SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
November 23, 1999
Date of Report
(Date of earliest event reported)
BIO-RESPONSE, INC. (n/k/a LIBERTY GROUP HOLDINGS, INC.)
(Exact name of registrant as specified in its charter)
Delaware 0-9201 59-3453151
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1612 N. Osceola Avenue, Clearwater, Florida 33755
(Address of registrant's principal executive offices)
(727) 443-3434
(Registrant's telephone number, including area code)
<PAGE>
Items 1, 2 and 5. Changes in Control of Registrant; Acquisition or Disposition
of Assets; Other Events.
The Merger and Asset Purchase
-----------------------------
On November 23, 1999, Bio-Response, Inc., a Delaware corporation (the
"Company"), announced that the Company and BR Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of the Company ("Merger Sub"),
executed and delivered an Agreement and Plan of Merger with Liberty Food Group,
Ltd., a Delaware corporation ("Liberty"), pursuant to which Merger Sub merged
with and into Liberty (the "Merger"), and the Company issued 4,500,000 shares of
common stock, par value $0.004 per share (the "Common Stock") to the
stockholders of Liberty. As a direct result of the Merger, Liberty Food Group,
LLC, a Delaware limited liability company which is wholly owned by the Company
(the "Buyer"), purchased all the assets of Ferro Foods Corporation, a New York
corporation ("Ferro"), in consideration of the issuance to Ferro of 2,000,000
shares (the "Ferro Shares") of Common Stock. The purchase by Liberty Food Group,
LLC of the assets of Ferro is hereinafter referred to as the "Asset Purchase".
Ferro was in the business of marketing and distributing restaurant pizzeria
food items and supplies. Upon consummation of the Merger and Asset Purchase, the
Company, through its wholly-owned limited liability company, owns all the assets
necessary to operate the business of Ferro, including without limitation, the
inventory, accounts receivable, equipment, vehicles, contract rights, the name
"Ferro Foods Corporation" and the goodwill of the business. The sole
consideration paid for the assets was the Ferro Shares. The Company did not
assume any debts, liabilities or obligations of Ferro in the Asset Purchase.
The Ferro Shares represent 31.37% of the issued and outstanding share
capital of the Company after the consummation of the Merger and Asset Purchase.
The Ferro Shares have been placed in escrow and shall not be released until the
Buyer determines, in its sole and absolute discretion, that Ferro has entered
into a financial accommodation sufficient to satisfy the outstanding debts and
liabilities connected with the business of Ferro. If such accommodation is not
established prior to December 24, 1999, only half of the Ferro Shares
(1,000,000) will be released to Ferro and the balance will be returned to the
Company. Moreover, the Ferro Shares are subject to a lock-up agreement and may
not be sold or transferred (other than to the two shareholders of Ferro) until
November 24, 2001.
In addition, Ferro and its principals executed a Voting Trust and Proxy
Agreement pursuant to which Barry Hawk has the sole power to vote the Ferro
Shares. See "Directors and Officers of the Company" below.
<PAGE>
Pursuant to the Merger, the Company assumed the Employment Agreements
between Liberty and each of Barry Hawk and Dennis Lane and the Option Agreements
between Liberty and each of Barry Hawk and Dennis Lane. Each of the employment
agreements with Messrs. Lane and Hawk is for a five-year term which commenced
July 1, 1999 and is automatically extended on a year-to-year basis unless
terminated by either party by notice given not less than 60 days prior to the
end of the then-current employment term. Commencing as of July 1, 1999, Mr. Lane
and Mr. Hawk are entitled to receive a base salary of $175,000 and $160,000,
respectively, per year, with annual increases each year thereafter at the
greater of 10% of the previous year's base salary or in an amount which is equal
to the proportionate annual increase in the Consumer Price Index-All Items. Each
of Messrs. Lane and Hawk are entitled to a cash bonus equal to no less than 10%
of their respective annual base salary if the Company has achieves either
$100,000 pre-tax earnings or a 10% growth in revenues for the previous 12-month
period (measured each July 1st through June 30th). The amount of the bonus,
which is payable based on the Company's unaudited financials as of June 30th
each year of the employment agreement, shall not be less than 10% and not more
than 100% of the amount of the then-current base salary.
Each of the employment agreements with Messrs. Lane and Hawk are subject to
termination by the Company only for cause upon 90 days' written notice if either
Mr. Lane or Mr. Hawk, as the case may be, has been convicted for any material
act of fraud, misappropriation, embezzlement, disloyalty, dishonesty or breach
of trust against the Company or any of its subsidiaries or affiliated companies.
Notwithstanding such termination, the Company will remain obligated to pay the
employee his annual base salary through the date of termination. In the event of
the employee's death or total disability, or a change of control of the Company,
he will be entitled to receive a death or disability benefit equal to the
remainder of the base salary and the bonus as if the earnings or growth levels
were met. for the balance of the five-year term of the agreement.
In connection with the option agreements assumed by the Company in the
Merger, each of Messrs. Hawk and Lane, are entitled to exercise their options to
purchase 275,000 shares of Common Stock at an exercise price of $.004 per share
pursuant to said option agreements. Said options were exercisable if between
July 1, 1999 through June 30, 2000 Liberty either (a "Threshold Benchmark")
achieved a 20% growth in revenues or acquired a company with at least $5,000,000
in revenues. The stock option agreements assumed by the Company also provide for
the following vesting of options exercisable for shares of Common Stock by each
of Messrs. Hawk and Lane: (i) if between July 1, 2000 and June 30, 2001 a
Threshold Benchmark is met, options to acquire 400,000 shares of Common Stock at
an exercise price of $1.00; (ii) if between July 1, 2001 and June 30, 2002 a
Threshold Benchmark is met, options to acquire 450,000 shares of Common Stock at
an exercise price of $1.50; (iii) if between July 1, 2002 and June 30, 2003 a
Threshold Benchmark is met, options to acquire 500,000 shares of Common Stock at
an exercise price of $2.00; (ii) if between July 1, 2003 and June 30, 2004 a
Threshold Benchmark is met, options to acquire 550,000 shares of Common Stock at
an exercise price of $2.50. The foregoing options automatically vest upon the
death, total disability or termination without cause of the Designee as an
officer and director of the Company. The options contain customary anti-dilution
provision, except that there is no anti-dilution adjustment if the Company
effectuates a reverse stock split. The options are exercisable for a period of 7
years from the date such option vested.
<PAGE>
Directors and Officers of the Company
-------------------------------------
Effective upon the closing of the Merger and Asset Purchase, Sally A.
Fonner, the sole officer of the Company resigned. Dennis Lane was appointed
Chairman, Chief Executive Office and Treasurer of the Company, and Barry Hawk
was appointed President, Chief Operations Officer and Secretary of the Company.
Effective ten (10) days after the expiration of ten days from the mailing to the
stockholders of the Company of an information statement pursuant to Rule 14-1 of
the Securities and Exchange Commission, which the Company intends to mail on or
about November 24, 1999, Sally A. Fonner, the sole director of the Company, will
resign and Dennis Lane and Barry Hawk will become the members of the Board of
Directors of the Company.
Name Change
-----------
In connection with the Merger and the Asset Purchase, the Board of
Directors of the Company effected a change in the name of the Company to
"Liberty Group Holdings, Inc." by the filing of a Certificate of Ownership and
Merger with the Secretary of State of the State of Delaware pursuant to Section
253 of the Delaware General Corporation Law. The Board believes that a change in
the name of the Company was necessary and appropriate to reflect the change in
the Company's status from a dormant company to a company with assets and
operations.
For the terms and conditions of the Agreement and Plan of Merger, the Asset
Purchase Agreement, the Escrow Agreement, the Voting Trust and Proxy Agreement,
the Employment Agreement and Option Agreements, reference is made to such
documents attached hereto as Exhibits 10.1-10.9. All statements made herein
concerning the foregoing agreements are qualified in their entirety by reference
to such Exhibits.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.*
(b) Pro Forma Financial Information.*
(c) 10.1 Agreement and Plan of Merger, dated as of November 23, 1999, by
and among Bio-Response, Inc., BR Acquisition Corp. and Liberty
Food Group, Ltd.
10.2 Asset Purchase Agreement dated as of November 23, 1999, by and
among Liberty Food Group, LLC, Ferro Foods Corporation, Frank
Ferro, Sr. and Frank Gambino
10.3 Escrow Agreement, dated as of November 23, 1999, by and among
Liberty Food Group, LLC, Ferro Foods Corporation, Frank Ferro,
Sr., Frank Gambino, and Herrick, Feinstein LLP, as escrow agent
10.4 Voting Trust and Proxy Agreement, dated as of November 23, 1999,
by an among Ferro Foods Corporation, Frank Ferro, Sr., Frank
Gambino, and Barry Hawk
<PAGE>
10.5 Employment Agreement, dated as of July 1, 1999, by and between
Liberty Food Group, Ltd. and Barry Hawk, as assumed and assigned
by BR Acquisitions Corp to Liberty Group Holdings, Inc., f/k/a
Bio-Response, Inc.*
10.6 Employment Agreement, dated as of July 1, 1999, by and between
Liberty Food Group, Ltd. and Dennis Lane, as assumed and assigned
by BR Acquisitions Corp to Liberty Group Holdings, Inc., f/k/a
Bio-Response, Inc.*
10.7 Option Agreement, dated as of July 1, 1999, by and between
Liberty Food Group, Ltd. and Dennis Lane, as assumed and assigned
by BR Acquisitions Corp to Liberty Group Holdings, Inc., f/k/a
Bio-Response, Inc.*
10.8 Option Agreement, dated as of July 1, 1999, by and between
Liberty Food Group, Ltd. and Barry Hawk, as assumed and assigned
by BR Acquisitions Corp to Liberty Group Holdings, Inc., f/k/a
Bio-Response, Inc.*
10.9 Press Release issued by Liberty Group Holdings,
Inc. f/k/a Bio-Response, Inc.
* To be filed by amendment.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BIO-RESPONSE, INC.
By: /s/ Sally A. Fonner
-------------------------
Sally A. Fonner
President and Chief Executive
Officer
Date: November 23, 1999
<PAGE>
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
dated as of November 23, 1999
by and among
LIBERTY GROUP HOLDINGS, INC.,
f/k/a
BIO-RESPONSE, INC.,
BR ACQUISITION CORP.
and
LIBERTY FOOD GROUP, LTD.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS...............................................................1
SECTION 1.1 Definitions................................................1
ARTICLE II
THE MERGER................................................................4
SECTION 2.1 The Merger.................................................4
SECTION 2.2 Closing; Effective Time....................................4
SECTION 2.3 Effect of the Merger.......................................5
SECTION 2.4 Certificate of Incorporation; Directors and Officers.......5
SECTION 2.5 Conversion of Securities...................................5
SECTION 2.6 Tax Consequences...........................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MERGER SUB..............6
SECTION 3.1 Corporate Existence and Power..............................6
SECTION 3.2 Certificate of Incorporation and By-Laws; Minute Books.....6
SECTION 3.3 Corporate Authority........................................6
SECTION 3.4 Capitalization.............................................7
SECTION 3.5 The Shares.................................................7
SECTION 3.6 No Conflict; Required Filings and Consents.................7
SECTION 3.7 SEC Filings; Financial Statements..........................8
SECTION 3.8 Absence of Certain Changes or Events.......................8
SECTION 3.9 Absence of Litigation......................................9
SECTION 3.10 No Violation of Government Orders or Laws..................9
SECTION 3.11 Agreements.................................................9
SECTION 3.12 Tax Matters...............................................10
SECTION 3.13 Employee Benefit Plans....................................11
SECTION 3.14 Employment Agreements.....................................11
SECTION 3.15 Insurance.................................................11
SECTION 3.16 Intellectual Property and Related Contracts...............12
SECTION 3.17 Absence of Undisclosed Liabilities........................12
SECTION 3.18 Changes...................................................12
SECTION 3.19 Real Property and Leases..................................12
SECTION 3.20 Merger Sub................................................12
SECTION 3.21 State Takeover Statutes...................................13
SECTION 3.22 Brokers...................................................13
SECTION 3.23 Disclosure................................................13
SECTION 3.25 Activities................................................13
SECTION 3.26 Capital Stock.............................................13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF LIBERTY................................14
SECTION 4.1 Corporate Existence and Power.............................14
SECTION 4.2 Certificate of Incorporation and Bylaws; Minute Books.....14
SECTION 4.3 Corporate Authority.......................................14
SECTION 4.4 Capitalization............................................14
SECTION 4.5 No Conflict; Required Filings and Consents................15
SECTION 4.6 Financial Statements......................................15
SECTION 4.7 Absence of Certain Changes or Events......................15
SECTION 4.8 Absence of Litigation.....................................16
SECTION 4.9 No Violation of Government Orders or Laws.................16
SECTION 4.10 Agreements................................................16
SECTION 4.11 Tax Matters...............................................16
SECTION 4.12 Employee Benefit Plans....................................17
SECTION 4.13 Employment Agreements.....................................18
SECTION 4.14 Insurance.................................................18
SECTION 4.15 Intellectual Property and Related Contracts...............18
SECTION 4.16 Absence of Undisclosed Liabilities........................18
SECTION 4.17 Changes...................................................18
SECTION 4.18 Real Property and Leases..................................19
SECTION 4.19 State Takeover Statutes...................................19
SECTION 4.20 Brokers...................................................19
SECTION 4.21 Disclosure................................................19
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING..........................................19
SECTION 5.1 Conditions Precedent to Obligations of Liberty............19
SECTION 5.2 Conditions Precedent to Obligations of the Company........22
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS................................23
SECTION 6.1 Forbearance...............................................23
SECTION 6.2 Obligations of Merger Sub.................................24
ARTICLE VII
ADDITIONAL AGREEMENTS....................................................25
SECTION 7.1 Access to Information.....................................25
SECTION 7.2 Legal Conditions to Transactions..........................26
SECTION 7.3 Further Assurances........................................26
SECTION 7.4 Advice of Changes.........................................26
SECTION 7.5 Transaction Expenses......................................26
SECTION 7.6 Public Announcements......................................27
SECTION 7.7 Transfer and Similar Taxes................................27
SECTION 7.8 D&O Insurance.............................................27
SECTION 7.9 Closing Covenant..........................................27
SECTION 7.10 Rule 14f-1 Compliance.....................................27
SECTION 7.11 Brokers...................................................27
SECTION 7.12 No Solicitation...........................................28
ARTICLE VIII
MISCELLANEOUS............................................................28
SECTION 8.1 Termination and Amendment.................................28
SECTION 8.2 Entire Agreement; Survival of Provisions..................29
SECTION 8.3 Communications............................................29
SECTION 8.4 Execution in Counterparts.................................29
SECTION 8.5 Binding Effect; Assignment................................29
SECTION 8.6 Governing Law.............................................30
SECTION 8.7 Severability of Provisions................................30
SECTION 8.8 Headings..................................................30
SECTION 8.9 Shares Transfer Expenses and Taxes........................30
SECTION 8.10 Waiver of Jury Trial......................................30
SECTION 8.11 Absence of Third Party Beneficiary Rights.................30
INDEX OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A - Section 253 Merger Certificate
Exhibit B - Certificate of Incorporation and By-Laws of the
Surviving Corporation
Exhibit C - Lock-Up Letter
Exhibit D - Escrow Agreement
Exhibit E - Indemnification Agreement
Exhibit F - Opinion of Stradley Ronon LLP
Exhibit G - Investment Agreements
SCHEDULES
Schedule 3.4 - Capitalization
Schedule 3.22 - Brokers
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 23, 1999 (the
"Agreement"), by and among Liberty Group Holdings, Inc., f/k/a Bio-Response,
Inc., a Delaware corporation (the "Company"), BR Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of the Company (the "Merger Sub"), and
Liberty Food Group, Ltd., a Delaware corporation ("Liberty").
RECITALS
WHEREAS, Liberty and the Company desire that Liberty merge with and
into the Merger Sub with the Merger Sub being the surviving corporation and a
wholly owned subsidiary of the Company as contemplated hereby (the "Merger");
WHEREAS, the Company, Merger Sub and Liberty desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, for Federal income tax purposes, it is intended that the
Merger shall qualify as a tax-free reorganization under the provisions of
Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the
"Code");
WHEREAS, the Board of Directors of the Company has approved, and
deemed it advisable and in the best interest of its stockholders, that in
connection with the Merger the Company issue to the stockholders of Liberty that
number of shares of common stock of the Company which will give such
stockholders an aggregate of not less than 87.4% of the issued and outstanding
capital stock of the Company on a fully-diluted basis, all on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. As used in this Agreement, and unless the
context clearly requires a different meaning, the following terms have the
following meanings:
"Act" means the Securities Act of 1933, as amended, or any successor
act or statute regulating the transactions contemplated hereby that were
formerly regulated under the Act that may be enacted after the date hereof and
the rules and regulations thereunder.
"Agreement" means this Agreement, as the same may be amended,
supplemented or modified in accordance with the terms hereof.
<PAGE>
"Balance Sheet Date" has the meaning provided therefor in Section
3.12(a)(ii) of this Agreement.
"Business Day" means a day in which the New York branch of the
Federal Reserve Bank is open for business during its normal hours of operation.
"By-Laws" means the By-Laws of the Company in effect on the date
hereof.
"Capston" has the meaning provided therefor in Section 7.5 of this
Agreement.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Company in effect on the date hereof.
"Certificate of Merger" has the meaning provided therefor in
Section 2.2 of this Agreement.
"Closing" has the meaning provided therefor in Section 2.2 of this
Agreement.
"Closing Date" has the meaning provided therefor in Section 2.2 of
this Agreement.
"Code" has the meaning provided therefor in the Recitals of this
Agreement.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Act.
"Common Stock" means the common stock, par value $.004 per share,
of the Company.
"Company" has the meaning provided therefor in the Preamble of this
Agreement.
"Confidential Information" has the meaning provided therefor in
Section 7.1(b) of this Agreement.
"DGCL" means the Delaware General Corporation Law.
"Effective Time" has the meaning provided in Section 2.2 of this
Agreement.
"Employment Agreements" means the (i) Employment Agreement between
Liberty and Barry Hawk and (ii) Employment Agreement between Liberty and Dennis
Lane.
"ERISA" has the meaning provided therefor in Section 3.13 of this
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor act or statute regulating the transactions
contemplated hereby that were formerly regulated under the Act that may be
enacted after the date hereof and the rules and regulations thereunder.
"GAAP" means United States generally accepted accounting
principles.
<PAGE>
"Governmental Entity" has the meaning provided therefor in Section
3.10 of this Agreement.
"Intellectual Property" has the meaning provided therefor in
Section 3.16 of this Agreement.
"Legal Proceeding" means any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding), hearing, inquiry, audit, examination or investigation
commenced, brought, conducted or heard by or before, or otherwise involving, any
court or other Governmental Entity or otherwise.
"Legal Requirement" means any federal, state, local, municipal,
foreign or other law, statute, constitution, principal of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Entity or otherwise.
"Liberty" has the meaning provided therefor in the Preamble of this
Agreement.
"Liens" means mortgages, pledges, security interests, conditional
and installment sale agreements, encumbrances, charges, options, rights of first
refusal, claims, preferential arrangements or restrictions of any kind,
limitations on voting rights, and other encumbrances of any kind, nature or
character, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"Merger" has the meaning provided therefor in the Recitals to this
Agreement.
"NASD" means the National Association of Securities Dealers.
"Options" means the options granted to (i) Barry Hawk pursuant to
the Option Agreement between Liberty and Barry Hawk and (ii) Dennis Lane
pursuant to the Option Agreement between Liberty and Dennis Lane.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company,
unincorporated organization or government or other agency or political
subdivision thereof.
"Preferred Stock" means the preferred stock, par value $.004 per
share, of the Company.
"Revival Date" means December 26, 1996, the effective date of the
revival of the Certificate of Incorporation pursuant to the Certificate of
Renewal, Revival, Extension and Restoration duly filed by the Company with the
Secretary of State of the State of Delaware on said date.
"SEC Reports" has the meaning provided therefor in Section 3.7 of
this Agreement.
<PAGE>
"Section 253 Merger Certificate" means the Certificate of Merger
between the Company and a wholly owned subsidiary of the Company effectuating
the change in the name of the Company in the form of Exhibit A attached hereto.
"Shares" means the 4,500,000 shares of Common Stock to be issued to
the stockholders of Liberty in the Merger.
"Surviving Corporation" has the meaning provided therefor in
Section 2.1 of this Agreement.
"Taxes" means all taxes, charges, fees, duties, levies, or other
similar assessments imposed by any federal, state, local or foreign Governmental
Entity, including, but not limited to, income, gross receipts, excise, property,
sales, gain, use, license, capital stock, transfer, franchise, payroll,
withholding, social security or other taxes, including any interest or penalties
attributable thereto.
"Tax Return" shall mean any return, report or information return
(including any related or supporting information) filed with any taxing
authority with respect to Taxes.
"Third Party Purchase" has the meaning provided therefor in Section
7.12 of this Agreement.
"Transfer Taxes" has the meaning provided therefor in Section 7.7
of this Agreement.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time, Liberty shall be
merged with and into the Merger Sub in accordance with the provisions of Section
251 of the DGCL. Following the Merger: (i) the separate corporate existence of
Liberty shall cease; (ii) the Merger Sub shall continue as the surviving
corporation in the Merger (the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Delaware; (iii) the Surviving Corporation
shall continue to be a wholly owned subsidiary of the Company; and (iv) the
Company shall change its name to "Liberty Group Holdings, Inc".
<PAGE>
SECTION 2.2 Closing; Effective Time. The closing of the Merger (the
"Closing") will take place at 10:00 a.m. (New York time) on November 23, 1999,
which date shall not be later than one (1) Business Day after the satisfaction
or waiver of the conditions set forth in Sections 5.1 and 5.2 at the offices of
Herrick, Feinstein LLP, Two Park Avenue, New York, New York 10016 (the date on
which the Closing shall occur being referred to in this Agreement as the
"Closing Date"), provided, however, that notwithstanding anything contained
herein to the contrary, (i) the resignation of the current director of the
Company and the appointment of the Barry Hawk and Dennis Lane as replacement
directors thereof shall not occur until the expiration of the ten (10) day
period commencing with the mailing to the Commission and the stockholders of the
Company a statement in compliance with Rule 14f-1 under the Exchange Act and
(ii) the Certificate of Amendment shall not be filed with the Secretary of State
of the State of Delaware until an information statement in compliance with
Section 14(c) of the Exchange Act and the rules and regulations promulgated
thereunder has been sent to the stockholders of the Company. Contemporaneously
with or as promptly as practicable after the Closing, a certificate of merger
(the "Certificate of Merger") shall be duly prepared and acknowledged by the
Surviving Corporation and thereafter filed with the Secretary of State of the
State of Delaware, in such form as is required by, and executed in accordance
with the relevant provisions of, the DGCL. The Merger shall become effective
upon the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware (the date and time of such filing being the "Effective Time").
Promptly after the filing of the Certificate of Merger, the Company shall file
the Section 253 Merger Certificate.
SECTION 2.3 Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in this Agreement and in the applicable
provisions of the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time all the property, rights, privileges,
powers and franchises of the Merger Sub and Liberty shall vest in the Surviving
Corporation, including without limitation the Employment Agreements (which shall
be assumed by the Surviving Corporation and assigned to the Company), and all
debts, liabilities, obligations, restrictions, disabilities and duties of the
Company and Merger Sub shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 2.4 Certificate of Incorporation; Directors and Officers.
The certificate of incorporation and by-laws of the Surviving Corporation shall
be substantially as set forth on Exhibit B attached hereto. The directors and
officers of the Surviving Corporation immediately after the Effective Time shall
be Barry Hawk and Dennis Lane.
SECTION 2.5 Conversion of Securities. (1) At the Effective Time, by
virtue of the Merger and without any action on the part of Liberty, Merger Sub,
the Company or any of the stockholders thereof, all the issued and outstanding
shares of Liberty shall be converted to the Shares and the issued and
outstanding shares of Liberty shall be canceled and retired and shall cease to
exist.
<PAGE>
(2) All rights with respect to the common stock of Liberty under
the Options shall be converted into and become rights with respect to Common
Stock, and the Company shall assume each Option in accordance with the terms of
the stock option agreements by which such options are evidenced. From and after
the Effective Time, (i) each Option assumed by the Company may be exercised
solely for shares of Common Stock, (ii) the number of shares of Common Stock
subject to each Option shall be equal to the number of shares of Common Stock
subject to such Option immediately prior to the Effective Time, (iii) any
restriction on the exercise of any Option shall continue in full force and
effect and the term, exercisability and other provisions of such Option shall
otherwise remain unchanged; provided, however, that each such Option shall, in
accordance with its terms, be subject to further adjustment as appropriate to
reflect any stock split, reverse stock split, stock dividend, subdivision,
reclassification, reorganization, business combination or similar transaction
subsequent to the Effective Time. The Company and Liberty shall take all action
that may be necessary (under the stock option agreements pursuant to which
Options are outstanding) to effectuate the provisions of this Section 2.5(b) and
to ensure that, from and after the Effective Time, holders of Options have no
rights with respect thereto other than those specifically provided herein.
Promptly after the Effective Time, the Company shall file with the Commission a
registration statement on Form S-8 relating to the shares of Common Stock
issuable with respect to the Options assumed by the Company in accordance with
this Section 2.5(b).
SECTION 2.6 Tax Consequences. For federal income tax purposes, the
Merger is intended to constitute a reorganization within the meaning of Section
368(a)(2)(D) of the Code. The parties to this Agreement hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MERGER SUB
A. The Company hereby represents and warrants to Liberty and
its stockholders that:
SECTION 3.1 Corporate Existence and Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified to do business as a foreign
corporation in each additional jurisdiction where such qualification is
necessary. The Company has all requisite power and authority (corporate and
otherwise) to own its properties and to carry on its business as now being
conducted and is duly licensed or qualified and in good standing as a foreign
corporation in each jurisdiction in which it is required to be so licensed or so
qualified, and to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. Other than
Merger Sub, the Company does not directly or indirectly own any equity or other
ownership interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any Person.
SECTION 3.2 Certificate of Incorporation and By-Laws; Minute Books.
The Company has delivered to Liberty true, correct and complete copies of the
Certificate of Incorporation and By-laws. The Company is not in violation of any
provision of either the Certificate of Incorporation or By-Laws. The minute
books of the Company contain a complete summary of all actions by the directors
and stockholders of the Company since the Revival Date and reflect all
transactions referred to in such minutes accurately in all respects.
<PAGE>
SECTION 3.3 Corporate Authority. The Company has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and the consummation
by the Company of the transactions contemplated herein have been duly and
validly authorized by all necessary action and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated by this Agreement, including, without
limitation, the approval and adoption of this Agreement by the holders of a
majority of the issued and outstanding shares of Common Stock (other than, (i)
with respect to the election of Barry Hawk and Dennis Lane to the Board of
Directors of the Company, the filing with the Commission and the mailing to the
stockholders of the Company a statement complying in all material respects with
the requirements of Rule 14f-1 under the Exchange Act and (ii) with respect to
the change in the name of the Company, the filing of the Certificate of
Amendment). This Agreement has been duly and validly executed and delivered by
the Company and, assuming the due authorization, execution and delivery by
Liberty, constitutes the legal, valid and binding obligation of the Company
enforceable against it in accordance with its terms.
SECTION 3.4 Capitalization. (a) The Company's entire authorized
capital stock consists of 25,000,000 shares of Common Stock and 5,000,000 shares
of Preferred Stock. On the date of this Agreement and on the Closing Date, there
will be (a) 650,000 shares of Common Stock issued and outstanding, (b) no shares
of Common Stock reserved for issuance upon exercise of warrants, options or
other securities convertible or exercisable into Common Stock or Preferred
Stock, (c) no shares reflected on the books and records of the Company as
treasury shares, and (d) no shares of Preferred Stock issued or outstanding. All
of the shares of Common Stock which were issued after the Revival Date are duly
authorized and validly issued, fully paid and nonassessable, and were issued in
compliance with all federal and state rules and regulations governing the
issuance of securities, including, without limitation, the Act, NASD, and
applicable state securities laws. Schedule 3.4 attached hereto reflects the
ownership of all the issued and outstanding shares of capital stock of the
Company. None of the outstanding shares of Common Stock were issued in violation
of any preemptive rights. There will, on the Closing Date, be no outstanding
options, warrants, rights to subscribe to, calls or commitments of any character
(including, without limitation, registration rights) relating to, or securities
or rights convertible into, or exercisable for, shares of capital stock of the
Company, or contracts, commitments or arrangements obligating the Company to
issue additional shares of its capital stock or options, warrants or rights to
purchase or acquire any shares of its capital stock, other than the issuance of
Common Stock at the Closing described in Schedule 3.22 attached hereto. There
are no outstanding contractual obligations of the Company to repurchase, redeem,
or otherwise acquire any shares or any capital stock or any other security,
instrument or right to acquire any equity interest of the Company or to provide
funds to, or make any investment (in the form of a loan, capital contribution or
otherwise) in the Company or any other Person. There are no agreements or
understandings with respect to the voting, sale, transfer, preemptive rights,
rights of first refusal, rights of first offer, proxy or registration of any
shares of capital stock of the Company.
SECTION 3.5 The Shares. When issued and delivered in accordance
with this Agreement, the Shares issued hereunder will be duly authorized,
validly issued and outstanding, fully paid for and non-assessable, free and
clear of all Liens, and exempt from registration under the Act pursuant to
Section 4(2) thereof, and under applicable state securities and "blue sky" laws.
The shares of Common Stock issuable upon the Options, when issued after the
Effective Date in accordance with their terms thereof, will be duly authorized,
validly issued and outstanding, fully paid for and non-assessable, free and
clear of all Liens, and exempt from registration under the Act pursuant to
Section 4(2) thereof, and under applicable state securities and "blue sky" laws.
<PAGE>
SECTION 3.6 No Conflict; Required Filings and Consents. The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not: (i) conflict with or
violate the Certificate of Incorporation and By-Laws; (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to the
Company or by which any of its property or asset is bound or affected; or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a breach or default), or give to others
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of a Lien on any property or assets of the Company. The
execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement by the Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Person, including without limitation, any Governmental Entity or the
stockholders of the Company, other than the approval of the Merger by the
Company as the sole stockholder of Merger Sub (which approval shall be obtained
prior to the Closing Date).
SECTION 3.7 SEC Filings; Financial Statements.
(1) The Company has filed all forms, reports and documents
required to be filed by it with the Commission between October 1979 and the date
of this Agreement (such forms, reports and other documents between October 1979
and the date hereof are referred to herein, collectively, as the "SEC Reports").
The SEC Reports: (i) complied in all material respects with the requirements of
the Act and the Exchange Act, as the case may be, and the rules and regulations
thereunder, including, without limitation, Items 401 through 404 of Regulation
S-K; and (ii) except to the extent that information contained in any SEC Reports
has been revised or superseded by a later-filed SEC Report, did not at the time
they were filed contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(2) The audited financial statements of the Company included
in the SEC Reports comply as to form in all material respects with applicable
accounting requirements and with the rules and regulations of the Commission
with respect thereto and have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the financial position of the Company as at
the date thereof and the results of its operations and cash flows for the
periods then ended. The unaudited financial statements included in any SEC
Report comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the Commission with
respect thereto, and such unaudited financial statements fairly present the
financial position of the Company as at the date thereof and the results of its
operations and cash flows for the periods then ended in conformity with GAAP
applied on a basis substantially consistent with that of the audited financial
statements included in the SEC Reports, subject to normal year-end audit
adjustments. Between June 30, 1999 and the date of this Agreement, the Company
has not incurred any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise) which would be required to be reflected on a
balance sheet, or in the notes thereto, prepared in accordance with GAAP, except
for liabilities and obligations incurred in connection with this transaction
which in the aggregate do not exceed $5,000.
<PAGE>
SECTION 3.8 Absence of Certain Changes or Events. Between March 31,
1999 and the date of this Agreement, except as contemplated by this Agreement or
disclosed in the most current SEC Report of the Company prior to the date of
this Agreement, the Company has not (i) conducted any business or entered into
any commitment, oral or written, of any nature whatsoever, including, without
limitation, with respect to its capital stock; (ii) any declaration, setting
aside or payment of any dividend or distribution in respect of its capital stock
or any redemption, purchase or other acquisition of any of its securities, other
than the cancellation of the 150,000 and 32,094 shares of Common Stock issued to
Bob Williams and John Petersen, respectively; (iii) established any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards, or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any officer or employee, or
(iv) any agreement, commitment or arrangement for the Company to do any of the
foregoing actions prior to or on the Closing Date.
SECTION 3.9 Absence of Litigation. There is no Legal Proceeding
pending or, to the best knowledge of the Company, threatened against the
Company, or any property or asset of the Company. Neither the Company nor any of
its properties or assets is subject to any order, writ, judgment, injunction,
decree, determination or award.
SECTION 3.10 No Violation of Government Orders or Laws. There are
no pending or, to the knowledge of the Company, threatened investigations, by
any Federal, state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality (each, a "Governmental Entity") with
respect to the Company or with respect to the activities of any officer or
director thereof. (i) There are no actions or proceedings pending or, to the
knowledge of the Company, threatened against the Company before any court or
before any Governmental Entity, (ii) there are no outstanding domestic or
foreign judgments, decrees or orders against the Company, (iii) to the knowledge
of the Company, the Company is not in violation of, and has not received any
claim or notice that it is in violation of, any Legal Requirement or any
Federal, state, local or foreign laws, statutes, rules, regulations or orders
promulgated or judgments entered by any Governmental Entity; and (iv) there are
no actions pending or, to the knowledge of the Company, threatened against any
director or officer of the Company alleging a breach of such persons' fiduciary
duties.
SECTION 3.11 Agreements. The Company is not a party to or bound by
any written, oral or implied contact, agreement, license, lease or other
commitment, including, without limitation: (i) loan agreements, credit lines,
promissory notes, mortgages, pledges, guarantees, security agreements, factoring
agreements and other agreements relating to indebtedness for borrowed money;
(ii) real property leases; (iii) personal property leases; (iv) trademark or
other Intellectual Property licenses; (v) employment, management, or severance
agreements; (vi) contracts or other agreements to undertake capital expenditures
or to acquire any property; (vii) pledges, guarantees, contracts or other
agreements to loan money or to extend credit; (viii) contracts or other
agreements which would restrict the Company from issuing the Shares; (ix)
contracts or other agreements involving any consultant or other Person who acts
for or on behalf of the Company; (x) contracts or other agreements involving the
sale of any of the assets or properties or the grant to any person of any
preferential right to purchase any of the assets or properties of the Company,
or any letter of intent or other arrangement regarding the issuance of any
capital stock, or securities convertible into, any capital stock of the Company;
(xi) contracts or other agreements pursuant to which the Company agrees to share
or otherwise indemnify the tax liability of any party; (xii) contracts or other
agreements or arrangements between the Company and any of its officers,
directors, agents (including legal counsel and accountants) or affiliates; or
(xiii) contracts or agreements pursuant to which there is either a current or
future obligation to make any payments or other commitments to any party or
related group of parties.
<PAGE>
SECTION 3.12 Tax Matters.
(1) (1) Since the Revival Date, the Company has (x) duly filed
(or there has been filed on its behalf) with the appropriate governmental
authorities all Tax Returns required to be filed by it, and all such Tax Returns
are true, correct and complete and (y) timely paid (or there has been paid on
its behalf) all Taxes due or claimed to be due from it by any taxing authority;
(2) The reserves for current Taxes (determined in
accordance with GAAP consistently applied) reflected in the financial statements
in the SEC Reports are adequate for the payment of all Taxes incurred or which
may be incurred by the Company through the date thereof. Since the date of the
balance sheet of the Company including in the Company=s Form 10-QSB filed for
the quarter ended June 30, 1999 (the "Balance Sheet Date"), the Company has not
incurred any liability for Taxes;
(3) Since the Revival Date, the Company has
complied in all respects with all applicable Legal Requirements relating to the
payment and withholding of Taxes (including withholding of Taxes pursuant to
Sections 1441 and 1442 of the Code or similar provisions under any foreign Legal
Requirements) and has, within the time and manner prescribed by any Legal
Requirements, withheld and paid over to the proper governmental authorities all
amounts required to be withheld and paid over under all applicable Legal
Requirements;
(4) There are no Liens for Taxes upon the assets or
properties of any of the Company except for statutory liens for Taxes not yet
due;
(5) There are no outstanding waivers or comparable
consents regarding the application of the statute of limitations with respect
to any Taxes or Tax Returns of any of the Company;
(6) The Company has not requested an extension of
time within which to file any Tax Return in respect of any taxable year, which
Tax Return has not since been filed;
(7) To the knowledge of the Company, no federal,
state, local or foreign audits or other administrative proceedings have formally
commenced or are presently pending with regard to any Taxes or Tax Returns of or
including the Company, and no notification has been received by either the
Company that such an audit or other proceeding is pending or threatened with
respect to any Taxes due from or with respect to the Company or any Tax Return
filed by or with respect to the Company;
(8) The Company has not changed any method of
accounting, received a ruling from any taxing authority or signed an agreement
with any taxing authority which would have an adverse effect on the Company;
(9) No deficiency for any Tax has been assessed
with respect to the Company which has not been paid in full;
<PAGE>
(10) The Company has no obligation under any Tax
sharing agreement or similar contract or arrangement or has a potential
liability or obligation to any Person as a result of, or pursuant to, any such
agreement, contract or arrangement (other than customary agreements to indemnify
lenders or security holders) with respect to Taxes other than of the Company;
(11) The Company is not a party to any agreement,
plan, contract or arrangement that would result, separately or in the aggregate,
in the payment of any "excess parachute payments" within the meaning of Section
280G of the Code;
(12) Since the Revival Date, no jurisdiction where
the Company does not file a Tax Return has made a claim that the Company is
required to file a Tax Return for such jurisdiction;
(13) No power of attorney which is currently in
force has been granted by or with respect to the Company with respect to any
matter relating to Taxes; and
(14) Since the Revival Date, no closing agreement
pursuant to Section 7121 of the Code (or any predecessor provision) or any
similar provision of Legal Requirement has been entered into by or with respect
to the Company.
(2) The Company has previously delivered or made available to
Liberty, complete and accurate copies of each of: (x) all audit reports, letter
rulings, technical advice memoranda relating to United States federal, state,
local and foreign Taxes due from or with respect to the Company, (y) United
States federal Tax Returns, and those state, local or foreign Tax Returns filed
by the Company for the Calendar Years ended December 31, 1996, 1997 and 1998,
and (z) any closing agreements entered into by the Company with any taxing
authority in each case existing on the date hereof. The Company will deliver or
make available to Liberty all materials with respect to the foregoing for all
matters arising after the date hereof.
SECTION 3.13 Employee Benefit Plans. The Company does not have any
employees, consultants, subcontractors, agents or Persons to which it owns
compensation of any nature whatsoever. Accordingly, the Company does not have
any deferred compensation or other bonus or other incentive compensation, stock
purchase, stock option and other equity compensation plan, program, agreement or
arrangement; severance or termination pay, medical, surgical, hospitalization,
life insurance and other "welfare" plan, fund or program (within the meaning of
Section 3(l) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")).
SECTION III.14 Employment Agreements. There are no employment,
consulting, severance or indemnification contracts or agreements between the
Company, on the one hand, and any other Person, director, officer or other
employee of the Company, on the other hand.
SECTION 3.15 Insurance. The Company does not have any insurance
policies of any kind, including directors' and officers' liability insurance,
maintained by or for the direct or indirect benefit of the Company.
<PAGE>
SECTION 3.16 Intellectual Property and Related Contracts. The
Company does not own or license any trademarks (including common law names and
marks and federally registered names and marks), trade names, service names,
copyrights, patents, technology, know-how and processes (collectively,
"Intellectual Property") or any computer software, computer firmware, computer
hardware (whether general or special purpose) or other similar or related items
of automated, computerized or software systems.
SECTION 3.17 Absence of Undisclosed Liabilities. The Company does
not have any liabilities (whether absolute, accrued or contingent) required to
be disclosed on a balance sheet prepared in accordance with GAAP.
SECTION 3.18 Changes. Since the date of the filing of the Company=s
1998 Form 10-KSB for its fiscal year ended December 31, 1998 except (i) as set
forth in the SEC Reports or (iii) as otherwise provided by this Agreement:
(1) there has been no change in the business or
operations of the Company;
(2) except as permitted by this Agreement, there has been no
direct or indirect redemption, purchase or other acquisition of any shares of
Company capital stock, or any declaration, setting aside or payment of any
dividend or other distribution by the Company in respect of its capital stock,
or any issuance of any shares of capital stock of the Company (other than
pursuant to the exercise of options and warrants pursuant to their terms), or
any grant to any Person of any option to purchase or other right to acquire
shares of capital stock of the Company or any stock split or other change in the
Company's capitalization;
(3) the Company has not entered into or agreed to enter into
any contract or other arrangement with any of its officers, directors,
contractors, agents or representatives or otherwise paid any compensation
thereto;
(4) the Company has not (i) entered into any bonus, incentive
compensation, deferred compensation, profit sharing, retirement, pension, group
insurance or other benefit plan or (ii) made any contribution to any such plan;
and
(5) the Company has not made any change in accounting methods,
principles or practices affecting its assets, liabilities or business.
SECTION 3.19 Real Property and Leases. The Company does not (i)
have title to any properties or assets, (ii) own or lease any real property, or
(iii) own, lease or have the legal right to use any property or assets.
SECTION 3.20 Merger Sub. Merger Sub has been formed for the sole
purpose of effectuating the Merger. Accordingly, Merger Sub has no assets,
liabilities, obligations, commitments, management, operations or function, other
than as specifically provided for in this Agreement.
<PAGE>
SECTION 3.21 State Takeover Statutes. The Board of Directors of the
Company has approved this Agreement and the consummation of the transactions
contemplated hereby and such approval constitutes approval of such transactions
by the Board of Directors of the Company under the provisions of Section 203 of
the DGCL such that Section 203 of the DGCL does not restrict the transactions
contemplated hereby.
SECTION 3.22 Brokers. Except as set forth in Schedule 3.22, no
broker, investment banker, financial advisor or other Person is entitled to any
broker=s, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based on
arrangements made by or on behalf of the Company.
SECTION 3.23 Disclosure. Neither this Agreement nor any
certificates, instruments or other documents delivered by the Company or Merger
Sub or its representatives to Liberty and its representatives in connection with
this Agreement or the transactions contemplated hereby, contains any untrue
statement of a fact or omits to state a fact required to be contained herein or
therein or necessary in order to make the statements herein or therein, in light
of the circumstances in which they were made, not misleading.
B. Merger Sub hereby represents to Liberty and its stockholders
that:
SECTION 3.24 Merger Sub. Merger Sub has been formed for the sole
purpose of effectuating the Merger. Accordingly, Merger Sub has no assets,
liabilities, obligations, commitments, management, operations or function, other
than as specifically provided for in this Agreement.
SECTION 3.25 Activities. Since the date of its incorporation,
Merger Sub has not engaged in any activities other than the execution of this
Agreement and Merger Sub will not engage in any activities other than those in
connection with or as contemplated by this Agreement.
<PAGE>
SECTION 3.26 Capital Stock. Merger Sub=s entire authorized capital
stock consists of 3,000, $0.01 shares of common stock. On the date of this
Agreement and on the Closing Date, there will be (a) 100 shares of common stock
issued and outstanding, all of which shall be solely owned by the Company, (b)
no shares of common stock reserved for issuance upon exercise of warrants,
options or other securities convertible or exercisable into common stock or
preferred stock, (c) no shares reflected on the books and records of Merger Sub
as treasury shares, and (d) no shares of preferred stock issued or outstanding.
All of the outstanding shares of common stock of Merger Sub are duly authorized
and validly issued, fully paid and nonassessable, and were issued in compliance
with all federal and state rules and regulations governing the issuance of
securities, including, without limitation, the Act, NASD, and applicable state
securities laws. There will, on the Closing Date, be no outstanding options,
warrants, rights to subscribe to, calls or commitments of any character
(including, without limitation, registration rights) relating to, or securities
or rights convertible into, or exercisable for, shares of capital stock of
Merger Sub, or contracts, commitments or arrangements obligating Merger Sub to
issue additional shares of its capital stock or options, warrants or rights to
purchase or acquire any shares of its capital stock. There are no outstanding
contractual obligations of Merger Sub to repurchase, redeem, or otherwise
acquire any shares or any capital stock or any other security, instrument or
right to acquire equity interest in Merger Sub or to provide funds to, or make
any investment (in the form of a loan, capital contribution or otherwise) in
Merger Sub or any other Person. There are no agreements or understandings with
respect to the voting, sale, transfer, preemptive rights, rights of first
refusal, rights of first offer, proxy or registration of any shares of capital
stock of Merger Sub.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF LIBERTY
Liberty hereby represents and warrants to the Company and Merger
Sub that:
SECTION 4.1 Corporate Existence and Power. Liberty is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified to do business as a foreign corporation
in each additional jurisdiction where such qualification is necessary. Liberty
has all requisite power and authority (corporate and otherwise) to own its
properties and to carry on its business as now being conducted and is duly
licensed or qualified and in good standing as a foreign corporation in each
jurisdiction in which it is required to be so licensed or so qualified, and to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. Liberty does not directly or
indirectly own any equity or other ownership interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any Person.
SECTION 4.2 Certificate of Incorporation and Bylaws; Minute Books.
Liberty has delivered to the Company true, correct and complete copies of the
certificate of incorporation and bylaws of Liberty. Liberty is not in violation
of any provision of either its certificate of incorporation or bylaws. The
minute books of Liberty contain a complete summary of all actions by the
directors and stockholders of Liberty and reflect all transactions referred to
in such minutes accurately in all respects.
SECTION 4.3 Corporate Authority. Liberty has all necessary power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Liberty and the consummation by Liberty of the
transactions contemplated herein have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Liberty are necessary to authorize this Agreement or to consummate the
transactions contemplated by this Agreement, including, without limitation, the
approval and adoption of this Agreement by the holders of a majority of the
issued and outstanding shares of common stock of Liberty. This Agreement has
been duly and validly executed and delivered by Liberty and, assuming the due
authorization, execution and delivery by the other parties hereto, constitutes
the legal, valid and binding obligation of Liberty enforceable against Liberty
in accordance with its terms.
<PAGE>
SECTION 4.4 Capitalization. Liberty's entire authorized capital
stock consists of 40,000,000 shares of common stock and 10,000,000 shares of
preferred stock. On the date of this Agreement and on the Closing Date, there
will be (a) 3,304,500 shares of common stock issued and outstanding, (b) no
shares of common stock reserved for issuance upon exercise of warrants, options
or other securities convertible or exercisable into common stock or preferred
stock except pursuant to the Options, (c) no shares reflected on the books and
records of Liberty as treasury shares, and (d) no shares of preferred stock
issued or outstanding. All of the outstanding shares of common stock are duly
authorized and validly issued, fully paid and nonassessable, and were issued in
compliance with all federal and state rules and regulations governing the
issuance of securities, including, without limitation, the Act, NASD, and
applicable state securities laws. The shares of common stock are owned by Willow
Road Trust, Crafton Road Trust, Steel II Trust, Haines City Trust, Potomac River
Trust, Great Falls Trust, George and Esther Mayer and Herschey and Diane Hawk.
None of the outstanding shares of common stock were issued in violation of any
preemptive rights. There will, on the Closing Date, be no outstanding options,
warrants, rights to subscribe to, calls or commitments of any character
(including, without limitation, registration rights) relating to, or securities
or rights convertible into, or exercisable for, shares of capital stock of
Liberty, or contracts, commitments or arrangements obligating Liberty to issue
additional shares of its capital stock or options, warrants or rights to
purchase or acquire any shares of its capital stock, other than the Options.
There are no outstanding contractual obligations of Liberty to repurchase,
redeem, or otherwise acquire any shares or any capital stock or any other
security, instrument or right to acquire any equity interest of Liberty or to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in Liberty or any other Person. There are no
agreements or understandings with respect to the voting, sale, transfer,
preemptive rights, rights of first refusal, rights of first offer, proxy or
registration of any shares of capital stock of Liberty.
SECTION 4.5 No Conflict; Required Filings and Consents. The
execution and delivery of this Agreement by Liberty do not, and the performance
of this Agreement by Liberty will not: (i) conflict with or violate any of the
certificate of incorporation and by-laws of Liberty; (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Liberty or by which any property or asset of Liberty is bound or affected; or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a breach or default) under, or give
to others any right of termination, amendment, acceleration or cancellation of,
or result in the creation of a Lien on any property or asset of Liberty. The
execution and delivery of this Agreement by Liberty does not, and the
performance of this Agreement by Liberty will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Person, including without limitation, any Governmental Entity, which will not be
obtained prior to the Closing Date.
SECTION 4.6 Financial Statements. Since Liberty was incorporated in
June 1999 and it has no assets or operations, there are no financial statements
of Liberty between June 30, 1999 and the date of this Agreement. Liberty has not
incurred any liability or obligation of any nature (where accrued, absolute,
contingent or otherwise) which would be required to be reflected on a balance
sheet, or in the notes thereto, prepared in accordance with GAAP, except for
liabilities and obligations incurred in connection with this transaction which
in the aggregate do not exceed $5,000.
<PAGE>
SECTION 4.7 Absence of Certain Changes or Events. Between June 1999
and the date of this Agreement, except as contemplated by this Agreement, other
than the Employment Agreements and Options, Liberty has not (i) conducted any
business or entered into any commitment, oral or written, or any nature
whatsoever, including, without limitation, with respect to its capital stock,
(ii) any declaration, setting aside or payment of any dividend or distribution
in respect of its capital stock or any redemption, purchase or other acquisition
of any of its securities; (iii) established any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officer or employee, or (iv)
any agreement, commitment or arrangement for Liberty to do any of the foregoing
actions prior to or on the Closing Date.
SECTION 4.8 Absence of Litigation. There is no Legal Proceeding
pending or, to the best knowledge of Liberty, threatened against Liberty, or any
property or asset of Liberty. Neither Liberty nor any property or asset of
Liberty is subject to any order, writ, judgment, injunction, decree,
determination or award.
SECTION 4.9 No Violation of Government Orders or Laws. There are no
pending or, to the knowledge of Liberty, threatened investigations, by any
Governmental Entity with respect to Liberty or with respect to the activities of
any officer or director thereof. (i) There are no actions or proceedings pending
or, to the knowledge of Liberty, threatened against Liberty before any court or
before any Governmental Entity, (ii) there are no outstanding domestic or
foreign judgments, decrees or orders against Liberty, (iii) to the knowledge of
Liberty, Liberty is not in violation of, and has not received any claim or
notice that it is in violation of, any Legal Requirement or any Federal, state,
local or foreign laws, statutes, rules, regulations or orders promulgated or
judgments entered by any Governmental Entity; and (iv) there are no actions
pending or, to the knowledge of Liberty, threatened against any director or
officer of Liberty alleging a breach of such persons= fiduciary duties.
SECTION 4.10 Agreements. Other than the Employment Agreements and
Options, Liberty is not a party to or bound by any written, oral or implied
contact, agreement, license, lease or other commitment, including, without
limitation: (i) loan agreements, credit lines, promissory notes, mortgages,
pledges, guarantees, security agreements, factoring agreements and other
agreements relating to indebtedness for borrowed money; (ii) real property
leases; (iii) personal property leases; (iv) trademark or other Intellectual
Property licenses; (v) employment, management, or severance agreements; (vi)
contracts or other agreements to undertake capital expenditures or to acquire
any property; (vii) pledges, guarantees, contracts or other agreements to loan
money or to extend credit; (viii) contracts or other agreements which would
restrict Liberty from issuing the Shares; (ix) contracts or other agreements
involving any consultant or other Person who acts for or on behalf of Liberty;
(x) contracts or other agreements involving the sale of any of the assets or
properties or the grant to any person or any preferential right to purchase any
of the assets or properties of Liberty, or any letter of intent or other
arrangement regarding the issuance of any capital stock, or securities
convertible into, any capital stock of either Liberty; (xi) contracts or other
agreements pursuant to which Liberty agrees to share or otherwise indemnify the
tax liability or any party; (xii) contracts or other agreements or arrangements
between Liberty, and any of its respective officers, directors, agents
(including legal counsel and accountants) or affiliates; or (xiii) contracts or
agreements pursuant to which there is either a current or future obligation to
make any payments or other commitments to any party or related group of parties.
SECTION 4.11 Tax Matters.
(1) (1) Liberty has (x) duly and timely filed (or there has been
filed on its behalf) with the appropriate governmental authorities all tax
Returns required to be filed by it, and all such tax Returns are true, correct
and complete and (y) timely paid (or there has been paid on its behalf ) all
Taxes due or claimed to be due from it by any taxing authority;
<PAGE>
(2) Liberty has complied in all respects with all applicable
Legal Requirements relating to the payment and withholding of Taxes (including
without the Taxes pursuant to Sections 1441 and 1442 of the Code or similar
provisions under any foreign Legal Requirements) and has, within the time and
manner prescribed by any Legal Requirements, withheld and paid over to the
proper governmental authorities all amounts required to be withheld and paid
over under all applicable Legal Requirements;
(3) There are no Liens for Taxes upon the assets or properties
of any of Liberty except for statutory liens for Taxes not yet due;
(4) There are no outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns of any of Liberty;
(5) Liberty has not requested an extension of time within
which to file any Tax Return in respect of any taxable year, which Tax Return
has not since been filed;
(6) To Liberty=s knowledge, no federal, state, local or
foreign audits or other administrative proceedings have formally commenced or
are presently pending with regard to any Taxes or Tax Returns of or including
Liberty, and no notification has been received by either Liberty that such an
audit or other proceeding is pending or threatened with respect to any Taxes due
from or with respect to Liberty or any Tax Return filed by or with respect to
Liberty;
(7) Liberty has not changed any method of accounting, received
a ruling from any taxing authority or signed an agreement with any taxing
authority which would have an adverse effect on Liberty;
(8) No deficiency for any Tax has been assessed with respect
to Liberty which has not been paid in full;
(9) Liberty has no obligation under any Tax sharing agreement
or similar contract or arrangement or has a potential liability or obligation to
any Person as a result of, or pursuant to, any such agreement, contract or
arrangement (other than customary agreements to indemnify lenders or security
holders) with respect to Taxes other than of Liberty;
(10) No jurisdiction where Liberty does not file a Tax Return
has made a claim that Liberty is required to file a Tax Return for such
jurisdiction;
(11) No power of attorney which is currently in force has been
granted by or with respect to Liberty with respect to any matter relating to
Taxes; and
(12) No closing agreement pursuant to Section 7121 of the Code
(or any predecessor provision) or any similar provision of Legal Requirement has
been entered into by or with respect to Liberty.
<PAGE>
SECTION 4.12 Employee Benefit Plans. Liberty does not have any
employees, consultants, subcontractors, agents or Persons to which it owns
compensation of any nature whatsoever other than Barry Hawk and Dennis Lane.
Accordingly, Liberty does not have any deferred compensation or other bonus or
other incentive compensation, stock purchase, stock option and other equity
compensation plan, program, agreement or arrangement; severance or termination
pay, medical, surgical, hospitalization, life insurance and other "welfare"
plan, fund or program (within the meaning of Section 3(1) of ERISA other than as
contemplated by the Employment Agreements and Options.
SECTION 4.13 Employment Agreements. Other than the Employment
Agreements, there are no employment, consulting, severance or indemnification
contracts or agreements between Liberty, on the one hand, and any other Person,
director, officer or other employee of Liberty, on the other hand.
SECTION 4.14 Insurance. Liberty does not have any insurance
policies of any kind, including directors= and officers= liability insurance,
maintained by or for the direct or indirect benefit of Liberty.
SECTION 4.15 Intellectual Property and Related Contracts. Liberty
does not own or license any Intellectual Property or any computer software,
computer firmware, computer hardware (whether general or special purpose) or
other similar or related items of automated, computerized or software systems.
SECTION 4.16 Absence of Undisclosed Liabilities. Liberty does not
have any liabilities (whether absolute, accrued or contingent) required to be
disclosed on a balance sheet prepared in accordance with GAAP.
SECTION 4.17 Changes. Since June 1999, except as otherwise provided
by this Agreement, the Employment Agreements and Options:
(1) there has been no change in the business or operations of
Liberty;
(2) except as permitted by this Agreement, there has been no direct
or indirect redemption, purchase or other acquisition of any shares of Company
capital stock, or any declaration, setting aside or payment of any dividend or
other distribution by Liberty in respect of its capital stock, or any issue of
any shares of capital stock of Liberty (other than pursuant to the exercise of
options and warrants pursuant to their terms), or any grant to any Person of any
option to purchase or other right to acquire shares of capital stock of Liberty
or any stock split or other change in Liberty=s capitalization;
(3) Liberty has not entered into or agreed to enter into any
contract or other arrangement with any of its officers, directors, contractors,
agents or representatives or otherwise paid any compensation thereto;
(4) Liberty has not (i) entered into any bonus, incentive
compensation, deferred compensation, profit sharing, retirement, pension, group
insurance or other benefit plan or (ii) made any contribution to any such plan;
and
<PAGE>
(5) Liberty has not made any change in accounting methods,
principles or practices affecting its assets, liabilities or business.
SECTION 4.18 Real Property and Leases. Liberty does not (i) hold
title to any real properties or assets, (ii) own or lease any real property, or
(iii) own, lease or have the legal right to use any real property or assets.
SECTION 4.19 State Takeover Statutes. The Board of Directors of
Liberty has approved this Agreement and the consummation of the transactions
contemplated hereby and such approval constitutes approval of such transactions
by the Board of Directors of Liberty under the provisions of Section 203 of the
DGCL such that Section 203 of the DGCL does not restrict the transactions
contemplated hereby.
SECTION 4.20 Brokers. No broker, investment banker, financial
advisor or other Person is entitled to any broker=s, finder=s, financial
advisor=s or other similar fee or commission in connection with the transactions
contemplated by this Agreement based on arrangements made by or on behalf of
Liberty.
SECTION 4.21 Disclosure. Neither this Agreement nor any
certificates, instruments or other documents delivered by Liberty or its
representatives to Liberty and its representatives in connection with this
Agreement or the transactions contemplated hereby, contains any untrue statement
of a fact or omits to state a fact required to be contained herein or therein or
necessary in order to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
SECTION 5.1 Conditions Precedent to Obligations of Liberty. The
obligations of Liberty hereunder are subject to the satisfaction of the
following conditions on or before the Closing Date:
(1) The representations and warranties made by the Company and
Merger Sub herein shall be true and correct in all material respects on and as
of the Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except where the
specific representation or warranty by its terms applies to an earlier date).
(2) The Company and Merger Sub shall have performed and
complied in all respects with all covenants, agreements and conditions set forth
herein which are required to be performed or complied with by it on or prior to
Closing Date.
<PAGE>
(3) The purchase of and exchange for the Shares to be issued
by the Company hereunder shall not (i) be prohibited by any applicable law or
governmental regulation (including without limitation Regulation S, T, U or X of
the Board of Governors of the Federal Reserve System), (ii) subject the
stockholders of Liberty to any penalty or other condition pursuant to any
applicable law or governmental regulation, (iii) be prohibited by the laws or
regulations of any jurisdiction to which it is subject or (iv) be permanently
enjoined at the Closing Date.
(4) All authorizations, consents, approvals, permits and
licenses and filings with, by or in respect of any Governmental Entity required
to be taken, given or obtained that are necessary in connection with the
transactions contemplated herein and in the other documents related hereto,
shall have been taken, given or obtained, be in full force and effect and not be
subject to any pending proceedings or appeals, administrative, judicial or
otherwise.
(5) All consents and approvals to be obtained by the Company
or Merger Sub from third parties (including licensors, lessors and others)
hereto that are necessary in connection with the transactions contemplated
herein and in the other documents related hereto, shall have been given or
obtained and be in full force and effect.
(6) Liberty and its representatives shall have completed their
due diligence of the Company to its satisfaction, which for the avoidance of any
doubt shall be in its sole and absolute discretion.
(7) On or before the Closing Date, Liberty and/or its
stockholders shall have received all of the following from the Company in form
and substance satisfactory to them:
(1) Certificates representing the Shares shall be issued
in the name of Willow Road Trust, Crafton Road Trust, Steel II
Trust, Haynes City Trust, Potomac River Trust and Great Falls
Trust;
(2) Certificate of the President of the Company dated as
of the date of Closing certifying (A) as to the accuracy of
Section 5.1 (a) and (b) above; (B) as to the Certificate of
Incorporation, recently certified by the Secretary of State of
Delaware as duly filed and currently in full force and effect;
(C) as to the By-Laws; (D) absence of amendments to the
Certificate of Incorporation and By-laws since the date of the
last amendment shown on the official evidence as to filed
constituent documents furnished pursuant to (vi) below; (E)
resolutions, of the board of directors of the Company duly
authorizing the execution, delivery and performance of this
Agreement and the other documents executed in connection with
this Agreement to which it is a party, including without
limitation, the Section 253 Merger Certificate and the
Indemnification Agreements referred to in Section (g)(viii)
below, and the absence of other resolutions relating thereto;
and (F) the incumbency and signature of the individuals
authorized to execute and deliver documents on the Company's
behalf;
<PAGE>
(3) Certificate of the President of the Merger Sub dated
as of the date of Closing certifying (A) as to the accuracy of
Section 5.1 (a) and (b) above; (B) as to its certificate of
incorporation, recently certified by the Secretary of State of
Delaware as duly filed and currently in full force and effect;
(C) as to its by-laws; (D) absence of amendments to such
certificate of incorporation and by-laws since the date of the
last amendment shown on the official evidence as to filed
constituent documents furnished pursuant to (vi) below; (E)
resolutions, of the board of directors of the Merger Sub duly
authorizing the execution, delivery and performance of this
Agreement and the other documents executed in connection with
this Agreement to which it is a party and absence of other
resolutions relating thereto; and (F) the incumbency and
signature of the individuals authorized to execute and deliver
documents on the Merger Sub's behalf;
(4) Resignation of the current officers and directors of
the Company and Merger Sub (as evidenced by letters of
resignation of such persons delivered at the Closing), and the
due election of Dennis Lane and Barry Hawk as replacement
members of the Board of Directors of the Company and Merger
Sub and as Chairman and President, respectively, of the
Company and Merger Sub; provided, however, that (y) the term
of office of Dennis Lane and Barry Hawk as directors of the
Company will become effective ten (10) days after mailing to
the Commission and the stockholders of the Company a statement
in compliance with Rule 14f-1 under the Exchange Act and (z)
the resignation of Sally A. Fonner as the sole director of the
Company shall be effective only upon the expiration of said
ten-day period;
(5) The Lock-up Letters, executed by each of Art Beroff,
John Petersen, Lawrence Kravitz, Maoz Goldstein, Michael
Manion, Michael Weber, Peter Bird, Rachel Fefer, Robert
Williams and Sally Fonner, in the form attached hereto as
Exhibit C;
(6) Official evidence dated no more than three days
prior to the Closing Date from appropriate governmental
authorities of appropriate domestic jurisdictions for the
Company and Merger Sub as to constituent documents on file,
good standing, payment of franchise taxes and qualification to
do business of the Company and Merger Sub, as the case may be;
(7) The Escrow Agreement, duly executed by Capston, in
the form attached hereto as Exhibit D;
(8) The Indemnification Agreement duly executed by the
Company in favor of Barry Hawk and Dennis Lane, in the form
attached hereto as Exhibit E;
(9) The Certificate of Merger and the Section 253 Merger
Certificate, duly prepared and executed in proper form for
filing with the Secretary of State of the State of Delaware;
and
<PAGE>
(10) An opinion addressed to Liberty and its
stockholders and dated the Closing Date of Stradley Ronon LLP,
counsel to the Company, with respect to certain corporate
matters and substantially in the form of Exhibit F attached
hereto.
(8) There shall not have occurred (1) any general suspension
of trading in, or limitation on prices for, securities on the NASD for a period
in excess of two Business Days (excluding suspension or limitation resulting
solely from physical damage or interference with such exchanges or related to
market conditions), (2) a declaration of a banking moratorium or any suspension
of payments, lending or the extension of credit generally in respect of banks in
the United States (whether or not mandatory), (3) any decline in either the Dow
Jones Industrial Average or the Standard & Poor's Index of 500 Industrial
Companies by an amount in excess of 25% measured from the close of business on
the date hereof or (4) in the case of any of the foregoing existing at the time
of the execution hereof, a material acceleration or worsening thereof.
SECTION 5.2 Conditions Precedent to Obligations of the Company and
Merger Sub. The obligations of the Company and Merger Sub hereunder are subject
to the satisfaction of the following conditions on or before the Closing Date:
(1) The representations and warranties made by Liberty herein
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties have been
made on and as of the Closing Date (except where the specific representation or
warranty by its terms applies to an earlier date).
(2) Liberty shall have performed and complied in all respects
with all covenants, agreements and conditions set forth herein which are
required to be performed or complied with by it on or prior to the Closing Date.
(3) The purchase of and payment for the Shares hereunder shall
not (i) be prohibited by any applicable law or governmental regulation
(including without limitation Regulation S, T, U or X of the Board of Governors
of the Federal Reserve System), (ii) be prohibited by the laws or regulations of
any jurisdiction to which the Company is subject or (iii) be permanently
enjoined at the Closing Date.
(4) All authorizations, consents, approvals, permits and
licenses and filings with, by or in respect of any federal, state, local or
foreign governmental authority, agency, court or other body required to be
taken, given or obtained that are necessary in connection with the transactions
contemplated herein and in the other documents related hereto, shall have been
taken, given or obtained, be in full force and effect and not be subject to any
pending proceedings or appeals, administrative, judicial or otherwise.
(5) All consents and approvals to be obtained by Liberty from
third parties (including licensors, lessors and others) that are necessary in
connection with the transactions contemplated herein and in the other documents
related hereto, shall have been given or obtained and be in full force and
effect.
(6) On or before the Closing Date, the Company shall have
received all of the following from Liberty in form and substance satisfactory to
the Company:
<PAGE>
(1) Certificates representing all the issued and
outstanding share capital of Liberty;
(2) a Certificate of the President of Liberty, dated as
of the date of Closing certifying (A) as to the accuracy of
Section 5.2(a) and (b); (B) the certificate of incorporation
of Liberty, recently certified by the Secretary of State of
Delaware as duly filed and currently in full force and effect;
(C) by-laws of Liberty; (D) absence of amendments to
constituent documents of such person (in the case of any such
documents of such person filed with a governmental authority,
since the date of the last amendment shown on the official
evidence as to filed constituent documents finished pursuant
to (iv) below; (E) resolutions, of the board of directors and
stockholders of Liberty duly authorizing the execution,
delivery and performance of this Agreement and the other
documents executed in connection with this Agreement to which
it is a party and absence of other resolutions relating
thereto; and (F) the incumbency and signature of the
individuals authorized to execute and deliver documents on
such person=s behalf;
(3) The Investment Agreements from each of the
stockholders of Liberty in the form of Exhibit G attached
hereto; and
(4) Official evidence dated no more than three days
prior to the Closing Date evidence from appropriate
governmental authorities of appropriate domestic jurisdictions
for Liberty as to constituent documents on file, good
standing, payment of franchise taxes and qualification to do
business of Liberty; and
(5) Payment in full in immediately available funds of
the balance of the expense allowance contemplated in Section
7.5 by certified check or money order or wire transfer to the
Company=s account at First Union National Bank ABA No.
063000021; Account No. 2090001541712.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 6.1 Forbearance. During the period from the date of this
Agreement to the Closing Date, neither the Company nor the Merger Sub shall,
without the prior written consent of Liberty:
<PAGE>
(1) adjust, split, combine or reclassify any of its capital
stock; make, declare or pay any dividend or make any other distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any shares of its
capital stock or any securities or obligations convertible into or exchangeable
for any shares of its capital stock; issue, deliver or sell any shares of its
capital stock or any securities convertible into or exercisable for, or any
rights, options or warrants to acquire, any such shares or securities (whether
for cash or property), except for the cancellation of 150,000 and 32,094 shares
of Common Stock currently held by Bob Williams and John Petersen, respectively;
(2) sell, lease, transfer, or otherwise dispose of, any of its
properties or assets;
(3) incur or assume any liabilities or incur any indebtedness
for borrowed money, assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other Person;
(4) make any acquisition or investment either by purchase of
stock or securities, merger or consolidation, contributions to capital, property
transfers, or purchases of any property or assets of any other Person;
(5) compensate in any manner any of its employees, agents or
representatives or pay any bonus, pension or retirement allowance to any
employee or become a party to, amend or commit itself to any pension,
retirement, profit-sharing or welfare benefit plan or agreement or employment
agreement with or for the benefit of any employee or accelerate the vesting of
any stock options or other stock-based compensation;
(6) except as otherwise permitted elsewhere in this Section
6.1, engage or participate in any transaction or incur or sustain any
obligation;
(7) settle or commence any Legal Proceeding;
(8) amend the Certificate of Incorporation or By-Laws;
(9) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any respect at any time prior to the
Closing Date, or in any of the conditions to the transactions contemplated
hereby set forth in Article V not being satisfied or in violation of any
provision of this Agreement;
(10) enter into any agreement or perform any transaction;
or
(11) agree to, or make any commitment to, take any of the
actions prohibited by this Section 6.1.
SECTION 6.2 Obligations of Merger Sub. The Company shall take any
and all action necessary to (i) cause Merger Sub to perform its obligations
under this Agreement and (ii) to ensure that Merger Sub takes no action other
than activities necessary in connection with the Merger.
<PAGE>
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Access to Information.
(1) Upon reasonable notice, the Company shall afford to the
representatives of Liberty during normal business hours during the period prior
to the Closing Date, access to all its properties, books, contracts, commitments
and records, and to its officers, employees, accountants, counsel and other
representatives and, during such period, the Company shall make available to the
other party all information concerning their business, properties and personnel
as such other party may reasonably request. The Company shall not be required to
provide access to or to disclose information where such access or disclosure
would, in the opinion of such counsel, waive the attorney-client privilege of
the institution in possession or control of such information or contravene any
law, rule, regulation, order, judgment, or decree. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(2) All confidential information furnished by the Company to
Liberty pursuant to this Agreement (the "Confidential Information") shall be
treated as the sole property of the Company and, if this Agreement shall be
terminated, Liberty shall upon request promptly return to the Company all of
such written information. Each party hereto receiving Confidential Information
shall keep confidential all such information, will use such information solely
for the purpose of evaluating the transactions contemplated by this Agreement
and shall not directly or indirectly use such information for any competitive or
other commercial purpose.
(3) The obligation to keep Confidential Information as such
shall not apply to (i) any information which (A) was already in the receiving
party=s possession on a non-confidential basis prior to the disclosure thereof
by the furnishing party, (B) was then generally known to the public other than
as a result of disclosure by the receiving party in violation of the provisions
hereof, or (C) was disclosed to the receiving party by a third party not bound
by any obligation of confidentiality or (ii) disclosures made as required by
law. If the receiving party is requested or required (by oral question or
request for information or documents in legal proceedings, interrogatories,
subpoena, civil investigative demand or similar process) to disclose any
information concerning the receiving party, the receiving party will promptly
notify the furnishing party of such request or requirement so that the
furnishing party may seek an appropriate protective order and/or waive the
receiving party=s compliance with the provisions or this Agreement. It is
further agreed that, if in the absence of a protective order or the receipt of a
waiver hereunder the receiving party is nonetheless, in the opinion of counsel,
compelled to disclose information concerning the furnishing party to any
tribunal or governmental body or agency or else stand liable for contempt or
suffer other censure or penalty, the receiving party may disclose such
information to such tribunal or governmental body or agency to the extent
necessary to comply with such order as advised by counsel without liability
hereunder.
<PAGE>
(4) Each receiving party understands and agrees that the
furnishing party will suffer immediate, irreparable harm in the event such
receiving party fails to comply with any of its obligations of confidentiality
under this Agreement, that monetary damages will be inadequate to compensate the
furnishing party for such breach and that such furnishing party shall be
entitled to specific performance as a remedy for any such breach without the
necessity of posting a bond or proving special damages. Such remedy shall not be
deemed to be the exclusive remedy in the event of breach of this Agreement by
any receiving party, but shall be in addition to all other remedies available to
the furnishing party at law or in equity.
(5) No investigation by either of the parties or their
respective representatives shall affect the representations, warranties,
covenants or agreements of the other set forth herein. No representations or
warranties are made by the Company, Liberty, or any affiliate thereof except as
expressly set forth in this Agreement and the Schedules hereto.
SECTION 7.2 Legal Conditions to Transactions. Subject to the terms
and conditions of this Agreement, each of the Company and Liberty shall use
their reasonable good faith efforts (i) to take, or cause to be taken, all
actions necessary, proper or advisable to comply promptly with all legal
requirements which may be imposed on such party with respect to the transactions
contemplated hereby and, subject to the conditions set forth in Article V
hereof, to consummate the transactions contemplated by this Agreement and (ii)
to obtain (and to cooperate with the other parties to obtain) any consent,
authorization, order or approval of, or any exemption by, any third
party(including any governmental agency) which is required to be obtained by the
Company or Liberty in connection with the transactions contemplated by this
Agreement.
SECTION 7.3 Further Assurances. In case at any time after the
Closing Date any further action, or the execution and delivery of any additional
documents or instruments, is necessary or desirable to carry out the purposes of
this Agreement, the parties hereto shall take such actions and execute and
deliver such additional documents and instruments as may be reasonably requested
by the other party hereto.
SECTION 7.4 Advice of Changes. Each of the parties hereto shall
promptly advise the other parties hereto of any change or event which,
individually or in the aggregate with other such changes or events, would or
would be reasonably likely to cause or constitute a breach of any of its
representations, warranties or covenants contained herein. From time to time
prior to the Closing, each party hereto shall promptly supplement or amend the
disclosure schedules attached hereto relating to such party, to reflect any
matter which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in such disclosure
schedules or which is necessary to correct any information in such disclosure
schedules which has been rendered inaccurate thereby. No supplement or amendment
to such disclosure schedules shall have any effect for the purpose of
determining the accuracy of any party=s representations and warranties contained
herein, the satisfaction of any of the conditions in Article V hereof, or the
compliance by any party with its covenants or agreements contained herein.
<PAGE>
SECTION 7.5 Transaction Expenses. Each party hereto shall bear its
own expenses relating to the transactions contemplated hereby, including all
fees of their counsel and accountants, whether or not the transaction is
consummated; provided that upon the Closing, Liberty shall pay to Capston
Network Company, a Delaware corporation ("Capston"), a non-accountable expense
allowance in the amount of the balance of the $175,000 (which is in addition to
the $25,000 Liberty has already paid Capston prior to the date hereof) not paid
to Capston prior to the Closing Date. Said non-accountable expense allowance in
the amount of $200,000 is to reimburse Capston for a portion of its
out-of-pocket expenses, including legal, accounting and other professional fees
advanced or to be paid by Capston in connection with the restoration of the
Company=s corporate charter, the filing of the Company=s reports, proxy
statements and other documents with the Commission and the other expenses
associated with the maintenance of the Company as a current reporting company
pursuant to the Exchange Act.
SECTION 7.6 Public Announcements. None of the parties hereto shall
make any announcement or disclosure of the transactions contemplated hereby
without the prior consent of the other.
SECTION 7.7 Transfer and Similar Taxes. Notwithstanding any other
provision of this Agreement to the contrary, the Company shall assume and
promptly pay all sales, use, privilege, transfer, documentary, gains, stamp,
duties, recording and similar Taxes and fees (including any penalties, interest
or additions) imposed upon any party incurred in connection with the
transactions contemplated by this Agreement (collectively, the "Transfer
Taxes"), and the Company shall, at its own expense, procure any stock transfer
stamps required by, and accurately file all necessary Tax Returns and other
documentation with respect to, any Transfer Tax.
SECTION 7.8 D&O Insurance. For not less than six years after the
Closing Date, the Company or its successors and assigns shall, to the extent
available on commercially reasonable terms, maintain in effect directors' and
officers' liability insurance covering Dennis Lane and Barry Hawk.
SECTION 7.9 Closing Covenant. The parties hereto agree to act in
good faith in taking any and all commercially reasonable actions necessary to
facilitate the Closing and the other transactions contemplated by this
Agreement, including, without limitation, the satisfaction of the respective
closing conditions of the parties set forth herein.
SECTION 7.10 Rule 14f-1 Compliance. As promptly as practicable
following the date hereto, the Company shall file with the Commission and mail
to the stockholders of the Company a statement meeting the requirements of Rule
14f-1 under the Exchange Act with respect to the appointment of Barry Hawk and
Dennis Lane as replacement members of the Board of Directors of the Company.
SECTION 7.11 Brokers.
(1) The Company shall indemnify and hold Liberty, its directors,
officers, stockholders, employees, representatives and agents harmless against
and with respect to all claims for brokerage or other commissions relative to
the transactions contemplated by this Agreement, based on any agreements,
arrangements, or understandings claimed to have been made by Liberty with any
third party.
(2) Liberty shall indemnify and hold the Company harmless against
and with respect to all claims for brokerage or other commissions relative to
the transactions contemplated by this Agreement, based on any agreements,
arrangements or understandings claimed to have been made by the Company or any
of its agents or affiliates with any third party.
<PAGE>
SECTION 7.12 No Solicitation. Upon execution and delivery of this
Agreement until the Closing, the Company shall not, directly or indirectly,
through any director, officer, employee, agent, representative or otherwise (i)
solicit, initiate or encourage the submission of any inquiries, proposals or
offers from any Person relating to a merger, consolidation or tender or exchange
offer or other business combination involving the Company or any transaction
involving the capital stock of the Company or Merger Sub (collectively, a "Third
Party Purchase"); (ii) consider or accept any agreement, arrangement or
understanding with respect to a Third Party Purchase; (iii) participate in any
discussion, negotiations or other communications regarding any Third Party
Purchase; (iv) furnish to any Person other than Liberty and its representatives
any information concerning the Company; (v) grant, issue or agree to grant or
issue to any Person: (a) any direct or indirect interest in the Company or (b)
any right or option to acquire any such interest; or (vi) cooperate in any way,
assist or participate in, facilitate or encourage any effort or attempt by any
Person other than Liberty to seek to do any of the foregoing.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Termination and Amendment.
(1) Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(1) by mutual consent of Liberty, the Company and
Merger Sub in a written instrument;
(2) by Liberty if the transactions contemplated hereby
shall not have been consummated on or before November 23,
1999, unless the failure of the Closing to occur by such date
shall be due to the failure of Liberty to perform or observe
the covenants and agreements of Liberty set forth herein; and
(3) by Liberty or the Company, provided that the
terminating party is not then in breach of any representation,
warranty, covenant or other agreement contained herein, if the
other party shall have breached in any material respect (i)
any of the covenants or agreements made by such other party
herein or (ii) any of the representations or warranties made
by such other party herein; provided, however, that neither
party shall have the right to terminate this Agreement
pursuant to this Section 8.1 unless the breach of any
representation or warranty, together with all other such
breaches, would involve a claim in excess of $100,000 and such
breach is not cured within ten (10) days following written
notice to the party committing such breach, or which breach,
by its nature, cannot be cured prior to the Closing.
<PAGE>
(20 Effect of Termination. In the event of the termination of
this Agreement by any party as provided in this Section 8.1, this Agreement
shall forthwith become void and have no effect, and neither Liberty nor the
Company shall have any liability of any nature whatsoever hereunder, or in
connection with the transactions contemplated hereby, except that (i) Sections
7.1(b), (c) and (d) shall survive any termination of this Agreement, (ii)
notwithstanding anything to the contrary contained in this Agreement, neither
Liberty nor the Company shall be relieved or released from any liabilities or
damages arising out of its willful breach of any provision of this Agreement and
(iii) all expense allowances and other fees paid to Capston prior to the date of
termination, including without limitation, the $25,000 paid to Capston prior to
the date hereof and all other amounts paid to Capston hereafter, shall be
credited dollar for dollar against any future payment or expense allowance due
to Capston with respect to another transaction between Liberty or its affiliates
and any other company controlled or represented by Capston, Art Beroff or any of
its stockholders, directors, officers or affiliates.
(30 Amendment; Extension; Waiver. The parties hereto may (i)
amend any provision of this Agreement, (ii) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (iii) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto, and (iv) waive compliance with any of
the agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such amendment, extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but any
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. No failure or
delay by a party in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy.
SECTION 8.2 Entire Agreement; Survival of Provisions. This
Agreement constitutes the entire agreement of the parties with respect to the
transactions contemplated hereby and supersedes all prior agreements and
understandings with respect thereto. All of the covenants of the parties made
herein shall remain operative and in full force and effect regardless of
acceptance of any of the Shares and payment therefor.
SECTION 8.3 Communications. All notices, demands and other
communications provided for hereunder shall be in writing, and, if to Liberty
shall be given by registered or certified mail, return receipt requested,
telecopy, nationally recognized overnight air courier service or personal
delivery, addressed to Liberty at 11 52nd Street, Brooklyn, New York 11232,
attention Barry Hawk, telecopier no. (718) 492-5517, or to such other address of
Liberty may designate to the Company in writing, with a copy to Herrick,
Feinstein LLP, 2 Park Avenue, New York, New York 10016, telecopier no. (212)
889-7577, Attention: David Lubin, Esq., and, if to the Company, shall be given
by similar means to the Company at 1612 N. Osceola Avenue, Clearwater, Florida
33755, attention Sally Fonner, telecopier no. (727) 443-5240 or to such other
address as the Company may designate in writing, and any such notice shall be
deemed given when delivered.
SECTION 8.4 Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
<PAGE>
SECTION 8.5 Binding Effect; Assignment. The rights and obligations
of the parties under this Agreement may not be assigned to any other Person
without the prior written consent of the other parties hereto. This Agreement
shall be binding upon and inure to the parties hereto and their respective
successors and permitted assigns.
SECTION 8.6 Governing Law. This Agreement shall be deemed to be a
contract made under the laws of the State of New York, and for all purposes
shall be construed in accordance with the laws of said State, without regard to
principles of conflict of laws. Each of the parties hereto agrees to submit to
the jurisdiction of the federal or state courts located in the City of New York
in any action or proceeding arising out of or relating to this Agreement.
SECTION 8.7 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 8.8 Headings. The Article and Section headings used or
contained in this Agreement are for convenience of reference only and shall not
affect the construction of this Agreement.
SECTION 8.9 Shares Transfer Expenses and Taxes. The Company shall
pay any and all stamp, transfer and other similar Taxes payable or determined to
be payable, if any, in connection with the original issuance of the Shares, and
shall save and hold Liberty and its affiliates harmless from and against any and
all liabilities with respect to or resulting from any delay in paying, or
omission to pay, such Taxes.
SECTION 8.10 Waiver of Jury Trial. The parties hereto hereby
irrevocably waive all right to a trial by jury in any action, proceeding or
counterclaim arising out of or relating to this Agreement or the transactions
contemplated hereby or thereby.
SECTION 8.11 Absence of Third Party Beneficiary Rights. Except as
otherwise expressly provided for herein, the provisions of this Agreement are
solely for the benefit of the parties hereto and no provision of this Agreement
is intended, nor will any provision be interpreted, to provide or create any
third party beneficiary rights or any other rights of any kind in any
stockholder, creditor, customer, lessor, lessee, licensor, licensee, employee or
any other Person.
[REMAINDER OF PAGE INTENTIONALLY OMITTED;
SIGNATURE PAGE TO FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers hereunto duly authorized, as of the
date first above written.
LIBERTY GROUP HOLDINGS, INC.,
f/k/a BIO-RESPONSE, INC.
By:
Name:
Title:
BR ACQUISITION CORP.
By:
Name:
Title:
LIBERTY FOOD GROUP, LTD.
By:
Name:
Title:
<PAGE>
ASSET PURCHASE AGREEMENT
by any among
LIBERTY FOOD GROUP, LLC
as Buyer
and
FERRO FOODS CORPORATION
as Seller
FRANK FERRO, SR.
and
FRANK GAMBINO
November 23, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I
SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Assets to be Sold. . . . . . . 1
Section 1.2 Excluded Assets. . . . . . . . 3
Section 1.3 Reorganization . . . . . . . . 3
ARTICLE II
EXCLUSION OF LIABILITIES . . . . . . . . . . . . . . . . . 3
Section 2.1 Liabilities Not Assumed by the
Buyer . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
CLOSING; PURCHASE PRICE AND PAYMENT. . . . . . . . . . . . 4
Section 3.1 Closing. . . . . . . . . . . . 4
Section 3.2 Purchase Price . . . . . . . . 4
Section 3.3 Payment of Purchase Price. . . 5
Section 3.4 Deliveries . . . . . . . . . . 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER . . . . . . . 7
Section 4.1 Due Incorporation and
Qualification . . . . . . . . . . . . . . . . . . . 7
Section 4.2 Subsidiaries . . . . . . . . . 7
Section 4.3 Authority to Execute and
Perform Agreements. . . . . . . . . . . . . . . . . 7
Section 4.4 Compliance . . . . . . . . . . 8
Section 4.5 Tax Matters. . . . . . . . . . 8
Section 4.6 No Loan Agreements . . . . . . 8
Section 4.7 Litigation . . . . . . . . . . 8
Section 4.8 Agreements . . . . . . . . . . 8
Section 4.9 Environmental and Other
Permits and Licenses. . . . . . . . . . . . . . . . 9
Section 4.10 Purchased Assets. . . . . . . 9
Section 4.11 Liens . . . . . . . . . . . .10
Section 4.12 Inventory; Accounts
Receivable; Equipment; Records;
Intellectual Property. . . . . . . .10
Section 4.13 Employee Matters. . . . . . .10
Section 4.14 Employee Benefit Plans. . . .10
Section 4.15 Bulk Transfer . . . . . . . .11
Section 4.16 Full Disclosure . . . . . . .11
Section 4.17 No Broker . . . . . . . . . .11
Section 4.18 Investment Intent . . . . . .12
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER. . . . . . . .13
Section 5.1 Incorporation and
Qualification13
Section 5.2 Authority to Execute and
Perform Agreements. . . . . . . . . . . . . . . . .13
Section 5.3 The Shares. . . . . . . . . . .13
Section 5.4 No Broker. . . . . . . . . . .13
ARTICLE VI
COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . .14
Section 6.1 Expenses of Sale . . . . . . .14
Section 6.2 Taxes. . . . . . . . . . . . .14
Section 6.3 Telephone Numbers. . . . . . .14
Section 6.4 Change of Name . . . . . . . .14
ARTICLE VII
BUYER'S CONDITIONS TO CLOSING. . . . . . . . . . . . . . .14
Section 7.1 Representations and Warranties.14
Section 7.2 Covenants. . . . . . . . . . .15
Section 7.3 Bulk Transfer. . . . . . . . .15
Section 7.4 Consents . . . . . . . . . . .15
ARTICLE VIII
RESTRICTIVE COVENANTS. . . . . . . . . . . . . . . . . . .15
Section 8.1 Confidential Information . . .15
Section 8.2 Non-Competition. . . . . . . .15
Section 8.3 Rights and Remedies Upon
Breach16
Section 8.4 Severability of Covenants. . .16
Section 8.5 Enforceability in
Jurisdictions16
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . .16
Section 9.1 Survival of Representations
and Warranties. . . . . . . . . . . . . . . . . . .16
ARTICLE X
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . .17
Section 10.1 Obligation of the Seller to
Indemnify . . . . . . . . . . . . . . . . . . . . .17
Section 10.2 Notice to Indemnifying Party.18
ARTICLE XI
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . .18
Section 11.1 Notices . . . . . . . . . . .18
Section 11.2 Entire Agreement. . . . . . .19
Section 11.3 Waivers and Amendments. . . .19
Section 11.4 Governing Law . . . . . . . .19
Section 11.5 Consent to Jurisdiction . . .19
Section 11.6 Assignment. . . . . . . . . .19
Section 11.7 Counterparts and Facsimile. .20
Section 11.8 Severability of Provisions . .20
Section 11.9 Exhibits and Schedules. . . .20
Section 11.10 Headings . . . . . . . . . .20
EXHIBITS
EXHIBIT A - Bill of Sale and Assignment
EXHIBIT B - Release Agreement
EXHIBIT C - Lock-Up Letter
EXHIBIT D - Voting Trust and Proxy Statement
EXHIBIT E - Escrow Agreement
EXHIBIT F - Creditors
EXHIBIT F-1 - Bulk Sale Notice
SCHEDULES
Schedule 1.1 (i) - Accounts Receivable
Schedule 1.1 (ii) - Cash; Marketable Securities
Schedule 1.1 (iv) - Inventory
Schedule 1.1 (v) - Customers and Suppliers
Schedule 1.1 (vi) - Intellectual Property
Schedule 1.1 (vii) - Equipment
Schedule 1.1 (viii) - Vehicles
Schedule 1.1 (xii) - Contracts
Schedule 1.1 - Permitted Liens
Schedule 1.2 - Excluded Assets
Schedule 4.9 - Permits
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT dated as of November 23, 1999 (this
"Agreement") by and among LIBERTY FOOD GROUP, LLC, a Delaware limited liability
company (the "Buyer"), and FERRO FOODS CORPORATION, a New York corporation (the
"Seller"), and Frank Ferro, Sr. and Frank Gambino (individually, a "Principal"
and, together, the "Principals").
W I T N E S S E T H
WHEREAS, the Seller, a corporation duly organized and existing under
the laws of the State of New York, is engaged in the business of wholesale food
distribution (the "Business"); and
WHEREAS, the Seller desires to sell to the Buyer, and the Buyer
desires to purchase from the Seller, all right, title and interest of the Seller
in and to substantially all the assets, properties and rights of the Seller as
provided herein, all upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Buyer and the Seller hereby
agree as follows:
ARTICLE I
SALE OF ASSETS
Section 1.1 Assets to be Sold. Except as otherwise provided in Section
1.2 below, at the Closing (as hereinafter defined) the Seller shall sell,
assign, convey, transfer and deliver to the Buyer, and the Buyer shall purchase
from the Seller, all right, title and interest of the Seller in and to the
assets, properties, rights and business of the Seller of every type and
description, real, personal and mixed, tangible and intangible, wherever located
and whether or not reflected on the books and records of the Seller relating to
or used in connection the Business (collectively, the "Purchased Assets"),
including, without limitation:
(i) all accounts receivable, whether collected or
uncollected on the date hereof, attributable to sales made by Seller and its
agents relating to the period commencing on the date which is 60 business days
prior to the Closing Date (as hereinafter defined), including without
limitation, those which are listed on Schedule 1.1(i) attached hereto (the
"Accounts Receivable");
(ii) all cash and marketable securities held or owned by
Seller on the date hereof in any bank or securities account, as set forth on
Schedule 1.1(ii) attached hereto;
(iii) the goodwill of the Seller;
(iv) all of the Seller's inventories on the Closing Date,
including, without limitation, all inventories of raw materials,
work-in-progress and active shipments and ordered goods whether located on the
premises of the Seller, in transit to or from such premises, in warehouses, in
the premises of manufacturers, or otherwise, including, without limitation,
those indicated on Schedule 1.1(iv) attached hereto (collectively, the
"Inventory");
(v) all of the Seller's customers and suppliers as set forth
on Schedule 1.1(v) attached hereto;
(vi) the name "Ferro Foods Corporation" and all trademarks,
service marks logos, copyrights and registrations and applications therefor, and
trade secrets and confidential business information, manufacturing and
production processes and techniques, research and development information,
customer and supplier data, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial, marketing and business data,
pricing and cost information, and business and marketing plans (the
"Intellectual Property"), including, without limitation, those indicated on
Schedule 1.1(vi) attached hereto;
(vii) all furniture, fixtures, equipment, machinery and
other tangible personal property used or held for use by the Seller at the
locations at which the Business is conducted, or otherwise owned or held by the
Seller at the Closing Date for use in conduct of the Business, including without
limitation, those listed on Schedule 1.1(vii) attached hereto (the "Equipment");
(viii) the vehicles used in the Business, including without
limitation, those indicated on Schedule 1.1(viii) attached hereto (the
"Vehicles");
(ix) all books of account, general, financial, tax and
personnel records, invoices, shipping records, sales invoices, warranties on all
supplies, equipment correspondence and other documents, records and files and
all computer software and programs and any rights thereto owned, associated with
or employed by the Seller or used in, or relating to, the Business, other than
organization documents, minutes and stock records books and the corporate seal
of the Seller (collectively the "Records");
(x) all claims, causes of action, choses in action, rights
of recovery and rights of set-off of any kind (including rights to insurance
proceeds and rights under and pursuant to all warranties, representations and
guaranties made by suppliers of products, materials or equipment, or components
thereof), pertaining to or arising out of, the Business and enuring to the
benefit of the Seller;
(xi) all sales and promotional literature and other
sales-related materials owned, used, associated with or employed by the Seller
in connection with the Business;
(xii) all written or oral contracts, licenses, sublicenses,
agreements, undertakings, commitments, and sales and purchase orders, quotations
and other executing contracts, including, without limitation, those listed on
Schedule 1.1(xii) attached hereto;
(xiii) all municipal, state and federal franchises, permits,
licenses, agreements, waivers and authorizations held or used by the Seller in
connection with, or required for, the Business, to the extent transferable; and
(xiv) all other assets, properties, rights and business of
every kind and nature owned or held by the Seller which are used by the Seller
in the Business, or in which the Seller has an interest, known or unknown, fixed
or unfixed, choate or inchoate, accrued, absolute, contingent or otherwise,
whether or not specifically referred to in this Agreement.
In confirmation of the foregoing sale, assignment, conveyance and
transfer, the Seller shall execute and deliver to the Buyer at the Closing a
Bill of Sale and Assignment in the form of Exhibit A attached hereto.
The Purchased Assets shall be conveyed and delivered to the Buyer free
and clear of all liens, encumbrances, security interests, claims, charges, and
other encumbrances of any kind, nature or character (collectively, "Liens"),
other than the Liens indicated on Schedule 1.1 attached hereto (the "Permitted
Liens").
Section 1.2 Excluded Assets. Notwithstanding the foregoing, there
shall be excluded from the assets, properties, rights and business to be
transferred to the Buyer hereunder those assets, properties and rights set forth
in Schedule 1.2 (collectively the "Excluded Assets").
Section 1.3 Reorganization. (a) It is intended that the transaction
described herein qualify as a tax-free reorganization under Section 368(a)(1)(C)
of the Internal Revenue Code of 1986, as amended (the "Code"). As such, and as
more fully described herein, Buyer will acquire substantially all of the assets
of the Seller solely in exchange for voting securities of Buyer.
(b) As soon as reasonably practicable, but in no event later than
12 months following the Closing Date (as hereinafter defined), Seller will be
liquidated pursuant to the requirements of Section 368(a)(2)(G) of the Code.
ARTICLE II
EXCLUSION OF LIABILITIES
Section 2.1 Liabilities Not Assumed by the Buyer. Anything in this
Agreement to the contrary notwithstanding, the Buyer shall not assume, or in any
way be liable or responsible for, any liabilities or obligations of the Business
or any liabilities or obligations of the Seller or the Principals, whether or
not such liabilities or obligations are in connection with or related to the
Business or the Purchased Assets. Without limiting the generality of the
foregoing, the Seller and the Principals shall retain, and shall be solely
responsible for paying, performing and discharging when due, and the Buyer shall
not assume or have any responsibility for, each of the following:
(i) any liability or obligation of the Seller arising out of
or in connection with the negotiation and preparation of this Agreement and the
consummation and performance of the transactions contemplated hereby, including,
without limitation, any tax liability so arising;
(ii) any liability or obligation under contracts and other
agreements to which the Seller is a party or by or to which it or its assets,
properties or rights are bound or subject;
(iii) any liability or obligation relating to or arising out
of the Purchased Assets and Excluded Assets;
(iv) any liability or obligation pertaining to any of the
employees of the Business;
(v) any tax, charge, duty, levy or other similar assessment
imposed by any federal, state local or foreign governmental department,
commission, board, bureau, agency or instrumentality (a "Taxing Authority"),
including without limitation, income, gross receipts, excise, property, sales,
gain, use, license, capital stock, transfer, franchise, payroll, withholding,
social security, unemployment insurance, medicaid or other taxes, including
without limitation any interest or penalties attributable thereto (collectively,
"Taxes"); and
(vi) any other liability or obligation of the Principals or
the Seller, and their respective stockholders, directors, officers, employees,
affiliates, agents or representatives and their respective successors and
assigns arising out of or relating to the Business or otherwise.
ARTICLE III
CLOSING; PURCHASE PRICE AND PAYMENT
Section 3.1 Closing. Subject to the terms and conditions of this
Agreement, the sale and purchase of the Purchased Assets contemplated by this
Agreement shall take place at a closing (the "Closing") to be held at the
offices of Herrick, Feinstein LLP, 2 Park Avenue, New York, New York 10016, on
November 23, 1999 or at such other date as the Seller and Buyer may mutually
agree; provided, however, that the Closing shall not occur prior to the tenth
(10th) day following the mailing of the notice to the creditors of the Seller as
provided in Section 4.15 below. The date upon which the Closing occurs is herein
called the "Closing Date."
Section 3.2 Purchase Price. The aggregate purchase price for the
Purchased Assets (the "Purchase Price") shall be two million five hundred
thousand (2,500,000) shares (the "Shares") of common stock, par value $.004 per
share, of Liberty Group Holdings, Inc., formerly known as Bio-Response, Inc., a
Delaware corporation (the "Issuer").
Section 3.3 Payment of Purchase Price. The Buyer shall pay the
Purchase Price to the Seller at the Closing by delivery to the Seller of a stock
certificate representing the Shares issued in the name of the Seller. The
certificate representing the Shares shall bear the following legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
SOLD OR OTHERWISE DISPOSED OF UNLESS (A) SUCH DISPOSITION IS PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (B) THE HOLDER HEREOF SHALL HAVE DELIVERED TO THE
COMPANY AN OPINION, FROM COUNSEL AND IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH DISPOSITION IS
EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THAT ACT.
THIS CERTIFICATE IS SUBJECT TO AND IS TRANSFERABLE ONLY UPON
COMPLIANCE WITH THE PROVISIONS OF (i) THE ESCROW AGREEMENT DATED AS OF
NOVEMBER 23, 1999 BETWEEN LIBERTY FOOD GROUP, LLC AND FERRO FOODS
CORPORATION AND (ii) THE VOTING TRUST AND PROXY AGREEMENT DATED AS OF
NOVEMBER 23, 1999, AMONG LIBERTY FOOD GROUP, LLC, FERRO FOODS
CORPORATION, FRANK FERRO, SR. AND FRANK GAMBINO. ANY DIRECT OR
INDIRECT TRANSFER, GIFT, ASSIGNMENT, PROXY, PLEDGE, LIEN OR ANY OTHER
DISPOSITION OF THE SHARES REPRESENTED BY THIS CERTIFICATE IN VIOLATION
OF SAID AGREEMENTS SHALL BE INVALID."
Section 3.4 Deliveries. (a) On or before the Closing
Date the Seller shall have received the following from the Buyer,
all in form and substance satisfactory to the Seller:
(i) A stock certificate representing the Shares
issued in the name of the Seller;
(ii) Resolutions of the Buyer duly authorizing the execution,
delivery and performance of this Agreement and the sale of the
Purchased Assets to the Buyer contemplated hereunder and the other
documents executed by the Buyer in connection with this Agreement; and
(iii) Recent official evidence dated at least three days prior to
the Closing Date from appropriate governmental authorities of
appropriate domestic jurisdictions of the Buyer as to constituent
documents on file, good standing, payment of franchise taxes and
qualification to do business of the Buyer.
(b) On or before the Closing Date, the Buyer shall have received
the following from the Seller, all in form and substance satisfactory to the
Buyer;
(i) the Bill of Sale and Assignment, duly executed
by the Seller;
(ii) the Release Agreement attached hereto as Exhibit B executed
by each of the Principals;
(iii) the Lock-Up Letter attached hereto as
Exhibit C duly executed by the Seller and each of the
Principals;
(iv) the Voting Trust and Proxy Agreement attached hereto as
Exhibit D duly executed by the Seller and each of the Principals;
(v) the Escrow Agreement attached hereto as Exhibit E duly
executed by the Seller;
(vi) the consent of each of the parties indicated on Schedule
1.1(xii) attached hereto;
(vii) Resolutions of the board of directors and stockholders of
the Seller duly authorizing the execution, delivery and performance of
this Agreement and the sale of the Purchased Assets to the Buyer
contemplated hereunder and the other documents executed by the Seller
in connection with this Agreement;
(viii) Recent official evidence dated at least three days prior
to the Closing Date from appropriate governmental authorities of
appropriate domestic jurisdictions of the Seller as to constituent
documents, on file, good standing, payment of franchise taxes and
qualification to do business of the Seller; and
(ix) Any other documents or agreements reasonably requested by
the Buyer or its counsel which are necessary or appropriate to
consummate the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
As an inducement to the Buyer to enter into this Agreement, the Seller
and the Principals, jointly and severally, hereby represent and warrant to the
Buyer as follows:
Section 4.1 Due Incorporation and Qualification. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York and has the corporate power and lawful authority to
own, lease and operate its assets, properties and business and to carry on its
business as now conducted. The Seller is qualified to transact business and is
in good standing in each jurisdiction in which the nature of its business or
location of its properties requires such qualification, except where the failure
to be so qualified and in good standing would not result in a material adverse
effect on the Business, any of the Purchased Assets or the ability of the Seller
to perform its obligations hereunder or to consummate the transactions
contemplated by this Agreement.
Section 4.2 Subsidiaries. Neither the Seller nor any of the Principals
directly or indirectly owns or has the power to vote, or to exercise a
controlling influence with respect to the securities of any class of any person,
the holders of which class are entitled to vote for the election of directors
(or persons performing similar functions) of such person, and neither the Seller
nor any of the Principals is an affiliate of any person engaged in the same
business as the Seller or any business directly or indirectly related to the
Business, including without limitation, any supplier or customer of the
Business.
Section 4.3 Authority to Execute and Perform Agreements. Each of the
Seller and the Principals has full legal right and power and all authority and
approval required to enter into, execute and deliver this Agreement and to
perform fully their respective obligations hereunder, including, without
limitation, the sale and transfer of Purchased Assets to the Buyer. This
Agreement has been duly executed and delivered and constitutes the valid and
binding obligation of each of the Seller and the Principals, enforceable against
each of them in accordance with its terms. No approval or consent of any
foreign, federal, state, county, local or other governmental or regulatory body
is required in connection with the execution and delivery by the Seller and the
Principals of this Agreement and the consummation and performance by the Seller
and the Principals of the transactions contemplated hereby. The execution and
delivery of this Agreement, the consummation of the transactions contemplated
under this Agreement, and the performance by the Seller and the Principals of
this Agreement in accordance with its terms and conditions will not conflict
with or result in the breach or violation of any of the terms or conditions of,
or constitute (or with notice or lapse of time or both would constitute) a
default under, (i) the Certificate of Incorporation or By-Laws of the Seller;
(ii) any instrument, contract or other agreement by or to which the Seller or
the Principals is a party or by or to which it or he, or its or his, as the case
may be, assets or properties are bound or subject; (iii) any statute or any
regulation, order, judgment or decree of any court or governmental or regulatory
body; or (iv) any Permit (as defined in Section 4.9 below). The execution and
delivery of this Agreement by each of the Seller and the Principals does not,
and the performance of this Agreement by the Seller and the Principals will not,
require any consent, approval, authorization or permit of or filing with, or
notification to any person or entity other than those consents which are
indicated on Schedule (xii) attached hereto.
Section 4.4 Compliance. The Seller and the Principals have conducted
the Business through the date hereof in accordance with all applicable laws,
ordinances, statutes, rules, regulations and governmental orders applicable to
the Business or any of its properties or assets. The Seller holds all permits,
licenses, vacancies, order and appeals necessary in the conduct of its Business
as currently being conducted. Neither the Seller nor any of the Principals is in
conflict with, or in default or violation of: (i) any law, rule, regulation,
order, judgment or decree applicable to the Seller or the Principals by which
any property or asset of the Seller or Principals is bound or affected; or (ii)
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which either the Seller
or Principals is a party or by which the Seller or Principals or any of their
properties or assets are bound or affected.
Section 4.5 Tax Matters. Each of the Seller and the Principals has
filed all returns, reports or information returns required to be filed with any
Taxing Authority with respect of Taxes and has paid and discharged all Taxes
shown as due thereon and have paid all applicable Taxes. Neither the United
States Internal Revenue Service nor any other Taxing Authority is now asserting
or, to the best knowledge of the Seller and the Principals, threatening to
assert against the Seller any deficiency or claim for additional Taxes,
including without limitation, interest thereon or penalties in connection
therewith, other than the current audit of the Seller's 1995 financials (the
"Audit"). The Seller has not granted any waiver of any statute of limitations
with respect to, or any extension of a period for the assessment of any Tax. The
accruals and reserves for taxes reflected in the current balance sheet of the
Seller are adequate to cover all Taxes accruable through such date (including
interest and penalties, if any, thereon) in accordance with U.S. generally
accepted accounting principles, consistently applied.
Section 4.6 No Loan Agreements. The Seller is not, directly or
indirectly, a party to any contract or other agreement or arrangement relating
to borrowed money or extending credit or by or to which it or its assets or
properties are bound or subject, including without limitation, loan agreements,
credit lines, promissory notes, mortgages, pledges, guarantees, security
agreements, factoring agreements, letters of credit, powers of attorney or other
arrangements to loan or borrow money or extend credit.
Section 4.7 Litigation. Neither the Seller, nor the Principals is a
party to, or threatened with, any litigation or judicial, administrative or
arbitration proceeding other than in connection with the Audit. Neither the
Seller nor the Principals knows of any dispute with any person which materially
and adversely affects, or may materially and adversely affect, the Purchased
Assets, or the Business.
Section 4.8 Agreements. Schedule 1.1(xii) attached hereto sets forth
all of the following contracts and other agreements to which the Seller is a
party or by or to which it or its assets or properties are bound or subject: (i)
contracts and other agreements with any current or former officer, director,
employee, consultant or stockholder; (ii) agreements with any labor union or
association representing any employee; (iii) contracts and other agreements for
the sale of materials, products, supplies, equipment, merchandise or services;
(iv) licenses, royalty agreements or similar contracts; (v) warehousing,
distributorship, depository, representative, management, marketing, sales
agency, or advertising agreements; (vi) contracts and other agreements for the
sale of any of its assets or properties other than in the ordinary course of
business or for the grant to any person of any preferential rights to purchase
any of its assets or properties; (vii) joint venture agreements relating to the
assets, properties or business of the Seller or by or to which it or its assets
or properties are bound or subject; (viii) contracts or other agreements under
which it agrees to indemnify any party, to share the Tax liability of any party
or to refrain from competing with any party; or (ix) any other material contract
or other agreement whether or not made in the ordinary course of business. All
of the contracts and other agreements set forth on Schedule 1.1(xii) and
elsewhere referred to in this Agreement are in full force and effect and no
condition exists which with the lapse of time or notice would constitute a
default thereunder. Except as separately identified on Schedule 1.1(xii), the
Seller is not a party to or bound by any contract or other agreement which
either individually or in the aggregate materially and adversely affects its
assets, properties, business, or condition, financial or otherwise, or which was
entered into other than in the ordinary course of its business.
Section 4.9 Environmental and Other Permits and Licenses.
The Seller currently holds all the health and safety and other
permits, licenses, authorizations, certificates, exemptions and approvals of
governmental authorities, including, without limitation, environmental permits
(collectively "Permits"), a list of which is set forth on Schedule 4.9 attached
hereto, necessary or proper for the current use, occupancy or operation of any
asset or property of the Seller or the conduct of the Business, and all such
Permits are in full force and effect. There is no existing practice, action or
activity of the Seller and no existing condition of the properties or assets of
the Seller or the Business which will give rise to any civil or criminal
liability under, or violate or prevent compliance with, any health or
occupational safety or other applicable statute, regulation, ordinance or
decree. The Seller has not received any notice from any governmental authority
revoking, cancelling, rescinding, materially modifying or refusing to renew any
Permit or providing written notice of violations under any law, statute,
regulation, ordinance or decree. The Seller is in all respects in compliance
with the Permits. There has never been any spill, discharge, release,
contamination or other condition or event involving "Hazardous Materials" (as
defined or promulgated pursuant to applicable federal, state and local law) at
any real property owned or leased by the Seller or at any location at which the
Seller now or previously has conducted business and none of such locations or
real property has been used for the generation, storage, or use of "Hazardous
Materials."
Section 4.10 Purchased Assets. The Seller owns, leases or has the
legal right to use all the properties and assets, used or intended to be used in
the conduct of the Business. The Purchased Assets and the Excluded Assets
constitute all the properties, assets and rights forming a part of, used, held
or intended to be used in, and all such properties, assets and rights necessary
in the conduct of, the Business. The Seller has caused the Purchased Assets to
be maintained in accordance with good business practice, and all the Purchased
Assets are in good operating condition and repair and are suitable for the
purposes for which they are used and intended. The Seller has the complete and
unrestricted power and unqualified right to sell, assign, transfer, convey and
deliver the Purchased Assets to the Buyers free and clear of all Liens (other
than the Permitted Liens) without penalty or other adverse consequences.
Following the consummation of the transactions contemplated by this Agreement,
the Buyer will own, with good, valid and marketable title, or lease, under valid
and subsisting leases, or otherwise acquire the interests of the Seller in the
Purchased Assets, free and clear of any Lien other than the Permitted Liens, and
without incurring any penalty or other adverse consequence.
Section 4.11 Liens. The Seller owns outright and has good and
marketable title to all of the Purchased Assets, in each case free and clear of
any Lien other than the Permitted Liens.
Section 4.12 Inventory; Accounts Receivable; Equipment; Records;
Intellectual Property. The Inventory consists of merchantable and usable goods
in the ordinary course of the Business, the amount and character which is
reasonable under present requirements. All of the Inventory is merchantable and
is usable in the ordinary course of business of Seller as presently conducted.
Seller is not under any liability or obligation with respect to the return of
any Inventory or merchandise in the possession of customers. The Accounts
Receivable as set forth on Schedule 1.1(i) is a true and accurate list of
receivables generated by sales of the Seller in the normal course of business,
and to the best of Seller's knowledge are valid obligations of the debtors
listed on such schedule. Seller knows of no reason why any such Account
Receivable should not be collected. The Equipment is in good operational
condition and repair, ordinary wear and tear excepted. The Records are the true
books and records of the Business and truly and accurately reflect the
underlying facts and transactions in all material respects. The Records contain
all of the documentation required to operate the Business after the Closing as
presently operated and no other records or documents exist which are necessary
to operate the Business. Seller owns the right to those Intellectual Property
free and clear of all Liens, other than the Permitted Liens, and the
Intellectual Property are all that are required for the conduct of the Business
or ownership of the Purchased Assets as now being conducted or presently
proposed to be conducted. There are no assignments, licenses or sublicenses with
respect to any of the Intellectual Property. There are no pending or, to the
best knowledge of the Principals, threatened, claims, or assertions by any
person or entity to the use of any of the Intellectual Property, and none of the
Intellectual Property infringes on the rights of any person or entity and no
valid basis exists or with notice or the passage of time will exist for any such
claim.
Section 4.13 Employee Matters. The Seller has paid to date and will
pay on or before the Closing Date all accrued wages, salary, bonus, commissions,
vacation and sick pay due to be paid or compensated on or before such respective
dates for all of its employees and sales representatives, including payroll
overheads (i.e., FICA, Florida state tax, federal tax, disability, workers'
compensation and liability, employee benefit plan contributions and payments),
and the Seller and Principals shall jointly and severally indemnify and hold
harmless the Buyer, its stockholders, directors, officers, employees,
affiliates, agents, representatives and their respective successors and assigns
from and against any liability that may be incurred by reason of the Seller
having failed to make such payments.
Section 4.14 Employee Benefit Plans. Other than the Ferro Foods 401(k)
and Profit Sharing Plan (the "Plan"), the employees of the Seller are not
covered by and the Seller does not maintain, participate in, contribute to, or
operate any pension, retirement, profit-sharing or other employee benefit plans,
the Seller does not maintain or contribute to and is not required to contribute
to any employee benefit plan (within the meaning of Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), which is intended
to qualify under paragraph 401(a) of the Code and the Seller has not been
required to contribute to any employee benefit plan which is a multi-employer
plan (within the meaning of Section 3(37) of ERISA) in the five years
immediately preceding the date hereof. The Seller has no responsibility for and
has not assumed any pension-related liabilities (including, without limitation,
withdrawal liability) of any predecessor business or person. (i) The Plan is not
a multiemployer plan with the meaning of ERISA; (ii) the Plan does not promise
or provide retiree medical or life insurance benefits to any person; (iii) the
Plan does not promise or provide severance benefits or benefits contingent upon
a change in ownership or control, within the meaning of Section 280G of the
Code;(iv) the Plan has been operated in all material respects in accordance with
its terms and the requirements of applicable law; and (v) if the Plan is subject
to Title IV of ERISA, the aggregate accumulated benefit obligations of the Plan
(as of the date of the most recent actuarial valuation prepared for the Plan)
does not exceed the fair market value of the assets of the Plan (as of the date
of such valuation).
Section 4.15 Bulk Transfer. Seller acknowledges that the sale of
assets as contemplated hereby constitutes a Bulk Transfer under Article 6 of the
New York Uniform Commercial Code (the "UCC").
The Seller has furnished to the Buyer a true, accurate and complete list of
Seller's creditors and the approximate amount of Seller's indebtedness to each,
which list is attached hereto as Exhibit F. Seller has delivered to each such
creditor a notice of Bulk Transfer, in the form attached hereto as Exhibit F-1,
on or about November 12, 1999, and any required waiting period under the UCC
shall have elapsed prior to the Closing Date.
Section 4.16 Full Disclosure. All documents and other papers delivered
by or on behalf of the Seller and the Principals in connection with this
Agreement and the transactions contemplated hereby are true, complete and
accurate; and all contracts and other agreements or instruments included
thereunder are valid, subsisting and binding on the parties thereto in
accordance with their terms. The information furnished by or on behalf of the
Seller and the Principals to the Buyer in connection with this Agreement and the
transactions contemplated hereby does not contain any untrue statement of a
material fact and does not omit to state any material fact necessary to make the
statements made, in the context in which made, not false or misleading. There is
no fact which the Seller or the Principals has not disclosed to the Buyer which
materially adversely affects, or so far as the Seller or the Principals can now
foresee will materially adversely affect, the business or condition (financial
or other) of the Business or the Purchased Assets, Seller or the ability of the
Seller or the Principals to perform this Agreement.
Section 4.17 No Broker. No broker, finder, agent or similar
intermediary has acted for or on behalf of the Seller or the Principals in
connection with this Agreement or the transactions contemplated hereby, and no
broker, finder, agent or similar intermediary is entitled to any broker's,
finder's or similar fee or other commission in connection therewith based on any
agreement, arrangement or understanding with the Seller or the Principals or any
action taken by the Seller or the Principals.
Section 4.18 Investment Intent. With respect to the
Shares to be received by the Seller as the Purchase Price:
(i) The Shares have not been registered under the Securities Act
of 1933, as amended (the "Securities Act"), and have not been registered or
qualified under the securities laws of any state of the United States. Seller
and each of the Principals acknowledges that it has no right to require the
Buyer or the Issuer to register the Shares under the Securities Act or to
register or qualify the Shares under the securities laws of any state of the
United States;
(ii) The Seller and each of the Principals agrees that it will
not, directly or indirectly, offer, transfer, sell or otherwise dispose of any
of the Shares (or solicit any offers to buy, purchase or otherwise acquire any
of the Shares), except in compliance with the Securities Act and the rules and
regulations thereunder. The Seller and each of the Principals further
understands, acknowledges and agrees that none of the Shares may be transferred,
sold or otherwise disposed of unless (x) such disposition is pursuant to an
effective registration statement under the Securities Act, or (y) the Seller
shall have delivered to the Issuer an opinion, from counsel and in form and
substance reasonably satisfactory to the Buyer, to the effect that such
disposition is exempt from the provisions of Section 5 of the Securities Act;
(iii) The Seller is acquiring the Shares for its own account, for
investment purposes only and not with a view to or for sale in connection with
any distribution thereof;
(iv) The Seller and each of the Principals and each of the
Principals must continue to bear the economic risk of the investment in the
Shares unless they are subsequently registered under the Securities Act or an
exemption from such registration is available. If any of the Shares are disposed
of in accordance with Rule 144 under the Securities Act, the Seller or each of ,
as applicable, the Principals shall deliver to the Issuer at or prior to the
time of such disposition an executed copy of Form 144 (if required by Rule 144)
and such other documentation as the Issuer may reasonably require in connection
with such disposition;
(v) The Seller and each of the Principals acknowledges that the
market value of the Shares will fluctuate from their value on the Closing Date
and, at the time that the Seller disposes of the Shares, such shares may not be
worth their market value on the Closing Date;
(vi) The Seller and each of the Principals have such knowledge
and experience in business matters to be able to evaluate the merits and risks
of an investment in the Shares and to make an informed decision with respect to
its acceptance of the Shares as the Purchase Price. The Seller and each of the
Principals have adequate means of providing for their current financial needs
and contingencies, are able to bear the substantial economic risks of an
investment in the Shares for an indefinite period of time, have no need for
liquidity thereof, and could afford a complete loss of the value of such
investment;
(vii) The Seller and each of the Principals have had an
opportunity to discuss the business, operations and conditions (financial and
otherwise) of the Buyer and the Issuer with representatives of the Buyer. In
accepting the Shares on the Closing Date, no oral representations or written
representations (other than those specifically made herein) have been made to
the Seller or the Principals; and
(viii) The Seller and each of the Principals is an "accredited
investor", as that term is defined in Regulation D under the Securities Act.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
As an inducement to the Seller to enter into this Agreement, the Buyer
hereby represents and warrants to the Seller as follows:
Section 5.1 Incorporation and Qualification. The Buyer is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware and has the power and lawful authority to own,
lease and operate its assets, property and business and to carry on its business
as now conducted.
The Buyer is qualified to transact business and is in good standing in each
jurisdiction in which the nature of its business or location of its property
requires such qualification, except where the failure to be so qualified and in
good standing would not result in a material adverse effect on the ability of
the Buyer to consummate the transactions contemplated by this Agreement.
Section 5.2 Authority to Execute and Perform Agreements. The Buyer has
the full legal right and power and all authority and approval required to enter
into, execute and deliver this Agreement, and to perform fully its obligations
under this Agreement. This Agreement has been duly executed and delivered by the
Buyer, and assuming the due execution hereof by each of the Seller and the
Principals, is the valid and binding obligation of the Buyer enforceable against
it in accordance with its terms.
Section 5.3 The Shares. When issued and delivered in accordance with
this Agreement, the Shares issued to the Seller will be duly authorized, validly
issued and outstanding, fully paid and non-assessable.
Section 5.4 No Broker. No broker, finder, agent or similar
intermediary has acted for or on behalf of the Buyer in connection with this
Agreement or the transactions contemplated hereby, and no broker, finder, agent
or similar intermediary is entitled to any broker's, finder's, or similar fee or
other commission in connection therewith based on any agreement, arrangement or
understanding with the Buyers or any action taken by the Buyer.
ARTICLE VI
COVENANTS AND AGREEMENTS
Section 6.1 Expenses of Sale. The Seller and the Buyer agree that each
of them shall bear their own direct and indirect expenses incurred in connection
with the negotiation and preparation of this Agreement and the consummation and
performance of the transactions contemplated hereby.
Section 6.2 Taxes. All transfer, documentary, gross receipts, sales,
use and gains taxes and similar liabilities, if any, resulting from the sale,
assignment, transfer and delivery hereunder of the Purchased Assets shall be
paid by the Seller. In the event that at any time hereafter, any claim, tax or
assessment of any kind is made by the federal, state or local authorities or any
government sub-division against the Buyer or the Issuer or its members,
managers, directors, officers, employees, stockholders, agents, representatives,
affiliates and their respective successors and assigns (collectively, the "Buyer
Group") by reason of the transfer and sale of the Purchased Assets hereunder,
then and in that event, the Seller undertakes to pay the same. Payment of any
federal, state or local taxes due from the Seller or its affiliates and filing
of all tax returns required to be filed with respect to the Seller and its
affiliates and with respect to the business and assets of the Seller shall be
the sole responsibility and obligation of the Seller. Such obligation of the
Seller to pay such taxes shall be subject to the indemnification provisions of
Article X below.
Section 6.3 Telephone Numbers. The Seller agrees that the Buyer shall
have all of the Seller's right to use, if the Buyer elects, the telephone
numbers (which telephone numbers include the Seller's telephone numbers used for
sending and receiving facsimile transmissions): (718) 492-0793 and (800)
___________, and facsimile number (718) 492-3482, which numbers have been used
through the date hereof by the Seller.
Section 6.4 Change of Name. After the Closing, the Seller and the
Principals agree that it will, upon the Buyer's or its assigns' request: (i)
immediately discontinue and no longer use the corporate or trade name of "FERRO
FOODS CORPORATION" or any variation or derivation thereof; and (ii) deliver to
the Buyer's or its assigns' for filing an executed Certificate of Amendment to
the Seller's Certificate of Incorporation changing the Seller's corporate name
to another name approved by the Buyer or its assigns.
ARTICLE VII
BUYER'S CONDITIONS TO CLOSING
The following are conditions precedent to the obligations of the Buyer
to consummate the transactions contemplated hereby:
Section 7.1 Representations and Warranties. The representations and
warranties made by the Seller and the Principals herein shall be true and
correct in all respects on and as of the Closing Date with the same effect as
though such representations and warranties have been made on and as of the
Closing Date (except where specific representation or warranty by its terms
applies to an earlier date).
Section 7.2 Covenants. The Seller and the Principals shall have
performed and complied in all respects with all covenants, agreements, and
conditions set forth herein which are required to be performed or complied with
by them on or prior to the Closing Date, including, without limitation, the
execution and delivery of the Bill of Sale and Assignment, the Lock-Up Letters,
and the Release Agreements.
Section 7.3 Bulk Transfer. The notices referred to in Section 4.15
above shall have been delivered in accordance with the provisions of the UCC,
and any waiting period thereunder shall have expired; and further, no creditor,
or group of creditors, shall have filed a claim against Seller attaching or
asserting rights of lien against any of the Purchased Assets.
Section 7.4 Consents. The required consent of any party to an
agreement set forth on Schedule 1.1 (xii) shall have been received by the Buyer
on or prior to the Closing Date.
ARTICLE VIII
RESTRICTIVE COVENANTS
Section 8.1 Confidential Information. The Seller and the Principals
hereby agree on behalf of itself and himself, as the case may be, and their
respective officers, directors, employees, stockholders, agents, representatives
and affiliates and their respective successors and assigns (collectively, the
"Seller Group") that from and after the date hereof each member of the Seller
Group shall keep secret and retain in the strictest confidence, and shall not
use for their benefit or the benefit of others except in connection with the
business and affairs of the Buyer and its affiliates, all confidential matters
relating to the Business, the Purchased Assets and the Seller and its
affiliates, including, without limitation, trade "know-how," secrets, customer
lists, supplier lists, details of contracts, pricing policies, operational
methods, marketing plans or strategies, methods of manufacture, technical
processes and other business affairs relating to the Business and to the Seller
Group learned by any member of the Seller Group heretofore or hereafter, and
shall not disclose them to anyone outside of the Buyer Group, except as required
in the course of performing its duties to the Buyer or with the Buyer's express
written consent.
Section 8.2 Non-Competition. Each of the Seller and the Principals
agree that until the third anniversary of the Closing Date, neither the Seller
nor the Principals will engage, directly or indirectly, either as principal,
agent, consultant, proprietor, creditor, stockholder, director, officer or
employee, or participate in the ownership, management, operation or control,
directly or indirectly, of any business engaged in the Business. This Section
shall not apply to the ownership of less than one percent (1%) of the capital
stock of a company having a class of capital stock which is traded on any
national stock exchange or on the over-the-counter market. Each of the Seller
and the Principals agrees that it or he will not, directly or indirectly, (i)
hire, solicit, divert or recruit or encourage any of the employees, or any
person who was an employee of the Seller, to leave the employ of Buyer, or
terminate or alter their contractual relationship in any way that is adverse, to
the Buyer's interests, (ii) solicit or divert business from the Buyer or assist
any person or entity in doing so or attempting to do so or (iii) cause or seek
to cause any person or entity to refrain from dealing or doing business with the
Buyer or assist any person or entity in doing so or attempting to do so.
Section 8.3 Rights and Remedies Upon Breach. If any member of the
Seller Group breaches, or threatens to commit a breach of, any of the provisions
of Sections 8.1 or 8.2 (collectively, the "Restrictive Covenants"), the Buyer or
its assigns shall have the following rights and remedies, each of which rights
and remedies shall be independent of the other and severally enforceable, and
all of which rights and remedies shall be in addition to, and not in lieu of,
any other rights and remedies available to the Buyer or its assigns under law or
in equity:
(i) Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Buyer or its assigns and
that money damages will not provide adequate remedy to the Buyer or its assigns.
(ii) Accounting. The right and remedy to require the applicable
member of the Seller Group to account for and pay over to the Buyer or its
assigns all compensation, profits, monies, accruals, increments or other
benefits (collectively, "Benefits") derived or received by such member of the
Seller Group as the result of any transactions constituting a breach of any of
the Restrictive Covenants, and the applicable member of the Seller Group shall
account for and pay over such Benefits to the Buyer or its assigns.
Section 8.4 Severability of Covenants. If any court determines that
any of the Restrictive Covenants, or any part thereof, is invalid or
unenforceable, the remainder of the Restrictive Covenants shall not thereby be
affected and shall be given full effect, without regard to the invalid portions.
Section 8.5 Enforceability in Jurisdictions. The Buyer and the Seller
and the Principals intend to and hereby confer jurisdiction to enforce the
Restrictive Covenants upon the courts of any jurisdiction within the
geographical scope of such Restrictive Covenants. If the courts of any one or
more of such jurisdictions hold the Restrictive Covenants wholly unenforceable
by reason of the breadth of such scope or otherwise, it is the intention of the
Buyer and the Seller and the Principals that such determination not bar or in
any way affect the Buyer's right to the relief provided above in the courts of
any other jurisdiction within the geographical scope of such Restrictive
Covenants.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 9.1 Survival of Representations and Warranties.
Notwithstanding any right of the Buyer to investigate the affairs of the Seller
and notwithstanding any knowledge of facts determined or determinable by the
Buyer pursuant to such investigation or right of investigation, the Buyer has
the right to rely fully upon the representations, warranties, covenants and
agreements of the Seller and the Principals contained in this Agreement or in
any document delivered to the Buyer by the Seller and the Principals or any of
its representatives, in connection with the transactions contemplated by this
Agreement. All such representations, warranties, covenants and agreements shall
survive the execution and delivery hereof and the Closing hereunder.
ARTICLE X
INDEMNIFICATION
Section 10.1 Obligation of the Seller and the Principals to Indemnify.
The Seller and the Principals and each member of the Seller Group shall jointly
and severally indemnify, defend and hold harmless each member of the Buyer Group
from and against any losses, liabilities, damages, claims, costs and expenses,
interest, awards, judgements and penalties, or deficiencies (including
reasonable attorneys' and consultants' fees and disbursements actually suffered
or incurred by them) ("Losses") arising out of or due to:
(i) a breach of any representation, warranty, covenant or
agreement of the Seller or the Principals contained in this Agreement or in any
document or other writing delivered pursuant hereto;
(ii) any liabilities or obligations not assumed by the Buyer
pursuant to Section 2.1, including, without limitation, any liability to which
the Buyer Group may become subject under any Bulk Transfers Act within the UCC
or any similar statute as enacted in any jurisdiction, domestic or foreign,
notwithstanding Seller's attempt to comply therewith;
(iii) any liabilities or obligations relating to or in connection
with the Business or arising out of or in connection with the Purchased Assets
sold hereunder for periods ending prior to or on the Closing Date;
(iv) any liabilities or obligations of the Seller, any of the
Principals or their respective affiliates and successors and assigns to their
creditors, including, without limitation, vendors, suppliers, customers, lending
institutions, governmental authorities or agencies, or otherwise;
(v) any liabilities or obligations of the Seller, any of the
Principals or their respective affiliates and successors and assigns for any
Taxes;
(vi) any liabilities or obligations for wages, salary, bonuses,
commissions, fees, vacation or sick pay and payroll overheads which were
required to have been paid by the Seller or its affiliates and that may be
asserted against any member of the Buyer Group;
(vii) any claims under any laws or regulations affecting health,
safety, the environment or the regulation of Hazardous Materials; or
(viii) any liability or obligation relating to, or in connection
with, any liabilities, obligations of the Seller or its affiliates that have not
been specifically assumed by the Buyer pursuant to this Agreement.
Section 10.2 Notice to Indemnifying Party. If any member of the Buyer
Group (in such capacity, the "Indemnitee") receives notice of any claim or other
commencement of any action or proceeding with respect to which any other party
(or parties) is obligated to provide indemnification (in such capacity, the
"Indemnifying Party") pursuant to Section 10.1, the Indemnitee shall promptly
give the Indemnifying Party notice thereof. The Indemnifying Party may
compromise or defend, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any such matter involving the asserted
liability of the Indemnitee. In any event, the Indemnitee, the Indemnifying
Party and the Indemnifying Party's counsel shall cooperate in the compromise of,
or defense against, any such asserted liability. Both the Indemnitee and the
Indemnifying Party may participate in the defense of such asserted liability and
neither may settle or compromise any claim over the objection of the other. If
the Indemnifying Party chooses to defend any claim, the Indemnitee shall make
available to the Indemnifying Party any books, records or other documents within
its control that are necessary or appropriate for such defense. If the
Indemnifying Party shall fail to defend, or if, after commencing or undertaking
any such defense, such party fails to prosecute or withdraws from such defense,
the Indemnitee shall have the right to undertake the defense or settlement
thereof, at the Indemnifying Party's sole expense. In the event of a dispute
over the obligation to provide indemnification hereunder, the prevailing party
in such dispute shall be entitled to its reasonable attorney's costs and
expenses thereof.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices. Any notice or other communication required or
which may be given hereunder shall be in writing and shall be delivered
personally, by facsimile transmission or sent by certified, registered or
express mail, postage prepaid, and shall be deemed given when so delivered
personally, by facsimile transmission or if mailed, two (2) days after the date
of mailing, as follows:
(i) if to the Buyer:
c/o Liberty Food Group, LLC
11 52nd Street
Brooklyn, New York 11232
Attention: Barry Hawk
Facsimile: (718) 492-5517
(ii) if to the Seller to:
Ferro Foods Corporation
25 53rd Street
Brooklyn, New York 11232
Attention: President
Facsimile: (718) 492-3482
Section 11.2 Entire Agreement. This Agreement (including the Exhibits
and Schedules hereto) contains the entire agreement among the parties with
respect to the purchase of the Purchased Assets and related transactions and
supersedes all prior agreements, written or oral, with respect thereto.
Section 11.3 Waivers and Amendments. This Agreement may be amended,
modified, superseded cancelled, renewed or extended, and the terms and
conditions hereof may be waived only by a written instrument signed by the
parties or, in the case of a waiver, the party waiving compliance. No delay on
the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any right, power or privilege hereunder, nor any single or partial exercise
of any right, power or privilege hereunder, preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which any party may otherwise have at law or
in equity. The rights and remedies of any party arising out of or otherwise in
respect of any inaccuracy in or breach of any representation, warranty, covenant
or agreement contained in this Agreement shall in no way be limited by the fact
that the act, omission, occurrence or other state of facts upon which any claim
of any such inaccuracy or breach is based may also be the subject matter of any
other representation, warranty, covenant or agreement contained in this
Agreement (or in any other agreement between the parties) as to which there is
no inaccuracy or breach.
Section 11.4 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely therein without regard to
principles of conflict of laws.
Section 11.5 Consent to Jurisdiction. All suits, actions or proceedings
arising out of, or in connection with, this Agreement or the transactions
contemplated by this Agreement shall be brought in any federal or state court of
competent subject matter jurisdiction sitting in New York County. Each of the
parties hereto by execution and delivery of this Agreement, expressly and
irrevocably (i) consents and submits to the personal jurisdiction of any such
courts in any such action or proceeding; (ii) consents to the service of any
complaint, summons, notice or other process relating to any such action or
proceeding by delivery thereof to such party as set forth in Section 11.1
hereof; and (iii) waives any claim or defense in any such action or proceeding
based on any alleged lack of personal jurisdiction, improper venue, forum non
conveniens or any similar basis.
Section 11.6 Assignment. Neither the Seller nor the Principals may not
assign this Agreement or any rights and obligations hereunder. The Buyer may
assign this Agreement and any rights, remedies, benefits and obligations
hereunder. This Agreement shall be binding upon the parties hereto and any
permitted successor and assign, and with respect to each of the Principals,
their respective heirs and legal representatives.
Section 11.7 Counterparts and Facsimile. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument. This Agreement
may be signed and delivered by any party by facsimile transmission, and such
transmission shall be deemed a valid signature.
Section 11.8 Severability of Provisions. Any portion of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 11.9 Exhibits and Schedules. The Exhibits and Schedules to this
Agreement are hereby made a part of this Agreement as if set forth in full
herein.
Section 11.10 Headings. The Article and Section headings in this
Agreement are intended solely for convenience of reference and shall be given no
effect in the interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
BUYER:
LIBERTY FOOD GROUP, LLC
By: Liberty Group Holdings, Inc.,
f/k/a Bio-Response, Inc.,
its sole member
By:
--------------------------
Name: Sally A. Fonner
Title: President
SELLER:
FERRO FOODS CORPORATION
By:
--------------------------
Name: Frank Ferro, Sr.
Title:
By:
--------------------------
Name: Frank Gambino
Title:
PRINCIPALS:
------------------------------
Frank Ferro, Sr., Individually
------------------------------
Frank Gambino, Individually
ESCROW AGREEMENT
Escrow Agreement (this "Escrow Agreement"), dated as of November 23,
1999, by and among Liberty Food Group, LLC, a Delaware limited liability company
(the "Buyer"), Ferro Foods Corporation, a New York corporation, Frank Ferro, Sr.
and Frank Gambino (collectively, the "Seller"), and Herrick, Feinstein LLP (the
"Escrow Agent").
RECITALS
WHEREAS, the Buyer and the Seller have entered into a certain Asset
Purchase Agreement dated the date hereof (the "Purchase Agreement"; capitalized
terms used herein not otherwise defined shall have the meanings given to such
terms in the Purchase Agreement) pursuant to which, among other things, the
Buyer is purchasing substantially all of the assets of the Seller;
WHEREAS, as a condition to the consummation of the transactions
contemplated by the Purchase Agreement, the Buyer is requiring that the Seller
borrow a sufficient amount of funds from a third party in order to satisfy all
the outstanding debts and liabilities connected with the Business (collectively,
the "Debt"), none of which are being assumed by the Buyer in the transaction;
and
WHEREAS, until the financial accommodation to satisfy the Debt is in
place which is satisfactory to the Buyer, the Seller agrees to deposit the
Shares with the Escrow Agreement as herein provided.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. The Buyer and each of the Sellers hereby appoint the Escrow Agent to
serve in such capacity hereunder. The Escrow Agent hereby accepts such
appointment and acknowledges receipt from the Buyer of (1) stock certificate
#___ in the amount of 1,000,000 shares of common stock of the Buyer issued in
the name of the Seller and (2) stock certificate #___ in the amount of 1,000,000
shares of common stock of the Buyer issued in the name of the Seller, and agrees
to hold and distribute the Shares in accordance with this Escrow Agreement.
2. Upon the receipt of a letter from the Buyer indicating that the
Shares shall be released to a financial institution as collateral for a loan to
satisfy the Debt, the Escrow Agent shall promptly deliver the Shares as
instructed by the Buyer.
3. Alternatively, the Buyer may deliver a notice to the Escrow Agent
instructing the Escrow Agent to deliver only 1,000,000 of the shares of the
Buyer to a financial institution and to deliver to the Buyer the balance of the
Shares to the Buyer. The Buyer and the Seller agree that such a notice will only
be delivered to the Escrow Agent if the financial accommodation to satisfy the
Debt, which must be to satisfactory to the Buyer, in its sole and absolute
discretion, is not established within thirty (30) days from the date hereof.
4. Each of the Sellers and the Escrow Agent acknowledge that the Shares
are subject to a Voting Trust and Proxy Agreement, and shall remain subject to
said agreement in accordance with the terms thereof.
5. The duties and responsibilities of the Escrow Agent hereunder shall
be determined solely by the express provisions of this Escrow Agreement, and no
other or further duties or responsibilities shall be implied. The Escrow Agent
shall not have any liability under, nor duty to inquire into the terms and
provisions of any agreement or instructions, other than outlined in this Escrow
Agreement.
6. The Escrow Agent may act upon any judgement, certification, demand,
notice, instrument or other writing believed by it, in good faith, to be genuine
and purporting to be signed on behalf of the party for whom it is signed without
being required to determine the authenticity or correctness of any fact stated
therein or the propriety or validity of the signature or service thereof. The
Escrow Agent may assume that any person purporting to give any notice or receipt
or advice or to make any statement or execute any document in connection wit the
provisions hereof has been duly authorized to do so. Notwithstanding any
provision to the contrary, notice to the Escrow Agent shall not be effective
unless actually received by such Escrow Agent.
7. In the event of any disagreement between any of the parties to this
Escrow Agreement, or between any of them and any other person, resulting in
adverse claims or demands being made in connection with the Shares, or in the
event that the Escrow Agent in good faith is in doubt as to what action it
should take hereunder, the Escrow Agent may, at its option, continue to hold the
Shares and refuse to comply with any claims or demands on it until (i) the
Escrow Agent shall have received a final, non-appealable order of a court of
competent jurisdiction located in the County of New York directing delivery of
the Shares or (ii) all differences shall have been adjusted and all doubt
resolved by written agreement executed by the parties to such disagreement.
8. The Escrow Agent (and any successor Escrow Agent) may at any time
resign as such by delivering the Shares to any successor Escrow Agent reasonably
acceptable to the parties hereto, designated by the Escrow Agent in writing, or
the Clerk of the United States District Court for the Southern District of New
York, or the Supreme Court of the State of New York, County of New York
whereupon the Escrow Agent shall be discharged of and from any and all further
obligations arising in connection with this Escrow Agreement.
9. The Escrow Agent shall not be liable for any action taken or omitted
by it in good faith unless a court of competent jurisdiction determines that the
Escrow Agent's willful misconduct was the primary and direct cause of any loss
to the Buyer or Seller. In the administration of the escrow account hereunder,
the Escrow Agent may act directly or through agents or attorneys and may, in its
sole discretion, consult with such counsel, accountants and other skilled
persons selected and retained by it. The Escrow Agent shall not be liable for
any acts, suffered or omitted in good faith by it in accordance with the advice
or opinion of any such counsel, accountants or other skilled persons. 10. Buyer
and the Seller, jointly and severally, shall indemnify, defend and save harmless
the Escrow Agent from all loss, liability or expense (including the fees and
expenses of outside counsel) arising out of or in connection with (i) its
execution and performance of this Escrow Agreement, except to the extent that
such loss, liability or expense is due to the gross negligence or willful
misconduct of the Escrow Agent, or (ii) its following any instructions or other
directions from the Buyer, except to the extent that following any such
instruction or direction is expressly forbidden by the terms hereof. Anything in
this Escrow Agreement to the contrary notwithstanding, in no event shall the
Escrow Agent be liable for special, indirect or consequential loss or damage of
any kind whatsoever (including but not limited to lost profits), even if the
Escrow Agent has been advised of the likelihood of such loss or damage and
regardless of the form of action. 11. All notices and communications hereunder
shall be in writing and shall be deemed to be duly given if sent by registered
mail, return receipt requested, or by facsimile as follows:
a. if to the Escrow Agent:
Herrick, Feinstein LLP
2 Park Avenue, 21st Floor
New York, New York 10016
Facsimile: 212-889-7577
Attention: David Lubin, Esq.
b. if to the Seller:
Ferro Foods Corporation
25 53rd Street
Brooklyn, New York 11232
Facsimile: 718-
Attention: Frank Ferro, Sr.
c. if to the Buyer:
Liberty Group Holdings, Inc.
11 52nd Street
Brooklyn, New York 11232
Facsimile: 718-492-5517
Attention: Barry Hawk
or at such other address as any of the above may have furnished to the other
parties in writing by registered mail, return receipt requested and any such
notice or communication given in the manner specified in this Paragraph 11 shall
be deemed to have been given as of the date received by the applicable party. In
the event that the Escrow Agent, in its sole discretion, shall determine that an
emergency exists, the Escrow Agent may use such other means of communications as
the Escrow Agent deems advisable.
12. The provisions of this Escrow Agreement may be waived, altered,
amended or supplemented in whole or in part, only by a writing signed by all of
the parties hereto.
13. Neither this Escrow Agreement nor any right or interest hereunder
may be assigned in whole or in part by any party without the prior consent of
the other parties, other than the rights and obligations of the Buyer.
14. This Escrow 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.
15. The Escrow Agent shall not incur any liability for following the
instructions herein contained or expressly provided for, or written instructions
given by the parties hereto.
16. Each of the Sellers hereby acknowledges and agrees that Herrick,
Feinstein LLP may act as Escrow Agent hereunder notwithstanding that Herrick,
Feinstein LLP represents the Buyer in the transactions contemplated by the
Purchase Agreement. Each of the Sellers further covenants that Escrow Agent may
at all times represent Buyer, even if a dispute or controversy arises between
the parties hereto with respect to this Escrow Agreement or the Purchase
Agreement, or any other matter whether or not related to this Escrow Agreement
or the Purchase Agreement, and each party hereby waives any claim of conflict of
interest it may now have, or in the future obtain, against the Escrow Agent.
17. This Escrow Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without regard to
its principles of conflicts of laws. All actions and proceedings arising out of,
or relating to, this Agreement shall be heard and determined in any state or
federal court sitting in New York, New York. Each party hereto irrevocably
waives any objection on the grounds of venue, forum non-conveniens or any
similar grounds and irrevocably consents to service of process by mail or in any
other manner permitted by applicable law and consents to the jurisdiction of
said courts.
[Remainder of Page Intentionally Omitted; Signature Page to Follow]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement on the date and year first above written.
HERRICK, FEINSTEIN LLP
as Escrow Agent
By:
---------------------------
Name:
Title:
FERRO FOODS CORPORATION
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
-------------------------------
Frank Ferro, Sr.
--------------------------------
Frank Gambino
LIBERTY FOOD GROUP, LLC
By: LIBERTY GROUP HOLDINGS, INC.,
f/k/a BIO-RESPONSE, INC.,
its sole member
By:
----------------------------
Name:
Title:
VOTING TRUST AND PROXY AGREEMENT
Voting Trust and Proxy Agreement (this "Agreement"), dated as of November
23, 1999 (this "Agreement"), by and among Liberty Food Group, LLC, a Delaware
limited liability company (the "Company"), Ferro Foods Corporation, a New York
corporation ("Seller"), Frank Ferro, Sr. ("Ferro") and Frank Gambino ("Gambino",
and together with Seller and Ferro, the "Holders", and each a "Holder").
WITNESSETH:
WHEREAS, the Company and the Holders have entered into an Asset Purchase
Agreement, dated as of the date hereof (the "Purchase Agreement"; capitalized
items used herein and not otherwise defined shall have the meanings ascribed to
them in the Purchase Agreement), pursuant to which the Company has acquired all
of the assets of the Seller in exchange for 2,000,000 shares (the "Shares") of
common stock of the Seller; and
WHEREAS, it is contemplated that each of Ferro and Gambino, at some future
date, will acquire the Shares ("Future Shares", and together with the Shares and
any other shares of common stock of the Company to be acquired by the Holders,
the "Subject Shares"); and
WHEREAS, as a condition of its entering into the Purchase Agreement, the
Company has requested that the Holders agree, and the Holders have agreed, to
enter into this Agreement with respect to their respective portion of Subject
Shares owned by each of the Holders on or after the date hereof.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, and intending to be legally bound hereby,
the parties hereto agree as follows:
Section 1. Agreement to Vote Shares. (a) Commencing on the date hereof, and
continuing for a period of twenty-four (24) months from and after the date
hereof (the "Expiration Date") (i) at every annual or special meeting of the
stockholders of the Company, and at every continuation or adjournment thereof,
and (ii) on every action or approval by written consent of the stockholders of
the Company in lieu of any such meeting, the Holders shall vote the Subject
Shares as determined in the sole discretion of Barry Hawk or his designee.
(b) No person executing this Agreement who is or becomes prior to
the Expiration Date a director of the Company makes any agreement or
understanding herein in his capacity as such director. The Holder signs solely
in its or his capacity as the owner of the Subject Shares.
Section 2. Delivery of Proxy. (a) Simultaneously with the execution and
delivery of this Agreement, each of the Holders is executing and delivering to
the Company the Irrevocable Proxy in the form attached hereto as Exhibit A (the
"Proxy"), which Proxy shall be coupled with an interest.
(b) The Proxy shall be irrevocable prior to the Expiration Date.
Section 3. Representations and Warranties of the Holders. Each Holder
hereby represents and warrants to the Company that:
(a) this Agreement has been duly executed and delivered by
the Holder;
(b) is the legal, valid and binding obligation of the
Holder, enforceable against such Holder in accordance
with its terms;
(c) no consent of any Governmental Entity, beneficiary,
co-trustee or other person or entity is necessary for
the execution, delivery and performance of this
Agreement by the Holder;
(d) the Holder holds the Subject Shares free and clear of
any Lien other than as provided for in this Agreement;
and
(e) the Holder has not (x) granted any power-of-attorney or
other authorization or interest with respect to any of
the Subject Shares, (y) deposited any of the Subject
Shares into a voting trust or (z) entered into any
voting agreement or other arrangement with respect to
the voting of any of the Subject Shares.
Section 4. Covenants of the Holders. Each Holder hereby agrees and
covenants that during the period between the date hereof and the Expiration
Date:
(a) any shares of capital stock of the Company that the
Holder acquires record or beneficial ownership (as such
term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) or the right to
acquire beneficial ownership (including by reason of
stock dividends, split-ups, recapitalizations,
combinations, exchanges of shares or the like) shall be
considered Subject Shares and subject to each of the
terms and conditions of this Agreement;
(b) the Holder shall not directly or indirectly sell,
assign, pledge, transfer, gift, hypothecate, encumber,
grant a proxy or option in, or otherwise dispose, in
whole or in part ("Transfer"), any of the Subject Shares
other than in accordance with Section 5 below;
(c) the Holder shall own the Subject Shares free and clear
of any Lien other than in accordance with Section 5
below; and
(d) except as provided herein, the Holder shall not (x)
grant any power-of-attorney or other authorization or
interest with respect to any of the Subject Shares, (y)
deposit any of the Subject Shares into a voting trust or
(z) enter into any voting agreement or other arrangement
with respect to the voting of any of the Subject Shares.
Section 5. Permitted Transfer. Each Holder agrees that it or he, as
the case may be, shall not directly or indirectly Transfer all or any portion of
the Subject Shares, other than in connection with a financial accommodation
satisfactory to the Company as collateral for all the outstanding debts and
liabilities connected with the Business.
Section 6. Legend. Certificates for the Subject Shares shall be
endorsed with a restrictive legend which shall read substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
SOLD OR OTHERWISE DISPOSED OF UNLESS (A) SUCH DISPOSITION IS
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) THE HOLDER HEREOF SHALL HAVE
DELIVERED TO THE COMPANY AN OPINION, FROM COUNSEL AND IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
SUCH DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THAT
ACT.
THIS CERTIFICATE IS SUBJECT TO AND IS TRANSFERABLE ONLY UPON
COMPLIANCE WITH THE PROVISIONS OF (i) THE ESCROW AGREEMENT DATED AS
OF NOVEMBER 23, 1999 BETWEEN LIBERTY FOOD GROUP, LLC AND FERRO FOODS
CORPORATION AND (ii) THE VOTING TRUST AND PROXY AGREEMENT DATED AS
OF NOVEMBER 23, 1999, AMONG LIBERTY FOOD GROUP, LLC, FERRO FOODS
CORPORATION, FRANK FERRO, SR. AND FRANK GAMBINO. ANY DIRECT OR
INDIRECT TRANSFER, GIFT, ASSIGNMENT, PROXY, PLEDGE, LIEN OR ANY
OTHER DISPOSITION OF THE SHARES REPRESENTED BY THIS CERTIFICATE IN
VIOLATION OF SAID AGREEMENTS SHALL BE INVALID."
Section 7. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, telecopy or
by registered or certified mail (postage prepaid, return receipt requested) or
by overnight courier to the respective parties at the following address (or at
such other address for a Holder as shall be specified in a notice given in
accordance with this Section 7).
If to any of the Holders, to:
Ferro Foods Corporation
25 53rd Street
Brooklyn, New York 11232
Facsimile: 718-
Attention: Frank Ferro, Sr.
If to the Company, to:
Liberty Food Group, LLC
11 52nd Street
Brooklyn, New York 11232
Facsimile: 718-492-5517
Attention: Barry Hawk
Section 8. Amendments; No Waivers. (a) Any provision of this Agreement
may be amended or waived if, and only if, such amendment or waiver is in writing
and signed by each Holder and the Company.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 9. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; and in addition, with respect to each
individual Holder, their heirs and legal representatives. This Agreement shall
not be assigned by the Holders by operation of law or otherwise. Any transferee
of the Shares by will or by the laws of descent shall take the Shares subject to
all the terms and provisions of this Agreement.
Section 10. Counterparts. This Agreement may be signed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed an original but all of which when taken
together shall constitute one and the same agreement.
Section 11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York governing
agreements made wholly within the State of New York, without reference to the
principles of conflict of laws.
Section 12. Jurisdiction; Jury Trial Waiver. (a) All suits, actions or
proceedings arising out of, or in connection with, this Agreement or the
transactions contemplated by this Agreement shall be brought in any federal or
state court of competent subject matter jurisdiction sitting in New York County.
Each of the undersigned by execution and delivery of this Agreement, expressly
and irrevocably: (i) consents and submits to the personal jurisdiction of any
such courts in any such action or proceeding; (ii) consents to the service of
any complaint, summons, notice or other process relating to any such action or
proceeding by delivery thereof to such party as set forth in Section 7 of this
Agreement; and (iii) waives any claim or defense in any such action or
proceeding based on any alleged lack of personal jurisdiction, improper venue or
forum non conveniens or any similar basis.
(b) EACH PARTY HERETO HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING INSTITUTED BY ANY PARTY AGAINST THE OTHER WHICH
PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, ANY ALLEGED TORTIOUS CONDUCT
BY ANY PARTY, OR IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO
THE RELATIONSHIP AMONG THE PARTIES HERETO.
Section 13. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that, in addition to any
remedy to which they are entitled at law or in equity the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement. Without
in any way limiting any of the rights or remedies otherwise available to the
Company and its successors and assigns, each Holder shall indemnify and hold
harmless the Company and its directors, officers, employees, agents,
representatives, affiliates, successors and assigns from and against any damages
suffered or incurred by any of the foregoing that arise from any breach of any
representation, warranty or agreement of Holder contained herein.
Section 14. Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior written and oral and all contemporaneous oral agreements
and understandings with respect to the subject matter hereof. Each party
acknowledges and agrees that no other party hereto makes any representations or
warranties, whether express or implied, other than the express representations
and warranties contained herein.
Section 15. Severability. If any term or other provision of this
Agreement is determined to be invalid, illegal or incapable of being enforced by
any rule of law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated herein is not
affected in any manner materially adverse to any party hereto. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner.
Section 16. Further Assurances. The parties hereto will execute and
deliver such further instruments, agreements and documents and do such further
acts and things as may be necessary to carry out the intent and purposes of this
Agreement, including, without limitation, the preparation and filing of a
Schedule 13D with the Securities and Exchange Commission and any and all
amendments thereto.
IN WITNESS WHEREOF, the parties hereto have executed this Voting Trust and
Proxy Agreement as of the day and year first above written.
<PAGE>
EXHIBIT A
IRREVOCABLE PROXY
The undersigned stockholder of LIBERTY GROUP HOLDINGS, INC., f/k/a
BIO-RESPONSE, INC., a Delaware corporation (the "Company"), hereby irrevocably
(to the full extent permitted by law) appoints and constitutes Barry Hawk and
any individual designated by said individual, the attorney and proxy of the
undersigned with full power of substitution and resubstitution, to the full
extent of the undersigned's rights with respect to all the shares of common
stock of the Company beneficially owned by the undersigned, and any and all
other shares or securities issued or issuable in respect thereof on or after the
date hereof or which the undersigned may acquire after the date hereof (the
"Shares"), until such time as the Voting Trust and Proxy Agreement, dated as of
November 23, 1999 (the "Voting Agreement") by and among the Liberty Food Group,
LLC, Ferro Foods Corporation, a New York corporation, Frank Ferro, Sr. and Frank
Gambino shall be terminated in accordance with its terms.
This proxy is irrevocable (to the fullest extent permitted by law), shall
be deemed to be coupled with an interest, and is granted in connection with the
Voting Agreement and in consideration of the Company entering into the Asset
Purchase Agreement, dated the date hereof by and among Liberty Food Group, LLC,
Ferro Foods Corporation, a New York corporation, Frank Ferro, Sr. and Frank
Gambino. This proxy shall terminate on the Expiration Date (as defined in the
Voting Agreement).
The attorney and proxy named above shall be empowered at any time prior to
termination of the Voting Agreement to exercise all voting and other rights
(including, without limitation, the power to execute and deliver written
consents with respect to the Shares) of the undersigned in his own discretion at
every annual or special meeting of the stockholders of the Company and at every
continuation or adjournment thereof, and on every action or approval by written
consent of the stockholders of the Company in lieu of any such meeting.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned, and with respect to the undersigned
who are individuals, upon their respective heirs and legal representatives.
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If any term or other provision of this proxy is determined to be invalid,
illegal or incapable of being enforced by any rule of law, or public policy, all
other conditions and provisions of this proxy shall nevertheless remain in full
force and effect. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the undersigned agrees with the
Company and Barry Hawk to negotiate in good faith to modify this proxy so as to
effect the original intent of the parties as closely as possible.
Dated: November 23, 1999
Signature of Stockholder: _________________________
Frank Ferro, Sr.
FERRO FOODS CORPORATION
By:
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Name:
Title:
By:
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Name:
Title:
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Frank Ferro, Sr.
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Frank Gambino
LIBERTY FOOD GROUP, LLC
By: LIBERTY GROUP HOLDINGS, INC.
f/k/a BIO RESPONSE, INC.,
its sole member
By: /s/ Sally Fonner
Name: Sally Fonner
Title: President
Liberty Foods Completes Acquisition; Commences Trading
NEW YORK, Nov. 23 /PRNewswire/ -- Bio-Response, Inc. (OTC Bulleting Board:
BRSPD), announced today that Liberty Food Group, Ltd. has merged with and into
BR Acquisition Corp., a wholly owned subsidiary of the Company, and the Company
issued 4,500,000 shares of Common Stock to the stockholders of Liberty. As a
direct result of the merger, Liberty Food Group, LLC, a Delaware limited
liability company which is wholly owned by the Company, purchased all the assets
of Ferro Foods Corporation, in consideration of the issuance to Ferro of
2,000,000 shares of Common Stock. Ferro is in the business of marketing and
distributing restaurant pizzeria food items and supplies. Neither the Company
nor Liberty Food Group, LLC assumed any debts, liabilities or obligations of
Ferro in the transaction.
The Company also announced that it changed the name of the Company to
"Liberty Group Holdings, Inc."
Effective Friday, November 26, 1999, Liberty Group Holdings, Inc. will be
traded under the symbol (OTC Bulletin Board: LGHI).
For more information contact the Investor Relations Department at
718-492-1200
SOURCE Bio-Response, Inc.
