Exhibit 2
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is dated this 15th day of October, 2004
by and between Health & Nutrition Systems International, Inc., a Florida
corporation ("Seller") and TeeZee, Inc., a Florida corporation ("Purchaser").
WHEREAS, Seller contemplates voluntarily filing a petition to commence
a case ("Bankruptcy Case") under Chapter 11 of Title 11 of the United States
Code ("Bankruptcy Code") in the United States Bankruptcy Court for the Southern
District of Florida ("Bankruptcy Court");
WHEREAS, in the event that Seller files the Bankruptcy Case, Purchaser
desires to purchase from Seller, and Seller desires to sell to Purchaser,
substantially all of Seller's assets and assume substantially all of Seller's
known liabilities, pursuant to ss. 363 and other applicable provisions of the
Bankruptcy Code, subject to higher or better bids, all upon the terms and
subject to the conditions set forth herein upon approval of this Agreement by
the Bankruptcy Court in the Bankruptcy Case;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements hereinafter set forth, the receipt and
sufficiency of which are hereby acknowledged, Purchaser and Seller do hereby
represent, warrant, covenant and agree as follows:
AGREEMENT
SECTION 1. DEFINITIONS
1.1. Defined Terms. In addition to terms defined elsewhere in this
Agreement, the following terms when utilized in this Agreement, unless the
context otherwise requires, shall have the meanings indicated, which meanings
shall be equally applicable to both the singular and plural forms of such terms:
"Accounting Standards" means the accounting policies and procedures of
Seller as described in Seller's 2003 Annual Report on Form 10-K, which policies
and procedures comply with GAAP.
"Accounts Receivable" means (a) all trade accounts receivable and other
rights to payment from customers of Seller and the full benefit of all security
for such accounts or rights to payment, including all trade accounts receivable
representing amounts receivable in respect of goods shipped or products sold to
customers of Seller, (b) all other accounts or notes receivables of Seller and
the full benefit of all security for such accounts or notes, and (c) any claim,
remedy or other right related to any of the foregoing.
"Acquired Assets" is defined in Section 2.1 of this Agreement
"Affiliate" with respect to any Person means any Person which, directly
or indirectly, through one or more intermediaries, controls the subject Person
or any Person which is controlled by or is under common control with a
Controlling Person. For purposes of this definition, "control" (including the
correlative terms "controlling", "controlled by" and "under common control
with"), with respect to any Person, means possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise.
"Agreement" means this Asset Purchase Agreement together with all
exhibits and schedules contemplated hereby.
"Assumed Obligations" is defined in Section 2.1(c) of this Agreement
"Business Day" means any day other than (a) Saturday or Sunday or (b)
any other day on which banks in Palm Beach County, Florida are permitted or
required to be closed.
"Cash Cap" is defined in Section 3.1 of this Agreement.
"Closing" is defined in Section 4.1 of this Agreement.
"Closing Date" is defined in Section 4.1 of this Agreement.
"Contracts" means any agreement, contract, lease, license, right to
use, promise or undertaking (whether written or oral and whether express or
implied), whether or not legally binding.
"Conveyance Documents" is defined in Section 2.1(b) of this Agreement.
"Drop Dead Date" means January 15, 2005.
"Excess Cash" means any and all cash not used by Seller during the
Bankruptcy Case for either (i) the payment of Seller's operating expenses in the
ordinary course of its business; or (ii) the payment of Seller's costs, expenses
or professional fees incurred in connection with the Bankruptcy Case; or (iii)
the settlement of any claims arising from or related to litigation pending as of
the date of the Bankruptcy Case.
"Excluded Assets" is defined in Section 2.1(a) of this Agreement.
"Excluded Obligations" is defined in Section 2.1(d) of this Agreement.
"Governmental Authorization" means any consent, license, registration
or permit issued, granted, given or otherwise made available by or under the
authority of any government, court, regulatory or administrative agency or
commission, or other governmental authority, agency or instrumentality, whether
federal, state or local (domestic or foreign) pursuant to any federal, state or
local law or ordinance.
"Intangible Rights" means (i) any and all foreign and domestic patents,
patent rights, trademarks, service marks, trade names, brands and copyrights
(whether or not registered and, if applicable, including pending applications
for registration) owned, Used, licensed or controlled by Seller and all goodwill
associated therewith; and (ii) any and all information, know-how, trade secrets,
software, formulae, methods, processes and other intangible properties that are
necessary or customarily Used by Seller in its business.
"Intellectual Property Assets" is defined in Section 5.10 of this
Agreement.
"Lien" means any lien, charge, claim, restriction, encumbrance,
security interest or pledge of any kind whatsoever.
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"Material Adverse Change" means (i) Wal-Mart's and/or GNC's decision to
discontinue the sale of any one or more of the Seller's products, or the loss of
Wal-Mart or GNC as a customer of Seller; (ii) the occurrence of a product
liability claim (whether initiated by demand or by commencement of suit)
reasonably likely to result in a recovery in excess of the policy limits; (iii)
the occurrence of any of the following; (A) any new material outbreak of
hostilities, including, but not limited to, an escalation of hostilities which
existed prior to the date of this Agreement, any other national or international
calamity or crisis, including an act of terrorism, or any material adverse
change in financial, political or economic conditions affecting the United
States; (B) any material interruption in the Seller's operations due to an act
of God, or (C) the issuance of any formal inquiry or investigation of Seller by
the Federal Trade Commission, the Food and Drug Administration or any other
applicable government agency; (iv) a material change in the policy limits, or
policy terms, of any of Seller's current insurance (including but not limited to
products liability, worker's compensation, property and crime, umbrella and
D&O); (v) an increase in the aggregate premiums on Seller's current insurance
policies to an amount equal to or greater than 105% of the aggregate premiums as
of the date of this Agreement; or (vi) Seller's monthly sales decrease to less
than $250,000.
"Material Adverse Effect" means that effect that flows from a Material
Adverse Change.
"Officer's Certificate" means a certificate executed by an officer of
the party as to the accuracy of the party's representations and warranties as of
the Closing Date and as to such party's compliance with and performance of its
covenants and obligations to be performed or complied with at or before the
Closing.
"Permitted Liens" means (i) Liens for taxes not yet due and payable,
(ii) easements, covenants, conditions and restrictions of record, (iii)
easements, covenants, conditions and restrictions not of record as to which no
material violation or encroachment exists or, if such violation or encroachment
exists, as to which the cure of such violation or encroachment would not
materially interfere with the conduct of Seller's operations, (iv) any zoning or
other governmentally established restrictions or encumbrances, (v) workers or
unemployment compensation Liens arising in the ordinary course of business
securing amounts which are not delinquent, (vi) mechanic's, material man's,
supplier's, vendor's, landlord's or similar Liens arising in the ordinary course
of business securing amounts which are not delinquent, (vii) railroad trackage
agreements, utility, slope and drainage easements, right-of-way easements and
leases regarding signs which are not material to Seller's operations, (viii)
other immaterial imperfections of title, easements, covenants, conditions,
restrictions or encumbrances; and (ix) all liens existing on the Acquired Assets
as of the date hereof (but expressly excluding any liens in favor of any person
existing on any Excluded Assets, whether existing on the date hereof or arising
hereafter).
"Person" means any natural person, corporation, limited liability
company, unincorporated organization, partnership, association, joint-stock
company, joint venture, trust or government, or any agency or political
subdivision of any government.
"Purchase Price" is defined in Section 3.1 of this Agreement.
"Purchase Price Assumed Obligation Component" is defined in Section 3.1
of this Agreement.
"Purchase Price Cash Component" is defined in Section 3.1 of this
Agreement.
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"Purchaser's Knowledge" means the actual knowledge, after reasonable
inquiry, of Tisi.
"Seller's Knowledge" means the actual knowledge, after reasonable
inquiry, of one or more of the members of the Board of Directors of Seller
serving on the Board as of the date hereof.
"Taxes" shall mean all taxes, assessments, charges, duties, fees,
levies or other governmental charges (including interest, penalties or additions
associated therewith) including federal, state, city, county, foreign or other,
franchise, capital stock, real property, personal property, tangible,
withholding, FICA, unemployment compensation, disability, transfer, sales, use,
excise, gross receipts and all other taxes of any kind for which any Seller may
have any liability imposed by the United States or any state, county, city,
country or foreign government or subdivision or agency thereof, whether disputed
or not.
"Used" shall mean, with respect to the properties, contracts, permits
or licenses of Seller, those owned, leased, licensed or otherwise held by Seller
which were acquired for use or held for use by Seller in connection with
Seller's operations, whether or not reflected on Seller's books of account.
1.2. Other Definitional Provisions. Unless otherwise defined herein,
all terms defined in this Agreement shall have the defined meanings when used in
any certificate, schedule, report or other document made or delivered pursuant
hereto.
SECTION 2. SALE AND PURCHASE OF ASSETS; OTHER COVENANTS
2.1. Sale and Purchase of Assets.
(a) On the terms and subject to the conditions of this
Agreement, at the Closing referred to in Section 4.1 hereof, Seller shall sell,
convey, assign, transfer and deliver to Purchaser, and Purchaser shall purchase,
acquire and accept delivery of, all assets and properties owned or Used by
Seller in its operations free and clear of all liens, claims and encumbrances
other than Permitted Liens, except for (i) cash and cash equivalents, the
Purchase Price, other rights of Seller under this Agreement, and Seller's
corporate minute book and stock records, and (ii) those assets specifically
listed on Schedule 2.1(a) (such specifically listed assets in clauses (i) and
(ii) being referred to as the "Excluded Assets"), including without limiting the
generality of the foregoing:
(i) all Accounts Receivable net of offsets due
customers;
(ii) all inventories of Seller, wherever located,
including all finished goods, raw materials, works-in-process, spare parts and
other materials and supplies of Seller to be used by Seller in the production of
finished goods, and including all inventory in transit or on order and not yet
delivered, and all rights with respect to the processing and completion of any
orders of Seller, including the right to collect and receive charges for such
orders;
(iiii) all supplies, equipment, vehicles, machinery,
furniture, fixtures, leasehold improvements, computer equipment and peripherals,
and other tangible property Used by Seller in connection with its operations,
and Seller's interest as lessee in any leases with respect to any of the
foregoing;
(iv) all of Seller's right, title and interest in and
to its Contracts, including the Material Contracts listed or required to be
listed on Schedule 5.6 hereto;
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(v) all proprietary knowledge, Trade Secrets,
Confidential Information, computer software and licenses, formulae, designs and
drawings, quality control data, processes (whether secret or not), methods,
inventions and other similar know-how or rights Used in the conduct of Seller's
operations, including, but not limited to, the areas of manufacturing,
marketing, advertising and personnel training and recruitment, together with all
other Intangible Rights used in connection with Seller's operations, including
all files, data, back-up tapes, manuals, documentation and source and object
codes related thereto;
(vi) all utility, security and other deposits and
prepaid expenses;
(ivii) Seller's operations as a going concern and its
licenses, telephone numbers, telecopy numbers, email addresses, URL, internet
web sites, internet domain names, customer lists, vendor lists, referral lists
and contracts, advertising materials and data, restrictive covenants, choses in
action and similar obligations owing to Seller from its present and former
customers, together with all books, operating data and records (including
financial, accounting and credit records), files, papers, records and other data
of Seller;
(viii) all rights of Seller in and to, Seller's name,
all assumed fictional business names, and all Intellectual Property Assets;
(ix) all rights to real property Used by Seller;
(x) all claims of Seller against third parties
relating to the Acquired Assets or Seller's operations, whether xxxxxx or
inchoate, known or unknown, contingent or noncontingent;
(xi) all tax credits, including but not limited to,
Seller's federal income tax loss carryforward, to the extent transferable;
(xii) all of Seller's insurance benefits relating to
the Acquired Assets or the Assumed Obligations prior to the Closing Date;
however, except for proceeds of claims made prior to Closing, Seller shall
retain its rights to all liability insurance with respect to events prior to
Closing; and
(xiii) all other property and rights of every kind or
nature Used by Seller in its operations.
It is specifically understood and agreed by the parties hereto that
Purchaser is acquiring, and Seller is selling, all of the tangible and
intangible assets attributable to or Used by Seller in its operations, except
the Excluded Assets. The aforesaid assets and properties to be transferred to
Purchaser hereunder are hereinafter collectively referred to as the "Acquired
Assets." Notwithstanding anything to the contrary contained herein, the transfer
of the Acquired Assets pursuant to this Agreement shall not include the
assumption of any liability relating to the Acquired Assets except those
liabilities assumed pursuant to Section 2.1(c) of this Agreement.
(b) Method of Conveyance. The sale, transfer, conveyance,
assignment and delivery by Seller of the Acquired Assets to Purchaser in
accordance with Section 2.1 hereof shall be effected on the Closing Date by
Seller's execution and delivery to Purchaser of one or more bills of sale,
assignments and other conveyance instruments with respect to Seller's transfer
of the Acquired Assets in form and scope reasonably satisfactory to Purchaser
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(collectively the "Conveyance Documents"). At the Closing, all of Seller's
right, title or interest in and to all of the Acquired Assets shall be
transferred, conveyed, assigned and delivered by Seller to Purchaser pursuant to
the Conveyance Documents.
(c) Assumed Obligations. Except for professional fees, costs
and other expenses incurred by the Seller in connection with the negotiation,
execution and delivery of this Agreement, the Bankruptcy Case, and the
consummation of the transactions contemplated hereby, all of which shall be
governed by Section 13.4 hereof, at the Closing, Purchaser shall assume:
(i) trade accounts payable and accrued expenses with the
vendors and other service providers of Seller, whether such payables or expenses
are incurred before or after the commencement of the Bankruptcy Case, other than
the Excluded Obligations and those vendors or service providers listed on
Schedule 2.1(c)(1);
(ii) trade accounts payable and accrued expenses with the
vendors of Seller who are listed on Schedule 2.1(c)(1) but with respect to each
such vendor, only up to the amount set forth opposite the name of such vendor on
Schedule 2.1(c)(1);
(iii) Seller's liabilities for accrued and unpaid vacation
days, sick days, personal days, bonuses, and damages for rejection of employment
executory Contracts to the employees of Seller employed as of the date of the
Bankruptcy Case, other than Excluded Obligations;
(iv) all ongoing obligations of payment and performance under
all leases and Contracts assumed by Seller and assigned to Purchaser; and
(v) Seller's liabilities and other obligations arising
subsequent to the Closing under the other obligations listed on Schedule
2.1(c)(2) hereto (collectively the "Assumed Obligations").
Notwithstanding anything to the contrary contained herein, in
no event shall any Assumed Obligation include.
(d) Excluded Obligations. Except as expressly set forth in
Section 2.1(c), Purchaser shall not assume or be responsible at any time for any
liability, obligation, debt or commitment of Seller, whether absolute or
contingent, accrued or unaccrued, asserted or unasserted, or otherwise,
including but not limited to any liabilities, obligations, debts or commitments
of Seller incident to, arising out of or incurred with respect to this Agreement
and the transactions contemplated hereby (except to the extent contemplated by
Section 12.5 hereof). Without limiting the generality of the foregoing, Seller
expressly acknowledges and agrees that Seller shall retain, and that Purchaser
shall not assume or otherwise be obligated to pay, perform, defend or discharge:
(i) any liability of Seller for Taxes, whether measured by
income or otherwise,
(ii) any product liability pertaining to products sold by
Seller prior to the Closing Date,
(iii) any liability or obligation of Seller relating to any
default taking place before the Closing Date under any of the Assumed
Obligations to the extent such default created or increased the liability or
obligation,
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(iv) any obligation of Seller to its shareholders, any
Affiliate of Seller or its shareholders, or any Person claiming to have a right
to acquire any capital stock or other securities of Seller,
(v) any and all accrued liabilities for professional fees
(including but not limited to brokers, attorneys, financial advisors or
accountants), costs and other expenses incurred by the Seller in connection with
the negotiation, execution and delivery of this Agreement, the Bankruptcy Case,
and the consummation of the transactions contemplated hereby;
(vi) any liabilities or obligations of Seller relating to the
Excluded Assets; and
(viii) those liabilities, debts, or obligations listed on
Schedule 2.1(d) hereto.
All obligations that are not Assumed Obligations, including but not
limited to the foregoing, are hereinafter referred to as the "Excluded
Obligations."
2.2. Other Covenants.
(a) Employee Relationships. Purchaser shall offer to employ
all of the "at will" employees of Seller, other than officers and/or directors
of Seller, that were employees of Seller as of the date hereof through the
Closing Date as "at will" employees of Purchaser at their respective rates of
pay as of the date hereof. Nothing herein is intended or should be construed (i)
to create an employment contract with such employees, (ii) to obligate Purchaser
to retain such employee other than as an "at will" employee for any period of
time after the Closing Date, or (iii) to obligate Purchaser to provide any
particular level of benefits or perquisites to such employees whether or not
such benefits or perquisites were offered or provided to such employees by
Seller prior to the Closing Date.
(b) Excess Cash. Seller agrees that, on the Closing Date, it
shall pay to Garden State Nutritionals, a division of Vitaquest International,
Inc. ("Garden State") all of its Excess Cash to be applied by Garden State
against the debt owed Garden State by Seller secured by a lien on the Seller's
assets.
SECTION 3. PURCHASE PRICE
3.1. Purchase Price. The total consideration for the Acquired Assets
will be $2,285,000.00 plus the unliquidated damages resulting from the potential
rejection of the Employment Contract between Seller and Xxxxxxxxxxx Xxxx (the
"Tisi Obligation" and collectively, the "Purchase Price") which shall consist of
(a) the assumption of the Assumed Obligations (the value of which as of the
Closing Date is hereinafter referred to as the "Purchase Price Assumed
Obligation Component") and (b) an amount in cash equal to the difference between
the Purchase Price and the Purchase Price Assumed Obligation Component
("Purchase Price Cash Component"); provided, however, (i) in no event shall the
Purchase Price Cash Component exceed Three Hundred and Fifty Thousand Dollars
($350,000) (the "Cash Cap"), and (ii) if the Purchase Price Cash Component
would, but for the limitation in Section 3.1(i), exceed the Cash Cap (because
the Assumed Obligations (other than the Tisi Unliquidated Obligation) as of the
Closing Date are less than $1,935,000), then the Purchase Price shall be reduced
accordingly. Purchaser shall make payment of the Purchase Price as follows:
(a) On the date of execution of this Agreement, Purchaser
shall deliver to Xxxxxx Xxxxxxxxx LLP as escrow agent (the "Escrow Agent'), One
Hundred Thousand Dollars
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($100,000), in next day funds (the "Escrow Amount"). The Escrow Amount shall be
held in an interest bearing account by the Escrow Agent pursuant to the terms
and conditions of an Escrow Agreement containing terms reasonably satisfactory
to Seller and Purchaser (the "Escrow Agreement"); and
(b) On the Closing Date, Purchaser shall deliver to Seller, by
official bank check or wire transfer (to an account specified by Seller in
writing at least three Business Days prior to Closing), in next day funds, the
remaining amount of the Purchase Price Cash Component.
SECTION 4. CLOSING
4.1. Closing. Subject to the conditions stated in Section 7 and Section
8 of this Agreement, the closing of the transactions contemplated herein (the
"Closing") shall be held no later than the next succeeding Monday following the
satisfaction of all of the conditions set forth in Section 7 and 8, at the
offices of Xxxxxx Xxxxxxxxx, 000 Xxxx Xxx Xxxx Xxxxxxxxx, Xxxxx 0000, Xxxx
Xxxxxxxxxx, Xxxxxxx, unless the parties agree to another time, date or place.
Notwithstanding the foregoing, unless this Agreement has been previously
terminated pursuant to the provisions of Section 12, the Closing may be delayed
up to the 15th Business Day after all of the conditions set forth in Section 7
and Section 8 have been satisfied. The term "Closing Date" shall mean the date
on which the Closing occurs. The Closing shall be deemed effective as of 11:59
p.m. West Palm Beach time on the Closing Date. Except as otherwise provided
herein, all proceedings to be taken and all documents to be executed at the
Closing shall be deemed to have been taken, delivered and executed
simultaneously, and no proceeding shall be deemed taken nor documents deemed
executed or delivered until all have been taken, delivered and executed.
4.2 Deliveries at Closing by Seller. On the Closing Date, Seller shall
deliver (or cause delivery) to Purchaser all of the following:
(a) the Conveyance Documents;
(b) Seller's Officer's Certificate;
(c) a certified copy of the resolutions adopted by Seller's
Board of Directors authorizing the execution, delivery and performance of this
Agreement and the consummation of all of the transactions contemplated by this
Agreement;
(d) a certificate of good standing of Seller from the Florida
Secretary of State;
(e) an incumbency certificate of Seller;
(f) the books and records of Seller's business, other than
those which constitute Excluded Assets pursuant to the terms of this Agreement
or those relating to an Excluded Obligation;
(g) an affidavit of Seller stating that, effective as of the
Closing Date, Seller will no longer use the name "Health & Nutrition Systems
International, Inc." for any purpose and that, effective as of the Closing Date,
Seller relinquishes the exclusive use of that name to Purchaser for Purchaser's
sole use and benefit;
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(h) evidence reasonably satisfactory to Purchaser that
Purchaser has been named as an additional named insured and loss payee on all of
the Seller's insurance policies listed on Schedule 5.11(a) hereto; and
(i) such other documents as Seller or its counsel may
reasonably request.
4.3 Deliveries at Closing by Purchaser. On the Closing Date,
Purchaser shall deliver an allocation (the "Allocation") of the Purchase Price
in accordance with Section 1060 of the Internal Revenue Code, which shall be
reasonably acceptable to Seller. Purchaser and Seller shall (i) be bound by the
Allocation, (for tax purposes only, and not for any other purpose), (ii) timely
file any information that may be required to be filed pursuant to Treasury
Regulations promulgated under Section 1060(b) of the Code (including Form 8594),
(iii) act in a manner consistent with the Allocation in the preparation of
financial statements and filing of all United States federal income tax returns
(including, without limitation, Form 8594) and in the course of any Tax audit,
Tax review or Tax litigation relating thereto, and (iv) take no position and
cause their Affiliates to take no position inconsistent with the Allocation for
any Tax purposes, except as may be adjusted by subsequent agreement following an
audit by the Internal Revenue Service or by court decision. Notwithstanding any
conflicting or inconsistent provisions hereof, no Allocation hereunder shall
supersede, usurp or otherwise affect the jurisdiction and authority of the
Bankruptcy Court to value the Acquired Assets for purposes of distributions to
Seller's estate under the Bankruptcy Code. In addition, Purchaser shall deliver
(or cause delivery) to Seller all of the following:
(a) the Purchase Price Cash Component;
(b) Purchaser's Officer's Certificate;
(c) a certified copy of the resolutions adopted by Purchaser's
Board of Directors and sole shareholder authorizing the execution, delivery and
performance of this Agreement and the consummation of all of the transactions
contemplated by this Agreement;
(d) a certificate of good standing of Purchaser from the
Florida Secretary of State; and
(e) such other documents as Seller or its counsel may
reasonably request.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER
Except as otherwise disclosed to Purchaser in the schedules to this
Agreement, Seller hereby represents and warrants the following to Purchaser:
5.1. Organization, Power and Qualification. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Florida. Seller has the power and authority to own, lease, and operate
its properties and assets and to carry on its business and Seller has, subject
to approval of the Bankruptcy Court in the Bankruptcy Case, the corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby.
5.2. Corporate Action. All corporate action necessary on the part of
Seller to authorize the execution and delivery to Purchaser of this Agreement
and the performance or
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satisfaction of the obligations of Seller in connection with the transactions
contemplated by this Agreement has been or will have been duly taken prior to
the Closing. Subject to approval of the Bankruptcy Court in the Bankruptcy Case,
this Agreement constitutes the valid and binding obligation of Seller and is
enforceable against Seller in accordance with its terms.
5.3. Consents; No Breach. Except for the approval of the Bankruptcy
Court and as set forth on Schedule 5.3, no material consent, approval or
authorization of, or designation, declaration or filing with, any Governmental
Authority on the part of Seller is required in connection with the valid
execution and delivery of this Agreement (collectively, the "Required
Consents"). Except as set forth on Schedule 5.3, the execution, delivery and
performance of this Agreement by Seller and the consummation of the transactions
contemplated hereby will not: (i) violate any provision of its articles of
incorporation, bylaws or any amendment thereto of Seller; (ii) violate in any
material manner any order, judgment, injunction, award or decree of any court,
arbitrator or governmental or regulatory body against, or binding upon, Seller;
or (iii) violate any statute, law or regulation of any jurisdiction, applicable
to the transactions contemplated herein including without limitation, the
Florida Business Corporation Act and all applicable federal and state securities
laws.
5.4. No Brokers or Finders. No Person has or will have, as a result of
the transactions contemplated by this Agreement, any right, interest or claim
against or upon Seller for any commission, fee or other compensation as a finder
or broker as a result of the consummation of this Agreement.
5.5. Litigation. Except as disclosed on Schedule 5.5 there is no
outstanding order, judgment, injunction, award or decree of any court,
governmental or regulatory body or arbitration tribunal against or involving
Seller which could have a Material Adverse Effect. Except as disclosed on
Schedule 5.5, there is no action, suit, or claim or legal, administrative or
arbitration proceeding or any investigation (whether or not the defense thereof
or liabilities in respect thereof are covered by insurance) pending, or to
Seller's Knowledge threatened against or involving Seller which could have a
Material Adverse Effect.
5.6. Material Contracts. Schedule 5.6 sets forth all material Contracts
of Seller (the "Material Contracts"). The Material Contracts are valid, binding,
enforceable and existing agreements, in full force and effect against Seller. To
Seller's Knowledge, Seller is not in default in any material respect under any
of the Material Contracts (nor to Seller's Knowledge, has it received notice of
the default of any other party to any Material Contracts), and to Seller's
Knowledge, no condition exists which with notice or lapse of time or both would
constitute default thereunder.
5.7. Financial Statements. Attached to this Agreement as Schedule 5.7
are the unaudited consolidated balance sheets of Seller as of October 8, 2004
(the "Balance Sheet") and statements of earnings of Seller for the six month
period ended June 30, 2004 and the two month period ended August 31, 2004
(collectively, the "Financial Statements"). To Seller's Knowledge, the Financial
Statements (i) present fairly in all material respects the financial condition
of Seller and its results of operations for such period in accordance with the
Accounting Standards, and (ii) have been prepared in accordance with the
Accounting Standards (other than the absence of notes to the Financial
Statements) for the periods covered by such statements.
5.8. Undisclosed Liabilities. Except as and to the extent reflected in
the Financial Statements, to Seller's Knowledge, there are no material
liabilities, commitments or obligations
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of any nature, whether absolute, accrued, contingent or otherwise, other than
those incurred in the ordinary course of Seller's business since September 24,
2004 which, (i) under the Accounting Standards, are required to be disclosed in
the Financial Statements, and (ii) would materially and negatively affect
Seller's operations or financial condition.
5.9. Taxes. All federal, state and other tax returns relating to Seller
or its operations required by law to be filed have been duly filed, and except
as set forth on Schedule 5.9, all such tax returns were correct and complete in
all material respects. Except as set forth on Schedule 5.9, all such federal,
state and other taxes, assessments, fees and other federal governmental charges
shown to be due and payable on such returns have been paid, except such taxes
which are being contested in good faith or for which the dates for payment have
been extended, which contests and extensions are identified on Schedule 5.9
hereto.
5.10. Intellectual Property Assets. Set forth on Schedule 5.10 is a
list and description of all material foreign and domestic patents, patent
rights, trademarks, service marks, trade names, brands and copyrights in both
published works and unpublished works (whether or not registered and, if
applicable, including pending applications for registration), and all rights in
mask works owned, Used, licensed or controlled by Seller and all going concern
value and goodwill associated therewith. To Seller's Knowledge, Seller has the
right to Use and shall as of the Closing Date own or have the right to Use any
and all information (whether confidential, proprietary or technical), know-how,
trade secrets, patents, copyrights, trademarks, trade names, slogans software,
formulae, methods, processes and other intangible properties that are necessary
or customarily Used by Seller for the ownership, management or operation of its
Properties (collectively, the "Intellectual Property Assets") including, but not
limited to, the Intellectual Property Assets listed on Schedule 5.10.
5.11. Insurance.
(a) Insurance Policies. Schedule 5.11(a) hereto is a complete and
correct list of all insurance policies (including, without limitation, fire,
liability, product liability, workers' compensation and vehicular) presently in
effect that relate to Seller, its properties or operations (collectively, the
"Insurance Policies"), including the amounts of such insurance and annual
premiums with respect thereto, all of which have been in full force and effect
from and after the date(s) set forth on Schedule 5.11(a). To Seller's Knowledge,
none of the insurance carriers has indicated to Seller an intention to cancel
any such Insurance Policy or to materially increase any insurance premiums, or
that any insurance required to be listed on Schedule 5.11(a) will not be
available in the future on substantially the same terms as currently in effect.
(b) Insurance Claims. Except as set forth in Schedule 5.11(b), Seller
has no claim pending or anticipated against any of its insurance carriers under
any of such policies and, to Seller's Knowledge, there has been no actual or
alleged occurrence of any kind which could reasonably be expected to give rise
to any such claim.
5.12. Title to Property. At the Closing, to Seller's Knowledge,
Purchaser will have good title to all of the Acquired Assets, free and clear of
all Liens, subject only to (i) the Permitted Liens and (ii) those Liens set
forth on Schedule 5.12, which Liens are the sole Liens being assumed or taken
subject to by Purchaser pursuant to the terms of this Agreement.
5.13. Disclaimer of Other Warranties. Purchaser hereby acknowledges and
agrees that, except as otherwise expressly provided in this Agreement, Seller
makes no
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representations or warranties whatsoever, express or implied, with respect to
any matter relating to the Acquired Assets, or otherwise relating to any of the
transactions contemplated hereby, including without limitation any income to be
derived or expenses to be incurred in connection with the Acquired Assets, the
physical condition of any personal Acquired Assets comprising a part of the
Acquired Assets or which is the subject of any other acquired real property
lease or acquired Contract, the environmental condition or other matter relating
to the physical condition of any real Acquired Assets or improvements which are
the subject of any real Acquired Assets lease to be assumed by Purchaser at the
Closing, the zoning of any such real Acquired Assets or improvements, the value
of the Acquired Assets (or any portion thereof), the terms, amount, validity or
enforceability of any Assumed Liabilities, the merchantability or fitness of the
personal Acquired Assets or any other portion of the Acquired Assets for any
particular purpose. Seller makes no warranties or representations, in connection
with this transaction, other than as set forth in this Agreement. Without in any
way limiting the foregoing, subject to the representations, warranties and
covenants expressly set forth in this Agreement, Seller hereby disclaims any
warranty, express or implied, of merchantability or fitness for any particular
purpose as to all or any portion of the Acquired Assets. Accordingly, subject to
the representations, warranties and covenants expressly set forth in this
Agreement, Purchaser will accept the Acquired Assets at the Closing "AS IS,"
"WHERE IS" AND "WITH ALL FAULTS."
SECTION 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller the following:
6.1. Binding Obligation. This Agreement constitutes the valid and
binding obligation of Purchaser and is enforceable against Purchaser in
accordance with its terms, except as such enforcement may be affected by
bankruptcy, moratorium and other laws relating to creditor's rights generally or
general principles of equity.
6.2. Consents; No Breach. No consent, approval or authorization of, or
designation, declaration or filing with, any Governmental Authority on the part
of Purchaser is required in connection with the valid execution and delivery of
this Agreement. Purchaser shall have on or before the Closing all necessary or
appropriate licenses, permits or others approvals from all applicable
Governmental Authorities which allow Purchaser to acquire the Acquired Assets
and to assume the Assumed Obligations. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
will not: (i) violate, conflict with or result in the breach of any of the
material terms of, result in a material modification of, otherwise give any
other contracting party the right to terminate, or constitute (or with notice or
lapse of time or both constitute) a default under, any material Contract or
other agreement to which Purchaser is a party; (ii) violate in any material
manner any order, judgment, injunction, award or decree of any court, arbitrator
or governmental or regulatory body against, or binding upon, Purchaser; or (iii)
violate any statute, law or regulation of any jurisdiction applicable to the
transactions contemplated herein.
6.3. Litigation. There is no outstanding order, judgment, injunction,
award or decree of any court, governmental or regulatory body or arbitration
tribunal against or involving Purchaser. There is no action, suit or claim or
legal, administrative or arbitration proceeding or any investigation (whether or
not the defense thereof or liabilities in respect thereof are covered by
insurance) pending, or to Purchaser's Knowledge, threatened, against or
involving Purchaser.
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6.4. No Brokers or Finders. No Person has or will have, as a result of
the transactions contemplated by this Agreement, any right, interest or claim
against or upon Purchaser for any commission, fee or other compensation as a
finder or broker as a result of the consummation of this Agreement.
6.5. Organization, Power and Qualifications. Purchaser is a
corporation, duly organized, validly existing and in good standing under the
laws of its state of formation. Purchaser has full power to enter into this
Agreement and to consummate the transactions contemplated hereby.
6.6. Capitalization. As of the date hereof, (i) the authorized capital
stock of Purchaser consists of One Hundred Thousand (100,000) shares of common
stock, Ninety Thousand (90,000) of which are issued and outstanding. All of the
issued and outstanding shares of common stock are owned by Xxxxxxxxxxx Xxxx.
There are no outstanding (a) securities convertible into or exchangeable for
such capital stock and membership interest; (b) options, warrants, or other
rights to purchase or subscribe to such capital stock or securities convertible
or exchangeable for such capital stock and membership interest; or (c)
Contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance of such capital stock and membership interest.
6.7. Corporate Action. All action necessary on the part of Purchaser to
execute and deliver to Seller this Agreement and the performance or satisfaction
of the obligations of Purchaser in connection with the transactions contemplated
by this Agreement has been or will have been duly taken prior to the Closing.
This Agreement constitutes the valid and binding obligation of Purchaser and is
enforceable against Purchaser in accordance with its terms, except as such
enforcement may be affected by bankruptcy, moratorium and other laws relating to
creditors' rights generally or general principles of equity.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF PURCHASER TO CLOSE
The obligation of Purchaser to consummate this Agreement and the
transactions contemplated hereby is subject to the satisfaction at or before the
Closing of each and every one of the following conditions, any of which
Purchaser may, in its sole discretion, waive.
7.1. Representations and Warranties True. Each of the representations
and warranties of Seller contained in this Agreement shall be true and correct
in all material respects as of the Closing, as though made on and as of the
Closing.
7.2. Performance of Obligations of Seller. Seller shall have performed
in all material respects all obligations and covenants required to be performed
by it under this Agreement prior to or as of the Closing Date.
7.3. No Obstructive Proceedings. No action or proceedings shall have
been instituted against, and no order, decree or judgment of any court, agency,
commission or Governmental Authority shall be existing against Purchaser or an
Affiliate of Purchaser which seeks to or would render it unlawful as of the
Closing to effect the sale of the Acquired Assets in accordance with the terms
hereof, and no such action shall seek damages against Purchaser or an Affiliate
of Purchaser in a material amount by reason of the transactions contemplated
hereby.
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7.4. No Adverse Change. Between the date hereof and the Closing Date,
there shall have not been any Material Adverse Change.
7.5. Insurance Matters. Seller shall have complied with the covenants
set forth in Section 11.6.
7.6. Employee Retention. As of the Closing Date, Xx Xxxxx, Xxxx Xxxxx,
Xxxxxx Xxxx, Xxxxx Xxxxxxxx and Xxxxx Xxxxxxxx (each a "Manager" and
collectively "Managers") shall continued to be employed by Seller in the
capacity each was employed by Seller as of the date hereof, unless a Resignation
Event (as defined below) occurs with respect to a particular Manager. A
"Resignation Event" occurs when a Manager dies, becomes disabled, resigns
employment with Seller due to relocation of residence or health issues, is fired
for cause, or resigns after committing conduct that would have been grounds for
firing for cause.
7.7 Bankruptcy Court Auction Procedures. Seller shall have filed and
obtained approval by the Bankruptcy Court in the Bankruptcy Case of the
bankruptcy auction procedures which shall, at a minimum, include the criteria
set forth on Exhibit 7.8 attached hereto and which shall otherwise be mutually
agreeable to Seller and Purchaser.
7.8. Bankruptcy Court Plan Confirmation/Approval. The Bankruptcy Court
in the Bankruptcy Case shall have approved this Agreement, the purchase and sale
of the Acquired Assets free and clear of all liens, claims and encumbrances
other than the Permitted Liens, the assignment and assumption of the Assumed
Obligations, and all other transactions contemplated herein by entering an order
(which may be accomplished by confirmation of a Chapter 11 plan), that includes
a finding that Purchaser acted, and the sale of the Acquired Assets was
conducted, in good faith within the meaning of 11 U.S.C. ss. 363(m) and that is
otherwise in a form reasonably satisfactory to Purchaser, which order shall
become final and non-appealable no later than ten calendar days prior to the
Drop Dead Date.
SECTION 8. CONDITIONS PRECEDENT TO OBLIGATION OF SELLER TO CLOSE
The obligation of Seller to consummate this Agreement and the
transactions contemplated hereby are subject to the satisfaction at or before
the Closing of each and every one of the following conditions, any of which
Seller may, in its sole discretion, waive.
8.1. Representations and Warranties True. Each of the representations
and warranties of Purchaser contained in this Agreement shall be true and
correct in all material respects as of the Closing, as though made on and as of
the Closing.
8.2. Performance of Obligations of Purchaser. Purchaser shall have
performed in all material respects all obligations and covenants required to be
performed by Purchaser under this Agreement prior to or as of the Closing Date.
8.3. No Obstructive Proceeding. No action or proceeding shall have been
instituted or threatened against and no order, decree or judgment of any court,
agency, commission or Governmental Authority shall be existing against Seller or
its business which seeks to or would render it unlawful as of the Closing to
effect the sale of the Acquired Assets in accordance with the terms hereof, and
no such action whether instituted or threatened shall seek damages against
Seller or its business in a material amount by reason of the transactions
contemplated hereby.
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8.4. Bankruptcy Court Plan Confirmation/Approval. The Bankruptcy Court
in the Bankruptcy Case shall have approved this Agreement, the purchase and sale
of the Acquired Assets free and clear of all liens, claims and encumbrances
other than the Permitted Liens, the assignment and assumption of the Assumed
Obligations, and all other transactions contemplated herein by entering an order
(which may be accomplished by confirmation of a Chapter 11 plan), that includes
a finding that Purchaser acted, and the sale of the Acquired Assets was
conducted, in good faith within the meaning of 11 U.S.C. ss. 363(m) and that is
otherwise in a form reasonably satisfactory to Purchaser, which order shall
become final and non-appealable no later than ten calendar days prior to the
Drop Dead Date.
SECTION 9. TAX MATTERS
9.1. Filing of Returns. Seller shall properly and timely prepare, file
and deliver to the appropriate authorities or other persons all tax returns,
reports and forms with respect to Seller's operations required to be filed and
delivered, for any taxable period ending on or before the Closing Date, and
shall ensure that all Charges (as hereinafter defined) and other impositions
shown thereon to be due and payable have been paid prior to the date on which
any fine, penalty, interest, late charge or loss may be added thereto for the
nonpayment thereof, unless any such amounts are being contested in good faith by
appropriate proceedings, or any such fine, penalty, interest, late charge or
loss has been paid. For purposes of this Agreement, "Charges" shall mean all
federal, state, county, city, municipal, local, foreign or other governmental
taxes, levies, assessments and charges, liens, claims or encumbrances upon or
relating to Seller's employees, payroll, income, or gross receipts, Seller's
ownership or use of any of its assets, or any other aspect of Seller's business,
in each case including any and all interest and penalties. For any period not
ending prior to or on the Closing Date, Purchaser shall timely prepare and file
with or deliver to the appropriate authorities or other persons all tax returns,
reports and forms required to be filed or delivered.
9.2. Ad Valorem and Similar Taxes. Ad valorem, property and similar
taxes and assessments (other than taxes on income, gain or receipts, or transfer
taxes in respect of the Acquired Assets) based upon or measured by the value of
the Acquired Assets shall be divided or prorated between Purchaser and Seller as
of the Closing Date based on the amount of such taxes paid for the previous
year, unless a new tax statement is received prior to the Closing Date, in which
event the tax apportionment made as of the Closing Date shall be adjusted in
accordance with such new tax statement or as otherwise mutually agreed. In this
regard, Seller shall assume responsibility for such taxes attributable to the
period of time prior to the Closing Date and Purchaser shall assume
responsibility for the periods of time thereafter. A period not ending on the
Closing Date shall be referred to as a "Straddle Period". Real, personal and
intangible personal property Taxes allocable to Seller shall be equal to the
amount of such Taxes for the entire taxable period multiplied by a fraction, the
numerator of which is a number of days in a Straddle Period prior to and
including the Closing Date and the denominator of which is the number of days in
the Straddle Period. All other Taxes for the portion of the Straddle Period
ending on the Closing Date shall be computed as if such taxable period ended as
of the close of business on the Closing Date. Not later than 30 days after the
Closing Date, Purchaser and Seller shall determine and shall pay all amounts
required to be paid pursuant to such allocation.
9.3. Audits. In the event of an audit by a taxing authority involving
Seller, the consent of Purchaser shall not be required unless Taxes are being
assessed against Purchaser and Seller has not provided funds to pay any such
Taxes.
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SECTION 10. PRE-CLOSING COVENANTS
10.1. Efforts to Consummate Subject to the terms and conditions of this
Agreement, each party hereto shall use commercially reasonable efforts to take
or cause to be taken all actions and do or cause to be done all things required
under applicable law in order to consummate the transactions contemplated
hereby, including, without limitation, (i) obtaining all Governmental
Authorizations and other permits, authorizations, consents and approvals of any
other Person that are required for or in connection with the consummation of the
transactions contemplated hereby and by the other documents contemplated hereby,
(ii) taking any and all reasonable actions necessary to satisfy all of the
conditions to such party's obligations hereunder, and (iii) executing and
delivering all agreements and documents required by the terms hereof to be
executed and delivered by such party on or prior to the Closing. With regard to
all dates and time period set forth or referred to in this Agreement, time is of
the essence.
10.2 Name Change.
(a) Seller hereby represents, warrants and covenants to
Purchaser that the corporate name of Seller is as set forth on the signature
page hereof and further agrees and acknowledges that such name is included with
the Acquired Assets and that the exclusive right to use such name will be
transferred to Purchaser on the Closing Date. Seller shall, prior to or
simultaneously with the Closing Date, (i) file an appropriate amendment to
Seller's Articles of Incorporation and take all other actions necessary to
change its name to a name which is in no way similar to the corporate name set
forth on the signature page hereof, in Purchaser's judgment; (ii) shall furnish
any written consents and assignments as Purchaser shall hereafter reasonably
request in connection with such name change. Seller further agrees to take all
actions, after the Closing, which are requested by Purchaser to enable Purchaser
to immediately change its name to Seller's present name.
(b) In connection with the same, Seller shall remove or cover,
or shall have caused to be removed or covered, no later than 30 days after the
Closing Date, the trademarks and/or trade names transferred pursuant to this
Agreement, or any derivative of such names or marks, from any letterhead,
envelopes, labels, containers, signs, panels, signage and other material or
matter (regardless of medium) not otherwise included in the Acquired Assets.
SECTION 11. POST-CLOSING COVENANTS
11.1. Further Assurances. Following the Closing, Seller and Purchaser
shall execute and deliver such documents, and take such other action, as shall
be reasonably requested by the other party hereto to carry out the transactions
contemplated by this Agreement.
11.2. Access to Records. For a period of three years after the Closing
Date, Seller shall have the right, at its expense, and during normal business
hours upon prior written notification, to inspect and copy any of the records
relating to the operation of Seller's business delivered to Purchaser in
connection with this transaction, for the purposes of (a) preparing and/or
defending tax returns for the period prior to the Closing Date, (b) obtaining
information relating to claims arising from the operation of Seller's business
prior to the Closing Date or (c) any other commercially reasonable purpose.
During such seven year period, Purchaser shall not destroy or discard such
records. After such seven year period, Purchaser may destroy or discard such
records, but must provide Seller with at least 90 days' prior written notice of
its intentions and shall give Seller the right, at its expense, to remove from
Purchaser's premises any such records within such 90 day period.
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11.3. Non-Competition. Seller hereby agrees that it shall, for a period
from the Closing Date until the fifth anniversary thereof, refrain from,
anywhere within the continental United States, directly or indirectly, owning,
managing, operating, controlling or financing, any business that is engaged in
the business of the research, development, manufacturing, marketing or sale of
dietary or nutritional supplements, drinks, bars, or other similar products
whether web-based or otherwise; provided, however, that the foregoing shall not
apply to the ownership of not more than five percent of the outstanding capital
stock of any company listed by a national securities exchange or an
over-the-counter stock listed by the National Association of Securities Dealers.
11.4 Insurance Matters.
(a) Purchaser as "Additional Insured." Effective as of the Closing
Date, Seller shall have included Purchaser as an additional named insured on
Seller's Insurance Policies, including but not limited to, Seller's products
liability insurance with respect to Seller's products, and Seller shall assure
that such policies provide coverage to Purchaser for products sold by Seller
prior to the Closing Date.
(b) D&O Insurance. Seller shall maintain its existing director and
officer liability insurance, shall maintain the availability of such coverage to
Xxxxxxxxxxx Xxxx for a period of time that is not less than the statute of
limitations for state and federal liability claims, and shall use reasonable
efforts to preserve the existing scope and terms of such coverage during such
period of time; provided, however, Seller's obligation to maintain such coverage
for Xxxxxxxxxxx Xxxx will terminate if and when Seller's director and officer
liability insurance (including any tail coverage and whether pursuant to its
director and officer liability policy in effect as of the date hereof or any
subsequent or replacement policy) for all of its directors and officers lapses
because Seller's Board of Directors has determined that the premiums therefor
are not, in the reasonable opinion of Seller's board of directors, commercially
reasonable. Seller agrees that, effective as of the Closing Date, it will cause
its director and officer liability insurer to, from time to time, timely deliver
directly to Xxxxxxxxxxx Xxxx copies of all notices and other communications
relating to Seller's director and officer liability policy.
11.5. Confidentiality.
(a) Definition of Confidential Information. As used in this
Section 11.5, the term "Confidential Information" includes any and all of the
following information of Seller or Purchaser that has been or may hereafter be
disclosed in any form, whether in writing, orally, electronically or otherwise,
or otherwise made available by observation, inspection or otherwise by either
party (Purchaser on the one hand or Seller on the other hand) or its
Representatives (collectively, a "Disclosing Party") to the other party or its
Representatives (collectively, a "Receiving Party"):
(i) all information that is a trade secret under
applicable trade secret or other law;
(ii) all information concerning product specifications,
data, know-how, formulae, compositions, processes,
designs, sketches, photographs, graphs, drawings,
samples, inventions and ideas, past, current and
planned research and development, current and planned
manufacturing or distribution methods and processes,
customer lists, current and anticipated customer
requirements, price lists, market studies, business
plans, computer hardware, Software and computer
software and database technologies, systems,
structures and architectures;
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(iii) all information concerning the business and affairs
of the Disclosing Party (which includes historical
and current financial statements, financial
projections and budgets, tax returns and accountants'
materials, historical, current and projected sales,
capital spending budgets and plans, business plans,
strategic plans, marketing and advertising plans,
publications, client and customer lists and files,
contracts, the names and backgrounds of key personnel
and personnel training techniques and materials,
however documented), and all information obtained
from review of the Disclosing Party's documents or
property or discussions with the Disclosing Party
regardless of the form of the communication;
provided, however, all such information relating to
Seller's operations after the Closing Date (whether
such information was prepared before or after the
Closing Date) shall be excluded form the definition
of "Confidential Information"; and
(iv) all notes, analyses, compilations, studies, summaries
and other material prepared by the Receiving Party to
the extent containing or based, in whole or in part,
upon any information included in the foregoing.
Any trade secrets of a Disclosing Party shall also be entitled
to all of the protections and benefits under applicable trade secret law and any
other applicable law. If any information that a Disclosing Party deems to be a
trade secret is found by a court of competent jurisdiction not to be a trade
secret for purposes of this Section 11.5, such information shall still be
considered Confidential Information of that Disclosing Party for purposes of
this Section 11.5 to the extent included within the definition. In the case of
trade secrets, each of Purchaser and Seller hereby waives any requirement that
the other party submit proof of the economic value of any trade secret or post a
bond or other security.
(b) Restricted Use of Confidential Information. Each Receiving
Party acknowledges the confidential and proprietary nature of the Confidential
Information of the Disclosing Party and agrees that such Confidential
Information (i) shall be kept confidential by the Receiving Party; (ii) shall
not be used for any reason or purpose other than to evaluate and consummate the
Contemplated Transactions; and (iii) without limiting the foregoing, shall not
be disclosed by the Receiving Party to any Person, except in each case as
otherwise expressly permitted by the terms of this Agreement or with the prior
written consent of an authorized representative of Seller with respect to
Confidential Information of Seller ("Seller Contact") or an authorized
representative of Purchaser with respect to Confidential Information of
Purchaser ("Purchaser Contact"). Each of Purchaser and Seller shall disclose the
Confidential Information of the other party only to its Representatives who
require such material for the purpose of evaluating the transactions
contemplated hereby and are informed by Purchaser or Seller, as the case may be,
of the obligations of this Section 11.5 with respect to such information. Each
of Purchaser and Seller shall (i) enforce the terms of this Section 11.5 as to
its respective Representatives; (v) take such action to the extent necessary to
cause its Representatives to comply with the terms and conditions of this
Section 11.5; and (vi) be responsible and liable for any breach of the
provisions of this Section 11.5 by it or its Representatives.
(c) Unless and until this Agreement is terminated, Seller
shall maintain as confidential any Confidential Information relating to any of
the Acquired Assets or the Assumed Obligations. From and after the Closing Date,
(i) the provisions of Section 11.5(b) above shall not apply to or restrict in
any manner Purchaser's use of any Confidential Information of the Seller
relating to any of the Acquired Assets or the Assumed Obligations; and (ii) the
provisions
18
of Section 11.5(b) shall apply to and restrict Seller's use of any Confidential
Information relating to the Acquired Assets and the Assumed Obligations.
(d) Exceptions. Sections 11.5(b) and (c) do not apply to that
part of the Confidential Information of a Disclosing Party that a Receiving
Party demonstrates (a) was, is or becomes generally available to the public
other than as a result of a breach of this Section 11.5 by the Receiving Party
or its Representatives; (b) was or is developed by the Receiving Party
independently of and without reference to any Confidential Information of the
Disclosing Party; or (c) was, is or becomes available to the Receiving Party on
a nonconfidential basis from a Third Party not bound by a confidentiality
agreement or any legal, fiduciary or other obligation restricting disclosure.
Seller shall not disclose any Confidential Information of Seller relating to any
of the Acquired Assets or the Assumed Obligations in reliance on the exceptions
in clauses (b) or (c) above.
(e) Legal Proceedings. If a Receiving Party becomes compelled
in any action, arbitration, audit, hearing, investigation, litigation or suit
(whether civil, criminal, administrative, judicial or investigative) by any
governmental body, court or administrative agency to make any disclosure that is
prohibited or otherwise constrained by this Section 11.5, that Receiving Party
shall provide the Disclosing Party with prompt notice of such compulsion or
request so that it may seek an appropriate protective order or other appropriate
remedy or waive compliance with the provisions of this Section 11.5. In the
absence of a protective order or other remedy, the Receiving Party may disclose
that portion (and only that portion) of the Confidential Information of the
Disclosing Party that, based upon advice of the Receiving Party's counsel, the
Receiving Party is legally compelled to disclose or that has been requested by
such court or governmental body, provided, however, that the Receiving Party
shall use reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded by any Person to whom any Confidential Information is
so disclosed. The provisions of this Section 11.5(e) do not apply to any
Proceedings between the parties to this Agreement.
(f) Return or Destruction of Confidential Information. If this
Agreement is terminated, each Receiving Party shall (a) destroy all Confidential
Information of the Disclosing Party prepared or generated by the Receiving Party
without retaining a copy of any such material; (b) promptly deliver to the
Disclosing Party all other Confidential Information of the Disclosing Party,
together with all copies thereof, in the possession, custody or control of the
Receiving Party or, alternatively, with the written consent of a Seller Contact
or a Purchaser Contact (whichever represents the Disclosing Party) destroy all
such Confidential Information; and (c) certify all such destruction in writing
to the Disclosing Party, provided, however, that the Receiving Party may retain
a list that contains general descriptions of the information it has returned or
destroyed to facilitate the resolution of any controversies after the Disclosing
Party's Confidential Information is returned.
(g) Attorney-Client Privilege. The Disclosing Party is not
waiving, and will not be deemed to have waived or diminished, any of its
attorney work product protections, attorney-client privileges or similar
protections and privileges as a result of disclosing its Confidential
Information (including Confidential Information related to pending or threatened
litigation) to the Receiving Party, regardless of whether the Disclosing Party
has asserted, or is or may be entitled to assert, such privileges and
protections. The parties (a) share a common legal and commercial interest in all
of the Disclosing Party's Confidential Information that is subject to such
privileges and protections; (b) are or may become joint defendants in
Proceedings to which the Disclosing Party's Confidential Information covered by
such protections and privileges relates; (c) intend that such privileges and
protections remain intact should either party become
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subject to any actual or threatened proceeding to which the Disclosing Party's
Confidential Information covered by such protections and privileges relates; and
(d) intend that after the Closing Date, the Receiving Party shall have the right
to assert such protections and privileges. No Receiving Party shall admit, claim
or contend, in Proceedings involving either party or otherwise, that any
Disclosing Party waived any of its attorney work-product protections,
attorney-client privileges or similar protections and privileges with respect to
any information, documents or other material not disclosed to a Receiving Party
due to the Disclosing Party disclosing its Confidential Information (including
Confidential Information related to pending or threatened litigation) to the
Receiving Party.
11.6. Survival. All representations and warranties of the parties
contained in this Agreement shall survive the Closing for 90 days following the
Closing Date. The covenants and agreements contained in this Agreement shall
survive the execution and delivery hereof and the completion of the transactions
contemplated herein.
SECTION 12. TERMINATION
12.1. Termination Events.
(a) Seller may terminate this Agreement by delivery of notice
of termination to Purchaser if:
(i) at any time prior to the Closing Date, Purchaser
fails or refuses to perform in
any material respect any obligation or covenant to be performed by it pursuant
to this Agreement prior to the Closing Date and the breach has not been cured
within ten Business Days following the receipt of notice by Purchaser of the
breach; or
(ii) at any time prior to the Closing Date, any of
the conditions in Section 8 of this Agreement has not been satisfied as of the
Drop Dead Date or, if satisfaction of such a condition is or becomes impossible
(other than through the failure of such Seller to comply with its obligations
under this Agreement), Seller have not waived such condition on or before Drop
Dead Date.
(b) Purchaser may terminate this Agreement by delivery of
notice of termination to Seller if any time prior to the Closing Date:
(i) Seller does not file the Bankruptcy Case within
20 calendar days after the date Purchaser executes (as reflected in Purchaser's
signature block) and delivers this signed Agreement to Seller; or
(ii) Seller fails to obtain either (i) a confirmed
plan of reorganization approving this Agreement and the transactions
contemplated hereby; or (ii) an order approving the sale contemplated hereby
outside of a plan of reorganization, by the Drop Dead Date; or
(iii) Any of the conditions set forth in Section 7 of
this Agreement has not been satisfied as of the Closing Date or, if satisfaction
of such a condition is or becomes impossible (other than through the failure of
Purchaser to comply with its obligations under this Agreement), Purchaser has
not waived such condition on or before the Drop Dead Date; or
(iv) Seller fails or refuses to perform in any
material respect any obligation or covenant to be performed by it pursuant to
this Agreement prior to the Closing
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Date that has not been cured within ten Business Days following receipt of
notice of the breach; or
(v) It shall become impossible for Seller to make the
representations otherwise required to be made by Seller at Closing.
(c) The parties may terminate this Agreement at any time
prior to the Closing Date by mutual written consent; or
(c) Any party may terminate this Agreement by delivery of
notice of termination to the other party if the Closing has not occurred on or
before the Drop Dead Date, or such later date as the parties may agree upon in
writing.
12.2. Effect of Termination. Each party's right of termination under
Section 12 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination shall not be an
election of remedies. If this Agreement is terminated pursuant to this Section,
all further obligations of the parties under this Agreement shall terminate,
except that the rights and obligations in Sections 13.4 (Expenses), and 13.6
(Governing Law), of this Agreement shall survive.
12.3. Liquidated Damages; Refund of Escrow Amount. Purchaser and Seller
agree that damages to Seller for a breach by Purchaser of this Agreement would
be difficult or impossible to calculate with any certainty. Accordingly, as
liquidated damages, and not as a penalty, in the event Seller terminates this
Agreement because of the breach of the Agreement by Purchaser or because one or
more of the conditions of the Seller's obligations under this Agreement are not
satisfied as a result of the Purchaser's failure to comply with its obligations
under this Agreement, then Seller shall retain the Escrow Amount. If this
Agreement is terminated for any reason other than the breach by Purchaser of any
of the terms and conditions hereof, Seller agrees to cause the Escrow Amount to
be distributed from escrow to Purchaser.
SECTION 13. MISCELLANEOUS
13.1. Severability. Should any part of this Agreement for any reason be
declared invalid, such decision shall not affect the validity of any remaining
portion, which remaining portion shall remain in full force and effect as if
this Agreement had been executed with the invalid portion thereof eliminated and
it is hereby declared the intention of the parties hereto that they would have
executed the remaining portion of this Agreement without including thereon any
such part, parts, or portion which may, for any reason, be hereafter declared
invalid.
13.2. Counterparts; Facsimile. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one Agreement. The exchange of copies of this
Agreement and of signature pages by facsimile transmission shall constitute
effective execution and delivery of this Agreement as to the parties and may be
used in lieu of the original for all purposes. Signatures of the parties
transmitted by facsimile shall be deemed to be their original signatures for all
purposes.
13.3. Headings. Section headings used in this Agreement have no legal
significance and are used solely for convenience of reference.
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13.4. Expenses. Except as otherwise specifically provided herein, each
party shall pay its own expenses, including, without limitation, accountants'
and attorneys' fees incurred in connection with the negotiation and consummation
of the transactions contemplated by this Agreement, whether or not such
transactions are consummated.
13.5. Transfer Taxes; Recording Fees. Any income, sales, transfer, use
or excise taxes payable in connection with these transactions shall be paid by
the party responsible therefor under applicable local law.
13.6. Law Governing. This Agreement shall be deemed to have been
entered into under the laws of the State of Florida, and the rights and
obligations of the parties hereunder shall be governed and determined according
to the laws of said state without giving any effect to conflict of laws.
13.7. Binding Effect and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns; but neither this Agreement nor any of the
rights, benefits or obligations hereunder shall be assigned, by operation of law
or otherwise, by Seller without the prior written consent of Purchaser which may
be withheld in its sole discretion. Nothing in this Agreement, express or
implied, is intended to confer upon any person or entity other than the parties
hereto and to a limited extent, Xxxxxxxxxxx Xxxx, and their respective permitted
successors and assigns, any rights, benefits or obligations hereunder.
13.8. Entire Agreement. This Agreement and the schedules and documents
delivered pursuant hereto constitute the entire contract between the parties
hereto pertaining to the subject matter hereof and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether written or oral (including any letter of intent and any confidentiality
agreement between Seller and Purchaser). No supplement, modification or waiver
of this Agreement shall be binding unless executed in writing by the party or
parties to be bound thereby. No delay in the exercise of any rights by any party
hereunder shall operate as a waiver of any rights of such party.
13.9. Notices. All notices, demands and other communications required
or permitted by this Agreement shall be in writing and shall be deemed to have
been duly given to a party when (a) delivered to the appropriate address by hand
or by nationally recognized overnight courier service (costs prepaid); (b) sent
by facsimile with confirmation of transmission by the transmitting equipment; or
(c) received or rejected by the addressee, if sent by certified mail, return
receipt requested, in each case to the following addresses and marked to the
attention of the person (by name or title) designated below (or to such other
address, facsimile or person as a party may designate by notice to the other
parties):
If to Purchaser: With a copy to:
TeeZee, Inc. Astigarraga Xxxxx Xxxxxxx & Xxxxxxxx
________________ 000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
________________ Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxxxxxx Xxxx, President Attn: Xxxxxxx X. Xxxxxxxx
Facsimile: Facsimile:
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If to Seller: With a copy to:
Health & Nutrition Systems Xxxxxx Xxxxxxxxx
International, Inc. [new name] 000 Xxxx Xxx Xxxx Xxxxxxxxx
[insert address] Suite 1000
Attn: Xxxxx X. Xxxxx, Chief Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Executive Officer Attn: Xxxxxx X. Xxxxxxx
Facsimile: 000-000-0000 Facsimile: 000-000-0000
or to such other address as Seller or Purchaser may designate by notice to the
other.
13.10 Attorneys' Fees. In the event that a suit for the collection of
any damages resulting from, or for the injunction of any action constituting, a
breach of any of the terms or provisions of this Agreement, then the
non-prevailing party shall pay all reasonable costs, fees (including reasonable
attorneys' fees) and expenses of the prevailing party.
13.12 Enforcement of Agreement. Seller acknowledges and agrees that
Purchaser would be irreparably damaged if any of the provisions of this
Agreement are not performed in accordance with their specific terms and that any
breach of this Agreement by Seller could not be adequately compensated in all
cases by monetary damages alone. Accordingly, in addition to any other right or
remedy to which Purchaser may be entitled, at law or in equity, it shall be
entitled to enforce any provision of this Agreement by a decree of specific
performance and to temporary, preliminary and permanent injunctive relief to
prevent breaches or threatened breaches of any of the provisions of this
Agreement, without posting any bond or other undertaking. Notwithstanding the
foregoing, (a) Purchaser shall not be entitled to any remedy hereunder unless
and until the Bankruptcy Court enters an order authorizing the sale of the
Seller's Assets pursuant to the Bankruptcy Auction Procedures set forth in
Exhibit 7.8 (the "Sale Order"), (b) after entry of the Sale Order and before
Closing, Purchaser shall not be entitled to damages (other than the breakup fee
described in Exhibit 7.8) and its remedy hereunder shall be limited to specific
performance, and (c) after Closing, should Purchaser seek damages in lieu of or
in addition to specific performance for the inaccuracy or breach of Seller's
representations or warranties under this Agreement, Purchaser shall make claim
therefor not later than 90 days after the Closing Date. If a claim is not timely
made, all remedies thereafter are barred.
13.13 Waiver; Remedies Cumulative. With the exceptions noted above, the
rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither any failure nor any delay by any party in exercising any
right, power or privilege under this Agreement or any of the documents referred
to in this Agreement will operate as a waiver of such right, power or privilege,
and no single or partial exercise of any such right, power or privilege will
preclude any other or further exercise of such right, power or privilege or the
exercise of any other right, power or privilege. To the maximum extent permitted
by applicable law, (a) no claim or right arising out of this Agreement or any of
the documents referred to in this Agreement can be discharged by one party, in
whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of that party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, all as of the day and year first above written.
PURCHASER:
TeeZee, Inc.
/s/Xxxxxxxxxxx Xxxx
By: Xxxxxxxxxxx Xxxx,
Title: President
Date: 10/15/04
SELLER:
HEALTH & NUTRITION SYSTEMS INTERNATIONAL, INC.
/s/Xxxxx X. Xxxxx
------------------------------
By: Xxxxx X. Xxxxx,
Title: Chief Executive Officer
Date: 10/15/04
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SCHEDULES
The Registrant agrees to furnish supplementally a copy of any omitted schedule
to the Commission upon request.
Schedule 2.1(a) Excluded Assets
Schedule 2.1(c)(1) Limited Assumed Obligations
Schedule 2.1(c)(2) Other Assumed Obligations
Schedule 2.1(d) Excluded Obligations
[To be Completed by Seller]
Schedule 5.3 Required Consents
Schedule 5.5 Litigation
Schedule 5.6 Material Contracts
Schedule 5.7 Balance Sheet
Schedule 5.9 Taxes
Schedule 5.10 Intellectual Property Assets
Schedule 5.11(a) Insurance Policies
Schedule 5.11(b) Insurance Claims
Schedule 5.12 Liens
EXHIBITS
Exhibit 7.8 Bankruptcy Auction Procedures
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Exhibit 7.8 - Bankruptcy Auction Procedures
1. Auction Will Be Subject To Higher And Better Bids By Qualifying Bidders
2. Qualifying Bidders
a. Must make written bid and execute a non-disclosure agreement
b. Not subject to financing or due diligence contingencies
c. Purchaser entitled to copies of any due diligence materials
provided to other potential bidders
d. Substantially similar to Asset Purchase Agreement proposed by
Purchaser
e. Must provide counsel for Purchaser will copy of written bid
f. Bid must be received no later than three Business Days before
auction
g. Must be a higher and better bid (see below) than Purchaser's
bid
h. Must put up good faith deposit equal to the Estimated Expense
Reimbursement (see below) plus the Escrow Amount
i. This deposit is refundable if bid is not accepted
ii. If bid accepted, this deposit is used to pay the
Estimated Expense Reimbursement (see below) and
remaining deposit is used to fund the Escrow Amount.
3. Higher and Better Bids
a. The first overbid must be at least $30,000 more than the
Purchase Price of Purchaser.
b. Except as provided below, higher bids must be for no less than
$10,000 over the previous highest bid.
4. Expense Reimbursement/Breakup Fee: If Purchaser is unsuccessful bidder, it is
entitled to reimbursement of (a) its actually incurred professional fees and
costs, plus (b) $75 per hour for each hour spent by Tisi in connection with
the process; but in no event shall the breakup fee exceed $30,000.
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