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Exhibit 99.1
ASSET PURCHASE AGREEMENT
by and between
NESTLE USA, INC.
as "Seller"
and
NUTRISYSTEM.COM INC.
as "Buyer"
Dated: August 25, 2000
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ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
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ARTICLE I. DEFINITIONS .................................................... 1
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1.1 Defined Terms ..................................................... 1
1.2 Other Defined Terms ............................................... 6
ARTICLE II. PURCHASE AND SALE OF ASSETS ................................... 7
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2.1 Transfer of Purchased Assets ...................................... 7
2.2 Assumption of Liabilities ......................................... 7
2.3 Purchase Price .................................................... 7
2.4 Taxes ............................................................. 7
2.5 Closing Costs; Transfer Taxes and Fees ............................ 8
ARTICLE III. CLOSING ...................................................... 8
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3.1 Closing ........................................................... 8
3.2 Conveyances at Closing ............................................ 8
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER....................... 9
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4.1 Organization ...................................................... 9
4.2 Authorization ..................................................... 10
4.3 Title ............................................................. 10
4.4 Consents and Approvals ............................................ 10
4.5 Absence of Certain Changes or Events .............................. 10
4.6 Contracts and Commitments ......................................... 11
4.7 No Conflict or Violation .......................................... 11
4.8 Financial Statements .............................................. 12
4.9 Litigation ........................................................ 12
4.10 No Brokers ........................................................ 12
4.11 Investment ........................................................ 12
4.12 Inventory ......................................................... 13
4.13 Litigation ........................................................ 14
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER ........................ 14
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5.1 Organization of Buyer ............................................. 14
5.2 Authorization ..................................................... 14
5.3 No Conflict or Violation .......................................... 14
5.4 Consents and Approvals ............................................ 15
5.5 No Brokers ........................................................ 15
5.6 Litigation ........................................................ 15
5.7 Capitalization .................................................... 15
5.8 Validity of Buyer Common Stock; Compliance with Securities Laws ... 15
5.9 SEC Reports and Financial Statements .............................. 16
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Page
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ARTICLE VI. COVENANTS OF SELLER AND BUYER .................................. 16
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6.1 Further Assurances ................................................. 16
6.2 Notification of Certain Matters .................................... 16
6.3 Access to Information .............................................. 17
6.4 Consents; Books and Records; Commercially Reasonable Best Efforts .. 17
6.5 Conduct of Business ................................................ 17
6.6 Updated Schedules .................................................. 18
6.7 Copack Agreement ................................................... 18
ARTICLE VII. CONDITIONS TO SELLER'S OBLIGATIONS ............................ 18
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7.1 Representations, Warranties and Covenants .......................... 18
7.2 Consents; Regulatory Compliance and Approval ....................... 18
7.3 No Actions or Court Orders ......................................... 19
7.4 Ancillary Documents ................................................ 19
7.5 Opinion of Counsel to Buyer ........................................ 19
ARTICLE VIII. CONDITIONS TO BUYER'S OBLIGATIONS ............................ 20
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8.1 Representations, Warranties and Covenants .......................... 20
8.2 Consents; Regulatory Compliance and Approval ....................... 21
8.3 No Actions or Court Orders ......................................... 21
8.4 Ancillary Documents ................................................ 21
ARTICLE IX. ACTIONS BY SELLER AND BUYER AFTER THE CLOSING .................. 21
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9.1 Tax Matters ........................................................ 21
ARTICLE X. SURVIVAL AND INDEMNIFICATION .................................... 21
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10.1 Survival of Representations, Etc ................................... 21
10.2 Indemnifications. .................................................. 22
10.3 Tax Indemnifications ............................................... 25
10.4 Insurance Proceeds ................................................. 25
10.5 Exclusive Remedy ................................................... 25
ARTICLE XI. MISCELLANEOUS .................................................. 26
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11.1 Termination ........................................................ 26
11.2 Assignment ......................................................... 27
11.3 Notices ............................................................ 27
11.4 Choice of Law ...................................................... 28
11.5 Jurisdiction; Services of Process .................................. 28
11.6 Entire Agreement; Amendments and Waivers ........................... 28
11.7 Multiple Counterparts .............................................. 29
11.8 Expenses ........................................................... 29
11.9 Severability of Provisions ......................................... 29
11.10 Titles; Gender .................................................... 29
11.11 Publicity ......................................................... 29
11.12 Confidential Information .......................................... 29
11.13 No Third-Party Beneficiary ........................................ 31
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11.14 Representation of Counsel; Mutual Negotiation .................... 31
11.15 No Reliance on Other Information ................................. 31
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of August 25, 2000 (this
"Agreement"), is entered into by and between nutrisystem.com inc., a Delaware
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corporation ("Buyer") and Nestle USA, Inc., a Delaware corporation ("Seller"
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and, together with Buyer, the "parties").
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RECITALS
Seller desires to sell certain Purchased Assets (as defined below),
including, but not limited to, certain assets of the Sweet Success business of
Nestle USA, Inc., and Buyer desires to purchase such Purchased Assets and assume
certain liabilities, upon the terms and subject to the conditions of this
Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the respective covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
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1.1 Defined Terms. As used herein, the terms below shall have the following
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meanings. Any of such terms, unless the context otherwise requires, may be used
in the singular or plural, depending upon the context.
"Accounts Receivable" shall mean all accounts and notes receivable (whether
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current or noncurrent), including the customer accounts receivable (including
accounts receivable for any products shipped prior to the Closing but not
invoiced) outstanding as of the Closing Date, and any other rights to receive
payments as of the Closing Date, including all trade accounts receivable
representing amounts receivable in respect of goods shipped, products sold or
services rendered on or prior to the Closing Date, and the full benefit of all
securities of such accounts or debts.
"Action" shall mean any action, claim, suit, litigation, proceeding, labor
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dispute, arbitral action, governmental audit, inquiry, criminal prosecution,
investigation or unfair labor practice charge or complaint.
"Affiliate" shall have the meaning set forth in the Securities Exchange Act
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of 1934, as amended, and the rules and regulations thereunder.
"Ancillary Agreements" shall mean the following: (a) the Intellectual
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Property Purchase Agreement, (b) the Transition Trademark License, (c) the
Transition Services Agreement, (d) the Registration Rights Agreement and (e) all
other instruments of transfer and assumption delivered pursuant to Section 3.2.
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"Assignment of Contract Rights" shall mean the Assignment of Contract
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Rights, in the form of Exhibit A attached hereto, to be entered into at Closing
by Seller and Buyer.
"Assumption Agreement" shall mean the Assumption Agreement in the form
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attached hereto as Exhibit B, to be entered into at Closing by Buyer.
"Bill of Sale" shall mean the Bill of Sale, in the form attached hereto as
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Exhibit C, to be executed at Closing by Seller in favor of Buyer.
"Books and Records" shall mean all business records, tangible data,
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documents, supplier lists, sales literature, and market research materials, in
each case which relate exclusively to the Business (the "Information");
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provided, however, that "Books and Records" shall exclude (i) all tax returns
and all worksheets, notes, files or documents primarily related thereto,
wherever located, (ii) all documents prepared in connection with the
transactions contemplated by this Agreement, (iii) all minute books and
corporate records of Seller and its Affiliates, (iv) all Information of Seller
or Seller's Affiliates to the extent not related to the Business, and (v) all
Information which relates to centralized research and development and sales and
distribution provided by Seller and Seller's Affiliates.
"Business" shall mean the Seller's business of manufacturing, marketing
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and/or selling the diet food products listed on Schedule 1.1A under the
trademark "SWEET SUCCESS."
"Buyer Common Stock" shall mean the common stock, par value $.001 per
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share, of Buyer.
"Closing Date" shall mean August 25, 2000, or such other date as Buyer and
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Seller shall mutually agree upon.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
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rules and regulations thereunder.
"Confidentiality Agreement" shall mean the Confidentiality Agreement, dated
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as of May 8, 2000, between Rhone Group LLC and Buyer.
"Contract" shall mean any agreement, contract, obligation, promise, or
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undertaking to which Seller is a party or is bound and which relates exclusively
to the Business, whether oral or written.
"Copack Agreement" shall mean the transitional Copack Agreement that
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Seller and Buyer will use their reasonable best efforts to negotiate and execute
after the execution of this Agreement substantially in accordance with the terms
of the term sheet attached hereto as Exhibit D.
"Court Order" shall mean any judgment, decision, consent decree,
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injunction, ruling or order of any federal, state or local court or governmental
agency, department or authority that is binding on any person or its property
under applicable law.
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"Damages" shall mean the amount of any loss, claim, demand, liability,
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obligation, damage, deficiency, assessment, judgment, penalty, cost or expense
(including reasonable attorneys' fees), net of any insurance proceeds or tax
benefits received with respect thereto.
"Encumbrance" shall mean any claim, lien, pledge, option, charge, easement,
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security interest, deed of trust, mortgage, right-of-way, encroachment, building
or use restriction, conditional sales agreement, encumbrance or other right of
any third party, whether voluntarily incurred or arising by operation of law,
and includes, without limitation, any agreement to grant any of the foregoing in
the future and any contingent sale or other title retention agreement or lease.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
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"Excluded Assets," notwithstanding any other provision of this Agreement,
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shall mean the following assets related to the Business of Seller or Seller's
Affiliates:
(a) all Intellectual Property (as defined in the Intellectual Property
Purchase Agreement);
(b) all of the assets used in the development, production, sales and
distribution of the products related to the Business;
(c) the Facilities;
(d) all Accounts Receivable related to the Business, refunds, deposits,
prepayments or prepaid expenses (including, without limitation, any prepaid
insurance premiums);
(e) all insurance policies, programs, reserves and related bonds of any
nature (and any dividends or claims payable in respect thereof) covering the
Business prior to the Closing;
(f) all claims, causes of action, chooses in action, rights of recovery and
rights of set-off of any kind, against any person or entity, including without
limitation any liens, security interests, pledges or other rights to payment or
to enforce payment in connection with products delivered by Seller or Seller's
Affiliates on or prior to the Closing Date;
(g) all claims, causes of action, choses in action, rights of recovery and
rights of set-off of any kind against any person or entity arising out of or
relating to the Excluded Assets;
(h) any amounts receivable by Seller from any of Seller's Affiliates with
respect to the Business;
(i) all franchise tax registrations and sales and use Permits of Seller
whether or not exclusively related to the Business;
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(j) all advertising time and advertising space, including free standing
inserts, booked during the Pre-Closing Period for the Post-Closing Period;
(k) all Tax refunds (and credits) attributable to the Pre-Closing Period;
(l) all accounting and information systems related to the Business;
(m) all Information which relates to centralized research and development;
(n) all fixtures and equipment related to the Business, wherever located;
and
(o) all cash and cash equivalents related to the Business.
"Excluded Liabilities" shall mean the following Liabilities of Seller or
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Seller's Affiliates:
(a) all accounts and other payables to the extent accruing, arising out of
or related to the Pre-Closing Period;
(b) all promotional accruals to the extent accruing, arising out of or
related to the Pre-Closing Period;
(c) all Liabilities to the extent and arising from the operation of the
Business during the Pre-Closing Period regardless of when the claim related
thereto is asserted including, without limitation, all Liabilities related to
products of the Business produced or sold during the Pre-Closing Period;
(d) any individual Liability in excess of $1,000 accruing, arising out of
or relating to returns of products of the Business sold during the Pre-Closing
Period and returned during the period between the Closing Date and the date
sixty (60) days from the Closing Date; and
(e) any Tax payable by Seller, its Affiliates or any member of any
consolidated, combined or unitary group of which Seller is or was a member
(including any Tax imposed under Treasury Regulation Section 1.1502-6 or any
analogous state or local tax provisions or by contract or otherwise and any Tax
on any gain or income recognized from the sale of the Purchased Assets pursuant
to this Agreement), except as expressly set forth in Sections 2.4 and 2.5
hereof.
"Facilities" shall mean the plants, manufacturing facilities, warehouses,
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administration buildings and all other related facilities located in Eau Claire,
Wisconsin, Waverly, Iowa, and Toluca, Mexico where manufacturing of certain of
the products related to the Business occurs, and the facilities owned by the
third-parties who manufacture certain of the products of the Business (each a
"Copacker").
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"Intellectual Property Purchase Agreement" shall mean the Intellectual
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Property Purchase Agreement in the form attached hereto as Exhibit E which shall
provide for Buyer's
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purchase of the "SWEET SUCCESS" trademark owned by Seller's Affiliate and other
intellectual property related to the Business.
"Inventory" shall mean all inventory relating exclusively to the Business
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held for resale and all raw materials, work in process, finished products,
wrapping, labeling supply and packaging items and similar items relating
exclusively to the Business, in each case wherever the same may be located, but
in each case other than the Excluded Assets.
"IRS" shall mean the Internal Revenue Service.
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"Liabilities" shall mean any direct or indirect liability, indebtedness,
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obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any person of any type, whether accrued, absolute, contingent, matured,
unmatured or other.
"Material Adverse Effect" or "material adverse change" shall mean with
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respect to the Business or the Purchased Assets any significant and substantial
adverse effect or change in the financial condition of the Business and/or the
Purchased Assets, taken as a whole, or on the ability of Seller or Buyer, as the
case may be, to consummate the transactions contemplated hereby, or on the
financial condition of Buyer.
"NASD" shall mean the National Association of Securities Dealers, Inc. (or
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any successor thereto).
"ordinary course of business" or "ordinary course" or any similar phrase
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shall mean the ordinary course of the Business and consistent with Seller's past
practice.
"Post-Closing Period" shall mean that period of time on and after the
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Closing Date.
"Pre-Closing Period" shall mean that period of time prior to, but not
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including, the Closing Date.
"Purchased Assets" shall mean all of Seller's and Seller's Affiliates'
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right, title and interest in, to and under (i) the Books and Records, (ii) the
Inventory, and (iii) all Contracts, purchase orders or sales orders (including,
without limitation, open orders to purchase raw materials or services) related
exclusively to the Business; provided, however, that in no event shall Purchased
Assets include any of the Excluded Assets.
"Registration Rights Agreement" shall mean the Registration Rights
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Agreement in the form attached hereto as Exhibit H to be entered into at Closing
by the parties, which agreement shall provide Seller with certain piggyback and
demand registration rights related to the Buyer Common Stock constituting the
Purchase Price.
"Representative" shall mean any officer, director, principal, attorney,
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agent, employee or other representative.
"SEC" shall mean the Securities and Exchange Commission.
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"Securities Act" shall mean the Securities Act of 1933, as amended.
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"Seller's Knowledge" shall mean the actual knowledge of Doreen Ida, Herb
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Hottinger and John Magnotta, as such knowledge may exist without inquiry into
the matter.
"Tax" shall mean any federal, state, local, foreign or other tax, levy,
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impost, fee, assessment or other government charge, including without limitation
income, estimated income, business, occupation, franchise, property, payroll,
personal property, sales, transfer, use, employment, commercial rent, occupancy,
franchise or withholding taxes, and any premium, including without limitation
interest, penalties and additions in connection therewith.
"Transition Trademark License" shall mean the Transition Trademark License
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in the form attached hereto as Exhibit F which shall provide for a temporary
transitional license by Seller's Affiliate to Buyer of certain trademarks.
"Transition Services Agreement" shall mean the Transition Services
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Agreement in the form attached hereto as Exhibit G, which shall provide for the
provision of certain services described therein by Seller to Buyer for a limited
period of time following the Closing.
"US GAAP" shall mean United States generally accepted accounting principles
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applied on a consistent basis.
1.2 Other Defined Terms. The following terms shall have the meanings
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defined for such terms in the Sections set forth below:
Term Section
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Assumed Liabilities 2.2
Buyer Financial Statements 5.9
Buyer SEC Reports 5.9
Claim 10.2(c)
Claim Notice 10.2(c)
Closing 3.1
Confidential Information 11.12(b)
Copacker 1.1
Financial Statements 4.8
Indemnified Party 10.2(c)
Indemnifying Party 10.2(c)
Information 1.1
Market Price 10.2(h)(ii)
Provider 11.12(b)
Purchase Price 2.3
Recipient 11.12(b)
SPN 10.2(h)(ii)
Term Sheet 6.7
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ARTICLE II.
PURCHASE AND SALE OF ASSETS
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2.1 Transfer of Purchased Assets. Upon the terms and subject to the
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conditions contained herein, at the Closing, Seller agrees to sell, convey,
transfer, assign and deliver, or cause to be sold, conveyed, transferred and
assigned, to Buyer, all of Seller's and Seller's Affiliates' right, title and
interest in, to and under the Purchased Assets, and Buyer agrees to purchase the
Purchased Assets and assume the Assumed Liabilities.
2.2 Assumption of Liabilities. At the Closing, upon the terms and subject
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to the conditions contained herein, Seller shall retain all of the Liabilities
relating to or arising out of the Business, including without limitation the
Excluded Liabilities, provided, however, that Buyer shall assume those
Liabilities of Seller or Seller's Affiliates relating to or arising out of the
Business, which are set forth below (the "Assumed Liabilities"):
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(a) Liabilities arising during the Post-Closing Period under each of
the Contracts;
(b) Liabilities accruing, arising out of or related to returns of
products of the Business sold during the Pre-Closing Period, except for such
Liabilities that are part of the Excluded Liabilities; and
(c) Liabilities to the extent arising from the improper storage,
handling or distribution by Buyer or its Affiliates or agents during the
Post-Closing Period of products manufactured or produced during the Pre-Closing
Period or other negligent conduct by Buyer related to such products.
2.3 Purchase Price. At the Closing, as consideration for Seller's sale,
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transfer, assignment, conveyance and delivery of the Purchased Assets hereunder
and as consideration for the transactions contemplated by the Intellectual
Property Purchase Agreement and Transition Trademark License, Buyer shall
deliver to Seller the Purchase Price and shall assume the Assumed Liabilities
pursuant to this Agreement. As used herein, the "Purchase Price" means 900,000
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shares of Buyer Common Stock. The value of the Purchase Price shall be allocated
among the Purchased Assets in the manner required by Section 1060 of the Code
and regulations thereunder. Buyer and Seller shall in good faith attempt
mutually to agree upon an allocation of Purchase Price and Assumed Liabilities
among the Purchased Assets. Buyer and Seller agree in accordance with any
agreed-upon allocation to each prepare and file on a timely basis with the
Internal Revenue Service substantially identical initial and supplemental
Internal Revenue Service Forms 8594 "Asset Acquisition Statements Under Section
1060".
2.4 Taxes. Except as otherwise provided in this Agreement, all Taxes in
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respect of the Purchased Assets and income of the Business for the period or
portions of periods ending prior to the Closing Date shall be borne by Seller.
Except as otherwise provided in this Agreement, all Taxes in respect of the
Purchased Assets and income of the Business for the period or portions of
periods beginning on and after the Closing Date shall be borne by Buyer.
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2.5 Closing Costs; Transfer Taxes and Fees.
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(a) Buyer shall pay the cost of all sales and use Taxes arising out of
the transfer of the Purchased Assets pursuant to this Agreement and Seller shall
reimburse Buyer for fifty percent (50%) of such sales and use Taxes within ten
business days of Seller's receipt of documents supporting such costs. Buyer
shall pay all costs and expenses incurred in connection with obtaining or
recording title to the Purchased Assets. The sales, use and transfer tax returns
required by reason of said transfer shall be timely prepared and filed by the
party normally obligated by law or regulation to make such filing. The parties
agree to cooperate with each other in connection with the preparation and filing
of such returns, in obtaining all available exemptions from such sales, use and
transfer Taxes, and in timely providing each other with resale certificates and
any other documents necessary to satisfy any such exemptions.
(b) If Buyer or Seller pays any Tax agreed to be borne by the other
party under this Agreement, such other party shall promptly (within 10 business
days) reimburse the paying party for the amounts so paid. If any party receives
any refund or credit of Tax to which another party is entitled under this
Agreement, the receiving party shall promptly (within 10 business days) pay such
amounts to the party entitled thereto.
ARTICLE III.
CLOSING
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3.1 Closing. The Closing of the transactions contemplated herein (the
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"Closing") shall be held at 10:00 a.m. local time on the Closing Date at the
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offices of Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles,
California 90071, unless the parties hereto otherwise agree. For the purpose of
any calculation or determination required to be made by any of the parties
following the Closing, the Closing shall be deemed to have been effective as of
12:01 a.m. on the Closing Date.
3.2 Conveyances at Closing.
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(a) Seller's Deliveries. To effect the sale and transfer referred to
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in Section 2.1 hereof, Seller will, at the Closing, execute and deliver, or
cause to be executed and delivered to Buyer:
(i) the Bill of Sale;
(ii) the Assignment of Contract Rights;
(iii) the Transition Trademark License;
(iv) the Transition Services Agreement;
(v) the Intellectual Property Purchase Agreement;
(vi) the Registration Rights Agreement; and
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(vii) the consents, certificates and other documents required by
Article VIII in form reasonably satisfactory to Buyer.
(b) Buyer's Deliveries. At the Closing, Buyer shall execute and
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deliver to Seller or Seller's Affiliates:
(i) a valid stock certificate representing the Purchase Price;
(ii) the Assumption Agreement;
(iii) the Transition Trademark License;
(iv) the Transition Services Agreement;
(v) the Intellectual Property Purchase Agreement;
(vi) the Registration Rights Agreement;
(vii) a long-form certificate of corporate good standing of Buyer
issued by the Secretary of State of the State of Delaware, dated not more than
five (5) days prior to the Closing Date and a bringdown certificate of good
standing dated as of the Closing Date;
(viii) a certificate of the Secretary of Buyer stating that this
Agreement and the transactions contemplated hereby have been approved by its
Board of Directors and shareholders, if necessary, together with a certified
copy of resolutions evidencing such approvals;
(ix) the opinion of Buyer's counsel described in Section 7.5 of
this Agreement; and
(x) the consents, certificates and other documents required by
Article VII in form reasonably satisfactory to Seller.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
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Seller hereby represents and warrants to Buyer, as of the date hereof,
and except as otherwise set forth on the Schedules, as follows:
4.1 Organization. Seller is a corporation duly organized, validly existing
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and in good standing under the laws of the State of Delaware with full corporate
power and authority to conduct the Business as it is presently being conducted
and to own the Purchased Assets. Seller is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is necessary under applicable law as a result of the conduct of
its business or the ownership of its properties, except where the failure to be
so qualified or in good standing would not have a Material Adverse Effect.
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4.2 Authorization. Seller has all requisite corporate power and authority,
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and has taken all corporate action necessary, to execute and deliver this
Agreement and the Ancillary Agreements to which it is a party, to consummate the
transactions contemplated hereby and thereby and to perform its obligations
hereunder and thereunder. This Agreement and each of and the Ancillary
Agreements to which Seller is a party has been (or, when executed and delivered,
will have been) duly executed and delivered by Seller and is (or, when executed
and delivered, will be) a legal, valid and binding obligation of Seller
enforceable against Seller in accordance with its terms except as limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditor's rights generally or by equitable principles (whether
considered in an action at law or in equity).
4.3 Title. Seller has good and marketable title in and to all of the
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Inventory, free and clear of all liens, charges, security interests and
encumbrances of any nature whatsoever, except for those reflected on the books
and records of Seller that are being assumed by Buyer pursuant to this
Agreement; and upon consummation of the transactions provided for herein, good
and marketable title to the Inventory shall be vested in Buyer.
4.4 Consents and Approvals. Except as set forth on Schedule 4.4 hereto, no
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notice to, declaration, filing or registration with, or authorization, consent
or approval of, or permit from, any domestic or foreign governmental or
regulatory body or authority, or any other person or entity, is required to be
made or obtained by Seller or any Affiliate of Seller in connection with the
execution, delivery and performance of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby.
4.5 Absence of Certain Changes or Events. Since December 31, 1999, except
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as set forth in Schedule 4.5 or otherwise contemplated by this Agreement, other
than in the ordinary course of business, there has not been any:
(a) material sale, assignment or transfer of any of the Purchased
Assets, singly or in the aggregate, except where such sale, assignment or
transfer would not have a Material Adverse Effect;
(b) execution, amendment, cancellation or termination of any Contract,
commitment, or agreement material to the Business, except where such execution,
amendment, cancellation or termination would not have a Material Adverse Effect;
(c) failure to repay when due any material obligation of Seller
related exclusively to the Business, except in the ordinary course of business
or where such failure would not have a Material Adverse Effect;
(d) change in accounting methods or practices by Seller which would
have a Material Adverse Effect on the Financial Statements;
(e) mortgage, pledge or other encumbrance of any material Purchased
Assets (other than any such encumbrance arising by operation of law);
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(f) change in sales practices relating to the Business or acceleration
of sales or shipments, except, in each case, for such changes or accelerations
which are made in the ordinary course of business consistent with Seller's past
practices; or
(g) agreement by Seller to do any of the foregoing.
4.6 Contracts and Commitments.
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(a) Contracts. Except as set forth in Schedule 4.6, as related
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exclusively to the Business, Seller is not a party to any written or, to
Seller's Knowledge, any oral:
(i) commitment, contract, note, loan, evidence of indebtedness,
purchase order (other than purchase orders entered into in the ordinary course
of business) or letter of credit involving any obligation or liability on the
part of Seller of more than $100,000 and not cancelable (without liability)
within ninety (90) days;
(ii) contracts or commitments not listed on Schedule 4.6 and
which otherwise materially affect the Business; and
(iii) material governmental or regulatory licenses or permits
required to conduct the Business as presently conducted.
(b) Absence of Defaults. Except as set forth in Schedule 4.6, as
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related exclusively to the Business, Seller is not in material breach or
violation of, or default under any of the Contracts or other instruments
described in (i)-(iii) above, the breach or violation of which would have a
Material Adverse Effect.
4.7 No Conflict or Violation. Neither the execution, delivery or
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performance of this Agreement or the Ancillary Agreements to which Seller is a
party, nor the consummation of the transactions contemplated hereby or thereby
nor compliance by Seller with any of the provisions hereof or thereof will
result in (a) a violation of or a conflict with any provision of the Certificate
of Incorporation or Bylaws of Seller, or (b) a breach of, or a default under,
any term or provision of any Contract which relates exclusively to the Business
and to which Seller is a party which breach or default would have a Material
Adverse Effect.
4.8 Financial Statements. Schedule 4.8 sets forth the net proceeds of sale,
--------------------
marginal contribution and product contribution for the Business for the year
ended December 31, 1999 (the "Financial Statements"). The Financial Statements
--------------------
relate solely to the Business and, except as set forth in the accounting
policies described and set forth in Schedule 4.8, the line items contained
therein were prepared in conjunction with the proposed sale of the Business in
accordance with US GAAP, applied on a basis consistent with prior years and the
practices and procedures of the Business and Seller, and present fairly and
accurately the information purported to be presented therein. Seller has
furnished to Buyer copies of the unaudited consolidated statement of profit and
loss of the Business for the seven-month periods ending July 31, 1999 and July
31, 2000, which statements have been prepared consistent with Seller's past
practice in the ordinary course of business.
11
<PAGE>
4.9 Litigation. There are no orders, writs, injunctions, judgments or
----------
decrees outstanding and in effect related to the Business which (i) could
reasonably involve potential liability to Seller in excess of $100,000, which
liability is uninsured or subject to deductibles or retention levels in excess
of $100,000 or (ii) could individually or in the aggregate, have a Material
Adverse Effect.
4.10 No Brokers. Neither Seller nor any of its officers, directors,
----------
employees, shareholders or Affiliates has employed or made any agreement with
any broker, finder or similar agent or any person or firm which will result in
the obligation of Buyer or any of its Affiliates to pay any finder's fee,
brokerage fees or commission or similar payment in connection with the
transactions contemplated hereby.
4.11 Investment. Seller represents as follows with respect to the Buyer
----------
Common Stock to be delivered by Buyer pursuant to Section 2.3 hereof:
(a) Seller is acquiring the Buyer Common Stock for investment for its
own account and not with a view to, or for resale in connection with, the
distribution thereof;
(b) Seller has been given the opportunity to obtain such information
and documents relating to, and to ask questions and receive answers about, Buyer
and the business and prospects of Buyer which Seller deems necessary to evaluate
the merits and risks related to its investment in the Buyer Common Stock and to
verify the information received, and its knowledge and experience in financial
and business matters are such that it is capable of evaluating the merits and
risks of its acquisition of the Buyer Common Stock;
(c) Seller's financial condition is such that it can afford to bear
the economic risk of holding the Buyer Common Stock for an indefinite period of
time and Seller has adequate means for providing for its current needs and
contingencies and to suffer a complete loss of its investment in the Buyer
Common Stock;
(d) Seller is an "accredited investor" as defined in Rule 501 under
the Securities Act; and
(e) Seller has been advised that (i) Buyer's issuance of the Buyer
Common Stock to Seller will not have been registered under the Securities Act,
(ii) the Buyer Common Stock may need to be held indefinitely, and Seller must
continue to bear the economic risk of the investment in the Buyer Common Stock
unless it is subsequently registered under the Securities Act or an exemption
from such registration is available, (iii) there is not be a public market for
the Buyer Common Stock, (iv) when and if the Buyer Common Stock may be disposed
of without registration in reliance on Rule 144 promulgated under the Securities
Act, such disposition can be made only in limited amounts in accordance with the
terms and conditions of such Rule, (v) if the Rule 144 exemption is not
available, public sale without registration will require compliance with
Regulation A or some other exemption under the Securities Act and (vi) a
restrictive legend in the following form shall be placed on the certificates
representing the Buyer Common Stock:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
12
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AMENDED (THE "SECURITIES ACT") OR QUALIFIED UNDER ANY APPLICABLE STATE
SECURITIES LAWS (THE "STATE ACTS"), HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
QUALIFICATION UNDER THE STATE ACTS OR EXEMPTIONS FROM SUCH REGISTRATION OR
QUALIFICATION REQUIREMENTS (INCLUDING, IN THE CASE OF THE SECURITIES ACT,
THE EXEMPTION AFFORDED BY RULE 144). UNLESS WAIVED BY NUTRISYSTEM.COM INC.,
NUTRISYSTEM.COM INC. SHALL BE FURNISHED WITH AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO IT OPINING AS TO THE AVAILABILITY OF EXEMPTIONS
FROM SUCH REGISTRATION AND QUALIFICATION AS A PRECONDITION TO ANY SUCH
TRANSFER.
In connection with any transfers of Buyer Common Stock constituting the Purchase
Price which are made by or on behalf of Seller pursuant to an effective
registration statement, Buyer will not require Seller to provide the opinion of
counsel referred to in such legend.
4.12 Inventory. Except as set forth in Schedule 4.12, the Inventory (a) is
---------
usable and sellable in the ordinary course of the Business except to the extent
that the transactions contemplated by this Agreement make any of the packaging
materials obsolete, (b) is not adulterated or misbranded, and (c) may be shipped
in interstate commerce in accordance with the Federal Food, Drug and Cosmetic
Act, as amended.
4.13 Litigation. There are no actions pending, threatened or anticipated
----------
against, related to or affecting Seller seeking to delay, limit or enjoin the
transactions contemplated by this Agreement.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Seller as follows:
5.1 Organization of Buyer. Buyer is a corporation duly organized, validly
---------------------
existing and in good standing under the laws of the State of Delaware with full
corporate power and authority to own and lease its properties and conduct its
business as it is presently being conducted. Buyer is duly qualified to do
business as a foreign corporation and is in good standing in each of the
jurisdictions in which its right, title and interest in or to any of the assets
held by it, or the conduct of its business, requires such authorization,
qualification or licensing, except where the failure to be so qualified would
not have a Material Adverse Effect.
5.2 Authorization. Buyer has all requisite corporate power and authority,
-------------
and has taken all corporate action necessary, to execute and deliver this
Agreement and the Ancillary Agreements to which it is a party, to consummate the
transactions contemplated hereby and thereby and to perform its obligations
hereunder and thereunder. No other corporate proceedings
13
<PAGE>
on the part of Buyer are necessary to authorize this Agreement and the Ancillary
Agreements and the transactions contemplated hereby and thereby. This Agreement
and each of the Ancillary Agreements to which Buyer is a party has been (or,
when executed and delivered, will have been) duly executed and delivered by
Buyer and is (or will be) a legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditor's rights generally or by equitable principles (whether
considered in an action at law or in equity).
5.3 No Conflict or Violation. Neither the execution, delivery or
------------------------
performance of this Agreement or the Ancillary Agreements to which Buyer is a
party, nor the consummation of the transactions contemplated hereby or thereby
nor compliance by Buyer with any of the provisions hereof or thereof will result
in (a) a violation of or a conflict with any provision of the Certificate of
Incorporation or Bylaws of Buyer, or (b) a breach of, or a default under, any
term or provision of any contract, indebtedness, note, bond, indenture, security
or pledge agreement, commitment, license, lease, franchise, permit, agreement,
authorization, concession, or other instrument or obligation to which Buyer is a
party, or (c) violate any Regulation or Court Order, which breach, default or
violation would have a Material Adverse Effect.
5.4 Consents and Approvals. Except as set forth on Schedule 5.4 hereto, no
----------------------
notice to, declaration, filing or registration with, or authorization, consent
or approval of, or permit from, any domestic or foreign governmental or
regulatory body or authority, or any other person or entity, is required to be
made or obtained by Buyer or any Affiliate of Buyer in connection with the
execution, delivery and performance of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby.
5.5 No Brokers. Neither Buyer nor any of its officers, directors,
----------
employees, shareholders or Affiliates has employed or made any agreement with
any broker, finder or similar agent or any person or firm which will result in
the obligation of Seller or any of its Affiliates to pay any finder's fee,
brokerage fees or commission or similar payment in connection with the
transactions contemplated hereby.
5.6 Litigation. There are no actions pending, threatened or anticipated
----------
against, related to or affecting Buyer seeking to delay, limit or enjoin
transactions such as the transaction contemplated by this Agreement.
5.7 Capitalization. The authorized capital stock of Buyer consists of
--------------
5,000,000 shares of Series Preferred Stock and 100,000,000 shares of Buyer
Common Stock. The Buyer Common Stock has the rights, preferences, privileges and
restrictions set forth in Buyer's Certificate of Incorporation and the Delaware
General Corporation Law. As of the date hereof and prior to the Closing,
27,794,737 shares of Buyer Common Stock are issued and outstanding. All such
issued and outstanding shares of Buyer Common Stock have been duly authorized
and validly issued, are fully paid and nonassessable and were issued in
compliance with all applicable state and federal laws concerning the issuance of
securities. On the Closing Date, following the issuance to Seller of the Buyer
Common Stock constituting the Purchase Price there will be 28,694,737 shares of
Buyer Common Stock issued and outstanding. Other than this Agreement and except
as set forth in Schedule 5.7, there are no agreements or other understandings,
written or oral, affecting the rights, preferences, privileges and restrictions
of any of Buyer's outstanding shares
14
<PAGE>
as set forth in the Certificate of Incorporation or the Bylaws of Buyer, true
and correct copies of which have been provided by Buyer to Seller.
5.8 Validity of Buyer Common Stock; Compliance with Securities Laws. The
---------------------------------------------------------------
Buyer Common Stock constituting the Purchase Price when issued and delivered in
accordance with the terms of this Agreement and Buyer's Certificate of
Incorporation, (i) will be duly and validly issued, fully paid and
nonassessable, (ii) will be free and clear of any Encumbrances and (iii) subject
to the accuracy of Seller's representations in Section 4.11 hereof, will be
issued in compliance with applicable federal and state securities laws;
provided, however, that the Buyer Common Stock constituting the Purchase Price
may be subject to restrictions on transfer under federal and state securities
laws.
5.9 SEC Reports and Financial Statements. Each form, report, schedule,
------------------------------------
registration statement and definitive proxy statement filed by Buyer with the
SEC (as such documents have been amended prior to the date hereof, the "Buyer
-----
SEC Reports"), as of their respective dates, complied in all material respects
-----------
with the applicable requirements of the Securities Act and the Exchange Act and
the rules and regulations thereunder and, since the first date on which Buyer
Common Stock was listed for trading on the NASDAQ National Market System, the
rules of the NASD. None of the Buyer SEC Reports, as of their respective dates,
contained any untrue statement of material fact or omitted any statement of a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Buyer included in such
Buyer SEC Reports (the "Buyer Financial Statements") comply as to form in all
--------------------------
material respects with applicable accounting requirements and with published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with US GAAP (except as may be indicated in the notes thereto, or in
the case of unaudited interim financial statements, as permitted by Form 10-Q of
the SEC) and fairly present in all material respects, subject, in the case of
the unaudited interim financial statements, to normal, year-end adjustments, the
consolidated financial position of Buyer as of the dates thereof.
ARTICLE VI.
COVENANTS OF SELLER AND BUYER
-----------------------------
Seller and Buyer each covenant with the other as follows:
6.1 Further Assurances. Upon the terms and subject to the conditions
------------------
contained herein, the parties agree, both before and after the Closing, (i) to
use all reasonable efforts to take, or cause to be taken, all actions and to do,
or cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement and the Ancillary
Agreements, (ii) to execute any documents, instruments or conveyances of any
kind which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder or thereunder, and (iii) to cooperate with
each other in connection with the foregoing.
6.2 Notification of Certain Matters. From the date hereof through the
-------------------------------
Closing, Seller shall give prompt notice to Buyer of, and Buyer shall give
prompt notice to Seller of (a) the
15
<PAGE>
occurrence, or failure to occur, of any event which occurrence or failure would
be likely to cause any representation or warranty contained in this Agreement or
any Ancillary Agreement, or in any exhibit or schedule hereto or thereto, to be
untrue or inaccurate in any material respect and (b) any material failure of
Seller, on the one hand, and Buyer on the other, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement or any Ancillary Agreement, or any exhibit or schedule hereto or
thereto, and each party shall use all reasonable efforts to remedy the same.
6.3 Access to Information. Seller shall cooperate with Buyer and provide
---------------------
Buyer and its authorized Representatives during the period between the date
hereof and the Closing Date with reasonable access to the Facilities, and will
permit Buyer and its authorized Representatives to make such inspections and
conduct such interviews and inquiries as Buyer may reasonably require in
connection with Buyer's review of the Business. With respect to those Facilities
owned by the Copackers, Buyer acknowledges that access is subject to Buyer's
receipt of the Copackers' prior consent and that such consent is not within
Seller's control. Buyer shall conduct all such inspections and other information
gathering described above only (a) at Buyer's sole cost and expense, (b) during
regular business hours, and (c) in a manner which will not unduly interfere with
the operation of the Business. Any and all such information gathered by Buyer as
a result of, or in connection with, such information gathering shall be kept
strictly confidential and shall not be revealed to, or discussed with, any
person other than the authorized Representatives of Buyer who agree to comply
with the Confidentiality Agreement and the provisions of this Section. In the
event the Closing is not consummated, such information shall be returned to the
Seller or destroyed in accordance with this Agreement and the Confidentiality
Agreement. Buyer shall indemnify Seller and hold it harmless from and against
any and all damages arising out of or resulting from the Buyer's information
gathering pursuant to this Agreement.
6.4 Consents; Books and Records; Commercially Reasonable Best Efforts.
-----------------------------------------------------------------
Buyer will, as soon as practicable, commence to take all action required to
obtain all consents, approvals and agreements of, and to give all notices and
make all other filings with, any third parties, including governmental
authorities, necessary to authorize, approve or permit the full and complete
sale, conveyance, assignment or transfer of the Purchased Assets, and Seller
shall cooperate with Buyer with respect thereto. Seller will deliver the Books
and Records to Buyer at the Closing, and to the extent any of the Books and
Records are not delivered at the Closing, they will be delivered to Buyer as
soon as practicable thereafter. In addition, subject to the terms and conditions
herein provided, each of the parties hereto covenants and agrees to use its
commercially reasonable best efforts to take, or cause to be taken, all action
or do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby and to cause the fulfillment of the parties'
obligations hereunder.
6.5 Conduct of Business. From the date hereof through the Closing, Seller
-------------------
will not take any action inconsistent with this Agreement or the Ancillary
Agreements or with the consummation of the Closing. Without limiting the
generality of the foregoing, Seller shall not, except as specifically
contemplated by this Agreement or as consented to by Buyer in writing:
16
<PAGE>
(a) enter into, extend, materially modify, terminate or renew any Contract,
except in the ordinary course of business; and
(b) enter into any agreement, or otherwise become obligated, to do any
action prohibited hereunder.
6.6 Updated Schedules. From the date hereof through the Closing Date,
-----------------
Seller and Buyer shall update those portions of the Schedules relating to the
representations and warranties contained in Articles IV and V hereof,
respectively, in each case to reflect changes thereto through the Closing Date.
6.7 Copack Agreement. Buyer and Seller shall negotiate in good faith and
----------------
use their respective commercially reasonable efforts to finalize the definitive
agreement contemplated by the term sheet attached as Exhibit D relating to the
Copack Agreement (the "Term Sheet"), prior to the Closing Date so that such
----------
definitive agreement may be executed and delivered at the Closing (it being
understood that such execution and delivery shall not be a condition to the
Closing to either party's obligation to consummate the Closing). If a definitive
agreement contemplated by the Term Sheet is not executed and delivered at the
Closing, the parties shall operate under the terms and conditions of the Term
Sheet (if any) pending execution of such definitive agreement.
ARTICLE VII.
CONDITIONS TO SELLER'S OBLIGATIONS
----------------------------------
The obligations of Seller to consummate the transactions provided for
hereby are subject to the satisfaction, on or prior to the Closing Date, of each
of the following conditions, any of which may be waived by Seller:
7.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at and as of the date of this Agreement and at and as of the
Closing Date, and Buyer shall have performed and satisfied in all material
respects all agreements and covenants required hereby to be performed by it
prior to or on the Closing Date (other than such agreements and covenants which,
by their terms, are qualified by materiality, which agreements and covenants
shall be fully performed in accordance with their terms).
7.2 Consents; Regulatory Compliance and Approval. All consents, approvals
--------------------------------------------
and waivers from governmental authorities and other parties necessary to permit
Seller to transfer the Purchased Assets to Buyer as contemplated hereby shall
have been obtained, unless the failure to obtain any such consent, approval or
waiver would not have a Material Adverse Effect.
7.3 No Actions or Court Orders. No Action by any governmental authority or
--------------------------
Court Order shall have been instituted seeking to enjoin or otherwise prevent
the transactions contemplated by this Agreement or the Ancillary Agreements.
7.4 Ancillary Documents. Buyer shall have executed and delivered each of
-------------------
the documents and/or deliveries set forth in Section 3.2(b).
17
<PAGE>
7.5 Opinion of Counsel to Buyer. Buyer shall have delivered to Seller an
---------------------------
opinion of counsel to Buyer, dated as of the Closing Date, in form and substance
reasonably satisfactory to Seller, to the effect that:
(a) Incorporation. Buyer is a corporation duly incorporated, validly
-------------
existing and in good standing under the laws of the State of Delaware;
(b) Corporate Power and Authority. Buyer has the corporate power and
-----------------------------
authority to enter into this Agreement and the Ancillary Agreements to which it
is a party and to perform its obligations hereunder and thereunder, and Buyer
has corporate power and authority to own its assets and to conduct its business
as presently conducted;
(c) Corporate Action and Enforceability. The execution, delivery and
-----------------------------------
performance of this Agreement and the Ancillary Agreements to which Buyer is a
party have been duly authorized by all necessary corporate action of Buyer; this
Agreement and the Ancillary Agreements to which it is a party has been duly
executed and delivered by Buyer, and no approval of the stockholders of Buyer is
required in connection therewith or, if required, such approval has been duly
obtained in accordance with the provisions of Buyer's Certificate of
Incorporation and Bylaws and applicable law; and this Agreement and each
Ancillary Agreement to which Buyer is a party constitutes a legally valid and
binding obligation of Buyer, enforceable against it in accordance with their
respective terms, except as limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights or remedies of creditors; (ii) the effect of
general principles of equity, whether enforcement is considered in a proceeding
in equity or at law, and the discretion of the court before which any proceeding
therefor may be brought; and (iii) the unenforceability under certain
circumstances under law or court decisions of provisions providing for the
indemnification of or contribution to a party with respect to a liability where
such indemnification or contribution is contrary to public policy;
(d) No Breach of Contract. Neither the execution and delivery by Buyer of
---------------------
this Agreement or the Ancillary Agreements to which it is a party nor the
consummation of the transactions contemplated hereby or thereby will (i) violate
the Certificate of Incorporation or Bylaws of Buyer, (ii) cause a Default under
any term or provision of any contract known to such counsel to which Buyer is a
party or by which Buyer is bound or (iii) to the knowledge of such counsel,
violate any Court Order applicable to Buyer;
(e) Capitalization of Buyer. The authorized capital stock of Buyer consists
-----------------------
of 5,000,000 shares of Series Preferred Stock and 100,000,000 shares of Buyer
Common Stock, 27,794,737 shares of which are issued and outstanding; the Buyer
Common Stock has been duly and validly authorized and is validly issued, fully
paid and nonassessable;
(f) Assumption of Assumed Liabilities. The documents to be delivered by
---------------------------------
Buyer at the Closing to effect the assumption by Buyer of the Assumed
Liabilities are effective to do so, subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights or remedies of creditors; (ii) the effect of
general principles of equity, whether enforcement is considered in a proceeding
in equity or at law, and the discretion of the court before which any proceeding
therefor may be brought; and
18
<PAGE>
(iii) the unenforceability under certain circumstances under law or court
decisions of provisions providing for the indemnification of or contribution to
a party with respect to a liability where such indemnification or contribution
is contrary to public policy; and
(g) Validity of Buyer Common Stock; Compliance with Securities Laws. The
---------------------------------------------------------------
Buyer Common Stock constituting the Purchase Price when issued and delivered in
accordance with the terms of this Agreement and Buyer's Certificate of
Incorporation, (i) will be duly and validly issued, fully paid and
nonassessable, (ii) will be free and clear of any Encumbrances and (iii) subject
to the accuracy of Seller's representations in Section 4.11 hereof, will be
issued in compliance with applicable federal and state securities laws;
provided, however, that the Buyer Common Stock constituting the Purchase Price
may be subject to restrictions on transfer under federal and state securities
laws.
In rendering such opinions, such counsel may rely as they deem advisable (i) as
to matters governed by the laws of jurisdictions other than states in which they
maintain offices, upon opinions of local counsel satisfactory to such counsel
and (ii) as to factual matters, upon certificates and assurances of public
officials and officers of Buyer. In addition, such opinions may be subject to
such additional qualifications and exceptions as are reasonably acceptable to
counsel to Seller.
ARTICLE VIII.
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
The obligations of Buyer to consummate the transactions provided for hereby
are subject to the satisfaction, on or prior to the Closing Date, of each of the
following conditions, any of which may be waived by Buyer:
8.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Seller contained in this Agreement shall be true and correct in
all material respects at and as of the date of this Agreement and at and as of
the Closing Date, and Seller shall have performed and satisfied in all material
respects all agreements and covenants required hereby to be performed by it
prior to or on the Closing Date (other than such agreements and covenants which,
by their terms, are qualified by materiality, which agreements and covenants
shall be fully performed in accordance with their terms).
8.2 Consents; Regulatory Compliance and Approval. All consents, approvals
--------------------------------------------
and waivers from governmental authorities and other parties necessary to the
consummation of the transactions contemplated hereby shall have been obtained,
unless the failure to obtain any such consent, approval or waiver would not have
a Material Adverse Effect.
8.3 No Actions or Court Orders. No Action by any governmental authority or
--------------------------
Court Order shall have been instituted seeking to enjoin or otherwise prevent
the transactions contemplated by this Agreement or the Ancillary Agreements.
8.4 Ancillary Documents. Seller shall have executed and delivered each of
-------------------
the documents and/or deliveries set forth in Section 3.2(a).
19
<PAGE>
ARTICLE IX.
ACTIONS BY SELLER AND BUYER AFTER THE CLOSING
---------------------------------------------
9.1 Tax Matters. Only as related to the Business, Seller and Buyer shall
-----------
(i) each provide the other with such assistance as may reasonably be requested
by any of them in connection with the preparation of any return, audit, or other
examination by any taxing authority or judicial or administrative proceedings
relating to Liability for Taxes, (ii) each retain and provide the other with any
records or other information that may be relevant to such return, audit or
examination, proceeding or determination, and (iii) each provide the other with
any final determination of any such audit or examination, proceeding, or
determination that affects any amount required to be shown on any tax return of
the other for any period. Without limiting the generality of the foregoing,
Buyer and Seller shall each retain, until the applicable statutes of limitations
(including any extensions) have expired, copies of all tax returns, supporting
work schedules, and other records or information that may be relevant to such
returns for all tax periods or portions thereof ending on or before the Closing
Date.
ARTICLE X.
SURVIVAL AND INDEMNIFICATION
----------------------------
10.1 Survival of Representations, Etc. The representations and warranties
--------------------------------
of Seller contained in Sections 4.1 and 4.2, and the representations and
warranties of Buyer contained in Sections 5.1, 5.2 and 5.8 (in each case, as
updated pursuant to Section 6.6 and as in effect on the Closing Date) shall
survive the Closing Date and shall terminate only when the applicable statutes
of limitations with respect to the liabilities in question expire. All other
representations and warranties of Seller and Buyer contained herein (in each
case, as updated pursuant to Section 6.6 and as in effect on the Closing Date)
shall survive the Closing Date and shall terminate eighteen months after the
Closing Date. Upon the termination of a representation or warranty in accordance
with the foregoing, such representation or warranty shall have no further force
or effect for any purpose under this Agreement, including Section 10.2 hereof,
provided that, any representation or warranty in respect of which indemnity may
be sought under Section 10.2, and the indemnity with respect thereto, shall
survive the time at which it would otherwise terminate pursuant to this Section
10.1 if notice of the inaccuracy or breach thereof giving rise to such right of
indemnity shall have been given to the party against whom such indemnity may be
sought prior to such time. The election by any party to consummate the
transactions contemplated by this Agreement, notwithstanding such party's actual
knowledge of the inaccuracy of any representation or warranty contained herein,
shall constitute a waiver by such party of any claim for indemnification arising
out of the breach of such representation or warranty.
10.2 Indemnifications.
----------------
(a) By Seller. Seller shall indemnify Buyer and its Representatives and
---------
Affiliates, and hold each of them harmless from and against any and all Damages
incurred by any of them in connection with, arising out of, or resulting from
(i) any breach of any representation or warranty made by Seller in this
Agreement (in each case, as updated pursuant
20
<PAGE>
to Section 6.6 as in effect on the Closing Date); or (ii) any failure by Seller
to perform in a timely manner any agreement, covenant or obligation of Seller
pursuant to this Agreement.
(b) By Buyer. Buyer shall indemnify Seller and its Representatives and
--------
Affiliates, and hold each of them harmless from and against any and all Damages
incurred by any of them in connection with, arising out of or resulting from (i)
any breach or inaccuracy of any representation or warranty made by Buyer in this
Agreement (as updated pursuant to Section 6.6 and as in effect on the Closing
Date) or (ii) any failure by Buyer to perform in a timely manner any agreement,
covenant or obligation of Buyer pursuant to this Agreement.
(c) Defense of Claims. If a claim for Damages (a "Claim") is to be made by
----------------- -----
a party entitled to indemnification hereunder (the "Indemnified Party") against
-----------------
the party from whom indemnification is claimed (the "Indemnifying Party"), the
------------------
Indemnified Party shall give written notice (a "Claim Notice") to the
------------
Indemnifying Party as soon as practicable after the Indemnified Party becomes
aware of any fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 10.2. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the Indemnifying
Party as promptly as practicable (and in any event within ten (10) business days
after the service of the citation or summons). The failure of any Indemnified
Party to give timely notice hereunder shall not affect rights to indemnification
hereunder, except to the extent that the Indemnifying Party demonstrates actual
damage caused by such failure. Notwithstanding the foregoing, a Claim Notice
that relates to a representation or warranty that is subject to a survival
period set forth in Section 10.1 must be made within such survival period,
whether or not the Indemnifying Party is prejudiced by any failure to give the
Claim Notice. The Claim Notice shall describe in reasonable detail the nature of
the Claim, including an estimate of the amount of Damages that have been or may
be suffered or incurred by the Indemnified Party attributable to such Claim, the
basis of the Indemnified Party's request for indemnification under the Agreement
and all information in the Indemnified Party's possession relating to such
Claim. After receipt of such Claim Notice, the Indemnifying Party shall be
entitled, if it so elects, at its own cost, risk and expense, (i) to take
control of the defense and investigation of such lawsuit or action and (ii) to
employ and engage attorneys of its own choice to handle and defend the same. If
the Indemnifying Party fails to assume the defense of such Claim within ten (10)
business days after receipt of the Claim Notice, the Indemnified Party against
which such Claim has been asserted will (upon delivering notice to such effect
to the Indemnifying Party) have the right to undertake, at the Indemnifying
Party's cost and expense, the defense, compromise or settlement of such Claim on
behalf of and for the account and risk of the Indemnifying Party; provided,
however, that such Claim shall not be compromised or settled without the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld. In the event the Indemnified Party assumes the defense of the Claim,
the Indemnified Party will keep the Indemnifying Party reasonably informed of
the progress of any such defense, compromise or settlement. Notwithstanding the
foregoing, the Indemnified Party shall be entitled to conduct its own defense at
the cost and expense of the Indemnifying Party if the Indemnified Party
establishes that the conduct of its defense by the Indemnifying Party would
reasonably be likely to prejudice materially the Indemnified Party due to a
conflict of interest between the Indemnified Party and the Indemnifying Party;
and provided further that in any event the Indemnified Party may participate in
such defense at its own expense.
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(d) Settlement. In the event that the Indemnified Party settles any Claim
----------
without the prior written consent of the Indemnifying Party, the Indemnifying
Party shall have no further indemnification obligations under this Section 10.2
with respect to such Claim; provided, however, that if the Indemnifying Party
refuses to defend or otherwise handle such Claim and it is subsequently
determined that the Indemnifying Party is or was obligated to defend or
indemnify the Indemnified Party with respect to such Claim, then the
Indemnifying Party shall remain obligated with respect to such settlement
amount. If the Indemnifying Party shall control the defense of any such Claim,
the Indemnifying Party shall obtain the prior written consent of the Indemnified
Party (which shall not be unreasonably withheld) before entering into any
settlement of a Claim or ceasing to defend such Claim if, pursuant to or as a
result of such settlement or cessation, injunctive or other equitable relief
shall be imposed against the Indemnified Party or if such settlement or
cessation does not expressly and unconditionally release the Indemnified Party
from all liabilities and obligations with respect to such Claim with prejudice.
In the event that the Indemnifying Party proposes a settlement to any Claim with
respect to which the Indemnifying Party is or was entitled to defend, which
settlement is satisfactory to the party instituting such Claim, and the
Indemnified Party withholds its consent to such settlement, and thereafter a
final judgment is entered against the Indemnifying Party or Indemnified Party
pursuant to which Damages exceed the amount of the proposed settlement, then in
such case the Indemnifying Party shall have no obligation to indemnify the
Indemnified Party under this Section 10.2 against and in respect of the amount
by which the Damages resulting from such final judgment exceed the amount of the
proposed settlement.
(e) Mitigation. Each Indemnified Party shall have an obligation to mitigate
----------
Damages under this Agreement, and to that end each party shall use its
reasonable efforts and shall consult and cooperate with each other with a view
towards mitigating claims, losses, liabilities, Damages, deficiencies, costs and
expenses that may give rise to claims for indemnification under this Section
10.2.
(f) Cooperation. In the event that any action, suit, proceeding or
-----------
investigation relating hereto or to the transactions contemplated by this
Agreement is commenced, whether before or after the Closing, the parties hereto
agree to cooperate and use reasonable efforts to vigorously defend against and
respond thereto and make available to each other such personnel, witnesses,
books, records, documents or other information within its control that are
necessary or appropriate for such defense (except for trade secrets and such
items which may not be made available pursuant to a Court Order); provided that,
subject to Section 10.2(c), the Indemnifying Party shall reimburse the
Indemnified Party for its out-of-pocket expenses incurred in connection
therewith.
(g) Product and Warranty Liability. The provisions of this Section 10.2
------------------------------
shall cover, without limitation, all liabilities of whatsoever kind, nature or
description relating, directly or indirectly, to product liability, litigation
or claims against Buyer or Seller in connection with, arising out of, or
relating to products set forth on Schedule 1.1A by Buyer or Seller, as
applicable.
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(h) Limitations.
-----------
(i) Neither Buyer nor Seller shall be liable to the other under this
Section 10.2 for any Damages due pursuant to Section 10.2(a)(i) or Section
10.2(b)(i) exclusively, unless and until (i) each individual amount otherwise
due the Indemnified Party exceeds Sixty Thousand Dollars ($60,000) (excluding
legal fees and expenses), and (ii) the aggregate amount of all such Damages
under this Agreement and the Intellectual Property Purchase Agreement otherwise
due the Indemnified Party (excluding Damages incurred in any individual claim of
less than Sixty Thousand Dollars ($60,000)) exceeds an accumulated total of
$200,000, and thereafter the total amount of all such Damages in excess of Sixty
Thousand Dollars ($60,000) per claim (excluding legal fees and expenses)
actually incurred (excluding the $200,000) shall be indemnifiable.
(ii) Neither (A) Seller's aggregate liability under (I) Sections 10.2(a)
and 10.3 of this Agreement and (II) Section 6.2(a) of the Intellectual Property
Purchase Agreement, for all claims for Damages incurred by Buyer (and its
Representatives and Affiliates) nor (B) Buyer's aggregate liability under (I)
Sections 10.2(b) and 10.3 of this Agreement and (II) Section 6.2(a) of the
Intellectual Property Purchase Agreement, for all claims for Damages incurred by
Seller (and its Representatives and Affiliates), shall in any event exceed the
sum of (x) the Market Price of the Buyer Common Stock received by Seller
hereunder which are still owned by Seller on the date of the Claim Notice,
calculated as of the date of the Claim Notice, and (y) the cash sale price
received by Seller for all sales of any Buyer Common Stock received hereunder
prior to the date of the Claim Notice. For purposes of this Section 10.2,
"Market Price" shall mean the average of the closing prices for the Buyer Common
------------
Stock on the NASDAQ National Market on the five (5) business days immediately
preceding the date of the relevant Claim Notice.
(i) In no event shall any party be liable for any incidental,
consequential, indirect or special losses or damages (including, without
limitation, lost profits, lost revenues and loss of business), whether
foreseeable or not, whether occasioned by any failure to perform or the breach
of any representation, warranty, covenant or other obligation under this
Agreement for any cause whatsoever.
(j) Nothing herein shall relieve either party of any liability to make any
payment expressly required to be made by such party pursuant to this Agreement.
(k) With regard to this Section 10.2, Buyer acknowledges that it has read
and is familiar with, and hereby waives the benefit of, the provisions of
California Civil Code Section 1542, which is set forth below:
"A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor."
(l) Seller, at its option, may pay any amount due under Section 10.2(a) in
Buyer Common Stock, which stock shall be valued for the purposes thereof at the
Market Price of such Buyer Common Stock.
23
<PAGE>
10.3 Tax Indemnifications. Except as otherwise provided in Section 2.5
--------------------
hereof and in the next sentence of this Section, Seller shall pay, or cause to
be paid, when due all Taxes for which Seller is or may be liable and shall
indemnify and hold harmless Buyer, its Affiliates, successors and assigns, from
and against any and all Taxes of the Seller, its Affiliates and any
consolidated, combined or unitary group of which Seller is or was a member.
Buyer shall indemnify and hold harmless Seller, its Affiliates, successors and
assigns, from and against any and all Taxes of the Buyer for any Taxes in
respect of the Purchased Assets and income of the Business for the period or
portions of periods beginning on and after the Closing Date.
10.4 Insurance Proceeds. With respect to any Claim required to be
------------------
indemnified pursuant to this Agreement, so long as the Indemnifying Party has
complied with its indemnification obligations on such Claim, (i) to the extent
available, the Indemnified Party shall assign to the Indemnifying Party any
applicable proceeds under any insurance policy which covers the matter which is
the subject of the indemnification and shall take reasonable steps to insure
that the Indemnifying Party obtains the benefits of such policy, including
providing any notices as required under such policy; and (ii) if the Indemnified
Party receives insurance proceeds with respect to any Damages paid by the
Indemnifying Party, then the Indemnified Party shall reimburse the Indemnifying
Party in an amount equivalent to such proceeds up to the amount actually paid by
the Indemnifying Party.
10.5 Exclusive Remedy. The rights of Buyer under Section 10.2 shall be the
----------------
exclusive remedy of Buyer with respect to claims based upon a breach or alleged
breach of the representations, warranties and covenants of Seller contained
herein. The rights of Seller under Section 10.2 shall be the exclusive remedy of
Seller with respect to claims based upon a breach or alleged breach of the
representations, warranties and covenants of Buyer contained herein. Except as
expressly set forth in this Agreement, neither Seller nor any of its
Representatives or Affiliates makes or has made any representations or
warranties, express or implied, in connection with the transactions contemplated
by this Agreement. Without limiting the generality of the foregoing, except as
expressly set forth in this Agreement, (i) the Purchased Assets shall be
transferred to Buyer pursuant to this Agreement in their present condition, "AS
IS" and without any warranty, express or implied; and (ii) no patent or latent
physical condition or defect in any of the Purchased Assets, whether or not now
known or discovered shall affect the rights of either party.
ARTICLE XI.
MISCELLANEOUS
-------------
11.1 Termination.
-----------
(a) Termination. This Agreement may be terminated at any time prior to
-----------
Closing:
(i) By mutual written consent of Buyer and Seller;
(ii) By Buyer or Seller if the Closing shall not have occurred on or before
August 31, 2000; provided, however, that this provision shall not be available
to Buyer if
24
<PAGE>
Seller has the right to terminate this Agreement under clause (iv) of this
Section 11.1, and this provision shall not be available to Seller if Buyer has
the right to terminate this Agreement under clause (iii) of this Section 11.1;
(iii) By Buyer if there is a material breach of any representation or
warranty set forth in Article IV hereof or any covenant or agreement to be
complied with or performed by Seller pursuant to the terms of this Agreement,
provided that Buyer may not terminate this Agreement prior to the Closing Date
if Seller has not had an adequate opportunity to cure such failure; or
(iv) By Seller if there is a material breach of any representation or
warranty set forth in Article V hereof or of any covenant or agreement to be
complied with or performed by Buyer pursuant to the terms of this Agreement,
provided that Seller may not terminate this Agreement prior to the Closing Date
if Buyer has not has an adequate opportunity to cure such failure.
(b) In the Event of Termination. In the event of termination of this
---------------------------
Agreement:
(i) Each party will redeliver all documents, work papers and other material
of any other party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party furnishing the same;
(ii) The provisions of the Confidentiality Agreement shall continue in full
force and effect; and
(iii) No party hereto shall have any Liability to any other party to this
Agreement, except as stated in subsections (i), (ii) and (iii) of this Section
11.1(b), except for any willful breach of this Agreement occurring prior to the
proper termination of this Agreement.
11.2 Assignment. Neither this Agreement nor any of the rights or
----------
obligations hereunder may be assigned by any party without the prior written
consent of the other parties, except that Seller may assign any of its rights or
obligations under this Agreement to any one or more of Seller's Affiliates as
long as Seller shall remain responsible therefor. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, and no other person shall
have any right, benefit or obligation under this Agreement as a third party
beneficiary or otherwise.
11.3 Notices. All notices, requests, demands and other communications which
-------
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given when received if personally delivered; when
transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (e.g., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
25
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If to Seller, addressed to:
Nestle USA, Inc.
800 North Brand Boulevard
Glendale, California 91203
Attn: Kristin Adrian, Esq.
Senior Vice President and General Counsel
Tel: (818) 549-6703
Fax: (818) 549-6713
With copies to:
Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, California 94111-2562
Attn: John M. Newell, Esq.
Tel: 415-391-0600
Fax: 415-395-8095
If to Buyer, addressed to:
nutrisystem.com inc.
202 Welsh Road
Horsham, PA 19044
Attn: James D. Brown
Tel: 215-706-5302
Fax: 215-706-5388
With a copy to:
Duane, Morris & Heckscher LLP
4200 One Liberty Place
Philadelphia, PA 19103-7396
Attn: Frederick W. Dreher, Esq.
Tel: 215-979-1234
Fax: 215-979-1213
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
11.4 Choice of Law. This Agreement shall be construed, interpreted and the
-------------
rights of the parties determined in accordance with the laws of the State of
California (without reference to its choice of law provisions).
11.5 Jurisdiction; Services of Process. Any action or proceeding seeking to
------------
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the State of
California, County of Los Angeles, or, if it has or can acquire jurisdiction, in
the United States District Court for the Central District of California,
26
<PAGE>
and each of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred to
in the preceding sentence may be served on any party in the country in which
such party has its principal place of business.
11.6 Entire Agreement; Amendments and Waivers. This Agreement and the
----------------------------------------
Ancillary Agreements, together with all exhibits and schedules hereto and
thereto (including the Schedules), and the Confidentiality Agreement,
constitutes the entire agreement among the parties hereto and their Affiliates
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. No amendment, supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party 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 hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
11.7 Multiple Counterparts. This Agreement may be executed in one or more
---------------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.8 Expenses. Except as otherwise specified in this Agreement, each party
--------
hereto shall pay its own legal, accounting, out-of-pocket and other expenses
incident to this Agreement and to any action taken by such party in preparation
for carrying this Agreement into effect.
11.9 Severability of Provisions. If any provision of this Agreement or the
--------------------------
application thereof to any person or circumstances shall to any extent be held
in any proceeding to be invalid or unenforceable, the remainder of this
Agreement, or the application of such provision to persons or circumstances
other than those to which it was held to be invalid or unenforceable, shall not
be affected thereby, and shall be valid and enforceable to the fullest extent
permitted by law, but only if and to the extent such enforcement would not
materially and adversely frustrate the parties' essential objectives as
expressed herein.
11.10 Titles; Gender. The titles, captions or headings of the Articles and
--------------
Sections herein, and the use of a particular gender, are for convenience of
reference only and are not intended to be a part of or to affect or restrict the
meaning or interpretation of this Agreement.
11.11 Publicity. Neither Buyer nor Seller shall issue any press release or
---------
make any public statement regarding the transactions contemplated hereby,
without prior written approval of the other party.
11.12 Confidential Information.
------------------------
(a) No Disclosure. The parties acknowledge that the transaction described
-------------
herein is of a confidential nature and shall not be disclosed except to
consultants, advisors and Affiliates, or as required by law, until such time as
the parties make a public announcement regarding the transaction as provided in
Section 11.11.
27
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(b) Preservation of Confidentiality. In connection with the negotiation of
-------------------------------
this Agreement, the preparation for the consummation of the transactions
contemplated hereby, and the performance of obligations hereunder, each party
acknowledges that it will have access to confidential information (such party
being the "Recipient") relating to the other party (such other party being the
---------
"Provider"), including technical, manufacturing or marketing information, ideas,
--------
methods, developments, inventions, improvements, business plans, trade secrets,
scientific or statistical data, diagrams, drawings, specifications or other
proprietary information relating thereto, together with all analyses,
compilations, studies or other documents, records or data prepared by Provider
or its Representatives which contain or otherwise reflect or are generated from
such information ("Confidential Information"). The term "Confidential
------------------------
Information" does not include information received by Recipient in connection
with the transactions contemplated hereby which (i) is or becomes generally
available to the public other than as a result of a disclosure by Recipient or
its Representatives, (ii) was within Recipient's possession prior to its being
furnished to Recipient by or on behalf of the Provider in connection with the
transactions contemplated hereby, provided that the source of such information
was not known by Recipient to be bound by a confidentiality agreement with or
other contractual, legal or fiduciary obligation of confidentiality to Provider
or any other Person with respect to such information or (iii) becomes available
to Recipient on a non-confidential basis from a source other than Provider or
any of its Representatives, provided that such source is not bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to Provider or any other Person with respect to
such information.
(c) Recipient shall treat all Confidential Information as confidential,
preserve the confidentiality thereof and not disclose any Confidential
Information, except to its Representatives and Affiliates who need to know such
Confidential Information in connection with the transactions contemplated
hereby. Recipient shall use all reasonable efforts to cause its Representatives
to treat all Confidential Information as confidential, preserve the
confidentiality thereof and not disclose any Confidential Information. Recipient
shall be responsible for any breach of this Agreement by any of its
Representatives. If, however, Confidential Information is disclosed, Recipient
shall immediately notify Provider in writing and take all reasonable steps
required to prevent further disclosure.
(d) Until the Closing or the termination of this Agreement, all
Confidential Information shall remain the property of the party who originally
possessed such information. In the event of the termination of this Agreement
for any reason whatsoever, Recipient shall, and shall cause its Representatives
to, return to Provider all Confidential Information (including all copies,
summaries and extracts thereof) furnished to Recipient by Provider in connection
with the transactions contemplated hereby.
(e) If Recipient or any of its Representatives or Affiliates is requested
or required (by oral questions, interrogatories, requests for information or
documents in legal proceedings, subpoena, civil investigative demand or other
similar process) or is required by operation of law to disclose any Confidential
Information, Recipient shall provide Provider with prompt written notice of such
request or requirement, which notice shall, if practicable, be at least 48 hours
prior to making such disclosure, so that Provider may seek a protective order or
other appropriate remedy and/or waive compliance with the provisions of this
Agreement. If, in the absence of a protective order or other remedy or the
receipt of such a waiver, Recipient or
28
<PAGE>
any of its Representatives are nonetheless, in the opinion of counsel, legally
compelled to disclose Confidential Information, then Recipient may disclose that
portion of the Confidential Information which such counsel advises is legally
required to be disclosed, provided that Recipient uses its reasonable efforts to
preserve the confidentiality of the Confidential Information, whereupon such
disclosure shall not constitute a breach of this Agreement.
11.13 No Third-Party Beneficiary. The provisions of this Agreement are for
--------------------------
the benefit only of the parties hereto, and no third party may seek to enforce,
or benefit from, these provisions. The parties specifically disavow any desire
or intention to create any third-party beneficiary hereunder, and specifically
declare that no person or entity, except for the parties and their successors,
shall have any right hereunder nor any right of enforcement hereof.
11.14 Representation of Counsel; Mutual Negotiation. Each party has had the
-------------------------
opportunity to be represented by counsel of its choice in negotiating this
Agreement. This Agreement shall therefore be deemed to have been negotiated and
prepared at the joint request, direction, and construction of the parties, at
arm's-length, with the advice and participation of counsel, and will be
interpreted in accordance with its terms without favor to any party. The
parties' respective counsel may not be disqualified from representing their
clients in indemnification or other disputes arising out of this transaction by
virtue of such counsel's prior representation of the other party in an unrelated
matter.
11.15 No Reliance on Other Information. Except for the representations and
--------------------------------
warranties contained in this Agreement, neither Seller nor Buyer or any of their
respective Representatives or Affiliates or other persons acting for any of them
makes any other representation or warranty, express or implied, with respect to
the Purchased Assets, Business, financial condition or prospects or the
execution, delivery or performance of this Agreement or with respect to the
transactions contemplated hereby, and each party hereby disclaims any such
representation or warranty, whether oral or written, whether by such party or
any of its Representatives or Affiliates or any other person. Each party
acknowledges that neither such party nor any other person has made any
representation or warranty, express or implied, as to the accuracy or
completeness of any information regarding such party not included in this
Agreement or the Schedules attached hereto, and neither party nor any other
person will have or be subject to any liability to the other party or any other
person resulting from the distribution to such other party, or such other
party's use of, any such information (including, without limitation, any
brochures, offering memoranda or other publications distributed in connection
with the sale of Purchased Assets or in any presentation by the management of
Seller and any estimates of anticipated performance of the Business).
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf, by their respective officers thereunto
duly authorized, all as of the day and year first above written.
NESTLE USA, INC. NUTRISYSTEM.COM INC.
By By /s/ Brian Haveson
----------------------------------- -----------------------------------
Name: Name: Brian Haveson
------------------------------ -----------------------------
Its Its President & CEO
-------------------------------- -------------------------------
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf, by their respective officers thereunto
duly authorized, all as of the day and year first above written.
NESTLE USA, INC. NUTRISYSTEM.COM INC.
By /s/ Peter Argentine By
----------------------------------- -----------------------------------
Name: Peter Argentine Name:
------------------------------ -----------------------------
Its Executive Vice President and Its
-------------------------------- -------------------------------
Chief Financial Officer
--------------------------------
31
