EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG SONIC MEDIA, INC. AND
THE STOCKHOLDERS OF GBI, INC.
DATED MARCH 26, 2004
STOCK PURCHASE AGREEMENT
BY AND AMONG
SONIC MEDIA CORP.
THE SHAREHOLDERS OF GLOBAL BOTANICS
INCORPORATED
DATED AS OF MARCH 26, 2004
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of this 26th day of
March, 2004 by and among, Sonic Media Corp., a Nevada corporation ("Buyer"), and
the shareholders of Global Botanics Incoporated, a corporation organized under
the laws of Niue (the "Company") listed on the signature page hereto (each
shareholder individually, a "Seller" and collectively, the "Sellers").
RECITALS
WHEREAS, the Sellers own all of the outstanding capital stock of the
Company; and
WHEREAS, the Buyer desires to acquire all of the outstanding capital stock
of the Company from the Sellers; and
WHEREAS, the Sellers desire to sell all of the outstanding capital stock of
the Company to the Buyer.
NOW THEREFORE, in consideration of the Recitals and of the mutual
covenants, conditions, and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
specified:
1.1 Agreement. "Agreement" shall mean this Stock Purchase Agreement,
together with the Schedules attached hereto, as the same shall be amended from
time to time in accordance with the terms hereof.
1.2 Buyer. "Buyer" shall have the meaning set forth in the introduction to
this Agreement.
1.3 Closing. "Closing" shall mean the conference at which the transactions
contemplated by this Agreement shall be consummated.
1.4 Closing Amount. "Closing Amount" shall mean an amount equal to the
Purchase Price.
1.5 Closing Date. "Closing Date" shall mean a date which is the earlier of
the delivery of audited financial statements for the Company by Sellers and,
forty-five days from the date hereof, or such other date as the Parties may
mutually agree to in writing.
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1.6 Code. "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
1.7 Company. "Company" shall have the meaning set forth in the introduction
to this Agreement.
1.8 Contracts. "Contracts" shall mean those contracts, purchase orders,
leases, agreements, and commitments, whether written or oral, to which the
Company is a party or by which the Company is bound, including but not limited
to those listed and described on SCHEDULE 4.7 hereto.
1.9 Effective Time. "Effective Time" shall mean 12:01 a.m., local time, on
the Closing Date.
1.10 Employee Benefit Plans. "Employee Benefit Plans" shall mean any
pension plan, profit sharing plan, bonus plan, incentive compensation plan,
stock purchase plan, stock option plan, stock appreciation plan, retirement
plan, fringe benefit program, health, dental, life or disability plan, accident
insurance plan, severance plan, sick leave plan, vacation plan, death benefit
plan, employee welfare plan or any other plan, program or policy, including
without limitation any "employee benefit plan" as defined in Section 3(3) of
ERISA, to provide income or benefits to active or former employees or directors
of the Company, and that is sponsored by the Company.
1.11 ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
1.12 Financial Information. "Financial Information" shall mean: (a) the
unaudited consolidated interim financial statements for the [THREE] month period
ended; (b) the books and records of account of the Company; and (c) all other
financial information relating to the financial condition of the Company
delivered or to be delivered by the Sellers to Buyer.
1.13 Fixed Assets. "Fixed Assets" shall mean the machinery, equipment,
furniture, fixtures, vehicles and, except for the Inventory, all other tangible
property owned by the Company or used by the Company, including but not limited
to those assets which are listed and set forth on SCHEDULE 1.13 hereto.
1.14 GAAP. "GAAP" shall mean generally accepted U.S. accounting principles
as applied to the Company's financial statements included in the Financial
Information, including the accounting methods, procedures, practices and
policies used by the Company in preparing such financial statements.
1.15 Indemnified Party. "Indemnified Party" shall mean a Party seeking
indemnification under Section 6.5 hereof.
1.16 Intangible Assets. "Intangible Assets" shall mean all of the
intangible assets owned or used by the Company, including but not limited to
trade secrets, know-how, operating methods and procedures, proprietary
information, processes, technical knowledge, formulae, advertising formats,
inventions, logos, software, software licenses, trademarks, trade designations,
service marks, trade names, patents, copyrights, applications for any of the
foregoing, goodwill, advertising and promotional rights, franchise rights,
customer lists, telephone number(s), domain names, websites and related rights.
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1.17 Inventory. "Inventory" shall mean all of the Company's inventories of
raw materials, supplies, work in process and merchantable finished goods.
1.18 Knowledge. "Knowledge" shall mean: (i) with respect to Sellers, the
actual knowledge of the directors; and (ii) with respect to Buyer, the actual
knowledge of Buyer personnel (other than attorneys) who conducted due diligence,
in each case without imposing any obligation on such persons to conduct any
investigation.
1.19 Law. "Law" shall mean any federal, state, foreign, local or other law,
statute, rule, regulation, or governmental requirement or restriction of any
kind, and the rules, regulations, and orders promulgated thereunder and any
final orders, decrees, consents, or judgments of any regulatory agency, court or
other Person.
1.20 Lease. "Lease" shall mean the lease for the Premises between the
Company and the owner of the Premises.
1.21 Lien. "Lien" shall mean, with respect to any asset: (a) any mortgage,
pledge, lien, charge, claim, restriction, easement, covenant, lease,
encroachment, title defect, imposition, security interest or other encumbrance
of any kind; and (b) the interest of a vendor or lessor under any conditional
sale agreement, financing lease or other title retention agreement relating to
such asset.
1.22 Losses. "Losses" shall mean any losses, damages, costs, expenses,
liabilities, obligations, actions, demands, judgments, interest or claims of any
kind, including reasonable attorney's fees, costs of investigation and
remediation, as limited by Article VI. "Losses" shall not include any punitive
damages, consequential damages, incidental damages or other special damages
(except to the extent that such punitive damages, consequential damages,
incidental damages or other special damages are payable to third parties), each
of which the Parties hereto expressly waive and agree not to seek.
1.23 Material Adverse Effect. "Material Adverse Effect" means an effect,
which results in a material adverse effect on the results of operations, assets
or condition (financial or otherwise) of the Company Group, taken as a whole.
1.24 Party. "Party" shall mean any Seller or Buyer and "Parties" shall
means Sellers and Buyer collectively.
1.25 Permits. "Permits" shall mean permits, licenses, approvals,
authorizations, consents and certifications, in each case from governmental
authorities.
1.26 Person. "Person" shall mean and include an individual, partnership,
corporation, limited liability company, association, trust, unincorporated
organization or any other entity or organization, including a government or any
department, agency or political subdivision thereof or any other legal entity.
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1.27 Premises. "Premises" shall mean the land, building, fixtures and
improvements leased by the Company that are located at Xx. 0 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxx, Niue.
1.28 Product Liability Matters. "Product Liability Matters" shall mean any
and all product recalls, and liabilities or obligations or damages of any kind
for death, disease, or injury to Persons, businesses, or property relating to
products produced, distributed, sold, or shipped by the Company prior to the
Closing Date.
1.29 Product Warranty Claims. "Product Warranty Claims" shall mean all
product warranty claims (other than Product Liability Matters) for any products
produced, distributed, sold, or shipped by the Company prior to the Closing
Date, other than products returned in the ordinary course of business.
1.30 Pro-Rata Percentage. "Pro-Rata Percentage" shall mean, with respect to
each Seller, a percentage equal to such Seller's pro-rata ownership interest in
the Company as set forth in SCHEDULE 4.1(D) attached hereto.
1.31 Purchase Price. "Purchase Price" shall mean an amount equal to three
million five hundred shares of common stock of Buyer.
1.33 Purchased Shares. "Purchased Shares" shall mean the issued and
outstanding shares of the capital stock of the Company.
1.34 Records. "Records" shall mean all books, documents and records owned
or used by the Company, including but not limited to personnel, medical and
accounting records, tax records, minute and stock record books, correspondence,
governmentally required records, manuals, engineering data, designs, drawings,
blueprints, plans, specifications, lists, customer lists, computer media,
software and software documentation, sales literature, catalogues, promotional
items, advertising materials and other written materials.
1.35 Securities Act Knowledge. "Securities Act Knowledge" shall mean that
level of knowledge and intent sufficient to constitute "scienter" under Rule
10b-5 promulgated under the Securities Exchange Act of 1934.
1.36 Seller or Sellers. "Seller" or "Sellers" shall have the meaning set
forth in the introduction to this Agreement.
1.37 Taxes. "Tax" or "Taxes" shall mean all taxes, levies, charges or fees
including, without limitation, income, profits, corporation, advance
corporation, gross receipts, transfer, excise, property, sales, use,
registration, alternative or add-on minimum, estimated, value-added, severance,
stamp, occupation, premium, windfall profits, environmental, custom duties,
capital stock, license, payroll, pay-as-you-earn, employment, withholding,
social security, FICA, workers' compensation, unemployment, disability, Pension
Benefit Guaranty Corporation premiums, real property, personal property, ad
valorem, single business and franchise or other governmental taxes or charges,
imposed by the United States or any state, territory, county, local, provincial,
foreign government, or other taxing authority, however denominated, whether
disputed or not, and such term shall include any interest, penalties or
additions to tax attributable to such taxes, whether disputed or not.
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1.38 Tax Return. "Tax Return" shall mean any report, return, declaration,
estimate, claim for refund, information statement or statement relating to
Taxes, including any form, schedule, or attachment thereto, required to be filed
or supplied to a taxing authority in connection with Taxes, and including any
amendment thereof.
1.39 Third Party Claim. "Third Party Claim" shall mean an action, claim,
proceeding, notice or demand instituted or made by a Person not a party to this
Agreement (including any governmental entity), which, if successful, would give
rise to Losses, which are indemnifiable under this Agreement.
1.40 Transaction Documents. "Transaction Documents" shall mean this
Agreement and the documents and agreements the forms of which are attached
hereto as Exhibits.
ARTICLE II
PURCHASE AND SALE; OTHER AGREEMENTS
2.1 Purchase and Sale. Upon all of the terms and subject to all of the
conditions of this Agreement (including without limitation the payments by Buyer
pursuant to Sections 2.2), each Seller hereby severally sells, assigns, conveys,
and delivers to Buyer, and Buyer hereby purchases and accepts from each Seller,
the Purchased Shares owned by such Seller. Said purchase and sale shall be
deemed to be effective as of the Effective Time.
2.2 Payment of Purchase Price. Buyer shall pay the Purchase Price, all to
be distributed to the Sellers according to their Pro-Rata Percentage of the
Company, three million five hundred thousand (3,500,000) restricted Rule 144
shares of common stock of Buyer. (the "Shares").
2.3 Closing. The Closing is taking place no later than forty-five (45) days
from the execution and delivery of this Agreement.
(a) Sellers' Closing Deliveries. At Closing, the Sellers are
delivering to the Buyer the following documents, each properly executed and
dated as of the Closing Date:
(i) stock certificates representing all of the
Purchased Shares duly endorsed and in proper form for transfer to Buyer or
accompanied by a duly executed assignment separate from certificate;
(ii) all corporate minute books, stock transfer
books, corporate seals, books of account, contracts, Tax Returns and other
Records in the Company's possession;
(iii) a copy of the Articles of Incorporation and
Bylaws of the Company certified by the Secretary or an Assistant Secretary of
the Company; and,
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(iv) such permissions, approvals, determinations,
consents and waivers, if any, as may be required by Law, regulatory authorities,
the Contracts or the Permits, in order to consummate the transactions
contemplated by this Agreement
(b) Buyer's Closing Deliveries:
(i) At Closing, the Buyer is delivering to the Sellers:
(A) the Shares; and,
(B) resolutions of the Buyer's Board of Directors
certified by a Secretary or Assistant Secretary of the Buyer approving the
transaction;
2.4 Stock Option. Sellers hereby grant to Buyer an option to purchase up to
three million (3,000,000) of the Shares (the "Option Shares") at the following
price: (a) from a period of time commencing with the date of this Agreement and
ending 365 days thereafter (the "Anniversary Date"), Buyer may purchase any
number of the Shares up to 3,000,000 shares at the purchase price of $1.00 per
share; (b) from a period of time commencing with the Anniversary Date and ending
on a date which is one hundred eighty days (180) thereafter (the "18 Month
Date"), Buyer may purchase any number of the Shares up to 3,000,000 shares less
the amount which was purchased during the preceding period at the purchase price
of $1.50 per share; and, (c) from a period of time commencing with the 18 Month
Date and ending on a date which is one hundred eighty days (180) thereafter (the
"Second Anniversary"), Buyer may purchase any number of the Shares up to
3,000,000 shares less the amount which was purchased during the two preceding
periods at the purchase price of $2.00 per Share. The option may be exercised in
tranches of a minimum of 100,000 Shares. Buyer and Sellers acknowledge that
should Sellers be indebted to Buyer pursuant to Article VI hereof, Buyer may use
the indebtedness of Sellers as a dollar for dollar set-off of the option price.
2.5 Excluded Liabilities. Sellers and Buyer agree that they are expressly
excluding from transfer hereby the liability of the Company to Ethno Tech which
is described in SCHEDULE 6.2 hereto. Sellers have agreed to assume this
liability and to indemnify and defend the Company and Buyer against any and all
claims arising out of this liability pursuant to Article VI. Buyer and Sellers
agree that no other assets or liabilities are been excluded from transfer
according to this Agreement.
2.6 Tax Matters. The following provisions shall govern the allocation of
responsibility for certain Tax matters and the payment of Taxes following the
Effective Time.
(a) Tax Periods Ending on or Before the Closing Date.
(ii) Except as set forth in subsection (ii) below,
Buyer shall prepare or cause to be prepared and file or cause to be filed all
Tax Returns for the Company for all periods ending on or prior to the Closing
Date which are filed after the Closing Date in a manner consistent with the Tax
Returns previously filed in the relevant jurisdiction (to the extent such is
consistent with the current applicable Laws in such jurisdiction). The Sellers
shall reimburse Buyer for Taxes of Company with respect to such periods within
three (3) days after payment by the Buyer or the Company of such Taxes to the
extent such Taxes are not reflected in the reserve for Taxes (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) shown on the face of the Closing Balance Sheet.
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(iii) The Sellers shall pay all federal, state, and
local income or franchise Taxes owed by the Company accruing on or before the
Closing Date except to the extent reserved for on the Closing Balance Sheet. The
Sellers shall cause to be prepared and timely and properly filed on behalf of
the Sellers and Company all Tax Returns with respect to federal, California and
other state income or franchise Taxes accruing on or before the Closing Date.
The Sellers shall prepare such returns and filings at their expense. No position
shall be taken on such Tax Returns that would materially adversely affect Buyer
or the Company after the Closing Date without the prior written consent of
Buyer, except for positions, which is consistent with past practice.
(iv) All Tax Returns shall be determined by closing
Company's books and records as of and including the date immediately before the
Closing Date or, if the allocation of an item of income, loss, deduction or
credit cannot be definitely allocated to an ascertainable date, such item shall
be pro rated on a daily basis.
(b) Tax Periods Beginning Before and Ending After the Closing
Date. The Buyer shall prepare or cause to be prepared and file or cause to be
filed any Tax Returns of Company for Tax periods, which begin before the Closing
Date, and end after the Closing Date. The Buyer shall deliver any such Tax
Return prepared by the Buyer to the Sellers' Representative for the Sellers'
Representative's review and approval at least thirty (30) days before such Tax
Return is due. The Sellers shall pay to Buyer within three (3) days after the
date on which Taxes are paid with respect to such periods an amount equal to the
portion of such Taxes which relates to the portion of such Taxable period ending
on the Closing Date to the extent such Taxes are not reflected in the reserve
for Taxes (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) shown on the face of the Closing
Balance Sheet. Should Seller fail to pay its pro-rata portion of the tax due,
such amount due may be deducted from any and all amounts due to Seller under
this Agreement. For purposes of this Section, in the case of any Taxes that are
imposed on a periodic basis and are payable for a Tax period that includes (but
does not end on) the Closing Date, the portion of such Tax which relates to the
portion of such Tax period ending on the Closing Date shall (i) in the case of
any Taxes other than Taxes based upon or related to income or receipts, be
deemed to be the amount of such Tax for the entire Tax period multiplied by a
fraction the numerator of which is the number of days in the Tax period ending
on and including the Closing Date and the denominator of which is the number of
days in the entire Tax period, and (ii) in the case of any Tax based upon or
related to income or receipts be deemed equal to the amount which would be
payable if the relevant Tax period ended on the Closing Date. Any credits
relating to a Tax period that begins before and ends after the Closing Date
shall be taken into account as though the relevant Tax period ended on the
Closing Date. All determinations necessary to give effect to the foregoing
allocations shall be made in a manner consistent with prior practice of the
Company.
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(c) Cooperation on Tax Matters.
(i) Sellers, Company and Buyer shall reasonably
cooperate, and shall cause their respective Affiliates, agents, auditors, and
representatives to cooperate, in preparing and filing all Tax Returns, and in
resolving all disputes and audits, appeals, hearings, litigation or other
proceedings with respect to all taxable periods relating to Taxes. Such
cooperation shall include the retention and (upon the other Party's request) the
provision of records and information which are reasonably relevant to any such
filing, audit, appeal, hearing, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Sellers and
Buyer agree (A) to retain all books and records with respect to Tax matters
pertinent to Company relating to any taxable period beginning before the Closing
Date until the expiration of the statute of limitations (and, to the extent
notified by the other Party, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with any
taxing authority and (B) to give the other Party reasonable written notice prior
to transferring, destroying or discarding any such books and records and, if the
other Party so requests, Sellers or Buyer, as the case may be, shall allow the
other Party to, if transferred, make copies of such books and records, or, if
destroyed or discarded, to take possession of such books and records.
(ii) Buyer and Sellers further agree, upon request, to
use their best efforts to obtain any certificate or other document from any
governmental authority or any other person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(d) Transfer Taxes. Except as otherwise set forth in this
Agreement to the contrary, all sales, use, and transfer Taxes incurred in
connection with the transactions contemplated by this Agreement shall be paid by
the Sellers, and Sellers shall, at their own expense, accurately file or cause
to be filed all necessary Tax Returns and other documentation with respect to
such Taxes and timely pay all such Taxes. If required by applicable law, Buyer
and the Company will join in the execution of any such Tax Returns or such other
documentation.
ARTICLE III
INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller individually represents and warrants to Buyer that:
3.1 Power. Such Seller has full power, right and authority to enter into,
execute and deliver this Agreement and the documents and instruments to be
executed and delivered by such Seller pursuant hereto and to carry out the
transactions contemplated hereby.
3.2 Purchased Shares. Such Seller owns of record that number of the
Purchased Shares set forth on SCHEDULE 4.1(D) attached hereto. Such Seller has
full power, right and authority to transfer the Purchased Shares owned by such
Seller to Buyer. Such Seller owns and is conveying to Buyer the Purchased Shares
owned by such Seller free and clear of all Liens and upon delivery of a
certificate(s) for the Purchased Shares owned by such Seller, Buyer will acquire
good and marketable title to the Purchased Shares free and clear of all Liens
derived through such Seller.
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3.3 Litigation. There is no litigation, arbitration, action, suit,
proceeding or investigation served upon or, to such Seller's knowledge,
threatened against such Seller relating to the purchase and sale of the
Purchased Shares owned by such Seller.
3.4 Enforceability. This Agreement and the documents and interests required
to be executed and delivered by such Seller pursuant hereto have been duly and
validly executed by such Seller and constitute valid and binding agreements of
such Seller enforceable against such Seller in accordance with their respective
terms.
3.5 No Violation. The execution, delivery and performance of this Agreement
by such Seller and all of the documents required hereby by such Seller do not
violate or conflict with any contract or agreement binding on such Seller, or to
such Sellers' actual knowledge, any Law, judgment, order or decree.
3.6 No Acquisitions. Except for this Agreement, such Seller is not party to
or bound by any agreement, undertaking or commitment with respect to a purchase,
sale, share exchange or tender offer for Purchased Shares.
ARTICLE IV
JOINT REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers, jointly and severally, represent and warrant to Buyer that,
except as otherwise set forth in the disclosure schedules attached hereto:
4.1 Organization; Business.
(a) The Company is a corporation duly and validly organized and
existing and in good standing under the Laws of Niue and is duly qualified to
conduct business as a foreign corporation in each jurisdiction where such
qualification is required, except where the lack of such qualification would not
have a Material Adverse Effect.
(b) The Company has full corporate power and authority necessary
to carry on its business as it is now being conducted and to own, lease, and
operate its assets and properties.
(c) Except as set forth on SCHEDULE 4.1(C), the Company does not
own or control, directly or indirectly, any interest (equity or otherwise),
directly or indirectly, in any other Person or business other than the Company
Group.
(d) The Company's authorized capital stock consists of 50,000
shares of common stock, par value U.S. $1.00 each, of which 50,000 are issued
and outstanding, all of which are owned by the Sellers in accordance with
SCHEDULE 4.1(d) and none of which are held
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as treasury shares. Except as set forth on SCHEDULE 4.1(D), no shares of the
Company's capital stock are issued and outstanding. All of the issued and
outstanding shares of Purchased Shares are duly authorized and validly issued,
fully paid and nonassessable, and to Sellers' Knowledge, were issued in
compliance with all Laws. Except as set forth on SCHEDULE 4.1(D), the Company
has not issued and has no outstanding commitment providing for the issuance of
any new shares (with or without voting rights), any securities convertible into
shares of capital stock or any other securities. No shares of capital stock of,
or other ownership interest in, the Company are reserved for issuance. Except as
set forth on SCHEDULE 4.1(D), there are no outstanding warrants, options,
contracts, calls, puts, rights, commitments, subscriptions, pledges, demands or
agreements of any character or nature whatsoever relating to the Company's
capital stock. To Sellers' Knowledge, all prior redemptions of the capital stock
of the Company have been in material compliance with all applicable Laws and
other applicable agreements and governing documents.
(e) True, correct and complete copies of the Certificate of
Incorporation and Memorandum and Articles of Association have been delivered to
Buyer.
(f) The Company's corporate minute books, complete and correct
copies of which have been delivered to Buyer, contain complete and accurate
records of the material actions taken by the shareholders and Board of Directors
of the Company. The share transfer books of the Company are correct, complete
and current.
(g) The present officers and directors of the Company are set
forth on SCHEDULE 4.1(G) attached hereto.
4.2 No Violation or Conflict. The execution, delivery, and performance by
Sellers of the Transaction Documents to which they are a party:
(a) do not and will not conflict with or violate any Law,
judgment, order, decree, the Articles of Incorporation or Bylaws of the Company
or any Contract or give rise to a right of termination or acceleration of an
obligation thereunder, except (i) as set forth in SCHEDULE 4.2(A) or (ii) to the
extent that such conflict, violation, or right of termination or acceleration
would not have a Material Adverse Effect;
(b) except as set forth in SCHEDULE 4.2(B) will not result in the
creation of any Lien of any kind or nature against or with respect to the
Purchased Shares or the Company's assets or properties; and
(c) do not require any permissions, approvals, waivers or
consents of third Person, or any declarations, filing or registration with any
court, governmental body or agency or other public or private body, entity, or
Person except where the failure to give any declarations, filing or registration
or to obtain any permissions, approvals, waivers or consents would not have a
Material Adverse Effect.
4.3 Assets.
(a) The Company owns good and marketable title to all of its
material assets and properties (excluding leased assets and properties), free
and clear of any and all Liens (other than Liens which are being released
concurrently with the execution of this Agreement, Liens for current Taxes not
yet due and payable, and Liens incurred in the ordinary course of business).
Except as disclosed in SCHEDULE 4.3, the Company or a member of the Company
Group is in possession or control of all of the Company's material assets and
properties, other than those assets in transit to or from any member of the
Company Group. Except as disclosed in SCHEDULE 4.3, none of the material assets
or properties owned or used by the Company is leased, rented, licensed, or
otherwise not owned by the Company or a member of the Company Group.
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(b) The material Fixed Assets and other material tangible
properties and assets necessary for the operation of the Company's business as
it is currently conducted are, taken as a whole, in usable condition, normal
wear and tear excepted. No notice of any violation of any building, zoning, or
other Law relating to such assets or their use is either within Sellers'
Knowledge or has been received by the Company or any Seller.
(c) The quantity of Inventory is adequate for, but does not
exceed levels appropriate to, the customary operations of the Company's
business.
(d) All of the tangible assets and properties of the Company are
either (i) physically located at the Premises, at sites leased by the Company
(ii) at warehouses with which the Company has storage agreements, (iii)
physically located in the possession or control of employees or agents of the
Company, or (iv) are in transit to or from one of the foregoing locations.
4.4 Financial Information.
(a) Complete and accurate copies of the financial statements
included in the Financial Information are attached as SCHEDULE 4.4(A). Such
financial statements are accurate and complete in all material respects.
(b) To the Knowledge of Sellers, the Company is not subject to
any debt, liability or obligation of any nature, whether absolute, accrued,
contingent or otherwise, and whether due or to become due, and to the extent (i)
set forth in the financial statements that are part of the Financial
Information, (ii) set forth on SCHEDULE 4.4(A), or (iii) incurred in or as a
result of the ordinary course of business since inception, and which are
consistent in amount and character with past practice and experience and are not
material in amount or effect,. All reserves and allowances included in the
Company's December 31, 2003 balance sheet are stated in accordance with GAAP.
Sellers have agreed to assume the obligations of the Company to Ethno Tech as
outlined in SCHEDULE 6.2 hereto, such obligations shall be excluded from the
obligations and liabilities being transferred to Buyer.
(c) With the exception of the deposit and collection of checks in
the ordinary course of business, the Company has not guaranteed or become a
surety and is not otherwise contingently liable for the obligation of any other
Person.
4.5 Taxes.
(a) The Company has duly and timely filed all Tax Returns of any
kind that were required to be filed. All such Tax Returns and reports are true,
complete and correct. The Company has paid or made adequate provision for the
payment of all Taxes owed by it. No Tax deficiency has been proposed, threatened
or assessed against the Company, and to Sellers' Knowledge, no grounds exist and
there is no basis in fact for the assessment of any additional Tax. The reserves
for Taxes to be reflected in the Closing Balance Sheet shall be adequate to
cover any and all Taxes which may be assessed with respect to its properties or
business up to and including the Effective Time and all prior periods. The
Company has not given or been requested to give waivers of any statutes of
limitations relating to the payment of Taxes for any taxable period. No Tax
Returns of the Company have been audited and no claim by any Tax authority for
additional Taxes are currently pending.
12
(b) The Company is not bound by and does not have any obligation
under or potential liability with respect to any Tax allocation, Tax sharing or
Tax indemnification agreement or similar contract or arrangement. The Company
does not have liability for Taxes of any other Person under the Code or any
provisions of state, local or foreign law, as a transferee or successor, by
contract or otherwise.
(c) Since incorporation, no claim has been asserted by a
jurisdiction in which the Company does not file Tax Returns that the Company is
or may be subject to Taxes assessed by such jurisdiction.
(d) The Company has duly withheld and paid all Taxes which it is
required to withhold and pay relating to amounts heretofore paid or owing to any
employee, independent contractor, creditor, Seller or any other third party.
(e) The Company has not been a member of an affiliated group
(within the meaning of Section 1504(a) of the Code) filing a consolidated
federal income Tax Return.
(f) Except as set forth in SCHEDULE 4.6, the Company has not
received from the Internal Revenue Service or any other taxing authority any
notice of underpayment of Taxes, assessment of additional Taxes, or other
deficiency which has not been paid or any objection to any Tax Return filed by
Company.
(g) There are no liens for Taxes (other than current Taxes not
yet due and payable) upon the assets of the Company.
(h) The Company is not a party to or bound by any contract,
agreement, plan or arrangement covering any employee or former employee nor is
there any agreement (including this Agreement) that the Company is a party to
that under any circumstances could obligate the Company, to make payments to an
employee or former employee that, individually or in the aggregate, could give
rise to any payment (nor have any payments been made) that would not be
deductible pursuant to Sections 280G or 162 of the Code.
(i) The Company has not applied for any Tax ruling, entered into
any closing agreement with a taxing authority, filed an election under Code
Section 338(g) or Code Section 338(h)(10) (nor has a deemed election under Code
Section 338(e) occurred), filed any consent under Code Section 341(f) or agreed
to have Code Section 341(f)(2) apply to any disposition of a subsection (f)
asset (as defined in Code Section 341(f)(4)) owned by the Company.
13
(j) The Company has not been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii) and Buyer is not
required to withhold Tax on the purchase of the Purchased Shares by reason of
Code Section 1445.
(k) The Company has delivered to the Buyer true and correct
copies of all requested federal and state income, franchise, and other Tax
Returns with respect to the Company together with true and correct copies of all
requested accountants' work papers relating to the preparation thereof.
(l) The assets of the Company are not treated as "tax-exempt use
property" within the meaning of Code Section 168(h) nor secure any debt the
interest of which is exempt from Tax under Section 103 of the Code. The Company
is not a party to any safe harbor lease within the meaning of Section 168(f)(8)
of the Internal Revenue Code of 1954, as in effect prior to amendment by the Tax
Equity and Fiscal Responsibility Act of 1982. The Company has not been the
"distributing corporation" (within the meaning of Section 355(c)(2) of the Code)
with respect to a transaction described in Section 355 of the Code within the
3-year period ending as of the date of this Agreement. The Company has not
participated in an international boycott as defined in Section 999 of the Code.
The Company has not agreed, and is not required to make, any adjustment under
Code Section 263A, 481(a) or 482 (or similar provision of any Tax law) by reason
of a change in accounting method or otherwise. The Company has no permanent
establishment in any foreign country, as defined in any applicable Tax treaty or
convention between the United States of America and such foreign country. The
Company is in compliance with the terms and conditions of any applicable Tax
exemptions, Tax agreements or Tax orders of any government to which it may be
subject or which it may have claimed, and the transactions contemplated by the
Transaction Documents will not have any adverse effect on such compliance. Since
incorporation, the Company has not received a written tax opinion with respect
to any transaction, nor has the Company received a written tax opinion with
respect to any transaction relating to the Company other than a transaction in
the ordinary course of business. The Company is not the direct or indirect
beneficiary of a guarantee of Tax benefits or any other arrangement that has the
same economic effect with respect to any transaction or Tax opinion relating to
the Company. The Company is not a party to an understanding or arrangement
described in Section 6111(d) or Section 6662(d)(2)(C)(iii) of the Code. The
Company is not a party to a lease agreement involving a defeasance of rent,
interest or principal.
4.6 Absence of Certain Changes. Except as disclosed in SCHEDULE 4.6, the
Company has operated its business only in the ordinary course and consistent
with past practice, and there has not been:
(a) To Sellers' Knowledge, any change in the Company's condition
(financial or otherwise), assets, liabilities, business, earnings, or prospects
that would have a Material Adverse Effect;
(b) Any damage, destruction, or loss (whether or not covered by
insurance) affecting the Company's properties, assets, business, or prospects
that would have a Material Adverse Effect, or to Sellers' Knowledge, any threat
to take by condemnation or eminent domain any real property owned or leased by
the Company;
14
(c) Any executory purchase commitment which is materially in
excess of normal business requirements or other than for normal operating
inventories;
(d) The declaration or payment of any dividend or distribution on
any of the Company's capital stock, nor has the Company made, directly or
indirectly, any payment or other distribution of assets of any nature whatsoever
to the Sellers or affiliates thereof except for regular salary payment for
services rendered and reimbursement for ordinary and necessary business
expenses;
(e) Any salary or bonus paid to any shareholder, director and/or
employee of more than $100,000, or any increase (or promised increase) in the
level or rate of salaries or compensation of any employees in excess of five
percent (5%);
(f) Any liability incurred or assumed, or any contract,
agreement, arrangement, lease (as lessor or lessee), license or other commitment
entered into or assumed, whether written or oral, involving more than $50,000 in
each instance, except in the ordinary course of business;
(g) Any loan or advance to third parties other than in the
ordinary course of business;
(h) Any payment of, or commitment to pay, any severance or
termination pay to any officer, director, consultant, agent, employee or
shareholder;
(i) Any change in accounting methods or practices or any change
in depreciation or amortization policies or rates;
(j) Any purchase, sale, abandonment or other disposition of
assets or properties in anticipation of this Agreement, or any purchase, lease,
sale, abandonment or other disposition of assets, except in the ordinary course
of business;
(k) Any acquisition of all or any substantial part of the stock
or the business or operating assets of any other Person;
(l) Any waiver or release of any rights, except for rights of
insubstantial value;
(m) Any cancellation or compromise of any debts owed to the
Company or known claims against others exceeding $10,000 or any payment of any
debts owed by the Company, other than in the ordinary course of business;
(n) Any sale, transfer, grant or expiration of any material rights
under any leases, licenses, agreements, or Intangible Assets, other than in the
ordinary course of business; and/or
(o) A redemption, purchase or acquisition of any shares of the
Company's capital stock or any issuance of any shares of the Company's capital
stock or securities convertible into its capital stock, other than shares issued
to the Exercising Optionholders.
15
4.7 Contracts and Commitments. SCHEDULE 4.7 hereto sets forth a complete
and accurate list of the following contracts and commitments to which the
Company is a party:
(a) All leases of real and/or personal property.
(b) All contracts or commitments (other than those for the sale
of its products or the purchase of Inventory) involving a consideration of or
expenditure in excess of $50,000, or involving performance over a period of more
than thirty (30) days.
(c) All purchase commitments: (i) for Inventory in excess of
three (3) months' normal usage; (ii) in excess of the normal, ordinary and usual
requirements; or (iii) at any price materially in excess of the current market
price in effect at the time of making the commitment.
(d) All contracts or commitments for the sale of products which
aggregate in excess of $50,000 to any one customer (or group of affiliated
customers), and any contracts or commitments for the sale of products involving
performance over a period of more than twelve (12) months.
(e) All powers of attorney given to any Person.
(f) All labor union or collective bargaining agreements.
(g) All management, consulting, or employment agreements or other
agreements providing for employment or the rendering of services that provide
for: (i) any commission, bonus, profit sharing, incentive, retirement,
consulting or additional compensation or (ii) contain severance or termination
pay liabilities or obligations.
(h) All agreements for the storage, transportation, treatment or
disposal of any hazardous waste or hazardous byproduct.
(i) All agreements restricting the right of the Company to
compete in any business or in any geographical area or any agreement by any
other Person not to compete with the Company in any business or in any
geographical area, other than provisions in agreements with employees entered
into in the ordinary course of business.
(j) All agreements restricting the right of the Company to use or
disclose any information in its possession, other than nondisclosure or
confidentiality agreements entered into with customers and suppliers in the
ordinary course of business.
(k) All partnership, joint venture, limited liability company or
similar agreements;
(l) All guaranties of any obligations of another Person or
similar agreement, and all loan agreements, promissory notes, industrial revenue
bonds, letter of credit or other evidence of indebtedness (short or long-term),
whether as a signatory, guarantor or otherwise;
(m) Any Contract that would terminate as a result of this
Agreement; and
16
(n) Any contract between the Company and a Seller, a director,
officer, employee, agent or affiliate of the Company or a Seller, other than
employment or agency agreements entered into in the ordinary course of business.
The Company has delivered to Buyer a true and complete copy of each Contract
listed on SCHEDULE 4.7.
4.8 Performance of Contracts; Business Relationships.
(a) To the Knowledge of Sellers (i) the Company and each other
party to each material Contract to which the Company is a party are not in
default under any material Contracts, and (ii) all of such material Contracts
are in full force and effect and are valid and enforceable; and
(b) Except as set forth in SCHEDULE 4.8(B) during the twelve (12)
month period preceding the date hereof, no material Contracts of the Company
were terminated, expired, or not renewed except in the ordinary course of
business. During the twelve (12) month period preceding the date hereof, no
material supplier or customer of the Company ceased doing business with the
Company.
4.9 Bank Accounts. SCHEDULE 4.9 hereto describes all checking accounts,
savings accounts, custodial accounts, certificates of deposit, safe deposit
boxes, money market accounts, or other similar accounts maintained by the
Company. The signatories identified on SCHEDULE 4.9 constitute the only
signatories with respect to said accounts.
(a) Accounts. All of the accounts receivable, which comprise the
Accounts, arose from arm's length transactions by the Company in the ordinary
course of business. To Seller's Knowledge, the Company has not received any
written notice that a portion of any such Accounts is subject to counterclaim or
set-off or is in dispute.
(b) To Sellers' Knowledge, except as reflected in the financial
statements included in the Financial Information, the Company has not received
any written notice that an account receivable previously collected by the
Company is or will be subject to any claim of any third party, including
preference claims under state and federal bankruptcy laws.
4.10 Intangible Assets.
(a) SCHEDULE 4.10 attached hereto sets forth the patents, patent
applications, trade names, trademarks, trade designations, logos, service marks,
trademark and service xxxx applications, copyrights, and copyright applications
owned by the Company, used by the Company, or owned by an employee of the
Company and related to the Company's business. The Company does not claim any
right, title or interest in any Intangible Assets other than those set forth on
SCHEDULE 4.10.
(b) To the Knowledge of Sellers, the Company possesses sufficient
right, title, and interest in and to each of the Intangible Assets to conduct
the Company's business as it has been conducted. To the Knowledge of Sellers,
the Company owns or possesses adequate licenses or other rights to use the other
patents, trademarks, service marks, trade names,
17
copyrights or Intangible Assets it uses. To the Knowledge of Sellers, the
Company does not infringe on any intellectual property rights of others. There
are no claims, demands or proceedings served on the Company or, to the Knowledge
of Sellers, threatened, by any third party pertaining to or challenging the
Company's rights to any of the Intangible Assets. To the Knowledge of Sellers,
none of the Intangible Assets set forth on SCHEDULE 4.10 is invalid or
unenforceable and no Person has infringed on the Intangible Assets.
(c) Except as set forth on SCHEDULES 4.7 or 4.10 hereto, no
royalty, commission, or payment of any kind is owed by the Company for the use
of any of the products sold by the Company.
4.11 Violations of Law.
(a) To the Knowledge of Sellers, the Company has complied in all
material respects with all applicable Laws; and, to the Knowledge of Sellers, no
action, suit, proceeding, hearing, investigation, complaint, claim, demand, or
notice has been filed or commenced against the Company alleging any failure to
so comply, except where the failure to comply would not have a Material Adverse
Effect.
(b) To the Knowledge of Sellers, the Company has never been a
party to any illegal payments.
4.12 Brokers. Neither the Sellers nor the Company has engaged in or is
liable to any Person for any brokers, finders' or similar fees in connection
with the transactions contemplated by this Agreement.
4.13 Permits. To the Knowledge of Sellers, the Company has all Permits
necessary for the ownership or use of the Company's assets and properties and
the operation of its business as currently conducted, except were the failure to
have such Permits would not have a Material Adverse Effect. All of such Permits
are listed on SCHEDULE 4.13 attached hereto. To the Knowledge of Sellers, each
of the Permits is in full force and effect and the Company is in compliance with
all restrictions and requirements thereof, except were such failure to comply
would not have an Material Adverse Effect.
4.14 Employment Matters.
(a) SCHEDULE 4.14(A) attached hereto lists all employees of the
Company as of the Closing Date, their current rates of compensation and dates of
hire.
(b) SCHEDULE 4.14(B) hereto lists all material Employee Benefit
Plans. Each Employee Benefit Plan is and at all times has been in material
compliance with all applicable Laws including ERISA. The Company is not
contributing to, and has never contributed to or been obligated to contribute
to, any multi-employer plan within the meaning of Section 3(37) of ERISA. There
is no accumulated funding deficiency under Section 412 of the Code or Section
302 of ERISA in connection with any Employee Benefit Plan and no reportable
event (within the meaning of Section 4041 of ERISA) has occurred in connection
with any Employee Benefit Plan, other than reportable events to which the
requirement of notice to the Pension Benefit Guarantee Corporation has been
waived. The Company has not engaged in any "prohibited transaction" as defined
in ERISA or the Code. An IRS determination letter or IRS opinion letter has been
issued with respect to each Employee Benefit Plan and is intended to meet the
requirements of Section 401(a) of the Code.
18
(c) Any past Employee Benefit Plan that has been terminated was done so in
material compliance with all applicable Laws, and the Company has no further
liability or obligation pursuant to any past Employee Benefit Plan..
(d) With respect to each Employee Benefit Plan: (i) all payments due from
the Company to date have been made and all amounts properly accrued to date as
liabilities of Company which have not been paid have been properly recorded on
the books of Company to the extent required by GAAP; (ii) each Employee Benefit
Plan has been administered in accordance with its terms; and (iii) there are no
actions, suits or claims pending (other than routine claims for benefits) and no
audits pending with respect to such Employee Benefit Plan or against the assets
of such Employee Benefit Plan, and to the Sellers' Knowledge, no act or omission
has occurred which would reasonably be expected to result in any such actions,
suits or claims (other than routine claims for benefits).
(e) Except as disclosed in SCHEDULE 4.14(E), the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee of the Company to severance pay, unemployment compensation or
any other payment, (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due to any such employee or former employee or (iii)
result in, with respect to any Employee Benefit Plan which the Company sponsors,
any prohibited transaction described in Section 406 of ERISA or Section 4975 of
the Code for which an exemption is not available.
(f) No Employee Benefit Plan provides benefits, including, without
limitation, death or medical benefits (whether or not insured) beyond retirement
or other termination of service other than (i) coverage mandated by applicable
Law, (ii) death or retirement benefits under any Employee Benefit Plan that is
an employee pension benefit plan, (iii) deferred compensation benefits that are
accrued as liabilities on the books of the Company, or (iv) disability benefits
under any employee welfare benefit plan.
(g) The Company has no announced plan or legally binding commitment to
create any additional employee benefit plans or to amend or modify any existing
Employee Benefit Plan, except to the extent required by Law.
(h) With respect to each Employee Benefit Plan, the Company has made
available to Buyer true and correct copies of:
(i) the plan document and any related trust agreement, all
amendments thereto, the summary plan description and any summary of material
modifications thereto;
(ii) Form 5500 annual reports for plan years beginning in 2002
and the preceding two years; and
19
(iii) with respect to each Employee Benefit Plan that is intended
to be qualified under Code section 401(a), the most recent favorable
determination letter or opinion letter issued by the Internal Revenue Service
(i) the Company is in material compliance with all applicable Laws
regarding employment and employment practices, terms and conditions of
employment, wages and hours and has not engaged in any unfair labor practice.
(j) Except as disclosed on SCHEDULE 4.14(J), to Seller's Knowledge, no
present or former employee of the Company has any claim against the Company
(whether under applicable Law, under any employee agreement or otherwise) on
account of or for: (i) overtime pay, other than overtime pay for the current
payroll period, (ii) wages or salaries, other than wages or salaries for the
current payroll period, or (iii) vacations, time off or pay in lieu of vacation
or time off, other than vacation or time off (or pay in lieu thereof) earned in
the twenty-four (24) month period immediately preceding the date hereof and
accrued as a liability on the most recent financial statements included in the
Financial Information.
(k) The Company has made all required payments to its unemployment
compensation reserve account with the appropriate governmental authorities, and
there are not currently any employees receiving unemployment compensation
benefits which are being charged against such account.
(l) There is not now pending or, to Sellers' Knowledge, threatened, any
charge or complaint before the National Labor Relations Board or any
representative thereof, or any comparable foreign or state agency or authority.
In the last five (5) years, the Company has not experienced and there is
currently no material labor dispute, work stoppage or union organizing
activities. The Company has not committed any unfair labor practice that has not
been fully remedied.
(m) To Seller's Knowledge, there are no pending or unresolved claims by any
person against the Company arising out of any Law relating to discrimination
against employees or employee practices or occupational or safety and health
standards.
(n) The Company has not been the subject of any inspection, audit,
investigation, complaint or other proceeding relating to employment Laws,
including without limitation occupational or safety and health standards and
immigration Laws.
4.15 Litigation.
(a) Except as set forth in SCHEDULE 4.15, there is not now, nor
has there been since incorporation, any litigation, arbitration, action, suit,
proceeding, claim or investigation brought by or served upon, or to the
Knowledge of the Sellers, threatened in writing against, the Company, its
properties, business or any of the Company's officers, directors, agents or
employees (in their professional or employee capacities). The Company is not
subject to any judgment, court decree, governmental decree or injunction.
20
(b) To Sellers' Knowledge, there are no actions, suits or
proceedings pending, proposed or threatened, by any Person that question the
legality, validity, or propriety of the transactions contemplated by this
Agreement.
4.16 Insurance.
(a) SCHEDULE 4.16 hereto lists and describes all of the insurance
policies of the Company. Said policies are in full force and effect.
(b) SCHEDULE 4.16 hereto lists and summarizes all claims in
excess of $5,000 under said insurance policies or any other policies made or
pending since inception.
(c) No lapse of the liability insurance coverage of the Company
has ever occurred, and the Company has not had any application for such
insurance coverage denied or any insurance policy or coverage thereunder
canceled, withdrawn, or not renewed.
(d) There is no claim pending under any insurance policy of the
Company as to which coverage has been questioned, denied or disputed and, to the
Knowledge of the Sellers, there is no basis for the denial of any such claim.
4.17 Product Matters.
(a) All instances of Product Warranty Claims of the Company
involving amounts in excess of $2,000 per occurrence that have occurred and for
which notice has been received by the Company since inception are listed on
SCHEDULE 4.17 hereto.
(b) All instances of Product Liability Matters of the Company
that have occurred and for which notice has been received by the Company since
inception, if any, are listed on SCHEDULE 4.17 hereto.
(c) Since inception, the Company has not received any written
notice setting forth defects or deficiencies in the design of products provided
by the Company prior to the date hereof.
(d) Since inception, there has been no product recalls with
respect to products manufactured by the Company.
(e) To Sellers' Knowledge, the products of the Company have
received all applicable governmental approvals required for their sale and use
and meet and comply with all applicable government standards and specifications,
except were the failure to comply would not have a Material Adverse Effect.
4.18 Premises.
(a) The Premises and the other properties listed on SCHEDULE
4.18(A) constitute all of the real property and improvements leased by the
Company. The Company does not own any real property and does not have any option
or other right to acquire any real property.
21
(b) To the Knowledge of Sellers, the roofs, walls, foundations
and other major structural components of the Premises are in a condition and
state of repair which is adequate for the current use of the Premises,
reasonable wear and tear excepted.
(c) The Premises (i) are not subject to any subleases of any
kind; (ii) are served by water, sewer, electrical, telephone, drainage and gas
utilities which are adequate for the current use of the Premises; (iii) to the
Knowledge of Sellers, are used by the Company in a manner which complies with
applicable zoning ordinances and other Laws without any special use approval or
permits, except to the extent noncompliance would not have a Material Adverse
Effect; (iv) to the Knowledge of Sellers, require no work or improvements to
bring it into compliance with any applicable Law other than work or improvements
which are not material in nature and cost; (v) to the Knowledge of Sellers, are
not subject to any unpaid assessments for public improvements; and (vi) to the
Knowledge of Sellers, are not the subject of any construction or improvements by
the Company for which payment in full has not been made.
4.19 Distributors; Manufacturer's Representatives.
(a) SCHEDULE 4.19 hereto: (i) lists all Persons that purchase the
Company's products as distributors; (ii) lists all non-employee Persons that
serve as sales representatives or manufacturer's representatives for the
Company's products; and (iii) lists all agreements with each such distributor or
representative.
(b) Except as set forth on SCHEDULE 4.19, all contracts with the
Company's distributors and/or manufacturers or sales representatives can be
terminated by the Company upon sixty (60) days' notice or less, with or without
cause, without liability, penalty, or premium of any nature whatsoever.
4.20 Transactions with Related Parties.
(a) Except as set forth on SCHEDULE 4.20 hereto, the Company is
not a party to any transaction or proposed transaction, including, without
limitation, the leasing of property, the purchase or sale of raw materials or
finished goods, the furnishing of services or the borrowing or lending of money,
with any director, officer, employee, shareholder, agent, or consultant or any
Person owned or controlled by any of the preceding, or any Person who is an
affiliate of any Seller. Except as set forth on SCHEDULE 4.20 hereto, no Seller
or any director, officer (or similar official) or, to the Sellers' Knowledge,
any employee of the Company or any of their affiliates, owns or has any
ownership interest in any corporation or other entity (other than a member of
the Company Group) which is in competition with the Company or which is engaged
in a related or similar business to that of the Company other than direct or
indirect passive investments of up to two percent (2%) of any class of
securities of any entity whose securities are actively traded on an established
national securities market or the national over-the-counter market.
(b) Except for the ordinary course payment of salary and the
provision of employee benefits, the Company has no obligations to any Seller,
any Affiliate of any Seller or any Affiliate of the Company and no Seller,
Affiliate of the Seller or Affiliate of the Company has any obligation to the
Company.
22
4.21 Customers and Suppliers. SCHEDULE 4.21 hereto sets forth a list of the
Company's ten (10) largest customers and the Company's ten (10) largest
suppliers during each of the Company's two (2) most recent calendar years
determined on the basis of the total dollar amount of net sales to such
customers and purchases from such suppliers. There has been no termination,
cancellation or material curtailment of the business relationship with any
customer or supplier listed on SCHEDULE 4.21. To Sellers' Knowledge (i) no
material unresolved dispute or complaint exists with a customer or supplier
listed on SCHEDULE 4.21, and (ii) no such customer or supplier has notified the
Company in writing that such Customer intends to terminate, cancel or materially
curtail its business relationship with the Company.
4.22 No Acquisitions. Except for this Agreement, the Company is not party
to or bound by any agreement, undertaking or commitment with respect to: (a) a
merger, share exchange, consolidation or other similar transactions involving
the Company; (b) a purchase, share exchange or tender offer for outstanding
shares of the capital stock of the Company; or (c) a purchase, lease or other
acquisition of all or substantially all of the assets of the Company.
4.23 Investment Representations. Sellers are acquiring the Shares solely
for each of its own account for investment and not with a view toward any resale
or distribution thereof. Sellers represent that their place of business and/or
residence is located outside of the United States of America and that Buyer is
providing the Shares to Sellers based on an exemption available from
registration under Regulation S of the Securities Act of 1933, as amended .
Sellers acknowledge that the Shares may not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of without registration under
the Securities Act of 1933, except pursuant to a an exemption from such
registration available under such Act, and without compliance with foreign
securities laws, in each case, to the extent applicable. Sellers have such
knowledge and experience in financial and business matters that it is capable of
evaluating the risks and merits of its purchase of the Shares. Sellers confirm
that Buyer has made available to Sellers the opportunity to ask questions of
Buyer and of the officers and management employees of Buyer and to acquire
additional information about the business and financial condition of the Buyer.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to the Sellers that:
5.1 Organization. Buyer is a corporation duly and validly organized and
existing and in good standing under the Laws of the State of Nevada and is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions in which Buyer conducts business.
5.2 Authorization; Enforceability. The execution, delivery, and performance
of the Transaction Documents by Buyer, and all of the documents and instruments
required hereby, are within the corporate power of Buyer and have been duly
authorized by all necessary corporate action. This Agreement is, and the other
documents and instruments required hereby will be, when executed and delivered
by Buyer, the valid and binding obligations of Buyer, enforceable in accordance
with their respective terms.
23
5.3 No Violation or Conflict. The execution, delivery, and performance of
the Transaction Documents by Buyer:
(a) do not and will not conflict with or violate any Law,
judgment, order, decree, the Articles of Incorporation or Bylaws of Buyer, or
any contract or agreement to which Buyer is a party or by which Buyer is bound
or give rise to a right to termination thereunder; and
(b) do not require any approvals or consents of third parties, or
any declarations or filings with any court, governmental body or agency or other
public or private body or Person.
5.4 Brokers. Buyer has not engaged and is therefore not liable to any
Person for any brokers', finders', or similar fees in connection with the
transactions contemplated by the Transaction Documents.
5.5 Investment Representations. Buyer is acquiring the Purchased Shares
solely for its own account for investment and not with a view toward any resale
or distribution thereof. Buyer acknowledges that the Purchased Shares may not be
sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed
of without registration under the Securities Act of 1933, except pursuant to a
an exemption from such registration available under such Act, and without
compliance with foreign securities laws, in each case, to the extent applicable.
Buyer has such knowledge and experience in financial and business matters that
it is capable of evaluating the risks and merits of its purchase of the
Purchased Shares Buyer confirms that Sellers and the Company have made available
to Buyer the opportunity to ask questions of Sellers and of the officers and
management employees of the Company and to acquire additional information about
the business and financial condition of the Company.
ARTICLE VI
INDEMNIFICATION
6.1 Survival of Representations and Warranties.
(a) Each of the representations and warranties set forth in
Section 4.1(d), 4.3(a), 4.5, or 4.12, 5.2, 5.4, and 5.5 shall survive the
Closing and shall continue in full force and effect until the three (3) year
anniversary of the date hereof, whereupon such representations and warranties
shall automatically expire. Each of the other representations and warranties set
forth in Articles III, IV and V shall survive the Closing and continue in full
force and effect until the twelve (12) month anniversary of the date hereof,
whereupon such representations and warranties shall automatically expire. Upon
the expiration of any representation or warranty pursuant to this Section
6.1(a), such representation and warranty shall be deemed to be of no further
force and effect, as if never made, and no action may be brought based on the
same, whether for breach of contract, tort or under any other legal theory,
unless and only to the extent that written notice of a claim based on such
representation and warranty specifying in reasonable detail the facts on which
such claim is based shall have been delivered to the Indemnifying Party prior to
the expiration of such representation or warranty.
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(b) Buyer expressly acknowledges that, except for the
representations and warranties of Sellers specifically set forth in Articles III
and IV, Buyer has not been induced by or relied on any statements or information
provided by Sellers or the Company in connection with the transactions
contemplated by the Transaction Documents, and Sellers make no other
representations or warranties other than those expressly set forth in such
Articles. Buyer have made their own investigation of the Company and its
business prior to the Effective Time and have not been induced by or relied upon
any representations or statements as to the advisability of entering into the
transactions contemplated by the Transaction Documents other than as expressly
set forth in the Transaction Documents.
(c) Sellers expressly acknowledge that, except for the
representations and warranties of Buyer specifically set forth in Article V,
Sellers have not been induced by or relied on any statements or information
provided by Buyer in connection with the transactions contemplated by the
Transaction Documents and that Buyer makes no other representations or
warranties other than those expressly set forth in such Article. Sellers have
made their own investigation of Buyer prior to the Effective Time and have not
been induced by or relied upon any representations or statements as to the
advisability of entering into the transactions contemplated by the Transaction
Documents other than as expressly set forth in the Transaction Documents.
6.2 Indemnification By Sellers. Subject to the provisions of this Article
VI, Sellers shall indemnify and hold the Buyer and the Company (jointly referred
to in this Article VI as "Buyer") harmless from and against all Losses actually
incurred by Buyer as a result of:
(a) any breach or inaccuracy of any of the representations and
warranties made by Sellers in this Agreement other than the representations and
warranties set forth in Sections 3.1, 3.2, 3.4, 4.1(d), 4.3(a), 4.5, or 4.12,
hereof, during the survival period for such representation or warranty as set
forth in Section 6.1(a);
(b) any breach or inaccuracy of any of the representations and
warranties made by Sellers in Sections 3.1, 3.2, 3.4, 4.1(d), 4.3(a), 4.5, or,
4.12 hereof, during the survival period for such representation or warranty as
set forth in Section 6.1(a);
(c) any liability, damages, and costs incurred by Buyer as a
result of the liability of the Company to Ethno Tech; Sellers have agreed to
jointly and severally be responsible for any and all obligations due by GBI to
Ethno Tech as more particularly described in SCHEDULE 6.2 hereto; and,
(d) any failure or breach by any Seller to carry out, perform,
satisfy, and discharge any of Sellers' covenants, agreements, undertakings,
liabilities, or obligations under this Agreement.
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6.3 Indemnification By Buyer. Subject to the provisions of this Article VI,
Buyer shall indemnify and hold Sellers and Sellers' Representative (jointly
referred to in this Article VI as "Sellers") harmless from and against:
(a) all Losses actually incurred by Sellers as a result of any
breach or inaccuracy of any of the representations and warranties made by Buyer
in this Agreement, during the survival period for such representation or
warranty as set forth in Section 6.1(a);
(b) all Losses actually incurred by Sellers as a result of any
failure or breach by Buyer to carry out, perform, satisfy, and discharge any of
its covenants, agreements, undertakings, liabilities, or obligations under this
Agreement; 6.4 Additional Limits on Indemnification.
(a) Notwithstanding any other provisions of this Agreement,
Sellers' indemnification obligations under Section 6.2 are subject to the
following limitations:
(i) Buyer shall not be entitled to indemnification
pursuant to Section 6.2(a) until the cumulative aggregate amount of
indemnifiable Losses under such Section exceeds $10,000 and then Buyer shall be
entitled to indemnification on all Losses back to the first dollar.
(ii) In no event shall the cumulative aggregate
liability of Sellers pursuant to Section
6.2 exceed six million dollars ($6,000,000).
(iii) Each Seller shall be individually, solely and
entirely responsible for a breach by such Seller of a representation and
warranty set forth in Article III, and no other Seller shall have any liability
therefor.
(iv) Each Seller shall be liable for such Seller's
Pro-Rata Percentage of any indemnification liability of Sellers not subject to
clause (iii) above (A) solely up to such Seller's Pro-Rata Percentage of the
Purchase Price. Except as set forth in clause (iii) above below, no Seller shall
have any liability to Buyer in excess of such Seller's Pro-Rata Percentage of
the Purchase Price.
(v) If, as of the Closing, Buyer has Knowledge of any
misrepresentation or any breach of any representation and warranty of Sellers
contained herein, such misrepresentation or breach of representation and
warranty shall be deemed to be irrevocably waived by Buyer (but solely to the
extent that Buyer had Knowledge of such misrepresentation or breach), and Buyer
shall be deemed to have fully released and forever discharged Sellers on account
of any and all claims or demands, known or unknown, with respect to such
misrepresentation or breach of representation and warranty (but solely to the
extent that Buyer had Knowledge of such misrepresentation or breach).
(b) Notwithstanding any other provisions of this Agreement,
Buyer's indemnification obligations under Section 6.3 are subject to the
following limitations:
26
(i) In no event shall the cumulative aggregate liability of
Buyer pursuant to Section 6.3 exceed the six million dollars ($6,000,000).
(ii) If, as of the Closing, Sellers have Knowledge of any
misrepresentation or any breach of any representation and warranty of Buyer
contained herein, such misrepresentation or breach of representation and
warranty shall be deemed to be irrevocably waived by Sellers (but solely to the
extent that Sellers had Knowledge of such misrepresentation or breach), and
Sellers shall be deemed to have fully released and forever discharged Buyer on
account of any and all claims or demands, known or unknown, with respect to such
misrepresentation or breach of representation and warranty (but solely to the
extent that Sellers had Knowledge of such misrepresentation or breach).
(c) For purposes of any claim by any Party hereto for breach of
any of the representations and warranties set forth herein, each Party
acknowledges that a disclosure by the other Party in any part of the Transaction
Documents (including the schedules) of any fact or omission shall be deemed a
disclosure of such fact or omission under all relevant provisions of the
Transaction Documents (including any relevant schedules).
6.5 Indemnification Procedure. The Indemnified Party shall promptly notify
the Indemnifying Party in writing of any indemnification claim which is not a
Third Party Claim, which written notice shall describe the nature of such claim,
the facts and circumstances that give rise to such claim and the amount of such
claim if reasonably ascertainable at the time such claim is made. Subject to
Section 6.1(a), the failure by the Indemnified Party to so notify the
Indemnifying Party shall not relieve the Indemnifying Party from any liability
to the Indemnified Party except to the extent that such failure shall have
prejudiced the Indemnifying Party.
(b) (i) An Indemnified Party seeking indemnification in respect
of a Third Party Claim shall give the Indemnifying Party from whom
indemnification with respect to such claim is sought, within fifteen (15) days
after the receipt of notice of such Third Party Claim (but in any event at least
ten (10) days before any responsive pleading is due), (A) written notice of such
Third Party Claim, and (B) copies of the documents and information relating to
any such Third Party Claim. Subject to Section 6.1(a), the failure by the
Indemnified Party to so notify or provide copies to the Indemnifying Party shall
not relieve the Indemnifying Party from any liability to the Indemnified Party
except to the extent that such failure shall have prejudiced the Indemnifying
Party.
(ii) The Indemnifying Party shall have the right, at its option
and expense, to assume the defense of such Third Party Claim using counsel
reasonably acceptable to the Indemnified Party. The Indemnifying Party shall
exercise such option by written notice to the Indemnified Party within fifteen
(15) days after its receipt from the Indemnified Party of the notice and copies
described in clause (i). The assumption of such defense by the Indemnifying
Party shall not constitute an admission by the Indemnifying Party that such
Third Party Claim is within the scope of or subject to indemnification by the
Indemnifying Party. So long as the Indemnifying Party is contesting or defending
the Third Party Claim with reasonable diligence and in good faith: (A) the
Indemnified Party may participate in (but not control) the defense of the Third
Party Claim with counsel of its choice and at its expense; (B) the Indemnifying
Party shall not be liable for any Losses with respect to the Third Party Claim
if the Indemnified Party
27
consents to the entry of any judgment or enters into any settlement with respect
to the Third Party Claim without the prior written consent of the Indemnifying
Party (which consent shall not be unreasonably withheld or delayed); and (C) the
Indemnifying Party may not enter into a settlement of any Third Party Claim
without the prior written consent of the Indemnified Party (which consent shall
be not unreasonably withheld or delayed) unless as part of such settlement the
third party bringing the Third Party Claim gives to the Indemnified Party a
release of all liability with respect to such Third Party Claim.
(iii) In the event the Indemnifying Party does not, within
fifteen (15) days after its receipt from the Indemnified Party of the notice and
copies described in clause (i), exercise its option to assume the defense of the
Third Party Claim as provided above, then: (A) the Indemnified Party shall have
the right to assume the defense of such claim in such manner as the Indemnified
Party deems appropriate; provided, however, that it may not consent to the entry
of any judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld or delayed; and (B) the assumption of such
defense shall not constitute either a waiver by the Indemnified Party of or an
entitlement by the Indemnified Party to indemnification for any Losses from the
Indemnifying Party.
(c) In connection with any Third Party Claim, the Buyer and the
Sellers shall cooperate with each other and provide each other with reasonable
access to the books and records and personnel in their possession or under their
control.
6.6 Calculation of Losses. In calculating any Indemnified Party's
indemnifiable Losses, such Losses shall be calculated net of:
(a) any Tax benefits, savings or reductions to such Indemnified
Party as a result of the claim giving rise to such losses, damages, costs,
expenses, liabilities, obligations, actions, demands, judgments, interest or
claims;
(b) any insurance proceeds or payments from third parties to
which the Indemnified Party is entitled by virtue of the claim giving rise to
such losses, damages, costs, expenses, liabilities, obligations, actions,
demands, judgments, or interest (it being understood that: (A) no Party shall
have any obligations to maintain any insurance coverage, and (B) any Indemnified
Party shall make commercially reasonable efforts to collect under any insurance
policy or from any third party responsible for any claim or event giving rise to
an indemnification obligation hereunder); and
(c) any amount actually saved by the Indemnified Party as a
result of its mitigation of damages, or which could have been saved by such
Indemnified Party had it made commercially reasonable efforts to mitigate its
damages.
6.7 Subrogation. If an Indemnifying Party makes any payment under this
Article VI in respect of any Losses, such Indemnifying Party shall be
subrogated, to the extent of such payment, to the rights of the Indemnified
Party against any insurer or third party with respect to such Losses.
28
6.8 Exclusive Remedy. Buyer and Sellers acknowledge and agree that: (i) the
foregoing indemnification provisions in this Article VI shall be the exclusive
remedy of the Buyer and the Sellers for any breach by Sellers or Buyers of any
representation, warranty, covenant or agreement contained in this Agreement;
(ii) no Party shall be entitled to any further indemnification, rights, remedies
or claims of any nature whatsoever in respect thereof, all of which the Parties
hereby waive; and (iii) neither Buyer nor Sellers shall not be entitled to a
rescission of this Agreement.
6.9 Set-Off. Buyer may set-off against the option price, on a dollar for
dollar basis, any liability that Sellers agreed to assume and/or any and all
amounts due by Sellers to Buyer pursuant to this indemnification and defense
Article VI.
ARTICLE VII
MISCELLANEOUS
7.1 Further Assurances. From time to time after the Closing, upon the
request of the Buyer, and at Buyer's expense for any out-of-pocket costs of
Sellers or Sellers' Representative, the Sellers shall execute and deliver, and
cause to be executed and delivered, such further instruments of conveyance,
assignment and transfer and take such further action (excluding any obligation
to make payments) as Buyer may reasonably request in order more effectively to
sell, assign, convey, transfer, reduce to possession and record title to the
Purchased Shares pursuant to this Agreement.
7.2 Entire Agreement; Amendment. This Agreement and the documents referred
to herein and to be delivered pursuant hereto constitute the entire agreement
between the Parties pertaining to the subject matter hereof, and supersede all
prior and contemporaneous agreements, understandings, negotiations, and
discussions of the Parties, whether oral or written, and there are no
warranties, representations, or other agreements between the Parties or on which
any of the Parties have relied in connection with the subject matter hereof,
except as specifically set forth in this Agreement. No amendment, supplement,
modification, waiver, or termination of this Agreement shall be binding unless
executed in writing by the parties to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision of this Agreement, whether or not similar, nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
7.3 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, the Sellers (on their own behalf and the Company's
behalf) and the Buyer shall pay all fees and expenses incurred by them,
including the fees of their respective counsel, accountants, brokers, investment
bankers, and other experts incident to the negotiation and preparation of this
Agreement and consummation of the transactions contemplated by this Agreement.
7.4 Governing Law. This Agreement and the rights and obligations hereunder
shall be governed by and construed in accordance with the Laws of the State of
Nevada.
29
7.5 Assignment. This Agreement shall not be assigned by any Seller or the
Buyer without the prior written consent of the other Party; provided, however,
that the Buyer shall have the right to assign all or to delegate all or any
portion of its obligations under this Agreement or any portion of its
obligations under this Agreement, to a subsidiary, its corporate parent or
another affiliate without the consent of any Seller. Any such assignment shall
not release Buyer from its obligations hereunder. "Assignment" shall include any
merger, reorganization, or similar event to which the Company is a party. The
provisions of this Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the Parties.
7.6 Notices. All communications or notices required or permitted by this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to a Party or the fifth business day
after having deposited the notice or communication in the United States mail,
certified or registered mail, postage prepaid, return receipt requested, and
addressed as follows, unless and until any of such Parties notify the others in
accordance with this section of a change of address:
7.7 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part of this Agreement.
7.8 Interpretation. Unless the context requires otherwise, all words used
in this Agreement in the singular number shall extend to and include the plural,
all words in the plural number shall extend to and include the singular, and all
words in any gender shall extend to and include all genders.
7.9 Severability. If any provision, clause, or part of this Agreement, or
the application thereof under certain circumstances, is held invalid, illegal,
or unenforceable, there shall be added automatically as part of this Agreement a
provision as similar in terms to such invalid, illegal, or unenforceable
provision as may be possible and be valid, legal, and enforceable. This
Agreement shall then be construed and enforced as so modified.
7.10 No Reliance. Except for any assignees permitted by Section 7.5 of this
Agreement: (a) no third party is entitled to rely on any of the representations,
warranties, and agreements of the Parties contained in this Agreement; and (b)
the Buyer, the Sellers, and the Company assume no liability to any third party
because of any such reliance.
If to Sellers: c/o Xxxxx X. X. XxXxxxxxx
00000 Xxxxxxxxxx Xxx
Xxxx Xxxxxx XX 00000
If to Buyer: Xxxxxxx-Xxxxxxx Xxxxxxxx
Xxxx 00xx Xxxxxx,
Xxxxxx Xxxx, Xxxxxx
30
7.11 Specific Performance. In addition to other remedies provided by law or
equity, upon a breach by one Party of any of the covenants contained in this
Agreement, the other Party shall be entitled to have a court of competent
jurisdiction enter an injunction prohibiting any further breach of the covenants
contained in this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Stock Purchase Agreement
to be duly executed as of the day and year first above written.
SONIC MEDIA CORP.
By /s/ Xxxxx Kalenuik
------------------------------
Xxxxx Kalenuik, its President
SELLERS
HEALTHPRO FOUNDATION, AS TO 25,000 SHARES
By /s/ Xxxxxx Xxxxx
--------------------------------
Its: Authorized Agent
PROTERRA INTERNATIONAL FOUNDATION, AS TO
25,000 SHARES
By /s/ Xxxxxxx Xxxx
--------------------------------
Its: Authorized Agent
31
