness or other obligation of Sunny Farms; or (iii) the creation or
imposition of any lien, charge, or encumbrance on any of the properties of Sunny
Farms.
3.15 Authority and Consents. Sunny Farms has the right, power, legal
capacity, and authority to enter into, and perform its obligations under this
Agreement, and no approvals or consents of any persons are necessary in
connection with it. The execution and delivery of this Agreement by Sunny Farms
has been duly authorized by all necessary corporate action. This Agreement has
been, and the other agreements contemplated hereby, when executed, will be, duly
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executed and delivered by Sunny Farms and, assuming the due authorization,
execution and delivery hereof and thereof by the other parties hereto and
thereto, this Agreement constitutes and, when executed, each of the other
agreements contemplated hereby will constitute, a valid and binding obligation
of Sunny Farms enforceable against Sunny Farms in accordance with its terms
subject to applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance and similar laws affecting creditors' rights generally
from time to time and to general principles of equity.
3.16 Interest in Customers, Competitors and Suppliers. Neither Sunny Farms
nor any officer, director, or employee has any direct or indirect interest in
any competitor or supplier of Sunny Farms.
3.17 Full Disclosure. None of the representations and warranties made by
Sunny Farms or made in any certificate or memorandum furnished or to be
furnished by it, or on its behalf, contains or will contain any untrue statement
of a material fact, or omits any material fact the omission of which would be
misleading.
4. WARRANTY OF GROSS PROFITS
----------------------------
4.1 Warranty. Sunny Farms warrants to OFP that the business derived from
the Assets will generate a minimum of $935,000.00 in gross profits (as defined
in Section 4.2) during the one-year period commencing on the Closing Date. The
business derived from the Assets includes (i) sales of items in the Sunny Farms'
Napa Valley Springs bottled water product line, the Pacific Rim fruit flavored
drinks product line, and the Sunny Farms packaged fruit juice product line,
including, without limitation, Sunny Farms' juice and fruit flavored drinks
business as to its glass, can, and plastic product lines, to existing customers
of Sunny Farms and to OFP customers, and (ii) sales of other OFP products to
existing Sunny Farms customers who are not now or were not previously OFP
customers or to new customers brought in after the Closing Date primarily
through the efforts of Xxxx Xxxxxxxxxx or Xxx Xxxxxxxxxx.
4.2 Definition of Gross Profits. For purposes of this Section 4, gross
profits shall mean net revenues derived from the Assets pursuant to Section 4.1,
less raw material costs, brokerage fees, a pre-determined amount for co-packing
fees for items produced by a co-packer, an amount equal to the pre-determined
co-packing fees as a reasonable overhead amount for all items produced by OFP,
and freight.
4.3 Remedies for Breach of Warranty. OFP's remedies for a breach of this
Section 4 shall be limited as follows: If gross profits derived from the
acquired Assets are less than $935,000.00 during the one-year period commencing
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on the Closing Date, the Base Purchase Price shall be adjusted downward such
that Sunny Farms shall return to OFP for cancellation a portion of the Escrowed
Stock, determined by multiplying the number of shares of Escrowed Stock (as
defined in Section 9.3) by a fraction, the numerator of which is the actual
gross revenues for such one-year period, and the denominator of which is
$935,000.00. Sunny Farms will also forfeit the Coupon Amount for such cancelled
shares. For example, if actual gross profits derived from the acquired Assets is
only $467,000.00 during such one-year period, Sunny Farms will return to OFP for
cancellation 50% of the Escrowed Stock and will forfeit the applicable Coupon
Amount relating to that stock.
4.4 Conduct of Business by OFP. If OFP makes any substantial change in the
nature or scope of business as to the acquired Assets during the one-year period
after the Closing Date, an appropriate adjustment shall be made to the required
threshold set forth in Section 4.1.
5. CONDUCT OF BUSINESS PRIOR TO CLOSING
---------------------------------------
Prior to the Closing, Sunny Farms shall (a) carry on its business and
activities diligently and in substantially the same manner as they previously
have been carried out, and shall not make or institute any unusual or novel
methods of purchase, sale, management, accounting, or operation that will vary
materially from those methods used by Sunny Farms as of the date of this
Agreement, (b) use its best efforts to preserve its business relationships with
suppliers, customers, and others.
6. CONDITIONS PRECEDENT TO OFP'S OBLIGATION TO CLOSE
----------------------------------------------------
OFP's obligation to consummate the transactions hereunder is subject to the
satisfaction, on or before the Closing Date, of the following conditions:
6.1 Performance of Acts and Undertaking of Sunny Farms. Each of the acts
and undertakings of Sunny Farms to be performed on or before the Closing Date
pursuant to the terms of this Agreement shall have been duly performed.
6.2 Certified Resolutions of Sunny Farms. Sunny Farms shall deliver to OFP
herewith certified copies of resolutions duly adopted by the board of directors
of Sunny Farms and Ellerise Company, Inc., authorizing and approving the
execution and delivery of this Agreement and authorizing the consummation of the
transactions contemplated by this Agreement.
6.3 Consents and Releases. Sunny Farms shall deliver to OFP as necessary to
permit consummation of this transaction (a) all consents of other parties to any
Sunny Farms agreements, and (b) all releases of security interests as to the
acquired Assets.
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6.4 Employment Agreements. Xxxx Xxxxxxxxxx and Xxx Xxxxxxxxxx shall execute
and deliver Employment Agreements in form and substance satisfactory to the
parties.
6.5 Noncompetition Agreement. Xxxx Xxxxxxxxxx, Xxx Xxxxxxxxxx, Sunny Farms,
and Ellerise Company, Inc., shall execute and deliver a Noncompetition Agreement
in form and substance satisfactory to the parties.
6.6 Continued Accuracy of Sunny Farms' Representations and Warranties. All
of the representations and warranties of Sunny Farms contained in this Agreement
and in Sunny Farms' Disclosure Schedule shall be true 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 that date; and OFP
shall have received at the Closing a certificate, dated the Closing Date and
executed by the president of Sunny Farms, containing a representation and
warranty to that effect.
6.7 Trademark Assignments. Sunny Farms shall execute and deliver to OFP
Assignments of Trademark in form and substance satisfactory to OFP as to the
Sunny Farms, Napa Valley Springs, and Pacific Rim trademarks.
7. CONDITIONS PRECEDENT TO SUNNY FARMS' OBLIGATION TO CLOSE
-----------------------------------------------------------
Sunny Farms' obligation to consummate the transactions hereunder is subject
to the satisfaction, on or before the Closing Date, of the following conditions:
7.1 Performance of Acts and Undertaking of OFP. Each of the acts and
undertakings of OFP to be performed on or before the Closing Date pursuant to
the terms of this Agreement shall have been duly performed.
7.2 Certified Resolutions of OFP. OFP shall deliver to Sunny Farms a copy,
certified by OFP's secretary, of a resolution or resolutions duly adopted by
OFP's board of directors authorizing and approving this Agreement.
7.3 Employment Agreements. OFP shall execute and deliver the Employment
Agreement with Xxxx Xxxxxxxxxx and Xxx Xxxxxxxxxx in form and substance
satisfactory to the parties.
8. TERMINATION RIGHTS
---------------------
Either party may on the Closing Date terminate this Agreement, without
liability to the other:
8.1 If any bona fide action or proceeding shall be pending against either
party on the Closing Date that could result in an unfavorable judgment, decree,
or order that would prevent or make unlawful the carrying out of this Agreement;
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8.2 If the other party materially defaults in the due and timely
performance of any of its representations, warranties, covenants, or agreements
under this Agreement, provided that the nondefaulting party gives notice to the
defaulting party of the default; or
8.3 If OFP determines that the business of Sunny Farms has been materially
and adversely affected, whether by reason of changes, developments, or
operations in the ordinary course of business.
9. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND INDEMNITIES
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The representations, warranties, and indemnities included or provided for
in this Agreement or in any Schedule or certificate or other document delivered
pursuant to this Agreement shall survive the date hereof for a period of 15
months. No claim may be made under this Section 9 unless written notice of the
claim is given within such 15-month period.
9.1 Indemnification by Sunny Farms. Sunny Farms shall indemnify, defend,
and hold OFP harmless, from and against any and all losses, liabilities, costs,
expenses, damages, actions, claims, demands, and causes of action, including but
not limited to attorneys fees, that were caused by, arose as a result of, or
arose with respect to:
9.1.1 Any inaccuracy in any representation or warranty or any breach
of any warranty of Sunny Farms under this Agreement or any Schedule,
certificate, instrument, or other document delivered pursuant to this Agreement;
or
9.1.2 Any failure of Sunny Farms duly to perform or observe any term,
provision, covenant, or agreement to be performed or observed by Sunny Farms
pursuant to this Agreement, and any item included in the Sunny Farms Disclosure
Schedule, certificate, agreement, or other document entered into or delivered
pursuant to this Agreement, whether such losses were known or unknown to Sunny
Farms. All claims under this provision for indemnity shall be made within the
time period and in the manner provided for in this Section 9.
9.2 Indemnification by OFP. OFP shall indemnify, defend, and hold Sunny
Farms harmless, from and against any and all losses, liabilities, costs,
expenses, damages, actions, claims, demands, and causes of action, including but
not limited to attorneys fees, that were caused by, arose as a result of, or
arose with respect to:
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9.2.1 Any inaccuracy in any representation or warranty or any breach
of any warranty of OFP under this Agreement or any Schedule, certificate,
instrument, or other document delivered pursuant to this Agreement; or
9.2.2 Any failure of OFP duly to perform or observe any term,
provision, covenant, or agreement to be performed or observed by Sunny Farms
pursuant to this Agreement, and any disclosure schedule, certificate, agreement,
or other document entered into or delivered pursuant to this Agreement, whether
such losses were known or unknown to OFP. All claims under this provision for
indemnity shall be made within the time period and in the manner provided for in
this Section 9.
9.3 Pledge Agreement. Upon the execution and delivery of this Agreement,
Sunny Farms shall pledge 212,500 shares of OFP stock issued to it under this
Agreement, and upon the issuance of Additional Shares, if any, under Section
1.2.3, one-half of such shares (collectively, the "Escrowed Stock"), as security
for Sunny Farms' obligations under Section 9.1. At the Closing, Sunny Farms
shall execute and deliver to OFP a Pledge Agreement in form and substance
satisfactory to the parties.
9.4 Offset. Any claim by OFP for indemnity under Section 9.1 properly made
may be offset against OFP's obligation to pay the Inventory Value under Section
1.2.2(ii)(b).
10. PUBLIC ANNOUNCEMENT
-----------------------
Neither Sunny Farms nor OFP, without the consent of the other, shall make
any public announcement or issue any press release with respect to this
Agreement or the transactions contemplated by it, which consent shall not be
unreasonably withheld.
11. GOVERNING LAW; SUCCESSORS AND ASSIGNS; COUNTERPARTS; ENTIRE AGREEMENT
-------------------------------------------------------------------------
This Agreement (a) shall be construed under and in accordance with the laws
of the State of California; (b) shall be binding on and shall inure to the
benefit of the parties to this Agreement and their respective successors and
assigns; (c) may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one or
more counterparts shall have been signed by each of the parties and delivered to
Sunny Farms and OFP; and (d) embodies the entire agreement and understanding,
superseding all prior agreements and understandings between OFP and Sunny Farms
relating to the subject matter of this Agreement.
14
12. NOTICES
-----------
All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if served personally on the party to whom notice is to be given,
or on the third day after mailing if mailed to the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid, and
properly addressed as follows:
To OFP: Organic Food Products, Inc.
000 Xxxxxxxx Xxxx
Xxxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxx
To Sunny Farms: Sunny Farms Corp.
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxxxx
Either party may change its address for purposes of this paragraph by
giving the other party written notice of the new address in the manner set forth
above.
13. AMENDMENTS
--------------
This Agreement may be amended only by the written agreement of the parties
hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ORGANIC FOOD PRODUCTS, INC.,
a California corporation
By: /s/ Xxxxx Xxxx
---------------------------------
Xxxxx Xxxx, Chief Executive
Officer
"OFP"
SUNNY FARMS CORP.,
a California corporation
By: /s/ Xxxx X. Xxxxxxxxxx
---------------------------------
Xxxx X. Xxxxxxxxxx, President
"Sunny Farms"
15
EXHIBITS
Exhibit Description
------- -----------
1. Purchased Assets
2. Assumed Liabilities
16
EXHIBIT 1
PURCHASED ASSETS
Contracts: Section 7.4 of the Agreement for Purchase and Sale of Assets between
Sunny Farms and California Bottling Company, Inc. ("CBC"), subject to CBC's
consent.
Equipment: To be determined
EXHIBIT 2
ASSUMED LIABILITIES
Obligation of Sunny Farms under Section 7.4 and Article 8 of the Agreement for
Purchase and Sale of Assets between Sunny Farms and California Bottling Company,
Inc. ("CBC"), provided CBC consents to any such assignment.
SUNNY FARMS DISCLOSURE SCHEDULE
Section 3.4.6 and 3.4.12
------------------------
California Bottling has an option to buy the Napa Valley Springs trademark
and business until November, 1998.
Sunny Farms is selling its Calistoga property and its equipment located at
its Richmond plant that is not required in the production of ready-to-drink
juices.
Section 3.5
-----------
Sunny Farms has continuing financial and marketing agreements with Sugar
Sweet until November, 1998, and Integrated Food until April, 1998.
Sunny Farms has a lease for its warehouse and production facility in
Richmond with Berkeley Land and a lease with Hans and _____ Shaper.
Sunny Farms has a line of credit with Xxxxx Fargo Bank, secured by
receivables, inventory and some fixed assets.
Sunny Farms has been sued by Coca Cola alleging that Sugar Sweet has
infringed on its patents and trademarks.
Sunny Farms has unsecured debt with Lega___ Resources, Inc.
Section 3.8
-----------
The registered trademarks include Sunny Farms, Napa Valley Springs and
Pacific Rim.
Section 3.9
-----------
Xxxxx Fargo Bank has a security interest in receivables, inventory and some
fixed assets.
Section 3.11
------------
Other contracts not included elsewhere in this Disclosure Statement include
co-packer contracts with H.A. Rider and California Bottling.
Section 3.13
------------
Sunny Farms has been sued by Coca Cola alleging that Sugar Sweet has
infringed on its patents and trademarks.
