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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
Date of Report (Date of earliest event reported) August 11, 1997
AMBI Inc.
(Exact Name of Registrant as Specified in its Charter)
New York 1-12106 11-2653613
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
771 Old Saw Mill River Road, Tarrytown, New York 10591
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including Area Code: (914) 347-5767
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Item 2. Acquisition of Assets
On August 11, 1997, AMBI Inc. (the "Company") acquired the entire
beneficial interest in Nutrition 21, a limited partnership, ("N21") by way of
the acquisition of Selene Systems, Inc. ("Selene"), which is the general partner
of N21, J. Bie Enterprises, Inc. ("J. Bie"), which is a corporate limited
partner of N21, and the limited partnership interests owned by all other limited
partners of N21. N21 is engaged in the business of developing, producing, and
marketing proprietary nutrition products and dietary supplements. The purchase
price for the acquisition was $10,000,000 (the "Cash Purchase Price"), plus
500,000 restricted shares of Common Stock of the Company, and additional cash
payments which are contingent upon the achievement of certain sales levels in
the next four years. The Company will also pay royalties to the sellers on sales
of certain patented products. The principal sellers were Herbert and Donna
Boynton. Mr. Boynton was President of Selene and Chief Executive Officer of N21,
and will serve as a consultant to the Company. Prior to the closing, there were
no material relationships between any of the sellers and the Company or any
director or officer of the Company, or any associate or affiliate of the Company
or any of its directors or officers. Part of the Cash Purchase Price was
provided pursuant to a Revolving Credit and Term Loan Agreement (the "Loan
Agreement") with State Street Bank and Trust Company (the "Bank") and the
remainder came from internal working capital. The loans bear interest at the
Bank's prime rate plus one percent and are due February 1, 1998 unless extended
pursuant to certain conditions set forth in the Loan Agreement.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
Financial statements of N21 will be filed within the mandated
time period.
(b) Pro Forma Financial Information
Pro forma financial information will be filed within the
mandated time period.
(c) Exhibits
10.1. Stock and Partnership Interest Purchase Agreement dated
as of August 11, 1997, by and among the Company, Herbert and
Donna Boynton, James Bie individually and as trustee of the
Bie Family Trust, Selene, J. Bie, N21, and all other limited
partners of N21.
10.2. Revolving Loan and Term Loan Agreement dated as of
August 11, 1997 between the Bank as Lender and the Company and
N21 as Borrowers.
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SIGNATURES
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 thereunto duly authorized.
AMBI Inc.
By: /s/ Fredric D. Price
---------------------------
Fredric D. Price
President and Chief Executive Officer
Date: August 25, 1997
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STOCK AND PARTNERSHIP INTEREST
PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is made as of August 11, 1997, by
AMBI INC., a New York corporation ("Buyer" or "AMBI"), HERBERT AND
DONNA BOYNTON, individuals resident in San Diego County, California
(collectively "Boynton" or "Selene Shareholders"), JAMES BIE,
Individually and as Trustee of The BIE FAMILY TRUST ("Bie" or "JBE
Shareholders"), THE INDIVIDUALS NAMED AS LIMITED PARTNERS AT THE FOOT
OF THIS AGREEMENT (collectively, the "Individual Limited Partners"),
SELENE SYSTEMS, INC., a California corporation ("Selene"), J. BIE
ENTERPRISES, INC., a California corporation ("JBE"), and NUTRITION 21,
a California Limited Partnership, including its predecessors in
interest and subsidiaries ("N21"). Boynton, Bie and the Individual
Limited Partners are collectively referred to herein as "Sellers" or
"Partners." Selene and JBE are for convenience also referred to as
"Sellers" notwithstanding that they are not selling any interests
hereunder. The Individual Limited Partners and JBE together constitute
all of the limited partners of N21 (the "Limited Partners"). Selene is
the sole general partner of N21. The Limited Partners and Selene
together constitute all of the partners in N21.
RECITALS
Sellers other than Selene and JBE desire to sell, and Buyer desires to
purchase, all of the partnership interests in N21, and all of the
shares of capital stock of Selene and JBE, all for the consideration
and on the terms set forth in this Agreement.
AGREEMENT
The parties, incorporating the above introduction and recitals, and
intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
1.1. "Acquired Companies" -- N21, Selene, JBE and predecessors in
interest, collectively.
1.2. "Adjustment Amount" -- as defined in Section 2.6.
1.3. "Affiliate" --- as defined in Section 3.12.
1.4. "Applicable Contract" -- any Contract (a) under which any Acquired
Company has or may acquire any rights, (b) under which any
Acquired Company has or may become subject to any obligation or
liability, or (c) by which any Acquired Company or any of the
assets owned or used by it is or may become bound.
1.5. "Balance Sheet" --- as defined in Section 3.4.
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1.6. "Best Efforts" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure
that such result is achieved as expeditiously as possible.
1.7. "Breach" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have
occurred if there is or has been any material inaccuracy in or
material breach of', or any material failure to perform or comply
with, such representation, warranty, covenant, obligation, or
other provision.
1.8. "Buyer" -- as defined in the first paragraph of this Agreement.
1.9. "Buyer's Reports" --- as defined in Section 7.3 of this Agreement.
1.10. "Closing" -- as defined in Section 2.3.
1.11. "Closing Date" -- the date and time as of which the Closing
actually takes place.
1.12. "Closing Date Balance Sheet" shall have the meaning set forth in
Section 2.6
1.13. "Closing Net Book Value" -as defined in Section 2.6.
1.14. "Common Stock" --- as defined in Section 2.2(a).
1.15. "Contemplated Transactions" -- all of the transactions
contemplated by this Agreement, including:
(a) the sale of all of the issued and outstanding shares of capital
stock in Selene by Boynton to Buyer;
(b) sale of all of the issued and outstanding shares of capital stock
in JBE by Bie to Buyer;
(c) the sale by all of the Individual Limited Partners to Buyer of all
of the outstanding limited partnership interests in N21 held by
the Individual Limited Partners;
(d) the execution, delivery, and performance of the Seller's Releases,
filings and certificates required herein;
(e) the performance by Buyer and Seller of their respective covenants
and obligations under this Agreement; and
(f) Buyer's acquisition and ownership of the Selene and JBE shares,
the limited partnership interests of the Individual Limited
Partners in N21.
1.16. "Contract" -- any material agreement, contract, obligation,
promise, or undertaking (whether written or oral and whether
express or implied) that is legally binding.
1.17. "Control" -- means the power to direct the business and policies
of that corporation or other Person.
1.18. "Damages" ---as defined in Section 13.
1.19. "Disclosure Letter" -- the disclosure letter delivered by Sellers
to Buyer concurrently with the execution and delivery of this
Agreement, and attached hereto as Exhibit 1.2.
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1.20. "Encumbrance" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of
income, or exercise of any other attribute of ownership.
1.21. "Environment" -- soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water
supply, stream sediments, ambient air (including indoor air),
plant and animal life. and any other environmental medium or
natural resource.
1.22. "Environmental, Health, and Safety Liabilities" -- any cost,
damages, expense, liability, obligation, or other responsibility
arising from or under Environmental Law or Occupational Safety and
Health Law and consisting of or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety
and health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial. or inspection costs and
expenses arising under Environmental Law or Occupational Safety
and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or
other remediation or response actions ("Cleanup") required by
applicable Environmental Law or Occupational Safety and Health Law
(whether or not such Cleanup has been required or requested by any
Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety
and Health Law.
The terms "removal," "remedial," and "response action," include the
types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 et seq., as amended ("CERCLA"').
1.23. "Environmental Law" -- any Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances
or materials, violations of discharge limits, or other
prohibitions and of the commencements of activities such as
resource extraction or construction, that could have significant
impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the
Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) protecting resources, species, or, ecological amenities;
(e) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances,
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pollutants, oil, or other potentially harmful substances;
(f) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such cleanup or
prevention; or
(g) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover
for injuries done to public assets.
1.24. "ERISA" -- the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to
that Act or any successor law.
1.25. [omitted]
1.26. [omitted]
1.27. [omitted]
1.28. "Facilities" -- any real property, leaseholds, or other interests
currently or formerly operated by any Acquired Company and any
buildings, plants, structures, or equipment currently or formerly
operated by any Acquired Company.
1.29. "FTC" - the U.S. Federal Trade Commission.
1.30. "FTC Decree" - the Complain, and Decision and Order entered into
by the FTC, N21, Boynton and Selene dated July 18, 1997.
1.31. "GAAP" -- generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section
3.4(b) were prepared.
1.32. "Governmental Authorization" -- any approval, consent, license,
permit, waiver, or other authorization issued, granted or given by
or under the authority of any Governmental Body or pursuant to any
legal Requirement.
1.33. "Governmental Body" -- any:
(a) nation, state, county. city, town, village. district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official,
or entity and any court or other tribunal); or
(d) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
1.34. "Hazardous Activity" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment,
or use,
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including any withdrawal or other use of groundwater, of
Hazardous Materials in, on, under, about, or from the Facilities
or any part thereof into the Environment, and any other act,
business, operation, or thing that poses an unreasonable risk of
harm to persons or property on or off the Facilities.
1.35. "Hazardous Materials" -- any waste or other substance that is
listed, defined, designated, or classified as, or otherwise
determined to be, hazardous, radioactive, or toxic or a pollutant
or a contaminant under or pursuant to any Environmental Law,
including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos containing materials
in an amount sufficient to cause a significant risk to health,
safety or the environment.
1.36. "Intellectual Property Assets" -- as defined in Sections 3, 4 and
5.
1.37. [omitted]
1.38. "IRC" -- the Internal Revenue Code of 1986 or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue
Code or any successor law.
1.39. "IRS" -- the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States
Department of the Treasury.
1.40. "Knowledge" --
(a) an individual will be deemed to have "Knowledge" of a particular
fact or other matter if:
(i) such individual is actually aware of such fact or other
matter; or
(ii) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the
course of conducting a reasonably comprehensive investigation
concerning the existence of such fact or other matter.
(b) A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if a director,
officer, partner, executor, or trustee of such Person (or in any
similar capacity) has, or at any time had, Knowledge of such fact
or other matter.
(c) Notwithstanding any other provision, a Limited Partner will be
deemed to have knowledge only of a fact or matter described in
1.40(a) (i).
1.41. "Legal Requirement" -- any applicable federal, state, local or
other administrative order, constitution, law, ordinance,
regulation or statute.
1.42. "Letter " -- that Letter between Buyer and Sellers dated June 1997
regarding the transactions contemplated herein.
1.43. "Net Sales" --- total sums invoiced by Buyer or its affiliates for
sales of N21 Products to unaffiliated third parties minus any: (i)
sales, excise or value added taxes, customs duties, or other
charges levied by any government on sales, which are separately
billed to Buyer's customers; (ii) shipping, delivery,
transportation, packing and insurance charges, which are
separately billed to Buyer's customers; and (iii) refunds,
credits, allowances, rebates, discounts, price adjustments,
recalls, rejections or returns.
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1.44. "N21 Products" --: (a) any product marketed actively by N21 as of
the Closing Date; (b) chromium picolinate and any product
containing chromium picolinate; (c) any product covered by a
patent held by N21 as of the Closing Date; or (d) any product
covered by a patent applied for by N21 as of the Closing Date.
1.45. "Occupational Safety and Health Law" --- any Legal Requirement
designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, and any government
mandated program designed to provide safe and healthful working
conditions.
1.46. "Order" -- any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by
any court, administrative agency, or other Governmental Body or by
any arbitrator.
1.47. "Ordinary Course of Business" -- an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business"
only if (a), (b) and (c) are all true, namely:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day
operations of such Person; and
(b) such action is not required to be authorized by the general
partner or the board of directors of such Person (or by any Person
or group of Persons exercising similar authority), and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of
directors (or by any Person or group of Persons exercising similar
authority), in the ordinary course of the normal day-to-day
operations of other Persons that are in the same line of business
as such Person.
1.48. "Organizational Documents" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership
agreement and any statement of partnership of a general
partnership; (c) the limited partnership agreement and the
certificate of limited partnership of a limited partnership; (d)
any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e)
any amendment to any of the foregoing.
1.49. "Partners" -- as defined in the first paragraph of this Agreement.
1.50. "Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization,
labor union, or other entity or Governmental Body.
1.51. "Plan" -- as defined in Section 3.13.
1.52. "Proceeding" -- any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
1.53. "Related Person"
(a) -- with respect to a particular individual:
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(i) each other member of such individual's Family;
(ii) any Person who is directly or indirectly controlled by
such individual or one or more members of such
individual's Family; and
(iii) any Person in which such individual or members of
such individual's Family hold (individually or in the
aggregate) a Material Interest.
(b) -- with respect to a specified Person other than an individual:
(i) any Person who directly or indirectly controls, is
directly or indirectly controlled by, or is directly or
indirectly under common control with such specified Person;
(ii) any Person who holds a Material Interest in such specified
Person;
(iii) each Person who serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a
similar capacity);
(iv) any Person in which such specified Person holds a Material
Interest;
(v) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar
capacity); and
(vi) any Related Person of any individual described in clause
(b) or (c).
(c) For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse, (iii)
any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other
natural person who resides with such individual; and (b) "Material
Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at
least 5% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 5% of
the outstanding equity securities or equity interests in a Person.
1.54. "Release" -- any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into
the Environment, whether intentional or unintentional.
1.55. "Representative" -- with respect to a particular Person, any
director, officer, employee, agent, consultant advisor, or other
representative of such Person, including legal counsel,
accountants, and financial advisors.
1.56. "Securities Act" -- the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any
successor law.
1.57. "Sellers" -- as defined in the first paragraph of this Agreement.
1.58. "Shares" - as defined in Section 2.2(a).
1.59. "Target Net Book Value" - as defined in Section 2.6.
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1.60. "Tax Return" -any return (including any information return),
report statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed
with or submitted to, any Governmental Body in connection with the
determination, assessment, collection, or payment of any tax or in
connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any tax.
1.61. "Threat of Release" -- a substantial likelihood of a Release that
may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
1.62. "Threatened" -- a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or
statement has been made (orally or in writing) or any notice has
been given (orally or in writing), or if any other event has
occurred or any other circumstances exist, that would lead a
prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced,
taken, or otherwise pursued in the future.
1.63. "Weinstein Litigation" --- as defined in Section 2.5(b).
2. CLOSING; CERTAIN PRE-CLOSING AND POST-CLOSING COVENANTS
2.1. INTERESTS TRANSFERRED. Subject to the terms and conditions of this
Agreement, at the Closing, Sellers will collectively sell and
transfer to Buyer, and Buyer will purchase from Sellers, all of
the issued and outstanding shares of stock in Selene, all of the
issued and outstanding shares of stock in JBE and all of the
limited partnership interests in N21 held by the Individual
Limited Partners.
2.2. PURCHASE PRICE.
(a) The purchase price (the "Purchase Price") for the interests
transferred under the foregoing Section 2.1 will be $10,000,000
(the "Cash Purchase Price"), plus 500,000 restricted shares (the
"Shares") of common stock of Buyer ("Common Stock"), plus the
amount (if any) by which the Adjustment Amount (as defined in
Section 2.6) is positive, minus the amount (if any) by which the
Adjustment Amount is negative, plus the Contingent Future Payments
(as defined in Section 2.7), plus the Royalties (as defined in
Section 2.8). The allocation of the Purchase Price among the
Sellers shall be as set forth in Exhibit 2.2. Buyer shall at the
Closing pay the Cash Purchase Price to the Sellers (allocated
among them as set forth in Exhibit 2.2).
2.3. CLOSING.
(a) The purchase and sale (the "Closing") provided for in this
Agreement will take place at the offices of Oscar D. Folger, 521
Fifth Avenue, New York, New York 10175 on August __, 1997 or, if
later, within five business days following the date on which the
last of the conditions to Closing set forth in this Agreement are
satisfied or fulfilled or waived, or at such other time and place
as Buyer and Boynton may agree.
(b) Subject to the provisions of Section 12, failure to consummate the
purchase and sale provided for in this Agreement on the date and
time and at the place determined pursuant to this Section 2.3 will
not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
2.4. CLOSING OBLIGATIONS. At the Closing:
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(a) Boynton will deliver to Buyer:
(i) certificates representing all of the issued and outstanding
shares of capital stock of Selene, duly endorsed (or
accompanied by duly executed stock powers), for transfer to
Buyer;
(ii) releases in the form of Exhibit 2.4(a)(ii) executed by
Boynton (collectively, "Boynton Releases");
(iii) a certificate executed by Boynton in the form of Exhibit
2.4(a)(iii) representing and warranting to Buyer that each
of Boynton's representations and warranties in this
Agreement was accurate in all respects as of the date of
this Agreement and is accurate in all respects as of the
Closing Date as if made on the Closing Date giving full
effect to any supplements to the Disclosure Letter delivered
by Sellers to Buyer prior to the Closing Date in accordance
with Section 8.5 ("Seller's Disclosure Letter");
(iv) [omitted];
(v) a non-compete agreement in the form of Exhibit 2.4(a)(v);
and
(vi) a recent certificate of good standing of Selene, certified
resolutions of the Board of Directors of Selene with respect
to the Contemplated Transactions in form reasonably
satisfactory to counsel to Buyer, and resignations by all
directors and officers of Selene and an instrument which
elects designees of Buyer as the successor directors and
officers of Selene.
(b) Bie will deliver to Buyer:
(i) certificates representing all of the issued and outstanding
shares of capital stock of JBE, duly endorsed, or
accompanied by duly executed stock powers;
(ii) releases in the form of Exhibit 2.4(b)(ii) executed by Bie
("Bie Releases");
(iii) a certificate executed by Bie representing and warranting to
Buyer that each of Bie's representations and warranties in
this Agreement was accurate in all respects as of the date
of this Agreement and is accurate in all respects as of the
Closing Date as if made on the Closing Date, giving full
effect to any supplements to the Disclosure Letter that were
delivered by Sellers to Buyer prior to the Closing Date in
accordance with Section 8.5, in the form of Exhibit
2.4(b)(iii);
(iv) [omitted]; and
(v) a recent certificate of good standing of JBE, certified
resolutions of the Board of Directors of JBE with respect to
the Contemplated Transactions in form reasonably
satisfactory to counsel to Buyer, and resignations by all
directors and officers of JBE and an instrument which elects
designees of Buyer as the successor directors and officers
of JBE.
(c) Each of the Individual Limited Partners shall deliver to Buyer:
(i) an assignment in the form of Exhibit 2.4(c)(i) executed by
the Individual Limited Partner transferring, assigning and
forever releasing to Buyer his entire limited partnership
interest in N21;
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(ii) releases in the form of Exhibit 2.4(c)(ii) executed by the
Individual Limited Partner (collectively the "Limited
Partners' Releases");
(iii) a certificate executed by the Individual Limited Partner
representing and warranting to Buyer that each of the
Individual Limited Partners representations and warranties
in this Agreement was accurate in all respects as of the
date of this Agreement and is accurate in all respects as of
the Closing Date as if made on the Closing Date, giving full
effect to any supplements to the Disclosure Letter that were
delivered by Sellers to Buyer prior to the Closing Date in
accordance with Section 8.5, in the form of Exhibit
2.4(c)(iii); and
(iv) [omitted].
(d) Selene shall deliver to Buyer:
(i) releases in the form of Exhibit 2.4(d)(i) executed by the
President and Secretary of Selene;
(ii) a certificate executed by the President and Secretary of
Selene representing and warranting to Buyer that each of
Selene's representations and warranties in this Agreement
was accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the Closing
Date as if made on the Closing Date, giving full effect to
any supplements to the Disclosure Letter that were delivered
by Sellers to Buyer prior to the Closing Date in accordance
with Section 8.5, in the form of Exhibit 2.4(d)(ii).
(e) JBE shall deliver to Buyer the following:
(i) releases in the form of Exhibit 2.4(e)(i) executed by the
President and Secretary of JBE;
(ii) a certificate executed by the President and Secretary of JBE
representing and warranting to Buyer that each of JBE's
representations and warranties in this Agreement was
accurate in all respects as of the date of this Agreement
and is accurate in all respects as of the Closing Date as if
made on the Closing Date, giving full effect to any
supplements to the Disclosure Letter that were delivered by
Sellers to Buyer prior to the Closing Dale in accordance
with Section 8.5, in the form of Exhibit 2.4(e)(ii).
(f) Buyer shall deliver to Sellers:
(i) $10,000,000 by wire transfer to the accounts or checks
payable to the persons set forth in Exhibit 2.2 or to Luce
Forward as attorney on their behalf;
(ii) certificates representing the Shares, allocated among the
Sellers as set forth in Exhibit 2.2;
(iii) a certificate executed by Buyer to the effect that, except
as otherwise stated in such certificate, each of Buyer's
representations and warranties in this Agreement was
accurate in all respects as of the date of this Agreement
and is accurate in all respects as of the Closing Date as if
made on the Closing Date, giving full effect to any notices
that were delivered by Buyer to Boynton prior to the Closing
Date; and
(iv) [omitted].
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(g) Boynton will cause N21 to deliver to Buyer:
(i) all of N21's books and records, which books and records may
be made available at the offices of N21; and
(ii) good standing certificates of N21
2.5. CERTAIN PRE-CLOSING COVENANTS.
(a) Not less than 30 days prior to the Closing, N21 shall give to the
FTC notice of the Contemplated Transactions.
(b) Immediately prior to the Closing, N21 will cause the Weinstein
Litigation to be settled exclusively by payments from N21's cash
and inventory then on hand, it being understood that to the extent
that the Weinstein Litigation is settled out of inventory, the
resulting reduction in inventory and in Closing Book Value will
reduce the Closing Book Value. In connection with such settlement,
N21 shall use its best efforts to cause Weinstein Chemicals, Inc.
to generally release N21 and its partners. The Weinstein
Litigation means litigation between the N21 and Weinstein
Chemicals, Inc.
(c) Immediately prior to the Closing and after the settlement referred
to in Section 2.5(b), N21 will distribute to the Partners the
balance of N21's cash then on hand.
2.6. ADJUSTMENT AMOUNT.
(a) On or prior to the 90th day after the Closing Date, Buyer shall
deliver to Sellers a balance sheet for N21 as of the Closing Date
(the "Closing Date Balance Sheet") prepared by Buyer in accordance
with GAAP as consistently applied by N21 and audited by KPMG.
(b) The amount, if any, by which the book value of N21 (exclusive of
cash) as of the Closing (the "Closing Net Book Value") exceeds the
Target Net Book Value is the positive Adjustment Amount. The
amount if any by which the Closing Net Book Value is less than the
Target Net Book Value is the negative Adjustment Amount. The term
"Target Net Book Value" means $2,730,655, which is the book value
of N21 reflected on the April 30, 1997 Balance Sheet.
(c) If there is a dispute between Seller and Buyer as to the Closing
Net Book Value, the dispute shall be submitted to the accounting
firms of Ernst & Young LLP and KPMG, which shall review N21's
books and records and make a final joint determination within 60
days. If such firms do not agree, the dispute shall be resolved as
soon as possible by Price Waterhouse & Company.
(d) A positive Adjustment Amount shall be paid by Buyer to Boynton for
the benefit of the Sellers via wire-transfer within ten (10) days
after the delivery of the Closing Date Balance Sheet to Boynton. A
negative Adjustment Amount shall be paid by Boynton via
wire-transfer within ten (10) days after the delivery to him of
the Closing Date Balance Sheet.
2.7. CONTINGENT FUTURE PAYMENTS.
(a) For each of the first four years after the Closing Date, Buyer
will make a payment (a "Contingent Future Payment") to the Sellers
(allocated among them as set forth in Exhibit 2.2) in an amount
equal to such year's Relevant Fraction (as defined below), times
$2,500,000.
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(b) If the quotient (the "Quotient") of (i) Net Sales from N21
products in such year, divided by (ii) $16.273 million, is at
least equal to one, the Relevant Fraction for such year is the
Quotient. If the Quotient is less than one, the Relevant Fraction
for such year is the Quotient squared (the Quotient times the
Quotient). There is no upper limit to this Contingent Future
Payment.
(c) By way of example, if the Quotient is 1.5 for any year, the
Contingent Future Payment for such year is 1.5 times $2,500,000,
or $3,750,000. If the Quotient is 0.9 for any year, the Contingent
Future payment for such year is 0.9 times 0.9 times $2,500,000, or
$2,025,000.
(d) A "year" for the purpose of this Section is each of the successive
12-month periods beginning on the first day of the first month
which begins after the Closing Date. The amounts owed to Sellers
under this Section shall be paid by Buyer to Boynton on behalf of
Sellers within thirty (30) days after the end of the year. Amounts
paid after thirty (30) days will be subject to an interest charge
of 10% per annum.
(e) Buyer will use ordinary business practices in the conduct of its
business in calculating Contingent Future Payments to N21. Buyer
will not engage in a practice of "holding or deferring" net sales
or "loading" net sales or other business practice for the purpose
of avoiding a Contingent Future Payment.
(f) Boynton or his representative will have the right at Boynton's
expense reasonably to audit Buyer's accounts receivable and other
customer records in respect of Buyer's obligations to make
Contingent Future Payments.
(g) KPMG Peat Marwick shall deliver to Sellers within sixty (60) days
of the end of the year a certificate verifying the amount of
Buyer's obligation pursuant to this Section 2.7.
2.8. ROYALTIES
(a) For the life of each N21 issued US patent (currently
No. 5,087,623; No. 5,087,624; and No. 5,175,156; excluding
No. RE 33,988) or of patents to be issued under applications
pending at Closing whose claims cover uses for chromium picolinate
("N21 Chromium Picolinate Patent(s)"), Buyer will within 30 days
after each calendar quarter make royalty payments to Boynton or
his representative on behalf of Sellers in an amount equal to 5%
of Net Sales during such quarter from N21 Products for uses which
are recommended by Buyer in writing and which are covered by any
such unexpired issued patent. An example of such recommendation is
a reference by Buyer to such use in the advertising, labeling or
other packaging material which is delivered to the end purchaser.
Only one royalty will be paid for each product whether or not such
product is covered by more than one patent. The following are
examples of the application of this Section. If Buyer sells
chromium picolinate as a raw material without recommendation of a
use covered by any such issued patent, no royalty is due. If Buyer
sells a finished product and includes a recommendation in writing
that the finished product be used for a use covered by any N21
Chromium Picolinate Patent(s), a royalty is due on such sales by
Buyer.
(b) For the life of each N21 issued US patent whose claims cover uses
for products other than for chromium picolinate ("Other N21
Products") or of patents to be issued under applications pending
at Closing whose claims cover uses of such Other N21 Products
("N21 Non-Chromium Picolinate Patent(s)"), Buyer will within 30
days after each calendar quarter make royalty payments to Boynton
on behalf of Sellers in an amount equal to 2.5% of Net Sales
during such quarter from Other N21 Products for uses which are
recommended by Buyer in writing and which are covered by any such
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unexpired issued patent. If such Net Sales under N21 Non-Chromium
Picolinate Patent(s) for such Other N21 Products exceed $20
million by any amount during any four consecutive calendar
quarters that fall within the life of the US N21 Non-Chromium
Picolinate Patent(s), the royalty payments to N21 on the portion
of such Net Sales from Other N21 Products during such period which
exceeds $20 million will be increased to 5%, while the royalty
payments on the first $20 million of such Net Sales from Other N21
Products during such period shall at all times remain 2.5%. Only
one royalty will be paid for each Product whether or not such
Product is covered by more than one patent. The following are
examples of the application of this Section. If Buyer sells Other
N21 Products as a raw material without recommendation of a use
covered by any such issued patent, no royalty is due. If Buyer
sells finished product and includes a recommendation in writing
that the finished product be used for a use covered by any N21
Non- Chromium Picolinate Patent(s), a royalty is due on such sales
by Buyer.
(c) In the event any N21 Chromium Picolinate Patent(s) or any N21
Non-Chromium Picolinate Patent(s) covering uses of N21 Products or
Other N21 Products, as the case may be, are held invalid, or the
claim(s) are transferred to another party by reason of a decision
in a US Patent Interference Proceeding, no further royalty shall
be due under any such Patent(s). If there is an infringement of
any such Patent(s), and Buyer brings an infringement action
against an infringer, then 50% of each dollar of the cost and
expenses of bringing and maintaining the action shall be
deductible from royalty payments due to Sellers. In the event that
Buyer recovers damages either by court order or a settlement of
the infringement, any such recoveries shall be shared equally by
Buyer and Sellers until Sellers have been paid the royalties which
the Sellers would have received were no deduction made from
royalties under the preceding sentence.
(d) Boynton or his representative will have the right at Boynton's
expense reasonably to audit Buyer's accounts receivable and other
customer records in respect of Buyer's obligations to make Royalty
Payments.
(e) KPMG Peat Marwick shall deliver to the Sellers within sixty (60)
days after the end of the year a certificate verifying the amount
of Buyer's obligation pursuant to this Section 2.8.
2.9. [omitted].
2.10. [omitted]
2.11. EMPLOYMENT AND CONSULTING MATTERS
(a) Effective at the Closing:
(i) Buyer will offer at will employment at the annual salary set
forth in Exhibit 2.11 to all persons who are employees of
N21 immediately prior to the Closing ("N21 Employees"); and
(ii) Buyer will grant to N21 Employees who accept such employment
the stock options set forth opposite their names on Exhibit
2.11, which options in the aggregate cover 400,000 Shares.
The option to each employee will vest in five equal
installments on each of the first five anniversaries of the
Closing so long as such employee's employment continues on
such anniversary. The option exercise price will be the
closing price per share of Buyer's common stock on NASDAQ on
the last business day immediately preceding the Closing.
(b) So long as they are employed by Buyer, Buyer will include the N21
Employees in all of Buyer's
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benefits programs, including health insurance, life insurance, and
401k and other plans, and the N21 Employees shall also be eligible
for additional stock option awards. There will be no past service
credit for vesting.
(c) If prior to the first anniversary of the Closing Date, Buyer
terminates the employment of an N21 Employee other than for cause,
Buyer will in lieu of all other obligations and against a valid
general release from such N21 Employee make a one-time payment to
such N21 Employee equal to the gross amount of his or her annual
salary for the period from such termination until the first
anniversary of the Closing Date, less all applicable federal and
state deductions. An N21 Employee who resigns voluntarily (other
than by reason of his involuntary relocation) or who is terminated
for cause is not eligible for any payment under the preceding
sentence.
(d) At the Closing, Buyer will enter into a consulting agreement with
Boynton in the form of Exhibit 2.11(d).
2.12. CERTAIN MATTERS RELATING TO THE SHARES AND BUYER SECURITIES;
REGISTRATION RIGHTS.
(a) Each Seller represents and warrants to Buyer that:
(i) The Shares which such Seller will acquire at the Closing
will be acquired by such Seller for investment for its own
account, not as a nominee or agent, and not with a view to
the sale or distribution of any part thereof, and that it
has no present intention of selling, granting participation
in, or otherwise distributing the same, but subject
nevertheless to any requirement of law that the disposition
of its property shall at all times be within its control. By
executing this Agreement, such Seller further represents
that it does not have any contract, undertaking, agreement,
or arrangement with any person to sell, transfer or grant
participation to such person, or to any third person, with
respect to any of the Shares.
(ii) such Seller understands that the Shares have not been
registered under the Securities Act on the grounds that the
issuance provided for in this Agreement is exempt from
registration under the Securities Act, and that Buyer's
reliance on such exemption is predicated in part on such
Seller's representation set forth herein. Such Seller
realizes that the basis for the exemption may not be present
if, notwithstanding such representations, such Seller has in
mind merely acquiring Shares for a fixed or determined
period in the future, or for a market rise, or for sale if
the market does not rise. such Seller does not have any such
intention.
(iii) such Seller represents that it is a sophisticated investor,
is able to fend for itself in the transactions contemplated
by this Agreement, has such knowledge and experience in
financial and business matters as to be capable of
evaluating the merits and risks of its investment in light
of the representations and warranties made by Seller under
this Agreement, and has the ability to bear the economic
risks of its investment.
(iv) such Seller understands that the Shares may not be sold,
transferred or otherwise disposed of without registration
under the Securities Act or an exemption therefrom, and that
in the absence of an effective registration statement
covering the Shares or an available exemption from
registration under the Securities act, the Shares must be
held indefinitely. Such Seller is aware that among the
conditions for use of Rule 144 is the availability of
current information to the public about Seller.
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(v) such Seller represents that, in the absence of an effective
registration statement covering the Shares it will sell,
transfer, or otherwise dispose of the Shares only in a
manner consistent with its representations set forth herein
and then only if it shall have received the favorable
opinion of counsel to Seller to the effect that such sale or
other transfer may be made in the absence of registration
under the Act. Seller agrees that such opinion will not be
unreasonably withheld or delayed.
(vi) such Seller understands that each instrument representing
the Shares will be endorsed with a legend substantially as
follows: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE
"SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS.
THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHER WISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT SECURITIES ACT
AND ANY APPLICABLE STATE LAWS, OR THE AVAILABILITY OF AN
EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE SECURITIES
ACT AND APPLICABLE STATE SECURITIES LAWS.
(b) Registration Rights.
(i) Buyer will use commercially reasonable efforts to file, on
or before the 30th day after the Closing, a registration
statement on Form S-3 (the "Registration Statement") for the
public sale by the Sellers of the Shares.
(ii) Buyer shall use its diligent efforts to cause the
Registration Statement to become effective not later than 90
days after the date of filing, and to remain effective for
two years. The registration shall be accompanied by blue sky
clearances in such states as the Sellers may reasonably
request.
(iii) Buyer shall pay all expenses of the registration hereunder,
other than the Sellers' legal fees and underwriting
discounts.
(iv) Buyer shall supply to the Sellers a reasonable number of
copies of all registration materials and prospectuses. Buyer
and the Sellers shall execute and deliver to each other
indemnity agreements which are conventional in registered
offerings of this type. The Sellers shall reasonably
cooperate with Buyer in the preparation and filing of the
Registration Statement and appropriate amendments thereto.
(v) Whether or not the Shares have been registered:
(A) No Seller who as of the Closing owns less than 5% of
the ownership interest in N21 ("Minority Sellers")
shall sell or otherwise dispose of any Shares until
the 90th day after the Closing;
(B) No Seller other than Boynton and the Minority Sellers
shall sell or otherwise dispose of any Shares until
the 180th day after the Closing; and
(C) Boynton shall not sell or otherwise dispose of any of
his Shares until the 365th day after the Closing.
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(c) No Seller shall engage (or cause others to engage or permit N21
employees to engage) in the trading of securities of Buyer prior
to the Closing.
(d) Sellers acknowledge that they have been advised that after the
Closing, Boynton, George McDowell, Mark McCarty, Bonuie Ricci,
Debbie DiSpaltro, Diana Chubbic, Jeff Korber, Dr. Victor Moreno,
and Richard Kaiser will be considered "insiders" according to
relevant laws and regulations and will be required to comply with
all applicable laws regulations regarding the trading of
securities of Buyer.
2.13. CERTAIN TAX MATTERS. For the purposes of this Section, "Sellers"
means Boynton as to Selene, and Bie as to JBE.
(a) Sellers represent that the two small business corporations, Selene
Systems, Inc. and J. Bie Enterprises, each has a valid S
corporation election in effect, has operated in accordance with
the special tax requirements for S corporations, and has not
terminated the election inadvertently or otherwise prior to the
Closing Date. The Sellers represent that there is no written or
other agreement to restrict the transferability of stock including
any option or right of first refusal. Additionally, any corporate
level tax, including but not limited to LIFO recapture, taxation
of passive investment income, and tax imposed on built-in gains
which has been required to be recognized has been properly
reported under applicable tax laws during the appropriate tax
period prior to the Closing Date. Likewise, Nutrition 21 has a
valid partnership agreement in effect and has operated in
accordance with the tax requirements for a limited partnership,
specifically the treatment of separately stated items. Except as
set forth in the N21 partnership agreement among Sellers, Sellers
represent that there is no written or other agreement to restrict
the transferability of partnership interests including any option
or right of first refusal.
(b) Upon the transfer of the shares of each S corporation to the
Buyer, the S election will terminate, and as greater than 50% of
the stock of the S Corporations will be transferred, the S
Corporation books will be closed on that date. The Sellers shall
be responsible for the preparation of the final S corporation
short year tax returns of the two acquired S Corporations,
provided the Buyer has the option to review the final short period
returns prior to their filing, or alternatively the Sellers will
reimburse the Buyer for the cost of the preparation of these
returns. The preparation of the initial C corporation short year
return for the two acquired former S corporations will be the
responsibility of the Buyer. The Sellers will supply all the
necessary books and records necessary for the completion of the
returns, by dividing the tax year into two separate taxable years,
the first ending on the day of the sale and the second one ending
at the usual year-end. Requests for information will be handled as
described in Section 14.4.
3. REPRESENTATIONS AND WARRANTIES OF N21, SELENE AND BOYNTON. Except as set
forth in the Seller's Disclosure Letter, N21, Selene and Boynton jointly
and severally represent and warrant to Buyer as follows:
3.1. ORGANIZATION AND GOOD STANDING OF N21.
(a) Part 3.1 of the Disclosure Letter contains a complete and accurate
list for N21 of its name, its jurisdiction of incorporation or
organization, other jurisdictions in which it is authorized to do
business, and its capitalization, including the identity of each
member, partner or other person holding an interest in N21 and the
number of specific interests held by each. N21 is a limited
partnership duly organized, validly existing, and in good standing
under the laws of the State of California, with full power and
authority to conduct its business as it is now being conducted, to
own or use the properties and assets
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that it purports to own or use, and to perform all its obligations
under Applicable Contracts. N21 is duly qualified to do business
as a foreign limited partnership and is in good standing under the
laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such
qualification.
(b) N21 has delivered to Buyer copies of the Organizational Documents
of N21, as currently in effect.
3.2. AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers and N21, enforceable against Sellers and N21
in accordance with its terms. Upon the execution and delivery by
Sellers of the documents required of them under Section 2.4
(collectively, the "Sellers' Closing Documents"), the Sellers'
Closing Documents will constitute the legal, valid, and binding
obligations of Sellers, enforceable against Sellers in accordance
with their respective terms, Sellers and N21 have the absolute and
unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and the Sellers' Closing Documents and to
perform their obligations under this Agreement and the Sellers'
Closing Documents.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated
Transactions will, directly or indirectly, with or without notice
or lapse of time.
(i) contravene, conflict with. or result in a violation of (A)
any provision of the Organizational Documents of N21, or (B)
any resolution, formal policy or other undertaking adopted
by the partners or general partners of N21;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to
exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which N21 or any Seller, or any
of the assets owned or used by N21, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any Governmental Authorization that is
held by N21 or that otherwise relates to the business of, or
any of the assets owned or used by, N21;
(iv) cause any of the assets owned by N21 to be reassessed or
revalued by any taxing authority or other Governmental Body;
(v) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel.
terminate, or modify, any Applicable Contract; or
(vi) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by
N21.
(c) Except for a Notice to the FTC, neither any Seller nor N21 is or
will be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the
Contemplated Transactions.
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3.3. CAPITALIZATION; RELATED PARTIES
(a) The authorized and outstanding equity securities or interests in
N21 consist only of the general partnership interest of Selene,
the limited partner interest of JBE and the limited partnership
interests of the Individual Limited Partners. Sellers are, and
will be on the Closing Date, the record and beneficial owners and
holders of all such authorized and outstanding partnership
interests, free and clear of all Encumbrances. No legend or other
reference to any purported Encumbrance appears upon any
certificate representing any such partnership interest or upon the
books and records of N21. All of the outstanding equity securities
and interests of N21 have been duly authorized and validly issued
and are fully paid and nonassessable. There are no Contracts
relating to the issuance, sale, or transfer of any equity
securities, interests or other securities of N21. None of the
outstanding equity securities or other securities of N21 was
issued in violation of the Securities Act or any other Legal
Requirement. N21 does not own, or have any Contract to acquire,
any equity securities or other securities of any Person or any
direct or indirect equity, income, distribution profits or
ownership interest in any other business.
(b) N21 does not, directly or indirectly, own any share capital, bonds
or other securities of, or have any proprietary interest in, any
corporation, firm, partnership, joint venture, trust or other
entity. The business carried on by N21 has not been conducted
through any other direct or indirect subsidiary or affiliate of
any partner or other affiliate of N21.
(c) Transactions with Certain Persons.
(i) Except as set forth on N21's Disclosure Letter, during the
past three years N21 has not, directly or indirectly,
purchased, leased from others or otherwise acquired any
property or obtained any services from, or sold, leased to
others or otherwise disposed of any property or furnished
any services to, or otherwise dealt with (except with
respect to remuneration for services rendered as a director,
officer or employee of N21), in the ordinary course of
business or otherwise, (i) any partner of N21 (a "Partner")
or (ii) any person, firm or corporation which, directly or
indirectly, alone or together with others, controls, is
controlled by or is under common control with N21 or any
Partner.
(ii) N21 does not owe any amount to, or have any contract with or
commitment to, any of its Partners, officers, employees or
consultants (other than compensation for current services
not yet due and payable and reimbursement of expenses
arising in the ordinary course of business), and none of
such persons owes any amount to N21.
(iii) No part of the property or assets of any Partner or any
direct or indirect subsidiary or affiliate of any Partner is
used by N21.
3.4. FINANCIAL STATEMENTS.
(a) N21 has made available to Buyer: (a) unaudited balance sheets of
N21 as at December 31 in each of the years since N21's
organization through 1996, and the related unaudited statements of
income for each of the fiscal years then ended, (b) an unaudited
balance sheet of N21 (the " Balance Sheet") as at April 30, 1997
(the "Balance Sheet Date") and the related unaudited statements of
income, changes in equity, and cash flow for the four months then
ended, including the notes thereto.
(b) Such financial statements and notes fairly present the financial
condition and the results of operations
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of N21 as at the respective dates of and for the periods referred
to in such financial statements; the financial statements referred
to in this Section 3.4 reflect the consistent application of such
accounting principles throughout the periods involved.
(c) The statements of earnings included in such financial statements
do not contain any items of special or nonrecurring income or any
other income not earned in the ordinary course of business except
as expressly specified therein, and such interim financial
statements include all adjustments, which consist only of normal
recurring accruals, necessary for such fair presentation.
(d) No financial statements of any Person other than N21 is required
by GAAP to be included in the consolidated financial statements of
N21.
3.5. BOOKS AND RECORDS. The books of account, minute books, partnership
records, ownership record books, and other records of N21, all of
which have been made available to Buyer, are complete and correct
and have been maintained in accordance with sound business
practices including the maintenance of an adequate system of
internal controls.
3.6. TITLE TO PROPERTIES; ENCUMBRANCES.
(a) Part 3.6 of the Disclosure Letter contains a complete and accurate
list of all real property, leaseholds, or other interests therein
owned by N21. Sellers have delivered to Buyer copies of the deeds
and other instruments, as recorded, by which N21 acquired such
real property and interests, and copies of all title insurance
policies, opinions, abstracts, and surveys in the possession of
Sellers or N21 and relating to such property or interests.
(b) N21 owns, with good and marketable title, subject only to the
matters permitted by the following sentence, all the properties
and assets, whether real, personal, or mixed and whether tangible
or intangible, that it purports to own or operate or which is
reflected as owned in the books and records of N21, including all
of the properties and assets reflected in the Balance Sheet and
the Balance Sheet, and all of the properties and assets purchased
or otherwise acquired by N21 since the date of the Balance Sheet,
which subsequently purchased or acquired properties and assets,
other than inventory and short-term investments, are listed in
Part 3.6 of the Disclosure Letter.
(c) All properties and assets reflected in the Balance Sheet and the
Balance Sheet are free and clear of all Encumbrances and are not,
in the case of real property, subject to any rights-of-way,
building use restrictions, exceptions, variances, reservations, or
limitations of any nature except, with respect to all such
properties and assets:
(i) mortgages or security interests shown on the Balance Sheet
or the Balance Sheet as securing specified liabilities or
obligations, with respect to which no default, or event
that, with notice or lapse of time or both, would constitute
a default, exists,
(ii) mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the
Balance Sheet, such mortgages and security interests being
limited to the property or assets so acquired, with respect
to which no default, or event that, with notice or lapse of
time or both, would constitute a default, exists,
(iii) liens for current taxes not yet due, and
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(iv) with respect to real property, (i) minor imperfections of
title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the
property subject thereto, or impairs the operations of N21,
and (ii) zoning laws and other land use restrictions that do
not impair the present or anticipated use of the property
subject thereto.
(d) All of the properties and assets owned, leased or used by N21 are
in good operating condition and repair, are suitable for the
purposes used, are adequate and sufficient for all current
operations of N21 and are directly related to the business of N21.
3.7. ACCOUNTS RECEIVABLE. All receivables of N21 (including accounts
receivable, loans receivable and advances) which are reflected in
the Balance Sheet, and all such receivables which will have arisen
since the date thereof, shall have arisen only from bona fide
transactions in the ordinary course of N21's business and shall be
collected (or have been) fully collected when due, or in the case
of each account receivable within 90 days after it arose, without
resort to litigation and without offset or counterclaim, in the
aggregate face amounts thereof except to the extent of the normal
allowance for doubtful accounts with respect to accounts
receivable computed as a percentage of sales consistent with N21's
prior practices as reflected on the Balance Sheet.
3.8. INVENTORY. All items of N21's inventory and related supplies
(including raw materials, work-in-process and finished goods)
reflected on the Balance Sheet or thereafter acquired
(and not subsequently disposed of in the ordinary course of
business) are merchantable, or suitable and usable for the
production or completion of merchantable products, for sale in the
ordinary course of business as first quality goods at normal
mark-ups, none of such items is obsolete or below standard quality
and each item of such inventory reflected in the Balance Sheet and
the books and records of N21 is so reflected on the basis of a
complete physical count and is valued at the lower of cost or
market in accordance with generally accepted accounting principles
consistently applied. Within five days prior to the Closing, N21's
assets shall include a sufficient but not an excessive quantity of
each type of such inventory and supplies in order to meet the
normal requirements of N21's business and operations for a period
of not less than two months nor more than six months.
3.9. NO UNDISCLOSED LIABILITIES.
(a) Except as and to the extent reflected or reserved against on the
face of the Balance Sheet (excluding the notes thereto), as of the
Balance Sheet Date N21 had no debts, liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of any nature
whatsoever, including, without limitation, any foreign or domestic
tax liabilities or deferred tax liabilities incurred in respect of
or measured by N21's income, or its property or authorized or
outstanding capital stock, for any period prior to the close of
business on the Balance Sheet Date or any other debts, liabilities
or obligations relating to or arising out of any act, transaction,
circumstance or state of facts which occurred or existed on or
before the Balance Sheet Date, whether or not then known, due or
payable.
(b) None of N21's employees is now or, will by the passage of time
hereafter become, entitled to receive any vacation time, vacation
pay or severance pay attributable to services rendered prior to
the Balance Sheet Date except as disclosed on the face of the
Balance Sheet (excluding the notes thereto).
(c) Except as otherwise disclosed in the schedules hereto, N21 is not
liable to any third party or entity for any damages resulting in
whole or in part from the negligent, reckless or willful acts or
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omissions of N21, whether such liability may arise in tort, strict
liability or for breach of contract, nor has N21 acted or failed
to act so as to result in such liability.
(d) All products manufactured, distributed or sold by N21 meet
published or quoted specifications, were not defective, were not
contaminated or spoiled, did not contain any foreign objects and
are in compliance with and were manufactured in accordance with
any warranties or representations given or implied in respect
thereof and in compliance with all applicable laws and
regulations. The products are packaged in appropriate containers
which comply in all material respects with all regulations,
including labeling regulations.
3.10. TAXES. Representations and warranties in this Section 3.10 as to
Selene are made exclusively by Boynton. Representations and
warranties in this Section 3.10 as to J. Bie Enterprises are made
exclusively by Bie.
(a) The Acquired Companies, Nutrition 21, Selene Systems, Inc., and J.
Bie Enterprises, have duly and timely filed or have received an
appropriate extension of time to file all tax returns for all
taxes, including without limitation, taxes imposed on or measured
by income, property, sales, use, franchise, profits, gross
receipts, capital stock, added valued, ad valorem, employees'
income withholding and social security taxes, payroll, license,
workers' compensation, unemployment compensation, utility,
severance, production, excise, stamp, occupation, premium,
windfall profits, transfer, gains taxes, and custom duties
imposed by the United States or by any foreign country or by any
state, municipality, subdivision or instrumentality of the United
States or any foreign country, or by an other taxing authority
which it is required to file. In each case, the Acquired
Companies have paid all taxes shown to be due on such Tax Returns
or on subsequent assessments with respect thereto, or otherwise
due and all interest and penalties thereon, whether disputed or
not, have been paid in full on a timely basis and no other taxes
are payable by the Acquired Companies with respect to items or
periods covered by such returns (whether or not shown on or
reportable on such returns) or with respect to any period prior to
the date of this Agreement. Additionally, persons performing
services on behalf of the Acquired Companies have been
appropriately classified as employees or independent contractors
with the requisite reporting of compensation amounts and the
appropriate withholding of employment taxes. All payments of
estimated Taxes required to be made under Section 6655 of the code
and any comparable provisions of state, local, foreign or other
law and all amounts required to be collected or withheld by the
Sellers have been duly remitted or deposited in accordance with
law. The Acquired Companies have complied with all information
reporting and backup withholding requirements including
maintenance of required records with respect thereto in connection
with amounts paid to or owing to any employee, creditor,
independent contractor or other third party. There are no liens on
any of the assets of the Acquired Companies with respect to taxes.
The Acquired Companies have made appropriate provision in the
Financial Statements for any Taxes not yet due, and all such Tax
Returns were, are, and will be true, correct, and complete. None
of the Tax Returns described above contains or will contain a
disclosure statement under Section 6662 of the Code or any similar
provision of state, local, foreign, or other law.
(b) The Sellers represent that Nutrition 21, Selene Systems, Inc. and
J. Bie Enterprises have not been delinquent in the payment of any
foreign or domestic tax, assessment or governmental charge or
deposit and have paid or finally settled all tax deficiencies
asserted or assessed against each Acquired Company. All Tax
Returns filed or required to be filed by the Acquired Companies
have been examined by the Internal Revenue Service or other
appropriate taxing authority or closed by the applicable statures
of limitations, and all liabilities asserted by the Internal
Revenue
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Service or any such taxing authority have been satisfied, and
any Tax liabilities for years which have not been so examined
or closed will not have a material adverse effect on the Acquired
Companies. There is no outstanding request for any extension of
time within which to pay any Taxes or file any Tax Returns. There
has been no waiver or extension of any applicable statute of
limitations for the assessment or collection of any Taxes. There
is no pending or threatened action, audit, proceeding or
investigation for the assessment or collection of any Taxes. There
are no requests for rulings, subpoenas or requests for information
pending with respect to any taxing authority. Any adjustment of
Taxes made by the Internal Revenue Service in any examination
which is required to be reported to state, local, foreign, or
other taxing authorities has been so reported, and any additional
Taxes due with respect thereto have been paid. No power of
attorney has been granted by the Acquired Companies and is
currently in force with respect to any matter relating to Taxes.
(c) No taxing authority either in writing or verbally, formally or
informally, has raised any issue with respect to the liability of
any Acquired Company for any Tax that by the application of
similar principles might result in a Notice of Deficiency or
similar notice of intention to assess Taxes by any taxing
authority. No Acquired Company has taken any action that would
have the effect of deferring any liability for Taxes from any
taxable period ending on or before the Closing Date to any taxable
period ending thereafter. None of the income recognized for
federal, state, local, foreign or other income tax purposes by the
Acquired Companies during the period beginning on the financial
statement date and ending on the Closing Date will be derived
other than in the ordinary course of business or arise from
transactions of a type not reflected in the relevant Tax Returns
for the last taxable period ending prior to the financial
statement date. The Acquired Companies are not required to include
in income any adjustment pursuant to Section 481(a) of the Code or
any similar provision of law or regulations by reason of a change
in accounting method, nor is any taxing authority considering any
such change in accounting method. The Acquired Companies have not
disposed of any property which has been accounted for tax purposes
under the installment method. The Acquired Companies have not
issued or assumed any corporate acquisition indebtedness within
the meaning of Section 279(b) of the Code. The Acquired Companies
have had no asset transfers subject to property transfer tax for
which there has not been a payment of the tax and filing of the
requisite returns. The 401(k) plans of the Acquired Companies are
in compliance with the qualification requirements and have been
operated in accordance with the special requirements of Section
401(k) of the Code and the representations of the plan. This
includes the proper tax treatment of employee and employer
contributions and any distributions from the plan.
(d) The Acquired Companies have not (nor have ever been) a party to
any tax sharing agreement and have not assumed the liability of
any other person under contract.
(e) Buyer has been furnished by Sellers true and compete copies of (i)
relevant portions of income tax audit reports, statements of
deficiencies, closing or other agreements received by Sellers
relating to Taxes, and (ii) all federal and state income or
franchise tax returns for the Sellers for all periods ending on
and after December 31, 1994 Sellers have never been a member of an
affiliated group filing consolidated returns. Sellers do no
business in or derive income from any state, local, territorial or
foreign taxing jurisdiction other than those for which all Returns
have been furnished to Buyer.
(f) Unless otherwise disclosed, the Acquired Companies have made no
tax elections that affect its
22
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depreciation, methods of accounting, intangible assets, or any
other tax items. Selene Systems Inc. and J. Bie Enterprises
each has a valid S corporation election in effect. The disclosure
schedule contains an accurate and complete description of the
Acquired Companies basis in its assets.
(g) Buyer and Sellers agree that so long as any books, records and
files retained by Sellers relating to the business of Sellers, or
the books, records and files delivered to the control of Buyer
pursuant to this Agreement, to the extent they relate to the
operations of Sellers prior to the Closing Date, remain in
existence and available, each party (at its expense) shall have
the right upon prior notice to inspect and to make copies of the
same at any time during business hours for any proper purpose.
Buyer and Seller shall use reasonable efforts not to destroy or
allow the destruction of any such books, records and files without
first offering in writing to deliver them to the other.
3.11. NO MATERIAL ADVERSE CHANGE. From the date of the Balance Sheet to
the Closing, there has not been, and until the Closing there will
not be, any material adverse change in the business, operations,
properties, prospects, assets, or condition (financial or
otherwise)of N21, including, without limitation, any change in
N21's revenues, costs, backlog or relations with its employees,
agents, customers or suppliers; and no event has occurred or
circumstance exists that may result in such a material adverse
change.
3.12. EMPLOYEE BENEFITS.
(a) There has not been any (i) termination of any "defined benefit
plan" within the meaning of the Employee Retirement Income
Security Act of l974 ("ERISA") maintained by N21 or any person,
firm or corporation ("Affiliate") which is under "common control"
(within the meaning of Section 4001(b) of ERISA) with N21, or (ii)
commencement of any proceeding to terminate any such plan pursuant
to ERISA, or otherwise or (iii) written notice given to N21 or any
Affiliate of the intention to commence or seek the commencement of
any such proceeding.
(b) All accrued benefits under each pension plan of N21 covering
employees who are to be transferred to the employ of AMBI
following the Closing ("Transferred Employees") shall be fully
provided for as of the date of the Closing by any one or more of
(i) annuity contracts for the benefit of such Transferred
Employees issued by an insurance company acceptable to AMBI, (ii)
the transfer to a successor plan established or maintained by AMBI
for the benefit of such Transferred Employees of assets having a
fair market value of not less than the present value of all such
accrued benefits and/or (iii) in the case of any multi-employer
plan or any single employer plan which AMBI shall assume, by the
fair market value of the assets of such plan as of the date of the
Closing being not less than the present value of all accrued
benefits under such plan at such date.
(c) The amount of accrued benefits and the present value thereof under
each such pension plan shall be computed by AMBI's actuary on the
basis of "Acceptable Actuarial Assumptions," which term is defined
to mean actuarial assumptions and methods to which AMBI consents
in writing (which consent shall not be unreasonably withheld).
(d) N21 has no knowledge or information of any planned or required
increase in the level of contributions or benefits under any such
pension plan, or of any circumstances which would suggest that
such an increase may be required, or that any union representing
employees covered under any such plan will attempt to negotiate
for such an increase.
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(e) In the case of each pension plan to which N21 makes contributions
on behalf of Transferred Employees under which contributions are
fixed pursuant to a collective bargaining agreement, the level of
contributions currently provided for in the applicable collective
bargaining agreement is sufficient to meet the funding
requirements of ERISA applicable to such plan, based on Acceptable
Actuarial Assumptions.
(f) Each funded pension plan maintained by N21 for one or more
Transferred Employees constitutes a qualified plan under section
40l(a) of the Internal Revenue Code of l954 and meets all
applicable requirements of ERISA.
3.13. COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
(a) N21 is, and at all times since its inception has been, in full
compliance with each Legal Requirement that is or was applicable
to it or to the conduct or operation of its business or the
ownership or use of any of its assets.
(b) No event has occurred or circumstance exists that (with or without
notice or lapse of time) (A) may constitute or result in a
violation by N21 of, or a failure on the part of N21 to comply
with, any Legal Requirement, or (B) may give rise to any
obligation on the part of N21 to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature.
(c) other than before October 7, 1996 in relation to the FTC Decree,
N21 has not received, at any time since its inception, any notice
or other communication, whether oral or written, from any
Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential violation of, or failure to comply
with, any Legal Requirement, or (B) any actual, alleged, possible,
or potential obligation on the part of N21 to undertake, or to
bear all or any portion of the cost of, any remedial action of any
nature. Sellers and N21 have provided Buyer with copies of all
documents generated, received or prepared by counsel with respect
to all proceedings involving the FTC.
(d) Part 3.13 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by
N21 or that otherwise relates to the business of, or to any of the
assets owned or used by, N21. Each Governmental Authorization
listed or required to be listed in Part 3.13 of the Disclosure
Letter is valid and in full force and effect. Except as otherwise
set forth in Part 3.13 of the Disclosure Letter:
(i) N21 is, and at all times since its inception has been, in
full compliance with all of the terms and requirements of
each Governmental Authorization identified or required to be
identified in Part 3.13 of the Disclosure Letter;
(ii) no event has occurred or circumstance exists that may, with
or without notice or lapse of time, (A) constitute or result
directly or indirectly in a violation of or a failure to
comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Part 3.13
of the Disclosure Letter, or (B) result directly or
indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to, any
Governmental Authorization listed or required to be listed
in Part 3.13 of the Disclosure Letter;
(iii) N21 has not received, at any time, any notice or other
communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of or
failure to comply with any term or
24
<PAGE>
requirement of any Governmental Authorization, or (B) any
actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and,
(iv) all applications required to have been filed for the renewal
of the Governmental Authorizations listed or required to be
listed in Part 3.13 of the Disclosure Letter have been duly
filed on a timely basis with the appropriate Governmental
Bodies, and all other filings required to have been made
with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate
Governmental Bodies.
(v) The Governmental Authorizations listed in Part 3.13 of the
Disclosure Letter collectively constitute all of the
Governmental Authorizations necessary to permit N21 to
lawfully conduct and operate its businesses in the manner it
currently conducts and operates such businesses and to
permit N21 to own and use it assets in the manner in which
it currently owns and uses such assets.
3.14. LEGAL PROCEEDINGS; ORDERS.
(a) Other than the FTC Decree, there is no pending Proceeding:
(i) that has been commenced by or against N21 or that otherwise
relates to or may affect the business of, or any of the
assets owned or used by, N21; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any
of the Contemplated Transactions.
(b) To the Knowledge of N21, (1) no such Proceeding has been
threatened, and (2) no event has occurred or circumstance exists
that may give rise to or serve as a basis for the commencement of
any such Proceeding.
(c) Other than the FTC Decree:
(i) there is no Order to which N21 or any of the assets owned or
used by N21 is subject;
(ii) no Seller is subject to any Order that relates to the
business of, or any of the assets owned or used by, N21; and
(iii) no officer, director, agent, or employee of N21 is subject
to any Order that prohibits such officer, director, agent,
or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of N21.
(d) with respect to the FTC Decree and all other Orders to which N21
is subject:
(i) N21 is, and at all times since inception has been, in full
compliance with all of the terms and requirements of each
order to which it, or any of the assets owned or used by it,
is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of
time) a violation of or failure to comply with any term or
requirement of any Order to which N21 or any of the assets
owned or used by N21 is subject; and
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(iii) N21 has not received, at any time since inception, any
notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding
any actual, alleged, possible, or potential violation of or
failure to comply with, any term or requirement of any
Order to which N21 or any of the assets owned or used by
N21 is or has been subject.
3.15. ABSENCE OF CHANGES OR EVENTS. Except as set forth in N21's
Disclosure Letter, since January 1, 1997, N21 has conducted
its business only in the ordinary course and there has not
been any:
(a) material change in N21's authorized or issued capital, income or
respective ratio of distributive interests between the N21
partners, or the grant of any right to purchase any capital,
income or distributive interest in N21; issuance of any security
convertible into such capital, income or distribution interest;
grant of any registration rights; purchase, redemption,
retirement, or other acquisition by N21 of any such interests; or
any undertaking or payment of any distribution or payment in
respect of such interests;
(b) amendment to the Organizational Documents of N21;
(c) change in the amount of any bonuses, salaries, vacation pay,
severance pay, or other compensation or benefits to any partner or
any holder of an income or distribution interest, or any affiliate
thereof or any consultant or employee of N21 or any partner or
affiliate thereof, or entry into any employment severance. or
similar Contract with any such Person;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with
any employees or consultants of N21;
(e) any other material modification in the operations, method of
operations, expenditures, or timing of expenditures;
(f) damage to or destruction or loss of any asset or property of N21,
whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition,
or prospects of N21, taken as a whole;
(g) entry into, termination of, or receipt of notice of termination of
(i) any license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement, or (ii) any Contract
or transaction involving a total remaining commitment by or to N21
of at least $50,000;
(h) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of
N21 or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of N21, including
the sale, lease, or other disposition of any of the Intellectual
Property Assets;
(i) cancellation or waiver of any claim or rights with a value to N21
in excess of an aggregate of $50,000;
(j) material change in the accounting methods used by N21;
(k) incurrence of any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or
26
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to become due, except current liabilities for trade or business
obligations incurred in the ordinary course of business and
consistent with its prior practice, none of which liabilities, in
any case or in the aggregate, materially and adversely affects the
business, liabilities or financial condition of N21;
(l) discharge or satisfaction of any lien, charge or encumbrance other
than those then required to be discharged or satisfied, or paid
any obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, other than current
liabilities shown on the Balance Sheet and current liabilities
incurred since the Balance Sheet Date in the ordinary course of
business and consistent with its prior practice;
(m) declaration or payment of dividends or other distribution upon or
in respect of any ownership interest, or purchased, retired or
redeemed, or obligated itself to purchase, retire or redeem, any
of its ownership interest;
(n) mortgage, pledge or subjection to lien, charge, security interest
or any other encumbrance or restriction any of its property,
business or assets, tangible or intangible;
(o) labor union organizing activity, had any actual or threatened
employee strikes, work-stoppages, slow-downs or lock-outs, or any
material change in its relations with its employees, agents,
customers or suppliers;
(p) transfer or grant of any rights under, or entry into any
settlement regarding the breach or infringement of, any United
States or foreign license, patent, copyright, trademark, trade
name, invention or similar rights, or modified any existing rights
with respect thereto;
(q) capital expenditures or capital additions or betterments in excess
of an aggregate of $50,000;
(r) change in banking or safe deposit arrangements;
(s) institution, settlement or agreement to settle any litigation,
action or proceeding before any court or governmental body
relating to N21 or its property;
(t) failure to replenish its inventories and supplies in a normal and
customary manner consistent with its prior practice and prudent
business practices prevailing in the industry, or any purchase
commitment in excess of the normal, ordinary and usual
requirements of its business or at any price in excess of the then
current market price or upon terms and conditions more onerous
than those usual and customary in the industry, or any change in
its selling, pricing, advertising or personal practices
inconsistent with its prior practice and prudent business
practices prevailing in the industry;
(u) entry into any transaction, contract or commitment other than in
the ordinary course of business or payment or agreements to pay
any legal, accounting, brokerage, finder's fee, taxes or other
expenses in connection with, or incurred by severance pay
obligations by reason of, this Agreement or the transactions
contemplated hereby; or
(v) entry into any agreement or the making of any commitment to take
any of the types of action described in this Section.
3.16. CERTAIN SCHEDULES. N21's Disclosure Letter includes a separate
schedule containing an accurate and complete list and description
of:
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(a) All real property owned by N21 or in which N21 has a leasehold or
other interest or which is used by N21 in connection with the
operation of its business, together with a description of each
lease, sublease, license, or any other instrument under which N21
claims or holds such leasehold or other interest or right to the
use thereof or pursuant to which N21 has assigned, sublet or
granted any rights therein, identifying the parties thereto, the
rental or other payment terms, expiration date and cancellation
and renewal terms thereof.
(b) As of a date no earlier than June 30, 1997 all of N21's
receivables (which shall include accounts receivable, loans
receivable and any advances), together with detailed information
as to each such listed receivable which has been outstanding for
more than 30 days.
(c) All machinery, tools, equipment, motor vehicles, and other
tangible personal property (other than inventory and supplies),
owned, leased or used by N21 except for items having a value of
less than $1,000 which do not, in the aggregate, have a total
value of more than $10,000, setting forth with respect to all such
listed property a summary description of all leases, liens,
claims, encumbrances, charges, restrictions, covenants and
conditions relating thereto, identifying the parties thereto, the
rental or other payment terms, expiration date and cancellation
and renewal terms thereof.
(d) All sales agency or route distributorship agreements or franchises
or agreements providing for the services of an independent
contractor to which N21 is a party or by which it is bound.
(e) All loan agreements, indentures, mortgages, pledges, conditional
sale or title retention agreements, security agreements, equipment
obligations, guarantees, leases or lease purchase agreements to
which N21 is a party or by which it is bound.
(f) All contracts, agreements and commitments, whether or not fully
performed, in respect of the issuance, sale or transfer of the
capital, debt or other securities of N21 or pursuant to which N21
has acquired any substantial portion of its business or assets.
(g) All contracts, agreements, commitments or other understandings or
arrangements to which N21 is a party or by which it or any of its
property is bound or affected but excluding
(i) purchase and sales orders and commitments made in the
ordinary course of business involving payments or receipts
by N21 of less than $5,000 in any single case but not more
than $20,000 in the aggregate,
(ii) contracts entered into in the ordinary course of business
and involving payments or receipts by N21 of less than
$5,000 in the case of any single contract but not more than
$20,000 in the aggregate, and
(iii) contracts entered into in the ordinary course of business
which are terminable by N21 on less than 30 days' notice
without any penalty or consideration and involving payments
or receipts by N21 of less than $1,000 in the case of any
single contract but not more than $10,000 in the aggregate.
(h) All collective bargaining agreements, employment and consulting
agreements, executive compensation plans, bonus plans, deferred
compensation agreements, employee pension plans or retirement
plans, employee stock options or stock purchase plans and group
life, health and accident insurance and other employee benefit
plans, agreements, arrangements or commitments, whether or not
legally binding,
28
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including, without limitation, holiday, vacation, Christmas and
other bonus practices, to which N21 is a party or is bound which
relate to the operation of N21's business.
(i) The names of all of N21's directors and officers; the name of each
bank in which N21 has an account or safe deposit box and the names
of all persons authorized to draw thereon or have access thereto,
and the names of all persons, if any, holding tax or other powers
of attorney from N21 and a summary of the terms thereof.
All of the contracts, agreements, leases, licenses and commitments
required to be listed on N21's Disclosure Letter (other than those
which have been fully performed) are valid and binding, enforceable in
accordance with their respective terms, in full force and effect and,
except as otherwise specified in N21's Disclosure Letter, the
enforceability thereof will not be affected by the change of control of
N21 contemplated hereby, so that, after the Closing N21 will continue
to be entitled to the full benefits thereof. Except as disclosed in
N21's Disclosure Letter, there is not under any such contract,
agreement, lease, license or commitment any existing default, or event
which, after notice or lapse of time, or both, would constitute a
default or result in a right to accelerate or loss of rights, and none
of such contracts, agreements, leases, licenses or commitments is,
either when considered singly or in the aggregate with others, unduly
burdensome, onerous or materially adverse to N21's business,
properties, assets, earnings or prospects or likely, either before or
after the Closing, to result in any material loss or liability. None of
N21's existing or completed contracts is subject to renegotiating with
any governmental body. True and complete copies of all such contracts,
agreements, leases, licenses and other documents listed on N21's
Disclosure Letter (together with any and all amendments thereto) have
been delivered to AMBI and initialed by N21's Secretary and identified
with a reference to this Section of this Agreement.
3.17. INSURANCE.
(a) N21 has delivered to Buyer:
(i) true and complete copies of all policies of insurance to
which N21 is a party or under which N21, or any partner or
director of a partner of N21 is or has been covered at any
time within the five years preceding the date of this
Agreement; and
(ii) true and complete copies of all pending applications for
policies of insurance; and
(b) N21 has fully disclosed to Buyer in writing:
(i) any self-insurance arrangement by or affecting N21,
including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by N21;
and
(iii) all obligations of N21 to third parties with respect
to insurance (including such obligations under leases
and service agreements) and the policy under which
such coverage is provided.
(c) N21 has fully disclosed to Buyer in writing, by year, for the
current policy year and each of the five preceding policy years:
(i) a summary of the loss experience under each policy;
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(ii) a statement describing each claim under an insurance policy
for an amount in excess of $10,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim; and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number
and aggregate cost of such claims.
(d) All policies to which N21 is a party or that provide coverage to
N21:
(i) are valid, outstanding, and enforceable;
(ii) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(iii) do not provide for any retrospective premium
adjustment or other experienced-based liability on
the part of N21.
(e) Within the last five (5) years, N21 has not received (i) any
refusal of coverage or any notice that a defense will be afforded
with reservation of rights, or (ii) any notice of cancellation or
any other indication that any insurance policy is no longer in
full force or effect or will not be renewed or that the issuer of
any policy is not willing or able to perform its obligations
thereunder.
(f) N21 has paid all premiums due, and has otherwise performed all of
its obligations, under each policy to which it is a party or that
provides coverage to N21.
(g) N21 has given notice to the insurer of all claims that may be
insured thereby.
3.18. ENVIRONMENTAL MATTERS.
(a) To N21's or Boynton's Knowledge, N21 is, and at all times has
been, in full compliance with, and has not been and is not in
material violation of any Environmental Law. N21 has no basis to
expect, nor has any of them or any other Person for whose conduct
it is or may be held to be responsible received, any actual or
Threatened order, notice, or other communication from (i) any
Governmental Body or private citizen acting in the public
interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to
comply with any Environmental Law with respect to any of the
Facilities or any other properties or assets (whether real,
personal, or mixed) in which N21 has had an interest, or with
respect to any property or Facility at or to which Hazardous
Materials were generated, manufactured, refined, transferred,
imported, used, or processed by N21, or any other Person for whose
conduct they are or may be held responsible, or from which
Hazardous Materials have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of Sellers and N21,
Threatened claims, Encumbrances, or other restrictions of any
nature, resulting from any Environmental, Health, and
Safety Liabilities or arising under or pursuant to any
Environmental Law, with respect to or affecting any of the
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30
Facilities or any other properties and assets (whether real
personal or mixed) in which N21 has or had an interest.
(c) N21 has no basis to expect, nor has any other Person for whose
conduct they are or may be held responsible, received, any
citation, directive, inquiry, notice, Order, summons, warning, or
other communication that alleges liability for any Hazardous
Activity, Hazardous Materials, or any alleged, actual, or
potential violation or failure to comply with any Environmental
Law with respect to any of the Facilities or any other properties
or assets (whether real, personal, or mixed) in which N21 had an
interest, or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined, transferred,
imported, used, or processed by N21 or any other Person for whose
conduct they are or may be held responsible, have been
transported, treated, stored, handled, transferred, disposed,
recycled, or received.
(d) To N21's or Boynton's Knowledge there are no Hazardous Materials
present on or in the Environment at the Facilities or at any
geologically or hydrologically adjoining property, including any
Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether
moveable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps, or any
other part of the Facilities or such adjoining property or
incorporated into any structure therein or thereon. None of
Sellers, N21, any other Person for whose conduct they are or may
be held responsible, or any other Person, has permitted or
conducted, or is aware of, any Hazardous Activity conducted with
respect to the Facilities or any other properties or assets
(whether real. personal, or mixed) in which Sellers or N21 has or
had an interest.
(e) To N21's or Boynton's Knowledge, there has been no Release or, to
the Knowledge of N21, Threat of Release, of any Hazardous
Materials at or from the Facilities or at any other locations
where any Hazardous Materials were generated, manufactured,
refined, transferred, produced, imported, used. or processed from
or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which N21 has or had
an interest, or any geologically or hydrologically adjoining
property, whether by N21, or any other Person.
(f) N21 has delivered to Buyer true and complete copies and results of
any reports, studies, analyses, tests, or monitoring possessed or
initiated by N21 pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities, or concerning
compliance by N21, or any other Person for whose conduct they are
or may be held responsible, with Environmental Laws.
3.19. EMPLOYEES.
(a) Part 3.19 of the Disclosure Letter contains a complete and
accurate list of the following information for each employee or
consultant to N21, including each employee on leave of absence or
layoff status: employer; name; job title; current compensation
paid or payable and any change in compensation since January 1,
1991; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under any N21 pension,
retirement profit-sharing, thrift-savings, deferred compensation,
bonus, option, cash bonus, employee ownership, severance pay,
insurance medical, welfare, or vacation plan, or any other
employee benefit plan.
(b) To N21's or Boynton's Knowledge no employee or partner of N21 is a
party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee or partner and
any other Person ("Proprietary Rights Agreement") that in any way
materially adversely affects or will affect (i) the performance of
his duties as an
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employee or partner of N21, or (ii) the ability of N21 to conduct
its business. No employee or partner of N21 is a party to, or is
otherwise bound by any Proprietary Rights Agreement with Sellers
or N21. To the Knowledge of N21 or any Seller, no key employee of
N21 intends to terminate his employment with N21.
(c) Part 3.19 of the Disclosure Letter also contains a complete and
accurate list of the following information for each retired
employee of N21, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension
benefit, pension option election, retiree medical insurance
coverage, retiree life insurance coverage, and other benefits.
3.20. LABOR RELATIONS; COMPLIANCE. Since inception, N21 has not been
and is not now a party to any collective bargaining or other
Contract with a Union. Since inception, there has not been, there
is not presently pending or existing, and there is not threatened,
(a) any strike, slowdown, picketing, work stoppage, or employee
grievance process, (b) to N21's or Boynton's Knowledge, any
Proceeding against or affecting N21 relating to the alleged
violation of any Legal Requirement pertaining to labor relations
or employment matters, including any charge or complaint filed by
an employee or union with the National Labor Relations Board, the
Equal Employment Opportunity Commission, or any comparable
Governmental Body, organizational activity, or other labor or
employment dispute against or affecting N21 or its premises, or
(c) to N21's or Boynton's Knowledge, any application for
certification of a collective bargaining agent. No event has
occurred or circumstance exists that could provide the basis for
any work stoppage or other labor dispute. There is no lockout of
any employees by N21 and no such action is contemplated by N21.
N21 has complied in all respects with all Legal Requirements
relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes,
occupational safety and health, and plant closing. N21 is not
liable for the payment of any compensation, damages, taxes, fines,
penalties, or other amounts, however designated, for failure to
comply with any of the foregoing legal Requirements.
3.21. INTELLECTUAL PROPERTY.
(a) Intellectual Property Assets. The term 'Intellectual Property
Assets" includes:
(i) the name "Nutrition 21", all fictional business names,
trading names, registered and unregistered trademarks,
service marks, and applications of N21 (collectively,
"Marks"');
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable owned by N21
(collectively, "Patents");
(iii) all copyrights in both published works and
unpublished works (collectively "Copyrights") owned
by N21;
(iv) all Patent licenses and other licenses necessary for or used
in the operation or business of N21; and
(v) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data,
process technology, plans, drawings, and blue prints
(collectively, "Trade Secrets") owned by N21.
(b) Agreements. Part 3.21(b) of the Disclosure Letter contains a
complete and accurate list and summary
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description, including any royalties paid or received by N21, of
all Contracts relating to the Intellectual Property Assets to
which N21 is a party or by which N21 is bound, except for any
license implied by the sale of a product and perpetual, paid-up
licenses for commonly available software programs with a value of
less than $5,000 under which N21 is the licensee. There are no
outstanding and, to N21's or Boynton's Knowledge, no Threatened
disputes or disagreements with respect to any such agreement
(c) Know-How Necessary for the Business.
(i) The Intellectual Property Assets are all those necessary for
the operation of the N21 businesses as they are currently
conducted. N21 is the owner of all right, title, and
interest in and to each of the Intellectual Property Assets,
free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims, and has
the right to use without payment to a third party all of the
Intellectual Property Assets.
(ii) Except as set forth in Part 3.21(c) of the Disclosure
Letter, all former and current employees of N21 have
executed written Contracts with N21 that assign to N21 all
rights to any inventions, improvements, discoveries, or
information relating to the business of N21. To N21's or
Boynton's Knowledge, no employee of N21 has entered into any
Contract with a party other than N21 that restricts or
limits in any way the scope or type of work in which the
employee may be engaged or requires the employee to
transfer, assign. or disclose information concerning his
work to anyone other than N21.
(d) Patents.
(i) Part 3.21(d) of the Disclosure Letter contains a complete
and accurate list and summary description of all Patents and
patent licenses. N21 is the owner of all right, title, and
interest in and to each of the Patents, free and clear of
all liens, security interests, charges, encumbrances,
entities, and other adverse claims.
(ii) All of the issued Patents are currently in compliance with
formal legal requirements (including payment of filing,
examination, and maintenance fees and proofs of working or
use), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within
ninety days after the Closing Date.
(iii) No Patent has been or is now involved in any
interference, reissue, reexamination, or opposition
proceeding. To N21's or Boynton's Knowledge, there is
no potentially interfering patent or patent
application of any third party.
(iv) To N21's or Boynton's Knowledge, no Patent is infringed or
has been challenged or, to Sellers' Knowledge, threatened in
any way. None of the products manufactured and sold, nor any
process or know-how used, by N21 infringes or, to N21's or
Boynton's Knowledge, is alleged to infringe on any patent or
other proprietary right of any other Person.
(v) All products made, used, or sold under the Patents have
been marked with the proper patent notice.
(e) Trademarks.
(i) Part 3.21(e) of Disclosure Letter contains a complete and
accurate list and summary description
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of all Marks. N21 is the owner of all right, title, and
interest in and to each of the Marks, free and clear of all
liens, security interests, charges, encumbrances. equities,
and other adverse claims.
(ii) All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with
all formal legal requirements (including the timely
post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety days after the
Closing Date.
(iii) To N21's or Boynton's Knowledge, no Mark has been or
is now involved in any opposition, invalidation, or
cancellation and, to Sellers' Knowledge, no such
action is Threatened with the respect to any of the Marks.
(iv) To N21's or Boynton's Knowledge, there is no potentially
interfering trademark or trademark application of any third
party.
(v) To N21's or Boynton's Knowledge, no Mark is infringed or has
been challenged or, to Sellers' Knowledge, threatened in any
way. None of the Marks used by N21 infringes or, to N21's or
Boynton's Knowledge, is alleged to infringe any trade name,
trademark, or service mark of any third party.
(vi) All products and materials containing a Mark bear the proper
federal registration notice where permitted by law.
(f) Copyrights.
(i) Part 3.21(f) of the Disclosure Letter contains a complete
and accurate list and summary description of all Copyrights.
N21 is the owner of all right, title, and interest in and to
each of the Copyrights, free and clear of all liens,
security interests, charges, encumbrances, equities, and
other adverse claims.
(ii) All the Copyrights have been registered and are currently in
compliance with formal legal requirements, are valid and
enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety days after the
date of Closing.
(iii) To N21's or Boynton's Knowledge, no Copyright is
infringed or has been challenged or, to N21's or
Boynton's Knowledge, threatened in any way. None of
the subject matter of any of the Copyrights infringes
or is alleged to infringe any copyright of any third
party or is a derivative work based on the work of a
third party.
(iv) All works encompassed by the Copyrights have been marked
with the proper copyright notice.
(g) Trade Secrets.
(i) With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate, and
sufficient in detail and content to identify and explain it
and to allow its full and proper use without reliance on the
knowledge or memory of any individual.
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(ii) N21 has taken all reasonable precautions to protect the
secrecy, confidentiality, and value of N21's Trade Secrets.
(iii) N21 has good title and an absolute (but not necessarily
exclusive) right to use the Trade Secrets. The Trade Secrets
are not part of the public knowledge or literature, and, to
Sellers' Knowledge, have not been used, divulged, or
appropriated either for the benefit of any Person, or to the
detriment of N21. No Trade Secret is subject to any adverse
claim or has been challenged or, to the Sellers' Knowledge,
threatened in any way.
3.22. CERTAIN PAYMENTS. Since inception, neither N21 or to N21's or
Boynton's Knowledge any partner, agent, or employee of N21, or any
other Person associated with or acting for or on behalf of N21,
has directly or indirectly (a) made any contribution, gift, bribe.
rebate, payoff, influence payment, kickback, or other payment to
any Person, private or public, regardless of form, whether in
money, property, or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for
business secured, (iii) to obtain special concessions or for
special concessions already obtained, for or in respect of N21 or
any Affiliate of N21, or (iv) in violation of any Legal
Requirement, or (b) established or maintained any fund or asset
that has not been recorded in the books and records of N21.
3.23. DISCLOSURE.
(a) No representation or warranty of N21 or Boynton in this Agreement
and no statement in the Disclosure Letter omits to state a
material fact necessary to make the statements herein or therein,
in light of the circumstances in which they were made, not
misleading.
(b) No notice given pursuant to Section 8.5 will contain any untrue
statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the
circumstances in which they were made, not misleading.
(c) There is no fact known to N21 that has specific application to any
Seller or N21 (other than general economic or industry conditions)
and that materially adversely affects, or so far as N21 can
foresee, materially threatens, the assets, business, prospects,
financial condition, or results of operations of N21 that has not
been set forth in this Agreement or the Seller's Disclosure
Letter.
3.24. BROKERS OR FINDERS. Seller, and their agents have incurred an
obligation to NewCap Partners, Inc. ("NewCap") for brokerage or
finders' fees or agents' commissions or other similar payment in
connection with this Agreement, and no other such liabilities or
obligations have been incurred. Sellers will indemnify and hold
Buyer harmless from all such liabilities and payment obligations
(including the obligation to NewCap) due by or through Sellers, or
any of them as a result of such obligations or any other the
action of Sellers or their partners, agents or Related Persons.
3.25. CERTAIN REPRESENTATIONS
(a) To N21's and Boynton's Knowledge, no supplier or customer is
considering termination, non-renewal or adverse modification of
its business relationship with N21, and the transactions
contemplated by this Agreement will not have a material adverse
effect on N21's relationships with its suppliers and customers.
(b) Except in connection with the FTC Decree, within the past five
years N21 has not entered into any
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agreement with, or been investigated by, any governmental
authority, community group or other third party that could
restrict the operation of its business.
(c) No key employee of N21 has indicated that he or she is considering
terminating his or her employment.
(d) No Partner has any direct or indirect interest of any kind in any
business or entity which is competitive with N21.
4. REPRESENTATIONS AND WARRANTIES OF BOYNTON AND SELENE. In addition
to the representations and warranties made by them pursuant to
Section 3, Boynton and Selene jointly and severally represent to
Buyer as follows:
(a) Part 4.1 of the Disclosure Letter contains a complete and accurate
list for Selene of its name, its jurisdiction of incorporation or
organization, other jurisdictions in which it is authorized to do
business, and its capitalization, including the identity of each
shareholder or other person holding an interest in Selene and the
number of shares held by each. Selene is a corporation duly
organized, validly existing, and in good standing under the laws
of the State of California, with full power and authority to
conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, and to
perform all its obligations under Applicable Contracts. Selene is
duly qualified to do business as a foreign limited corporation and
is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification.
(b) Selene has delivered to Buyer copies of the Organizational
Documents of Selene, as currently in effect.
4.1. AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers and Selene, enforceable against Selene in
accordance with its terms. Upon the execution and delivery by
Sellers of the documents required of them under Section 2.4
(collectively, the "Sellers' Closing Documents"), the Sellers'
Closing Documents will constitute the legal, valid, and binding
obligations of Selene, enforceable against Selene in accordance
with their respective terms, and Boynton and Selene have the
absolute and unrestricted right, power, authority, and capacity to
execute and deliver this Agreement and the Sellers' Closing
Documents and to perform their obligations under this Agreement
and the Sellers' Closing Documents.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated
Transactions will, directly or indirectly, with or without notice
or lapse of time.
(i) contravene, conflict with. or result in a violation of (A)
any provision of the Organizational Documents of Selene, or
(B) any resolution, formal policy or other undertaking
adopted by the shareholders of Selene;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to
exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which Selene or any Seller, or
any of the assets owned or used by Selene, may be subject;
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(iii) contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by Selene or
that otherwise relates to the business of, or any of
the assets owned or used by, Selene;
(iv) cause any of the assets owned by Selene to be reassessed or
revalued by any taxing authority or other Governmental Body;
(v) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel.
terminate, or modify, any Applicable Contract; or
(vi) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by
Selene.
(c) Except for a Notice to the FTC, neither Boynton nor Selene is or
will be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.2. CAPITALIZATION; RELATED PARTIES
(a) The authorized and outstanding equity securities or interests in
Selene consist only of shares owned by Boynton. Boynton is, and
will be on the Closing Date, the record and beneficial owner and
holder of all such authorized and outstanding shares, free and
clear of all Encumbrances. No legend or other reference to any
purported Encumbrance appears upon any certificate representing
any such shares on the books and records of Selene. All of the
outstanding shares of Selene have been duly authorized and validly
issued and are fully paid and nonassessable. There are no
Contracts relating to the issuance, sale, or transfer of any
equity securities, interests or other securities of Selene. None
of the outstanding equity securities or other securities of Selene
was issued in violation of the Securities Act or any other Legal
Requirement. Selene does not own, or have any Contract to
acquire, any equity securities or other securities of any Person
or any direct or indirect equity, income, distribution profits or
ownership interest in any other business.
(b) Except for N21, Selene does not, directly or indirectly, own any
share capital, bonds or other securities of, or have any
proprietary interest in, any corporation, firm, partnership, joint
venture, trust or other entity. The business carried on by Selene
has not been conducted through any other direct or indirect
subsidiary or affiliate of any partner or other affiliate of
Selene.
(c) Transactions with Certain Persons.
(i) Except as set forth on Selene's Disclosure Letter, during
the past three years Selene has not, directly or indirectly,
purchased, leased from others or otherwise acquired any
property or obtained any services from, or sold, leased to
others or otherwise disposed of any property or furnished
any services to, or otherwise dealt with (except with
respect to remuneration for services rendered as a director,
officer or employee of Selene), in the ordinary course of
business or otherwise, (i) any partner of Selene (a
"Partner") or (ii) any person, firm or corporation which,
directly or indirectly, alone or together with others,
controls, is controlled by or is under common control with
Selene or any Partner.
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(ii) Selene does not owe any amount to, or have any contract with
or commitment to, any of its Partners, officers, employees
or consultants (other than compensation for current services
not yet due and payable and reimbursement of expenses
arising in the ordinary course of business), and none of
such persons owes any amount to Selene.
(iii) No part of the property or assets of any Partner or any
direct or indirect subsidiary or affiliate of any Partner is
used by Selene.
4.3. FINANCIAL STATEMENTS.
(a) Selene has made available to Buyer: (a) unaudited balance sheets
of Selene as at December 31 in each of the years since Selene's
organization through 1996, and the related unaudited statements of
income for each of the fiscal years then ended, (b) an unaudited
balance sheet of Selene (the " Balance Sheet") as at April 30,
1997 (the "Balance Sheet Date") and the related unaudited
statements of income for the four months then ended, including the
notes thereto.
(b) Such financial statements and notes fairly present the financial
condition and the results of operations of Selene as at the
respective dates of and for the periods referred to in such
financial statements; the financial statements referred to in this
Section 4.4 reflect the consistent application of such accounting
principles throughout the periods involved.
(c) The statements of earnings included in such financial statements
do not contain any items of special or nonrecurring income or any
other income not earned in the ordinary course of business except
as expressly specified therein, and such interim financial
statements include all adjustments, which consist only of normal
recurring accruals, necessary for such fair presentation.
(d) No financial statements of any Person other than Selene is
required by GAAP to be included in the consolidated financial
statements of Selene.
4.4. BOOKS AND RECORDS. The books of account, minute books, partnership
records, ownership record books, and other records of Selene, all
of which have been made available to Buyer, are complete and
correct and have been maintained in accordance with sound business
practices including the maintenance of an adequate system of
internal controls.
4.5. TITLE TO PROPERTIES; ENCUMBRANCES.
(a) Part 4.6 of the Disclosure Letter contains a complete and
accurate list of all real property, leaseholds, or other
interests therein owned by Selene. Sellers have delivered to
Buyer copies of the deeds and other instruments, as recorded, by
which Selene acquired such real property and interests, and
copies of all title insurance policies, opinions, abstracts, and
surveys in the possession of Sellers or Selene and relating to
such property or interests.
(b) Selene owns, with good and marketable title, subject only to the
matters permitted by the following sentence, all the properties
and assets, whether real, personal, or mixed and whether
tangible or intangible, that it purports to own or operate or
which is reflected as owned in the books and records of Selene,
including all of the properties and assets reflected in the
Balance Sheet and the Balance Sheet, and all of the properties
and assets purchased or otherwise acquired by Selene since the
date of the Balance Sheet, which subsequently purchased or
acquired properties and assets, other than inventory and
short-term investments, are listed in Part 4.6 of the Disclosure
Letter.
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(c) All properties and assets reflected in the Balance Sheet and the
Balance Sheet are free and clear of all Encumbrances and are not,
in the case of real property, subject to any rights-of-way,
building use restrictions, exceptions, variances, reservations, or
limitations of any nature except, with respect to all such
properties and assets:
(i) mortgages or security interests shown on the Balance Sheet
or the Balance Sheet as securing specified liabilities or
obligations, with respect to which no default, or event
that, with notice or lapse of time or both, would constitute
a default, exists,
(ii) mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the
Balance Sheet, such mortgages and security interests being
limited to the property or assets so acquired, with respect
to which no default, or event that, with notice or lapse of
time or both, would constitute a default, exists,
(iii) liens for current taxes not yet due, and
(iv) with respect to real property, (i) minor imperfections of
title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the
property subject thereto, or impairs the operations of
Selene, and (ii) zoning laws and other land use restrictions
that do not impair the present or anticipated use of the
property subject thereto.
(d) All of the properties and assets owned, leased or used by Selene
are in good operating condition and repair, are suitable for the
purposes used, are adequate and sufficient for all current
operations of Selene and are directly related to the business of
Selene.
5. REPRESENTATIONS AND WARRANTIES OF BIE AND JBE. In addition to the
representations and warranties made by them pursuant to Section 3, Bie
and JBE jointly and severally represent to Buyer as follows:
(a) Part 5.1 of the Disclosure Letter contains a complete and accurate
list for JBE of its name, its jurisdiction of incorporation or
organization, other jurisdictions in which it is authorized to do
business, and its capitalization, including the identity of each
shareholder or other person holding an interest in JBE and the
number of shares held by each. JBE is a corporation duly
organized, validly existing, and in good standing under the laws
of the State of California, with full power and authority to
conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, and to
perform all its obligations under Applicable Contracts. JBE is
duly qualified to do business as a foreign limited corporation
and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification.
(b) JBE has delivered to Buyer copies of the Organizational
Documents of JBE, as currently in effect.
5.1. AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers and JBE, enforceable against JBE in
accordance with its terms. Upon the execution and delivery by
Sellers of the documents required of them under Section 2.4
(collectively, the "Sellers' Closing Documents"), the Sellers'
Closing Documents will constitute the legal, valid, and binding
obligations of JBE, enforceable against JBE in accordance with
their respective terms, and Bie and JBE have the absolute and
unrestricted right, power, authority, and capacity to execute
and deliver this Agreement and the Sellers' Closing
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Documents and to perform their obligations under this Agreement
and the Sellers' Closing Documents.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated
Transactions will, directly or indirectly, with or without notice
or lapse of time.
(i) contravene, conflict with. or result in a violation of (A)
any provision of the Organizational Documents of JBE, or (B)
any resolution, formal policy or other undertaking adopted
by the shareholders of JBE;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to
exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which JBE or any Seller, or any
of the assets owned or used by JBE, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any Governmental Authorization that is
held by JBE or that otherwise relates to the business of, or
any of the assets owned or used by, JBE;
(iv) cause any of the assets owned by JBE to be reassessed or
revalued by any taxing authority or other Governmental Body;
(v) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel.
terminate, or modify, any Applicable Contract; or
(vi) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by JBE.
(c) Neither Bie nor JBE is or will be required to give any notice to
or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
5.2. CAPITALIZATION; RELATED PARTIES
(a) The authorized and outstanding equity securities or interests in
JBE consist only of shares owned by Bie. Boynton is, and will
be on the Closing Date, the record and beneficial owner and holder
of all such authorized and outstanding shares, free and clear
of all Encumbrances. No legend or other reference to any
purported Encumbrance appears upon any certificate representing
any such shares on the books and records of JBE. All of the
outstanding shares of JBE have been duly authorized and validly
issued and are fully paid and nonassessable. There are no
Contracts relating to the issuance, sale, or transfer of any
equity securities, interests or other securities of JBE. None
of the outstanding equity securities or other securities of JBE
was issued in violation of the Securities Act or any other Legal
Requirement. JBE does not own, or have any Contract to acquire,
any equity securities or other securities of any Person or any
direct or indirect equity, income, distribution profits or
ownership interest in any other business.
(b) Except for N21, JBE does not, directly or indirectly, own any
share capital, bonds or other securities of, or have any
proprietary interest in, any corporation, firm, partnership, joint
venture, trust or other
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entity. The business carried on by JBE has not been conducted
through any other direct or indirect subsidiary or affiliate of
any partner or other affiliate of JBE.
(c) Transactions with Certain Persons.
(i) Except as set forth on JBE's Disclosure Letter, during the
past three years JBE has not, directly or indirectly,
purchased, leased from others or otherwise acquired any
property or obtained any services from, or sold, leased to
others or otherwise disposed of any property or furnished
any services to, or otherwise dealt with (except with
respect to remuneration for services rendered as a director,
officer or employee of JBE), in the ordinary course of
business or otherwise, (i) any partner of JBE (a "Partner")
or (ii) any person, firm or corporation which, directly or
indirectly, alone or together with others, controls, is
controlled by or is under common control with JBE or any
Partner.
(ii) JBE does not owe any amount to, or have any contract with or
commitment to, any of its Partners, officers, employees or
consultants (other than compensation for current services
not yet due and payable and reimbursement of expenses
arising in the ordinary course of business), and none of
such persons owes any amount to JBE.
(iii) No part of the property or assets of any Partner or any
direct or indirect subsidiary or affiliate of any Partner is
used by JBE.
5.3. FINANCIAL STATEMENTS.
(a) JBE has made available to Buyer: (a) unaudited balance sheets of
JBE as at December 31 in each of the years since JBE's
organization through 1996, and the related unaudited statements of
income for each of the fiscal years then ended, (b) an unaudited
balance sheet of JBE (the " Balance Sheet") as at April 30, 1997
(the "Balance Sheet Date") and the related unaudited statements of
income for the four months then ended, including the notes
thereto.
(b) Such financial statements and notes fairly present the financial
condition and the results of operations of JBE as at the
respective dates of and for the periods referred to in such
financial statements; the financial statements referred to in
this Section 5.4 reflect the consistent application of such
accounting principles throughout the periods involved.
(c) The statements of earnings included in such financial statements
do not contain any items of special or nonrecurring income or any
other income not earned in the ordinary course of business except
as expressly specified therein, and such interim financial
statements include all adjustments, which consist only of normal
recurring accruals, necessary for such fair presentation.
(d) No financial statements of any Person other than JBE is required
by GAAP to be included in the consolidated financial statements of
JBE.
5.4. BOOKS AND RECORDS. The books of account, minute books, partnership
records, ownership record books, and other records of JBE, all of
which have been made available to Buyer, are complete and correct
and have been maintained in accordance with sound business
practices including the maintenance of an adequate system of
internal controls.
5.5. TITLE TO PROPERTIES; ENCUMBRANCES.
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(a) Part 5.6 of the Disclosure Letter contains a complete and accurate
list of all real property, leaseholds, or other interests therein
owned by JBE. Sellers have delivered to Buyer copies of the deeds
and other instruments, as recorded, by which JBE acquired such
real property and interests, and copies of all title insurance
policies, opinions, abstracts, and surveys in the possession of
Sellers or JBE and relating to such property or interests.
(b) JBE owns, with good and marketable title, subject only to the
matters permitted by the following sentence, all the properties
and assets, whether real, personal, or mixed and whether tangible
or intangible, that it purports to own or operate or which is
reflected as owned in the books and records of JBE, including all
of the properties and assets reflected in the Balance Sheet and
the Balance Sheet, and all of the properties and assets purchased
or otherwise acquired by JBE since the date of the Balance Sheet,
which subsequently purchased or acquired properties and assets,
other than inventory and short-term investments, are listed in
Part 5.6 of the Disclosure Letter.
(c) All properties and assets reflected in the Balance Sheet and the
Balance Sheet are free and clear of all Encumbrances and are not,
in the case of real property, subject to any rights-of-way,
building use restrictions, exceptions, variances, reservations, or
limitations of any nature except, with respect to all such
properties and assets:
(i) mortgages or security interests shown on the Balance Sheet
or the Balance Sheet as securing specified liabilities or
obligations, with respect to which no default, or event
that, with notice or lapse of time or both, would constitute
a default, exists,
(ii) mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the
Balance Sheet, such mortgages and security interests being
limited to the property or assets so acquired, with respect
to which no default, or event that, with notice or lapse of
time or both, would constitute a default, exists,
(iii) liens for current taxes not yet due, and
(iv) with respect to real property, (i) minor imperfections of
title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the
property subject thereto, or impairs the operations of JBE,
and (ii) zoning laws and other land use restrictions that do
not impair the present or anticipated use of the property
subject thereto.
(d) All of the properties and assets owned, leased or used by JBE are
in good operating condition and repair, are suitable for the
purposes used, are adequate and sufficient for all current
operations of JBE and are directly related to the business of JBE.
6. REPRESENTATIONS AND WARRANTIES OF INDIVIDUAL LIMITED PARTNERS. Except as
set forth in each Limited Partner's Disclosure Letter, the Individual
Limited Partners each severally and not jointly represent and warrant to
Buyer as follows:
6.1. AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of the Individual Limited Partner, enforceable against
the Individual Limited Partner in accordance with its terms. Upon
the execution and delivery by the Individual Limited Partner of
the documents required of them under Section 2.4, (collectively,
the "Limited Partners' Closing Documents"), the Limited Partners'
Closing Documents
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will constitute the legal, valid, and binding obligations of the
Individual Limited Partner, enforceable against the Individual
Limited Partner in accordance with their respective terms. The
Individual Limited Partner has the absolute and unrestricted
right, power, authority, and capacity to execute and deliver this
Agreement and the Limited Partners' Closing Documents and to
perform his/her obligations under this Agreement and the Limited
Partners' Closing Documents.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated
Transactions will, directly or indirectly, with or without notice
or lapse of time:
(i) contravene, conflict with, or result in a violation of any
provision of any agreement, obligation or other undertaking
adopted by the Individual Limited Partner; or
(ii) give any Person the right to challenge any of the
obligations of the Individual Limited Partner in connection
with the Contemplated Transactions or to exercise any remedy
or obtain any relief under, any Legal Requirement or any
Order to which the Individual Limited Partner, or any of the
assets owned or used by the Individual Limited Partner, may
be subject.
(c) Except as provided in the N21 Partnership Agreement, the
Individual Limited Partner is not and will not be required to give
any notice to or obtain any Consent from any Person in connection
with his or her execution and delivery of this Agreement or the
consummation or performance of their obligations in connection
with any of the Contemplated Transactions.
(d) The Individual Limited Partner has been advised to seek his or her
own legal, tax and investment counsel in connection with his or
her participation in the Contemplated Transactions, has access to
competent independent legal, tax and investment counsel, and has
sought and received such counsel to the extent he or she has
deemed desirable.
6.2. OWNERSHIP. The Individual Limited Partner is, and will be on the
Closing Date, the record and beneficial owner and holder of
authorized and outstanding limited partnership interests, free and
clear of all Encumbrances. Except as provided in the N21
Partnership Agreement, there are no contracts relating to the
sale, or transfer of any of the Individual Limited Partner's
interests or other securities of N21.
6.3. CERTAIN PAYMENTS. Since inception, the Individual Limited
Partner, including his or her agents or employees and any other
Person associated with or acting for or on behalf of the
Individual Limited Partners, has not directly or indirectly made
any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services: (i)
to obtain favorable treatment in securing business, (ii) to pay
for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained,
for or in respect of N21 or any Affiliate of N21, or (iv) in
violation of any Legal Requirement.
6.4. DISCLOSURE.
(a) No representation or warranty of the Individual Limited Partner in
this Agreement and no statement in the Individual Partner's
Disclosure Letter omits to state a material fact necessary to make
the statements herein or therein, in light of the circumstances in
which they were made, not misleading.
(b) No notice given by or on behalf of the Individual Limited Partner
pursuant to Section 8.5 will contain
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any untrue statement or omit to state a material fact necessary
to make the statements therein or in this Agreement, in light of
the circumstances in which they were made, not misleading.
(c) To the Individual Limited Partner's Knowledge, there is no fact
that has specific application to the Individual Limited Partner
(other than general economic or industry conditions) that
materially adversely affects, or threatens, the assets, business,
prospects. financial condition, or results of operations of N21,
and that has not been set forth in this Agreement or the
Individual Partner's Disclosure Letter.
6.5. RELATIONSHIPS WITH RELATED PERSONS. Other than its interest as
a Limited Partner, the Individual Limited Partner or any
Related Person of the Individual Limited Partner or to the
Knowledge of the Individual Limited Partner, any Related Person of
N21 has not had any interest in any property ( whether real,
personal, or mixed and whether tangible or intangible), used in or
pertaining to N21's businesses. The Individual Limited Partner
and any Related Person to the Individual Limited Partner does not
and has not owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person
that has (i) had business dealings or a material financial
interest in any transaction with N21, or (ii) engaged in
competition with N21 with respect to any of the products or
services of N21 (a "Competing Business") in any market or with any
customer presently served by N21. The Individual Limited Partner
and any Related Person of the Individual Limited Partner is not a
party to any Contract with N21, and does not have any claim or
right against, N21.
6.6. BROKERS OR FINDERS. The Individual Limited Partner or its agents
or Related Persons have incurred an obligation or liability, for
brokerage or finders' fees or agents' commissions or other similar
payment in connection with this Agreement, and the Individual
Limited Partner will indemnify and hold Buyer harmless from any
such payment due as a result of the action of the Sellers or their
agents or Related Persons.
7. REPRESENTATIONS AND WARRANTIES OF Buyer. Except as set forth in Buyer's
Disclosure Letter, Buyer represents and warrants to Sellers as follows:
7.1. ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws
of the State of New York, with full power and authority to conduct
its business as it is now being conducted, to own or use the
properties and assets that it purports to own or use, and to
perform all its obligations by which it or any of the assets owned
or used by it is or may become bound. Buyer is duly qualified to
do business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such
qualification. Buyer has delivered to N21 copies of the
Organizational Documents of Buyer, as currently in effect.
7.2. AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with
its terms. Upon the execution and delivery by Buyer of the
documents required of it under Section 2, (collectively, the
"Buyer's Closing Documents"), the Buyer's Closing Documents will
constitute the legal, valid, and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective
terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Buyer's
Closing Documents and to perform
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<PAGE>
its obligations under this Agreement and the Buyer's Closing
Documents.
(b) Neither the execution and delivery of this Agreement by Buyer nor
the consummation or performance of any of the Contemplated
Transactions by Buyer will, directly or indirectly, with or
without notice or lapse of time:
(i) contravene, conflict with or result in a violation of (A)
any provision of Organization Documents of Buyer, or (B) any
resolution, formal policy or other undertaking adopted by
the Board of Directors of Buyer;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to
exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which Buyer, or any of the
assets owned or used by Buyer, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any Governmental Authorization that is
held by Buyer or that otherwise relates to the business of,
or any of the assets owned or used by, Buyer;
(iv) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel,
terminate, or modify, any contract under which Buyer has any
rights, or by which Buyer may become subject to any
obligation or liability, or by which any of the assets owned
or used by Buyer is or may become bound; or
(v) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by Buyer.
(c) Other than a resolution of its Board of Directors to enter into
this Agreement, Buyer is not nor will Buyer be required to give
any notice to or obtain any Consent from any Person in connection
with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated
Transactions.
7.3. CAPITALIZATION.
(a) Buyer has an authorized capitalization consisting of 65,000,000
shares of voting common stock, no par value, of which 18,783,342
shares were issued and outstanding as of June 30, 1997, and
5,000,000 shares of preferred stock, of which as of June 30, 1997
222 shares of Series C were outstanding and 45,000 shares of
Series D were outstanding. All such outstanding shares have been
duly authorized, are validly issued, and are fully paid and
nonassessable. There are no other shares of stock of Buyer issued
and outstanding. There are no outstanding options, warrants,
rights, preemptive rights, calls, commitments, conversion rights,
rights of exchange, plans or other agreements of any character
providing for the purchase, issuance or sale of any shares of the
capital stock of Buyer, except as contemplated by this Agreement.
None of the outstanding shares of Buyer have been issued in
violation of any preemptive right or agreement, commitment or
obligation binding on Buyer or any of its shareholders or any
applicable securities laws.
(b) Buyer has previously furnished to Sellers true and complete copies
of its Annual Reports on Form 10-
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K (including all amendments thereto) filed with the SEC for each
of its two fiscal years ended June 30, 1996, inclusive, and true
and complete copies of its Quarterly Reports (including all
amendments thereto) on Form 10-Q filed with the SEC for the fiscal
quarters ended thereafter through March 31, 1997 (the "Buyer
Reports"). Each of the balance sheets included in the Buyer
Reports, as finally amended (including any related notes and
schedules), fairly presents the consolidated financial position of
Buyer as of its date and the other financial statements included
in the Buyer Reports, as finally amended (including any related
notes and schedules), fairly present the consolidated results of
operations or other information included therein of Buyer for the
periods or as of the dates therein set forth, subject, where
appropriate, to normal year-end adjustments, in each case in
accordance with generally accepted accounting principles
consistently applied during the periods involved (except as
otherwise stated therein). All of the documents referred to in
this Section 7.3 were filed in a timely manner. None of the
documents referred to in this Section 7.3 contained, as of its
date, any untrue statement of a material fact or any omission to
state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
7.4. BOOKS AND RECORDS. The books of account, minute books,
corporate records, ownership record books, and other records
of Buyer, are complete and correct and have been maintained in
accordance with sound business practices including the
maintenance of an adequate system of internal controls. The
corporate records of Buyer contain accurate and complete
records of all meetings held of, and action taken by, the
Board of Directors of Buyer and committees thereof and the
Shareholders, and with the exception of minutes of the most
recent meetings of the Board of Directors not yet approved by
the Board, no meeting of the Board of Directors or committee
thereof has been held for which minutes have not been prepared
and are not contained in such records. At the Closing all of
those books and records will be in the possession of Buyer or
its counsel.
7.5. TITLE TO PROPERTIES; ENCUMBRANCES. Buyer owns, with good and
marketable title in the case of real property, all the
properties and assets, whether real, personal, or mixed and
whether tangible or intangible, that it purports to own
located in the facilities owned or operated by Buyer or
reflected as owned in the books and records of Buyer,
including all of the properties and assets reflected in the
Buyer's Reports. All material properties and assets of Buyer
are free and clear of all Encumbrances except for liens to be
granted to Buyer's lender at or prior to the Closing.
7.6. CONDITION AND SUFFICIENCY OF ASSETS. All equipment owned by
Buyer is structurally sound, are in good operating condition
and repair, and are adequate for the uses to which they are
being put, and none of such equipment is in need of
maintenance or repairs except for ordinary, routine
maintenance and repair that are not material in nature or
cost. The equipment is sufficient for the continued conduct of
N21's business after the Closing in substantially the same
manner as conducted prior to the Closing.
7.7. NO UNDISCLOSED LIABILITIES. Buyer has no material liabilities
or obligations of any nature, whether known or unknown and
whether absolute, accrued, contingent, or otherwise which are
required to be reflected in the Buyer's Reports and which have
not been reflected or reserved against in the Buyer's Reports.
Buyer has advised Sellers that Buyer proposes to obtain
secured bank financing at the Closing.
7.8. TAXES.
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(a) Buyer has filed or caused to be filed on a timely basis,
since inception, all Tax Returns that are or were required
to be filed by it or with respect to it or its businesses,
either separately or as a member of a group, pursuant to
applicable Legal Requirements. Buyer has paid, or made
provision for the payment of, all taxes that have or may
have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by
Buyer.
(b) All Tax Returns filed by, or that include on a
consolidated basis, Buyer are true, correct, and complete.
There is no tax sharing agreement that will require any
payment by Buyer after the date of this Agreement.
7.9. NO MATERIAL ADVERSE CLAIM. Since the date of the financial
statements and most recent Buyer's Report, there has not been
any material adverse change in the business, operations,
properties, prospects, assets, or condition of Buyer, and no
event his occurred or circumstance exists that may result in
such a material adverse change.
7.10. EMPLOYEE BENEFIT PLANS.
(a) Buyer does not maintain or contribute to any such Employee
Benefit Plan subject to ERISA which is not in substantial
compliance with ERISA, or which has incurred any
accumulated finding deficiency within the meaning of
Section 412 or 418B of ERISA, or which has applied for or
obtained a waiver from the Internal Revenue Service of any
minimum funding requirement under Section 412 of the Code.
Buyer has not incurred any liability to the Pension
Benefit Guaranty Corporation ("PBGC") in connection with
any Employee Benefit Plan or ceased operations at any
facility or withdrawn from any such Plan in a manner which
could subject it to liability under Section 4062(f), 4063
or 4064 of ERISA. Buyer does not know of any facts or
circumstances which might give rise to any liability to
the PBGC under Title IV of ERISA on which could reasonably
be anticipated to result in any claims being made against
Buyer by the PBGC. Buyer has not incurred any withdrawal
liability (including any contingent or secondary
withdrawal liability) within the meaning of Sections 4201
and 4202 of ERISA, to any Employee Benefit Plan which is a
multi-employer Plan (as defined in Section 4001 of ERISA),
and no event has occurred, and there exists no condition
or set of circumstances, which presents a material risk of
the occurrence of any withdrawal from or the partition,
termination, reorganization or insolvency of any
multi-employer Plan which could result in any liability to
a multi-employer Plan.
(b) Full payment has been made of all amounts which Buyer is
required, under applicable law or under any Employee
Benefit Plan or any agreement relating to any Employee
Benefit Plan to which Buyer is a party, to have paid as
contributions thereto for or with respect to the most
recent fiscal year of such Employee Benefit Plan ended
prior to the date hereof. Buyer has made adequate
provisions for reserves to meet contributions that have
not been made because they are not yet due under the terms
of any Employee Benefit Plan or related agreements. All
payments and contributions to any such Employment Benefit
Plans have been finally determined and paid for the period
ended December 31, 1995. No contributions have been made
nor are any contributions contemplated to be made to any
Employee Benefit Plan for the period subsequent to
December 31, 1995.
(c) To Buyer's Knowledge, each Employee Benefit Plan intended
to be qualified under Section 401(a) of the Code has been
determined to be so qualified by the Internal Revenue
Service and nothing has occurred since the date of the
last such determination which resulted or is
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likely to result in the revocation of such determination.
(d) No reportable event (as defined in Section 4043 of
ERISA) for which the 30-day notice requirement has not
been waived by the PBGC has occurred with respect to any
Employee Benefit Plan, and Buyer has not engaged in any
transaction with respect to any Employee Benefit Plan
which would subject it to a tax, penalty or liability for
prohibited transactions under ERISA or the Code, nor have
any of its directors, officers or employees, to the extent
they or any of them are fiduciaries with respect to such
plans, materially breached any of their responsibilities
or obligations imposed upon fiduciaries under Title I of
ERISA or which would result in any claim being made under
or by or on behalf of any such plans by any party with
standing to make such claim.
7.11. COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
(a) Except for violations, events, circumstances and
proceedings which would not have a material adverse effect
on the business, assets, operations, or financial
condition taken as a whole of Buyer:
(i) Buyer is in compliance with each Legal
Requirement that is applicable to it or to the
conduct or operation of its business or the
ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) (A) may
constitute or result in a violation by Buyer of,
or a failure on the part of Buyer to comply with,
any Legal Requirement or (B) may give rise to any
obligation on the part of Buyer to undertake, or
to bear all or any portion of the cost of, any
remedial action of any nature; and
(b) Buyer has not within the past two years received any
notice or other communication, whether oral or written,
from any Governmental Body or any other Person regarding
(A) any actual, alleged, possible, or potential violation
of, or failure to comply with, any Legal Requirement, or
(B) any actual, alleged, possible, or potential obligation
on the part of Buyer to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature.
7.12. LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Proceeding that has been commenced by
or against Buyer or that otherwise relates to or may
materially affect the business of, or any of the assets
owned or used by, Buyer; or that challenges, or that may
have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated
Transactions. To Buyer's Knowledge, no such Proceeding has
been threatened except for a letter with respect to NoSalt
which demands a change in advertising of Buyer's
Cardia(TM) Salt Alternative.
(b) Buyer is not subject to any Order that relates to the
business of, or any of the assets owned or used by, Buyer;
and no officer, director, agent, or employee of Buyer is
subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to
the business of Buyer.
7.13. ABSENCE OF CERTAIN CHANGES AND EVENTS. Since the date of
the most recent Buyer's Report, Buyer has conducted its
businesses only in the Ordinary Course of Business, and
there
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has not been any:
(a) material change in Buyer's authorized or issued capital,
interests, or the grant of any right to purchase any
interest in Buyer; issuance of any security convertible
into such capital, income or distribution interest; grant
of any registration rights; purchase, redemption,
retirement, or other acquisition by Buyer of any such
interests; or any undertaking or payment of any
distribution or payment in respect of such interests;
(b) amendment to the Organizational Documents of Buyer;
(c) change in the amount of any bonuses, salaries, or other
compensation to any partner or any holder of an income or
distribution interest, or any affiliate thereof or any
consultant or employee of Buyer or any partner or
affiliate thereof, or entry into any employment severance.
or similar Contract with any such Person;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement, or other employee
benefit plan for or with any employees or consultants of
Buyer;
(e) any other material modification in the operations, method
of operations, expenditures, or timing of expenditures;
(f) damage to or destruction or loss of any asset or property
of Buyer, whether or not covered by insurance, materially
and adversely affecting the properties, assets, business,
financial condition, or prospects of Buyer, taken as a
whole;
(g) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer,
sales representative, joint venture, credit, or similar
agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to Buyer of at least
$50,000;
(h) sale, lease, or other disposition of any asset or property
of Buyer or mortgage. pledge, or imposition of any lien or
other encumbrance on any material asset or property of
Buyer including the sale, lease or other disposition of
Buyer's Intellectual Property;
(i) cancellation or waiver of any claim or rights with a value
to Buyer in excess of $50,000;
(j) material change in the accounting methods used by Buyer;
and
(k) agreement, whether oral or written, by Buyer to do any of
the foregoing;
7.14. CONTRACTS; NO DEFAULTS.
(a) Each Contract to which Buyer is obligated is to Buyer's
Knowledge in full force and effect and is valid and
enforceable in accordance with its terms.
(b) Buyer is in full compliance with all material terms and
requirements of each material Contract under which Buyer
has or had any obligation or liability or by which Buyer
or any of the assets owned or used by Buyer is or was
bound;
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(c) Each other Person that has or had any obligation or
liability under any Contract under which Buyer has or had
any rights is in material compliance with all applicable
terms and requirements of such Contract;
(d) To Buyer's Knowledge no event has occurred or circumstance
exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or
breach of, or give buyer or any other Person the right to
declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel,
terminate, or modify, any contract to which Buyer is a
party; and
(e) Buyer has not given to or received from any other Person,
at any time since January 1, 1997, any notice or other
communication (whether oral or written) regarding any
actual, alleged, possible, or potential violation or
breach of, or default under, any Contract.
(f) There are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts
paid or payable to Buyer under current or completed
Contracts with any Person and no such Person has made
written or oral demand for such renegotiation.
7.15. INSURANCE.
(a) All policies to which Buyer is a party or that provide
coverage to Buyer;
(i) are to Buyer's Knowledge valid, outstanding, and
enforceable;
(ii) are to Buyer's Knowledge issued by an insurer
that is financially sound and reputable;
(iii) to Buyer's Knowledge taken together, provide
adequate insurance coverage for the assets
and the operations of Buyer for all risks to
which Buyer is normally exposed;
(iv) are sufficient for compliance with all Legal
Requirements and Contracts to which Buyer is a
party or by which it is bound;
(v) will continue in full force and effect following
the consummation of the Contemplated
Transactions; and
(vi) do not provide for any retrospective premium
adjustment or other experienced-based liability
on the part of Buyer.
(b) Buyer has paid all premiums due, and has otherwise
performed all of its obligations, under each policy to
which it is a party or that provides coverage to Buyer or
any partner or any officer or director of any partner of
Buyer.
(c) Buyer has given notice to the insurer of all claims that
may be insured thereby.
(d) Buyer has paid all premium due, and has otherwise
performed all of its obligations, under each policy to
which it is a party or that provides coverage to Buyer.
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7.16. ENVIRONMENTAL MATTERS.
(a) To Buyer's Knowledge, Buyer is in material compliance
with, and has not been and is not in violation of or
liable under, any Environmental Law. Buyer has no basis
to expect nor has Buyer or any other Person for whose
conduct Buyer is or may be held to be responsible
received, any actual or Threatened order, notice, or other
communication from (i) any Governmental Body or private
citizen acting in the public interest, or (ii) the current
or prior owner or operator of any Facilities, of any
actual or potential violation or failure to comply with
any Environmental Law, or of any actual or Threatened
obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets
(whether real, personal, or mixed) in which Buyer has had
an interest, or with respect to any property or Facility
at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or
processed by Buyer or any other Person for whose conduct
they are or may be held responsible, or from which
Hazardous Materials have been transported. treated,
stored, handled, transferred, disposed, recycled, or
received.
(b) There are no pending or, to the Knowledge of Buyer,
Threatened claims, Encumbrances, or other restrictions of
any nature, resulting from any Environmental, Health, and
Safety Liabilities or arising under or pursuant to any
Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (whether
real, persona, or mixed) in which Buyer has or had an
interest.
(c) Buyer has no basis to expect any citation, directive,
inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Activity,
Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law,
or of any alleged, actual, or potential obligation to
undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether
real, personal, or mixed) in which Buyer has an interest,
or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by or any other
Person for whose conduct they are or may be held
responsible, have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
(d) Neither Buyer nor any other Person for whose conduct they
are or to Buyer's Knowledge may be held responsible, has
any Environmental, Health, and Safety Liabilities with
respect to the Facilities or, with respect to any other
properties and assets (whether real, persona, or mixed) in
which Buyer (or any predecessor to any of them), has or
had an interest, or at any property geologically or
hydrologically adjoining the Facilities or any such other
property or assets.
(e) To Buyer's Knowledge there are no Hazardous Materials
present on or in the Environment at Buyer's facilities
("Facilites") or at any geologically or hydrologically
adjoining property, including any Hazardous Materials
contained in barrels, above or underground storage tanks,
landfills, land deposits, dumps, equipment (whether
moveable or fixed) or other containers, either temporary
or permanent, and deposited or located in land, water,
sumps, or any other part of such facilities or such
adjoining property, or incorporated into any structure
therein or thereon. Neither Buyer nor any other Person
for whose conduct it is or may be held responsible, or any
other Person, has permitted or conducted, or is aware of,
any Hazardous Activity conducted with respect to the
Facilities or any other properties or assets (whether
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real. personal, or mixed) in which Buyer has or had an
interest.
(f) There has been no Release or, to the Knowledge of Buyer,
Threat of Release, of any Hazardous Materials at or from
the Facilities or at any other locations where any
Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from
or by the Facilities, or from or by any other properties
and assets (whether real, personal, or mixed) in which
Buyer has or had an interest, or any geologically or
hydrologically adjoining property, whether by Buyer or any
other Person.
7.17. EMPLOYEES. [omitted]
7.18. LABOR RELATIONS; COMPLIANCE. Buyer is not a party to any
collective bargaining or other labor Contract. There is not
presently pending or existing, and there is not threatened,
(a) any strike, slowdown, picketing, work stoppage, or
employee grievance process, (b) any Proceeding against or
affecting Buyer relating to the alleged violation of any Legal
Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an
employee or union with the National Labor Relations Board, the
Equal Employment Opportunity Commission, or any comparable
Governmental Body, organizational activity, or other labor or
employment dispute against or affecting Buyer or its premises,
or (c) any application for certification of a collective
bargaining agent. No event has occurred or circumstance
exists that could provide the basis for any work stoppage or
other labor dispute. There is no lockout of any employees by
Buyer and no such action is contemplated by Buyer. Buyer has
complied in all material respects with all Legal Requirements
relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits,
collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant
closing. Buyer is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other
amounts, however designated, for failure to c(imply with any
of the foregoing Legal Requirements.
7.19. INTELLECTUAL PROPERTY.
(a) Intellectual Property Assets. The term 'Intellectual
Property Assets" includes:
(i) the name "AMBI", all fictional business names,
trading names, registered and unregistered
trademarks, service marks, and applications of
AMBI (collectively, "Marks"');
(ii) all patents, patent applications, and inventions
and discoveries that may be patentable owned by
Buyer (collectively, "Patents");
(iii) all copyrights in both published works and
unpublished works (collectively
"Copyrights") owned by Buyer; and
(iv) all know-how, trade secrets, confidential
information, customer lists, software, technical
information, data, process technology, plans,
drawings, and blue prints (collectively, "Trade
Secrets") owned by Buyer.
(b) Agreements. There are no outstanding and, to Buyer's
Knowledge, no Threatened disputes or disagreements with
respect to any Contracts relating to the Intellectual
Property Assets to
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which Buyer is a party or by which Buyer is bound.
(c) Know-How Necessary for the Business.
(i) The Intellectual Property Assets are all those
necessary for the operation of the Buyer
businesses as they are currently conducted.
Except for Intellectual Property assets which are
licensed to Buyer, Buyer is the owner of all
right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of
all Encumbrances, and has the right to use
without payment to a third party all of the
Intellectual Property Assets. Security interests
which Buyer grants to its lender at the Closing
do not constitute an Encumbrance within the
meaning of this Section 7.19.
(d) Patents.
(i) Buyer is the owner of all right, title, and
interest in and to each of the Patents, free and
clear of all Encumbrances.
(ii) All of the issued Patents are currently in
compliance with formal legal requirements
(including payment of filing, examination, and
maintenance fees and proofs of working or use),
are valid and enforceable, and are not subject to
any maintenance fees or taxes or actions falling
due within ninety days after the Closing Date.
(iii) No Patent is involved in any interference,
reissue, reexamination, or opposition
proceeding. To Buyer's Knowledge, there is
no potentially interfering patent or patent
application of any third party.
(iv) To Buyer's Knowledge, no Patent is infringed or
is being challenged or, to Sellers' Knowledge,
threatened in any way. None of the products
manufactured and sold, nor any process or
know-how used, by Buyer infringes or, to Buyer's
Knowledge, is alleged to infringe on any patent
or other proprietary right of any other Person.
(e) Trademarks.
(i) Buyer is the owner of all right, title, and
interest in and to each of the Marks, free and
clear of all Encumbrances, except that Buyer may
transfer the trademark "Cardia" to Oriola in
exchange for an exclusive license of such Mark.
(ii) All Marks that have been registered with the
United States Patent and Trademark Office are
currently in compliance with all formal legal
requirements (including the timely
post-registration filing of affidavits of use and
incontestability and renewal applications), are
valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due
within ninety days after the Closing Date.
(iii) To Buyer's Knowledge, no Mark has been or is
now involved in any opposition, invalidation,
or cancellation and, to Sellers' Knowledge, no
such action is Threatened with the respect to
any of the Marks.
(iv) To Buyer's Knowledge, there is no potentially
interfering trademark or trademark application of
any third party.
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(v) To Buyer's knowledge, no Mark is infringed or has
been challenged or, to Sellers' Knowledge,
threatened in any way. None of the Marks used by
Buyer infringes or, to Buyer's Knowledge, is
alleged to infringe any trade name, trademark, or
service mark of any third party.
(vi) All products and materials containing a Mark
bear the proper federal registration notice
where permitted by law.
(f) Copyrights.
(i) Buyer is the owner of all right, title, and
interest in and to each of the Copyrights, free
and clear of all liens, security interests,
charges, encumbrances, equities, and other
adverse claims.
(ii) All the Copyrights have been registered and are
currently in compliance with formal legal
requirements, are valid and enforceable, and are
not subject to any maintenance fees or taxes or
actions falling due within ninety days after the
date of Closing.
(iii) To Buyer's Knowledge, no Copyright is
infringed or has been challenged or, to
Buyer's Knowledge, threatened in any way.
None of the subject matter of any of the
Copyrights infringes or is alleged to
infringe any copyright of any third party or
is a derivative work based on the work of a
third party.
(iv) All works encompassed by the Copyrights have
been marked with the proper copyright notice.
(g) Trade Secrets.
(i) With respect to each Trade Secret, the
documentation relating to such Trade Secret is
current, accurate, and sufficient in detail and
content to identify and explain it and to allow
its full and proper use without reliance on the
knowledge or memory of any individual.
(ii) Buyer has taken all reasonable precautions to
protect the secrecy, confidentiality, and value
of Buyer's Trade Secrets.
(iii) Buyer has good title and an absolute (but
not necessarily exclusive) right to use the
Trade Secrets. The Trade Secrets are not
part of the public knowledge or literature,
and, to Buyer's Knowledge, have not been
used, divulged, or appropriated either for
the benefit of any Person, or to the
detriment of Buyer. No Trade Secret is
subject to any adverse claim or has been
challenged or, to Buyer's Knowledge,
threatened in any way.
7.20. CERTAIN PAYMENTS. Since January 1, 1996, neither Buyer or to
Buyer's Knowledge any partner, agent, or employee of Buyer, or
any other Person associated with or acting for or on behalf of
Buyer, has directly or indirectly (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback, or
other payment to any Person, private or public, regardless of
form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain
special concessions
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or for special concessions already obtained, for or in respect
of Buyer or any Affiliate of Buyer, or (iv) in violation of
any Legal Requirement, (b) established or maintained any fund
or asset that has not been recorded in the books and records
of Buyer.
7.21. DISCLOSURE. No Buyer Report omits to state a material fact
necessary to make the statements herein or therein, in light
of the circumstances in which they were made, not misleading.
7.22. INVESTMENT INTENT. Buyer is acquiring the partnership
interests of N21 and the shares of capital stock of Selene and
JBE for its own account and not with a view to their
distribution within the meaning of Section 2(l1) of the
Securities Act.
7.23. BROKERS OR FINDERS. Except for a fee in respect of financing
for the Contemplated Transactions, Buyer and its officers and
agents have not incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees or
agents' commissions or other similar payment in connection
with this Agreement and will indemnify and hold Sellers
harmless from any such obligation, liability or payment
alleged to be due by or through Buyer as a result of the
action of Buyer or its officers or agents.
7.24. REGISTERED SECURITIES; REPORTING COMPANY. A number of one or
more classes of Buyer's securities have been registered
pursuant to the Securities Act, and are currently traded on
the NASDAQ National Market System. Buyer has filed all
documents required to be filed by it pursuant to the
Securities Act. No documents filed by Buyer pursuant to the
Securities Act contained, as of its date, any untrue statement
of a material fact or any omission to state a material fact
required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under
which they were made, not misleading. Buyer is also subject to
the reporting requirements of the Securities Exchange Act of
1934. As of the date hereof, all reports required to be filed
by Buyer pursuant to the Securities Exchange Act of 1934 have
been filed, and no such reports contained, as of its date, a
misstatement of a material fact or any omission to state any
material fact necessary in order to make the statements
therein in light of the circumstances under which they were
made, not misleading.
8. COVENANTS OF SELLERS AND ACQUIRED COMPANIES PRIOR TO CLOSING DATE
8.1. ACCESS AND INVESTIGATION. Between the date of the Letter and
the Closing Date, N21 will, and will cause each Acquired
Company and its Representatives to, (a) afford Buyer and its
Representatives and prospective lenders and their
Representatives (collectively, "Buyer's Advisors") full and
free access to each Acquired Company's personnel, properties
(including subsurface testing), contracts, books and records,
and other documents and data, (b) furnish Buyer and Buyer's
Advisors with copies of all such contracts, books and records,
and other existing documents and data as Buyer may request,
and (c) furnish Buyer and Buyer's Advisors with such
additional financial, operating, and other data and
information as Buyer may request.
8.2. OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES.
Between the date of the Letter and the Closing Date, Sellers
will, and will cause each Acquired Company to:
(a) conduct the business of such Acquired Company only
in the Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the current
business organization of such
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Acquired Company, keep available the services of the
current officers, employees, and agents of such
Acquired Company, and maintain the relations and good
will with suppliers, customers, landlords, creditors,
employees, agents, and others having business
relationships with such Acquired Company;
(c) confer with Buyer concerning operational matters of a
material nature; and
(d) otherwise report periodically to Buyer concerning the
status of the business, operations, and finances of
such Acquired Company.
8.3. NEGATIVE COVENANT. Except as otherwise expressly permitted by
this Agreement, between the date of the Letter and the Closing
Date, Sellers will not, and will cause each Acquired Company
not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action
within their or its control, as a result of which any of the
changes or events listed in Section 3.15 is likely to occur.
8.4. REQUIRED APPROVALS. As promptly as practicable after the date
of this Agreement, Sellers will, and will cause each Acquired
Company to, make all filings required by Legal Requirements to
be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the
Closing Date, Sellers will, and will cause each Acquired
Company to, (a) cooperate with Buyer with respect to all
filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the contemplated
transactions, and (b) cooperate with Buyer in obtaining all
consents identified by Buyer pursuant to Section 7.2 provided
this requirement will not require N21 to dispose of or make
any material change in any portion of its business or incur
any additional burden not otherwise required herein.
8.5. NOTIFICATION. Between the date of this Agreement and the
Closing Date, each Seller will promptly notify Buyer in
writing if such Seller or any Acquired Company becomes aware
of any fact or condition that causes or constitutes a Breach
of any of Sellers' representations and warranties as of the
date of this Agreement, or if such Seller or any Acquired
Company becomes aware of the occurrence after the date of this
Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute
a Breach of any such representation or warranty had such
representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Disclosure
Letter if the Disclosure Letter were dated the date of the
occurrence or discovery of any such fact or condition, Sellers
will promptly deliver to Buyer a supplement to the Disclosure
Letter specifying such change. During the same period, each
Seller will promptly notify Buyer of the occurrence of any
Breach of any covenant of Sellers in this Section 8 or of the
occurrence of any event that may make the satisfaction of the
conditions in Section 8 impossible or unlikely.
8.6. PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Sellers will
cause all indebtedness owed to an Acquired Company by any
Seller or any Related Person of any Seller to be paid in full
prior to Closing.
8.7. BEST EFFORTS. Between the date of this Agreement and the
Closing Date, Sellers will use their Best Efforts to cause the
conditions in Sections 10 and 11 to be satisfied.
8.8. NO SOLICITATIONS OR NEGOTIATIONS. Neither N21 or any Seller
nor any of N21's
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employees, representatives or agents will, directly or
indirectly, solicit or participate in discussions or
negotiations with, any third party concerning the sale of all
or any substantial portion of the assets of or any equity
interest in N 21, or offer for sale or sell all or any
substantial portion of the assets of or equity interest in N
21 to any other party, or give to any other party access to
any confidential information regarding N 21.
9. COVENANTS OF BUYER PRIOR TO CLOSING DATE
9.1. APPROVALS OF GOVERNMENTAL BODIES. As promptly as practicable
after the date of this Agreement, Buyer will, and will cause
each of its Related Persons to, make all filings required by
Legal Requirements to be made by them to consummate the
Contemplated Transactions (including all filings under the HSR
Act). Between the date of this Agreement and the Closing
Date, Buyer will, and will cause each Related Person to, (a)
cooperate with Sellers with respect to all filings that
Sellers are required by Legal Requirements to make in
connection with the Contemplated Transactions, and (b)
cooperate with Sellers in obtaining all consents required
pursuant to Section 3.2; provided that this Agreement will not
require Buyer to dispose of or make any change in any portion
of its business or to incur any other burden to obtain a
Governmental Authorization.
9.2. NOTICE TO SELLERS. Buyer shall notify Boynton of any
information of which it becomes aware prior to Closing which
constitutes, or is likely to constitute, the Breach of a
representation, warranty or covenant of any Seller (a
"Preclosing Situation"). Notwithstanding the foregoing, and
whether or not Buyer gives such notice, Seller's liabilities
in respect of Preclosing Situations shall not be limited or
reduced by Buyer's awareness or actual knowledge thereof or by
reason of Buyer's failure to comply with the provisions of
this Section.
9.3. NOTIFICATION. Between the date of this Agreement and the
Closing Date, Buyer will promptly notify Sellers and N21 in
writing if Buyer becomes aware of any fact or condition that
causes or constitutes a Breach of any of Buyer's
representations and warranties as of the date of this
Agreement, or if Buyer becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or
constitute a Breach of any such representation or warranty had
such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Buyer's
Disclosure Letter if the Buyer's Disclosure Letter were dated
the date of the occurrence or discovery of any such fact or
condition, Buyer will promptly deliver to Sellers and N21 a
supplement to the Buyer's Disclosure Letter specifying such
change. During the same period, Buyer will promptly notify
Sellers and N21 of the occurrence of any Breach of any
covenant of Buyer in this Section 9 or of the occurrence of
any event that may make the satisfaction of the conditions in
Section 9 impossible or unlikely.
9.4. BEST EFFORTS. Except as set forth in the provision to Section
9.1, between the date of this Agreement and the Closing Date,
Buyer will use its Best Efforts to cause the conditions in
Sections 10 and 11 to be satisfied.
10. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's
obligation to purchase the partnership interests of N21 and the shares
of capital stock of Selene and JBE and to take the other actions
required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Buyer, in whole or in part):
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10.1. ACCURACY OF REPRESENTATIONS.
(a) All of Sellers' and the Acquired Companies'
representations and warranties in this Agreement
(considered collectively), and each of these
representations and warranties (considered
individually), must have been accurate in all
material respects as of the date of this Agreement
and must be accurate in all material respects as of
the Closing Date as if made on the Closing Date,
without giving effect to any supplement to the
Disclosure Letter.
(b) Without limiting the generality of the foregoing,
Buyer shall not be obligated to purchase any
interests referred to in Section 2.1 unless all
interests referred to in such Section are tendered to
it hereunder on the Closing Date.
10.2. SELLERS' PERFORMANCE.
(a) All of the covenants and obligations that Sellers or
the Acquired Companies are required to perform or to
comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of
these covenants and obligations (considered
individually), must have been duly performed and
complied with in all material respects.
(b) Each document required to be delivered pursuant to
Section 2.4 must have been delivered, and each of the
other covenants and obligations in Section 8 must
have been performed and complied with in all
respects.
10.3. CONSENTS. Each of the Consents required pursuant to Section
3.2, and each Consent required pursuant to Section 4.2, must
have been obtained and must be in full force and effect.
10.4. ADDITIONAL DOCUMENTS. Each of the following documents must
have been delivered to Buyer:
(a) an opinion of Luce, Forward, Hamilton & Scripps LLP,
dated the Closing Date. including their opinion as to
the matters listed in Exhibit 10.4(a);
(b) an opinion of counsel for JBE and Selene, dated the
Closing Date including such counsel's opinion as to
the matters listed in Exhibit 10.4(b); and
(c) such other documents as Buyer may request for the
purpose of (i) enabling its counsel to provide the
opinion referred to in Section 11.4(a), (ii)
evidencing the accuracy of any of Sellers' and the
Acquired Companies' representations and warranties,
(iii) evidencing the performance by any Seller or any
Acquired Company of, or the compliance by any Seller
or any Acquired Company with, any covenant or
obligation required to be performed or complied with
by such Seller or Acquired Company, (iv) evidencing
the satisfaction of any condition referred to in this
Section 10 or (v) otherwise facilitating the
consummation or performance of any of the
Contemplated Transactions.
10.5. NO PROCEEDINGS. Since the date of this Agreement, there must
not have been commenced or Threatened against Buyer, or
against any Person affiliated with Buyer, any Proceeding (a)
involving any challenge to, or seeking damages or other relief
in connection with, any of the Contemplated Transactions, or
(b) that may have the effect of preventing. delaying, making
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illegal, or otherwise interfering with any of the Contemplated
Transactions.
10.6. NO CLAIM REGARDING PARTNERSHIP OR STOCK OWNERSHIP OR SALE
PROCEEDS. There must not have been made or Threatened by any
Person any claim asserting that such Person (a) is the holder
or the beneficial owner of, or has the right to acquire or to
obtain beneficial ownership of, any partnership interest or
stock of. or any other voting, equity, profits, income
distribution or ownership interest in, any of the Acquired
Companies, or (b) is entitled to all or any portion of the
Purchase Price payable for the interests to be transferred
hereunder.
10.7. NO PROHIBITION. Neither the consummation nor the performance
of any of the Contemplated Transactions will, directly or
indirectly (with or without notice or lapse of time),
materially contravene, or conflict with, or result in a
material violation of, or cause Buyer or any Person affiliated
with Buyer to suffer any material adverse consequence under,
(a) any applicable Legal Requirement or Order, or (b) any
Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any
Governmental Body.
10.8. AUDIT OF N21. Prior to the Closing Date, KPMG shall have
advised Buyer that KPMG has had access to books and records
sufficient within 75 days after the Closing to prepare an
audit of N21 for the three years ended December 31, 1996.
10.9. NO ADVERSE CHANGE. Since the date of this Agreement there
shall not have occurred any material adverse change in the
condition (financial or otherwise), business, properties,
assets or prospects of N21.
10.10. FAIRNESS OPINION. Buyer shall have received the opinion of
Adams, Harkness & Hill that the Contemplated Transactions are
fair to the shareholders of Buyer from a financial point of
view.
11. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE. Sellers'
obligation to sell the partnership interests and shares of capital
stock in Selene and JBE and to take the other actions required to be
taken by Sellers at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
11.1. ACCURACY OF REPRESENTATIONS. All of Buyer's representations
and warranties in this Agreement (considered collectively),
and each of these representations and warranties (considered
individually), must have been accurate in all material
respects as of the date of this Agreement and must be accurate
in all material respects as of the Closing Date as if made on
the Closing Date, giving effect to Buyer's Disclosure Letter
and any certificate of Buyer delivered to Sellers at Closing,
without giving effect to any supplements thereto.
11.2. BUYER'S PERFORMANCE.
(a) All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to
this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and
obligations (considered individually), must have been
performed and complied with in all material respects.
(b) Buyer must have delivered each of the documents
required to be delivered by Buyer pursuant to Section
2 and each of the other covenants and obligations in
Section 9 must
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have been compiled with in all respects.
11.3. CONSENTS. Each of the Consents required pursuant to Section
3.2 must have been obtained and must be in full force and
effect.
11.4. ADDITIONAL DOCUMENTS. Buyer must have caused the following
documents to be delivered to Sellers:
(a) an opinion of Oscar D. Folger, Esq., dated the
Closing Date, including their opinion as to the
matters listed in Exhibit 11.4(a); and
(b) such other documents as Sellers may request for the
purpose of (i) enabling their counsel to provide the
opinion referred to in Section 10.4(a), (ii)
evidencing the accuracy of any representation or
warranty of Buyer, (iii) evidencing the performance
by Buyer of, or the compliance by Buyer with, any
covenant or obligation required to be performed or
complied with by Buyer, (iv) evidencing the
satisfaction of any condition referred to in this
Section 11, or (v) otherwise facilitating the
consummation of any of the Contemplated Transactions.
12. TERMINATION
12.1. TERMINATION EVENTS. This Agreement may, by notice given
prior to or at the Closing, be terminated:
(a) by either Buyer or any Seller if a material Breach of
any provision of this Agreement has been committed by
the other party and such Breach has not been waived;
(b) by Buyer if any of the conditions in Section 10 has
not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes
impossible (other than through the failure of Buyer
to comply with its obligations under this Agreement)
and Buyer has not waived such condition on or before
the Closing Date; or (ii) by any Seller, if any of
the conditions in Section 11 has not been satisfied
as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than
through the failure of Sellers to comply with their
obligations under this Agreement) and Sellers have
not unanimously waived such condition on or before
the Closing Date;
(c) by mutual consent of Buyer and Sellers; or
(d) by either Buyer or Sellers if the Closing has not
occurred (other than through the failure of any party
seeking to terminate this Agreement to comply fully
with its obligations under this Agreement) on or
before ______, 1997, or such later date as
the parties may agree upon in writing.
12.2. EFFECT OF TERMINATION. Each party's right of termination
under Section 12.1 is in addition to any other rights it may
have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. If
this Agreement is terminated pursuant to Section 12.1, all
further obligations of the parties under this Agreement will
terminate, except that the obligations in Sections 14.1 and
14.3 will survive; provided, however, that if this Agreement
is terminated by a party because of the Breach of the
Agreement by the other party
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or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such
termination unimpaired.
13. INDEMNIFICATION; REMEDIES; RIGHT TO INDEMNIFICATION NOT AFFECTED BY
KNOWLEDGE.
13.1. SURVIVAL. All representations and warranties of Boynton, Bie,
the Individual Limited Partners and Buyer in this Agreement,
the Disclosure Letter, the supplements to the Disclosure
Letter, the closing documents of each party delivered pursuant
to Section 2.4, and any other certificate, document or
covenant delivered pursuant to this Agreement will survive the
Closing for the period set forth elsewhere in this Section 13.
All covenants and obligations by such parties shall survive
the Closing indefinitely. Such representations, warranties,
covenants and obligations of N21, Selene and JBE shall not
survive the Closing, provided that Boynton shall continue
after the Closing to be responsible for representations made
jointly and severally with N21. The representations and
warranties contained in this Agreement shall not be affected
or deemed waived by reason of the fact that the beneficiary of
such representations or warranties and/or its Representatives
knew or should have known that any such representation or
warranty is or might be inaccurate in any respect.
Notwithstanding anything set forth in this Agreement, all
representations and warranties and covenants applicable to tax
matters shall survive the closing and extend until the
expiration of the appropriate statute of limitations for taxes
(including any extension thereof) even if other indemnities
survive for more limited periods.
13.2. INDEMNIFICATION AND PAYMENT OF DAMAGES BY CERTAIN SELLERS.
(a) Boynton as to Selene and N21, Bie as to JBE and each
other Seller as to himself will indemnify and hold
harmless Buyer, the Acquired Companies, and their
respective Representatives, stockholders, controlling
persons, counsel, and affiliates, including the
Acquired Companies after the Closing, (collectively,
the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss,
liability, claim, damage (including incidental and
consequential damages), expense (including costs of
investigation and defense and reasonable attorneys'
fees) or diminution of value, whether or not
involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or
in connection with:
(i) any Breach of any representation or warranty
made by N21, or any Seller in this
Agreement, the Disclosure Letter, the
supplements to the Disclosure Letter, or any
other certificate or document delivered by
any Seller pursuant to this Agreement or in
connection with the Contemplated
Transactions.
(ii) any Breach by N21 or any Seller of any
covenant or obligation of N21 or any Seller
in this Agreement;
(iii) any product shipped or manufactured by, or
any services provided by, any Acquired
Company prior to the Closing Date;
(iv) the amount of any and all receivables of N21
which are not collected in accordance with
the provisions contained in Section 3.7,
provided Buyer has
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used reasonable efforts (not including
litigation) to collect such receivables; or
(v) any Breach of any representations or
warranty made by the Acquired Companies or
any Seller with regard to any tax liability
as disclosed in Section 3.10, or the amount
of any tax liability, interest and penalties
imposed on the Acquired Companies for any
taxable period including any liabilities
that result from the Acquired Companies
being partners in N21 up to the Closing
Date.
(b) The remedies provided in this Section 13.2, as well
as Buyer's other rights under this Agreement, may be
asserted as a set off against obligations otherwise
due by Buyer to Sellers, and are not exclusive of and
do not limit any other remedies that may be available
to Buyer or the other Indemnified Persons. The
Acquired Companies shall be included as Indemnified
Persons under this Section only after the Closing.
13.3. INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER.
(a) Buyer will indemnify and hold harmless Boynton, Bie,
and the Individual Limited Partners, and will pay to
Boynton, Bie, and the Individual Limited Partners the
amount of any Damages arising, directly or
indirectly, from or in connection with (a) any Breach
of any representation or warranty made by Buyer in
this Agreement, any certificate of Buyer's delivered
to Boynton, Bie, and the Individual Limited Partners
at the Closing, and any supplements thereto, or in
any other certificate or covenant delivered by Buyer
pursuant to this Agreement or in connection with the
Contemplated Transactions, (b) any Breach by Buyer of
any covenant or obligation of Buyer in this
Agreement, (c) any product shipped or manufactured by
Buyer, or any services provided by Buyer, after the
Closing Date or (d) any claim by any Person for
brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer
(or any Person acting on its behalf) in connection
with any of the Contemplated Transaction.
(b) The remedies provided in this Section 13.3 may be
asserted as a set off against obligations due from
Sellers to Buyer and are not exclusive of or limit
any other remedies that may be available to Sellers
or the other Indemnified Persons. In the event that
the Closing does not occur for any reason, the Buyer
shall not have any liability pursuant to this Section
13.3.
13.4. TIME LIMITATIONS.
(a) If the Closing occurs, Boynton, Bie, and the
Individual Limited Partners will have no liability
(for indemnification or otherwise) with respect to
any representation or warranty, or covenant or
obligation to be performed and complied with prior to
the Closing Date, other than those in Sections 3.3,
3.10, 3.11, 3.13, and 3.19, unless on or before the
first (1st) anniversary of the Closing Date Buyer
notifies Boynton of a claim specifying the factual
basis of that claim in reasonable detail to the
extent then known by Buyer. A claim with respect to
Sections 3.3, 3.10, 3.11, 3.13, or 3.19, or a claim
for indemnification or reimbursement not based upon
any representation or warranty or any covenant or
obligation to be performed and complied with prior to
the Closing Date, may be made at any time prior to
the later to occur of: (1) the last payment becoming
due to
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Boynton, Bie and the Individual Limited Partners from
Buyer under any of the Royalties or Contingent Future
Payments; or (2) the expiration of the applicable
statute of limitations.
(b) If the Closing occurs, Buyer will have no liability
(for indemnification or otherwise) with respect to
any representation or warranty, or covenant or
obligation to be performed and complied with prior to
the Closing Date, unless on or before the first (1st)
anniversary of the Closing Date Boynton notifies
Buyer of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known
by Boynton.
13.5. PROCEDURE FOR INDEMNIFICATION--NON THIRD-PARTY PARTY CLAIMS.
(a) Notice of Claims.
(i) If an indemnified party becomes aware of
facts or circumstances establishing a claim
("Claim") that an indemnified party has
experienced or incurred Damages or may
experience or incur Damages which will give
rise to a right of set-off or
indemnification under this Section 13, then
such indemnified party shall give written
notice to the indemnifying party of such
Claim ("Indemnification Notice") as soon as
reasonably practicable but in no event more
than thirty (30) days after the indemnified
party has actual knowledge of such facts or
circumstances (provided that failure to give
an Indemnification Notice shall not limit
the indemnifying party's indemnification
obligation hereunder except to the extent
that the delay in giving, or failure to
give, the Indemnification Notice adversely
affects the indemnifying party's ability to
defend against a Claim).
(ii) To the extent reasonably practicable, the
Indemnification Notice will describe the
nature, basis and amount of the Claim and
include any relevant supporting
documentation. If the Indemnifying Party
does not object within thirty (30) days
after receipt of the Indemnification Notice
to the propriety of (i) the Claim described
on the Indemnification Notice as being
subject to set-off or indemnification
pursuant to Sections 13.2, 13.3, and (or)
13.5 and (ii) the amount of Damages
specified in the Indemnification Notice, the
Claim described in the Indemnification
Notice shall be deemed to be final and
binding upon the Indemnifying Party
(hereinafter, "Permitted Indemnification
Claim").
(iii) Any undisputed set-off or Claim described in
the Indemnification Notice shall be deemed
to be final and binding upon the
Indemnifying Party and shall constitute a
Permitted Indemnification Claim. If the
Indemnifying Party contests the propriety of
a set-off or Claim described in the
Indemnification Notice and/or the amount of
Damages alleged to be associated with such
Claim then the Indemnifying Party shall
deliver to the Indemnitee an Indemnification
Objection Notice detailing all specific
objections the Indemnitee has with respect
to the Claim described in the
Indemnification Notice.
(iv) If the Indemnifying Party and the Indemnitee
are unable to resolve the dispute issues
concerning the set-off or Claim within
twenty (20) business days after the date the
Indemnifying Party received the
Indemnification Objection Notice, the
disputed issue shall be settled by
arbitration in San Diego, California, as
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determined by the three arbitrators in
accordance with the commercial rules of the
American Arbitration Association and the
procedures set forth below.
(b) Settlement of Claims.
(i) If any disputed issues ultimately are
resolved by an arbitrator pursuant to this
Section 13, and if the arbitrator's
determination of the disputed issues results
in all or any portion of a Claim properly
being subject to set-off or indemnification
pursuant to this Section 13, (i) such Claim
or portion thereof shall be final and
binding upon the Indemnifying Party and
shall constitute a Permitted Indemnification
Claim, and (ii) the Indemnifying Party shall
pay to the Indemnitee the entire amount of
all Damages associated with any Permitted
Indemnification Claim within ten (10) days
after such Claim is determined to be a
Permitted Indemnification Claim pursuant
hereto, together with interest accruing at
10% per annum from the date of such
determination.
(ii) If, however, disputed issues ultimately are
resolved by the arbitrator and (x) the
arbitrator determines that the Claim is not
properly subject to set-off or
indemnification and (y) Buyer has withheld
any payment otherwise due hereunder, then
Buyer immediately shall pay to Boynton, Bie,
and the Individual Limited Partners such
amount improperly withheld, together with
interest accruing at 10% per annum.
(iii) Boynton, Bie, and the Individual Limited
Partners acknowledge and agree that the
right to receive the payments improperly
withheld plus accrued interest as described
herein shall be their exclusive remedy with
respect thereto.
13.6. PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under
this Section 13, of notice of the commencement of any
Proceeding against it, such indemnified party will,
if a Claim is to be made against an indemnifying
party under such Section, give notice to the
indemnifying party of the commencement of such Claim,
provided the failure to give an Indemnification
Notice to the indemnifying party will not relieve the
indemnifying party of any liability, except to the
extent that the indemnifying party's delay in giving
or failure to give, an Indemnification Notice
materially adversely affecting the indemnified
party's ability to defend against a Claim is
prejudiced by the indemnifying party's failure to
give such notice.
(b) If any Proceeding referred to in Section (a) is
brought against an indemnified party and it gives
notice to the indemnifying party of the commencement
of such Proceeding, the indemnifying party will,
unless the claim involves taxes, be entitled to
participate in such Proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is
also a party to such Proceeding and the indemnified
party determines in good faith that joint
representation would be inappropriate, or (ii) the
indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel
reasonably satisfactory to the indemnified party and,
after notice from the indemnifying party to the
indemnified party of its election
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to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently
conducts such defense, be liable to the indemnified
party under this Section 13 for any fees of other
counsel or any other expenses with respect to the
defense of such Proceeding, in each case subsequently
incurred by the indemnified party in connection with
the defense of such Proceeding, other than reasonable
costs of investigation.
(c) If the indemnifying party assumes the defense of a
Proceeding, no compromise or settlement of such
claims may be effected by the indemnifying party
without the indemnified party's consent unless (A)
there is no finding or admission of any violation of
Legal Requirements or any violation of the rights of
any Person and no effect on any claims that claims
that may be made against the indemnified party, and
(B) the sole relief provided is monetary damages that
are paid in full by the indemnifying party; and the
indemnified party will have no liability with respect
to any compromise or settlement of such claims
effected without its consent.
(d) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a
reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a
result of monetary damages for which it would be
entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying
party, assume the exclusive right at the indemnifying
party's expense to defend, compromise, or settle such
Proceeding, but the indemnifying party will not be
bound by any compromise or settlement effected
without its consent (which may not be unreasonably
withheld).
(e) After final resolution of the Proceeding, the
indemnifying party and the indemnified party shall
satisfy any Claims resulting from the Proceeding in
accordance with the other provisions of this Section
13.
13.7. RESOLUTION OF DISPUTED CLAIMS.
(a) In the event of a disputed Claim, each of (i) the
indemnified party and (ii) the indemnifying party
shall appoint one arbitrator, and the two arbitrators
so appointed shall then together appoint a third
arbitrator ("neutral arbitrator") from a list of
persons supplied by the American Arbitration
Association in San Diego.
(b) If one party shall fail to appoint the arbitrator to
be appointed by it within 14 days of the end of the
20-day period provided for in Section 13.6 above, the
arbitrator appointed by the other party shall select
from a list of persons supplied by the American
Arbitration Association a person who shall serve as
the single neutral arbitrator for purposes of the
arbitration.
(c) If each party shall have appointed one arbitrator;
but such designees cannot agree on the person to act
as the neutral arbitrator within a period of 14 days
after the appointment of the second arbitrator, then
either party may apply to the American Arbitration
Association in San Diego which shall appoint a
neutral arbitrator. As used hereafter the term
"arbitrator" shall include the singular and the
plural as applicable.
(d) The arbitrator shall conduct the arbitration with all
reasonable dispatch in accordance with the commercial
rules of the American Arbitration Association,
provided, however, that
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the parties to such arbitration shall take such
action and execute such instruments as shall be
necessary to cause the California Rules of Civil
Procedure pertaining to pre-trial discovery to be
applicable in respect of such proceeding. The
arbitrator shall render a written award (the "Award")
which shall be delivered to the indemnified party and
the indemnifying party; provided, however, in no
event may the Award include punitive damages. An
Award hereunder may be used as a basis for the entry
of judgment in any jurisdiction. In the event the
parties have submitted a Claim for anticipated
Damages to arbitration under this Section 13, then
the arbitrator may, in its sole discretion, postpone
resolution of the Claim until the time which it has
determined, in its sole discretion, to be the time
when such anticipated Damages shall have occurred or
passed has been reached.
(e) Prior to making the Award, the arbitrator shall
direct the indemnified party and the indemnifying
party to submit statements describing any element of
Damages or anticipated Damages as to which
indemnification is claimed hereunder that is
attributable to attorneys' fees, disbursements, and
any similar costs incident to such Damages or
anticipated Damages, supported by affidavits showing
that such costs actually have been or are likely to
be incurred, and all such attorneys' fees,
disbursements and other costs shall be apportioned as
determined by the arbitrator. All fees of the
arbitrator and administrative expenses of the
American Arbitration Association shall be treated as
costs for purposes of this Article. As a part of
each Award made pursuant to this Agreement, the
arbitrator shall allow interest thereon (other than
on the portion of the Award representing attorneys'
fees, disbursements and costs) from the date of the
Damages or the date the anticipated Damages becomes
Damages to the date of payment at the rate of 8% per
annum.
(f) The Award shall be a conclusive determination of the
matter and shall be binding upon the indemnified
party and the indemnifying party, and shall not be
contested by any of them. In the event that the
arbitrator shall determine that the indemnified party
shall be entitled to any indemnification by reason of
its claim for attorneys' fees or interest as above
provided (a "Fee Award"), an executed copy of the Fee
Award setting forth the amount of the indemnification
shall be delivered to the indemnifying party. When
the time for filing an application for correction of
the Fee Award or filing a petition to vacate or
correct the Fee Award has passed (or immediately if
such rights are waived by the parties before or after
the Fee Award) then the indemnifying party shall be
liable for the payment of such claim. The Fee Award
shall be satisfied in the same manner as an
undisputed claim and the indemnifying party shall be
directed to mail to the arbitrator its check in
payment of the arbitrator's fee to the extent of
funds available. The indemnified party shall pay any
balance of such fee and such payment by the
indemnified party shall be deemed Damages, which
shall be due and payable as an Award in favor of the
indemnified party which shall be satisfied and paid
as herein provided.
13.8. SCOPE OF INDEMNIFICATION, LIABILITIES AND OBLIGATIONS.
Notwithstanding anything herein to the contrary:
(a) the liabilities and obligations of each Seller under this
Section 13 shall be limited to such Seller's share of the
Purchase Price and shall be limited as to claims asserted
pursuant to a Notice of Claim made by Buyer within the
time limitations set forth in this Section; and
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(b) the liabilities and obligations of Buyer under this
Section 13 shall be limited to claims asserted pursuant to
a Notice of Claim made by Sellers within the time
limitations set forth in this Section.
13.9. SPECIAL PROCEDURE FOR TAX CLAIMS.
(a) The Buyer will promptly notify the Sellers in writing
upon receipt by the Buyer of notice of any pending or
threatened Tax audits of, or assessments against, the
Acquired Companies for taxable periods of the
Acquired Companies ending on or prior to the Closing
Date, or which may affect the Determination of Taxes
for which Sellers indemnify the Buyer. The Sellers
shall promptly notify the Buyer in writing upon
receipt by the Sellers of notice of any pending or
threatened Tax audits of, or assessments against, the
Sellers for all taxable periods of the Acquired
Companies ending on or prior to the Closing Date, or
which may affect the Determination of Taxes for which
Sellers indemnify the Buyer.
(b) The Buyer shall have the right, at its own expense,
to control any audit or determination by any
authority, initiate any claim for refund or amended
return, and contest, resolve and defend against any
assessment, notice of deficiency or other adjustment
or proposed adjustment of Taxes for any taxable
period, provided, however, that the Buyer shall (i)
consult with the affected Sellers with respect to the
resolution of any issues that would affect such
Sellers in that or any other taxable year, and (ii)
not settle any such issue, or file any amended return
relating to such issue, without the consent of the
Sellers, which consent shall not unreasonably be
withheld. Where consent to a settlement is withheld
by the Sellers pursuant to clause (iii) of the
preceding sentence, the Buyer may continue or
initiate any further proceedings at its own expense,
provided, that the liability of the Sellers, after
giving effect to this Agreement, shall not exceed the
liability that would have resulted from the
settlement or amended return.
(c) The Buyer and Sellers shall furnish or cause to be
furnished to each other at a reasonable times upon
request as promptly as practicable such information
(including access to personnel and books and records
pertinent solely to the Acquired companies) and
assistance relating to the Acquired Companies as is
reasonably necessary for the preparation, review,
audit and filing of any Tax Return, the preparation
for any Tax audit or the defense of any assessment or
other similar claim, provided, that access shall be
limited to those items pertaining solely to the
Acquired Companies. The Sellers shall transfer to
the Buyer all books and records of the Acquired
Companies within thirty business days of a request
therefore. The party retaining information to which
this paragraph applies shall not dispose of such
information until two months after the expiration of
the applicable statute of limitations (including any
extensions thereof); provided, however, that written
notice of the intended disposal of such information
shall be made to the other party at least one month
prior to disposing of such information. The party
retaining the information shall not dispose of such
information without consent of the other party or
shall transfer such information to the other party at
the expense of the party to whom the information is
transferred.
14. GENERAL PROVISIONS
14.1. EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this
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Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of
this Agreement and the Contemplated Transactions, including
all fees and expenses of agents, representatives, counsel, and
accountants. In the event of termination of this Agreement the
obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of
this Agreement by another party.
14.2. PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated
Transactions will be issued, if at all, at such time and in
such manner as Buyer determines. Unless consented to by Buyer
in advance or required by Legal Requirements, prior to the
Closing Sellers shall, and shall cause the Acquired Companies
to, keep this Agreement strictly confidential and may not make
any disclosure of this Agreement to any Person Prior to the
Closing, Buyer will provide Sellers advance copies of any
press release for their advice and comment. Sellers and Buyer
will consult with each other concerning the means by which the
Acquired Companies' employees, customers, and suppliers and
others having dealings with the Acquired Companies will be
informed of the Contemplated Transactions, and Buyer will have
the right to control any such communication.
14.3. CONFIDENTIALITY.
(a) The terms of this Agreement, as well as any
information regarding Buyer or the Acquired
Companies, including the proposed acquisitions by
Buyer relative to the Acquired Companies, in any
form, of trade secrets, formulas, processes,
know-how, data, laboratory test data or results,
clinical trial data or results, designs, drawings,
costs, efficiency rates, price lists, financial
information, and any information regarding or
relating to other parties with whom Buyer or any of
the Acquired Companies may have agreements or other
business relations, is deemed "Confidential
Information."
(b) With regard to Confidential Information (oral or
written or both), the parties agree, unless Buyer and
Boynton agree otherwise or unless otherwise required
by law or by legal process:
(i) that such Confidential Information shall not
be disclosed or used in any manner;
(ii) not to use the Confidential Information
except for the sole purpose of' evaluating
said information in connection with the
Contemplated Transactions;
(iii) to treat all Confidential Information with
the utmost level of security and to not
disclose or exploit it in any form, directly
or indirectly, partially or completely,
commercially or otherwise;
(iv) to cause all parties to whom it is deemed
necessary to disclose Confidential
Information to fulfill the business purpose
of this Agreement, to execute an agreement
approved by all parties and containing
corresponding confidential obligations;
(v) to not disclose the Confidential Information
to others.
14.4. NOTICES. All notices, consents, waivers, and other
communications under this Agreement must be in writing and
will be deemed to have been duly given when (a) delivered by
hand (with
68
<PAGE>
written confirmation of receipt), (b) sent by facsimile (with
written confirmation of receipt), provided that a copy is
mailed by certified mail, return receipt requested, or (c)
when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and facsimile numbers
set forth herein and with copies sent to the addresses and
facsimile number set forth below (or to such other addresses
and facsimile numbers as a party may designate by notice to
the other parties):
Sellers:
Herbert and Donna Boynton
6266 Camino de la Costa
La Jolla California 92037
Attention: Mr. Herbert Boynton
Facsimile No.:(619) 488-7316
Seller's Counsel:
Luce, Forward, Hamilton & Scripps LLP
West Broadway, Suite 2600
San Diego, California 92101
Attention: Phillip L. Jelsma
Facsimile No.: (619) 232-8311
Buyer:
AMBI Inc.
771 Old Saw Mill River Road
Tarrytown, New York 10591
Attention: Fredric D. Price and Benjamin T. Sporn
Facsimile No.: (914)-347-6370
Buyer's Counsel:
Oscar D. Folger
521 5th Avenue, 24th floor
New York, New York 10175
Facsimile No.: 212-697-7833
14.5. JURISDICTION; SERVICE OF PROCESS. Any action or proceeding
seeking to enforce any provision of, or based on any right
arising out of, this Agreement may be brought against any of
the parties only in the courts of the State of California,
County of San Diego, or, if it has or can acquire
jurisdiction, in the United States District Court for the
Southern District of California, and each of the parties
consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding
and waives any objection to venue laid therein. Process in
any action or proceeding referred to in the preceding sentence
may be served on any party anywhere in the world.
14.6. FURTHER ASSURANCES. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute
and deliver to each other such other documents, and (c) to do
such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent
of this Agreement and the documents referred to in this
Agreement.
69
<PAGE>
14.7. WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the
failure nor any delay by any party in exercising any right,
power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise
of any such right, power, or privilege will preclude any other
or further exercise of such right, power, or privilege or the
exercise of any other fight, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or the documents referred
to in this Agreement can be discharged by one party, in whole
or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver
that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to
or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving
such notice or demand to take further action \without notice
or demand as provided in this Agreement or the documents
referred to in this Agreement
14.8. ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes
all prior agreements between the parties with respect to its
subject matter, including the Letter, and constitutes (along
with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between
the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by
the party to be charged with the amendment.
14.9. ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither
party may assign any of its rights under this Agreement
without the prior consent of the other parties, except that
Buyer may assign any of its rights under this Agreement to any
Subsidiary of Buyer or to State Street Bank and Trust Company.
Subject to the preceding sentence, this Agreement will apply
to, be binding in all respects upon, and inure to the benefit
of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this
Agreement (including, without limitation, any employee of N21)
any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement.
This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
14.10. SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent
jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree
will remain in full force and effect to the extent not held
invalid or unenforceable.
14.11. SECTION HEADINGS, CONSTRUCTION. The headings of Sections in
this Agreement are provided for convenience only and will not
affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement. All words used in this Agreement
will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided,
the word "including" does not limit the preceding words or
terms.
14.12. TIME OF ESSENCE. With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the
essence.
14.13. GOVERNING LAW. This Agreement will be governed by the laws of
the State of' California without regard to conflicts of laws
principles.
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<PAGE>
14.14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original
copy of this Agreement and all of which, when taken together,
will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.
AMBI INC., a New York corporation NUTRITION 21, a California Limited
Partnership
By: Selene Systems, Inc. - General
partner
By: By:
Fredric D. Price, President and CEO Herbert Boynton,
Date: President and CEO
Date:
- ----------------------------- -------------------------------
Herbert Boynton, individually James Bie, individually and as
Trustee of the Bie
Family Trust
- --------------------- -----------------------
Donna Boynton, individually Victoria Bie, individually
SELENE SYSTEMS, INC., a California J. BIE ENTERPRISES, INC., a California
corporation corporation
By:
By:________________________ By: ______________________
Herbert Boynton, President James E. Bie
Limited Partners
(in addition to J. Bie Enterprises, Inc.):
The Barnhart Family Trust
By _______________________
Alice Barnhart
------------------------
Diana B. Chubbic
------------------------
Joel Cornish
------------------------
Patty Jo Cornish
-------------------------
Melissa Cunningham
-------------------------
Stephanie Dutton
-------------------------
Mary Erwin
71
<PAGE>
-------------------------
April Johnson
-------------------------
Howden F. King
--------------------------
Angelique Mambelli
The Morris Family Trust
By __________________________
Scot A. Morris
---------------------------
Patricia P. Ortlieb
The L.N.R. Family Trust
By ___________________________
Laurence Rivkin, MD
----------------------------
Brett Smithers
----------------------------
Al Smithson
----------------------------
Hayley Wade
The Williams Family Trust
By_____________________
72
<PAGE>
REVOLVING CREDIT
AND TERM LOAN AGREEMENT
Dated as of August 11, 1997
between
STATE STREET BANK AND TRUST COMPANY, as Lender
and
AMBI INC.
and
NUTRITION 21
as Co-Borrowers
<PAGE>
TABLE OF CONTENTS
ARTICLE I.................................................................... 1
Section 1.01. Definitions................................................. 1
Section 1.02. Accounting Terms and Determinations......................... 8
Section 1.03. Other Definitional Terms.................................... 8
ARTICLE II................................................................... 8
Section 2.01. Commitment to Lend.......................................... 8
Section 2.02. Termination of Commitment................................... 8
Section 2.03. The Revolving Note.......................................... 8
Section 2.04. Making the Revolving Loans.................................. 9
Section 2.05. Interest on Revolving Loans................................. 9
Section 2.06. Repayments and Prepayments of Revolving Loans............... 9
Section 2.07. Extension of Revolving Loan Termination Date................ 10
Section 2.08. Fees........................................................ 10
ARTICLE III.................................................................. 11
Section 3.01. Commitment to Lend.......................................... 11
Section 3.02. The Term Note............................................... 11
Section 3.03. Interest on Term Loan....................................... 11
Section 3.04. Repayments and Prepayments of Term Loan..................... 11
ARTICLE IV................................................................... 12
Section 4.01. Default Interest............................................ 12
Section 4.02. Payment from Insurance and Condemnation Proceeds............ 12
Section 4.03. Place and Mode of Payments; Computations.................... 12
Section 4.04. Use of Proceeds............................................. 13
ARTICLE V.................................................................... 13
Section 5.01. Security Agreements; Negative Pledge........................ 13
Section 5.02. Negative Pledge of USDA License............................. 13
Section 5.03. Collateral Assignment of Stock and Partnership Interests.... 13
Section 5.04. Consents.................................................... 14
Section 5.05. Filing and Recording........................................ 14
Section 5.06. Additional Collateral....................................... 14
ARTICLE VI................................................................... 15
Section 6.01. Conditions Precedent to Initial Loans....................... 15
(a) Loan Documents, etc................................................ 15
(b) Security Documents................................................. 15
(c) Lien Searches; Perfection Certificates............................. 15
(d) Opinions of U.S. and U.K. Counsel.................................. 15
i
<PAGE>
(e) Proceedings; Receipt of Documents.................................. 15
(f) Organizational Documents........................................... 16
(g) Certificates of Legal Existence and Good Standing and Tax Good
Standing........................................................... 16
(h) Incumbency Certificates............................................ 16
(i) Examination of Books............................................... 16
(j) Material Litigation................................................ 16
(k) Negative Pledge.................................................... 16
(l) Pledge of Partnership Interests.................................... 17
(m) Insurance.......................................................... 17
(n) Borrowing Base Certificate......................................... 17
(o) Aging of Receivables, etc.......................................... 17
(p) Disbursement Authorization Letter.................................. 17
(q) Payment of Fees and Disbursements.................................. 17
(r) Warrants and Warrant Purchase Agreement............................ 17
(s) Consummation of the Acquisition; New Cash Equity................... 17
(t) Compliance with U.S. and U.K. Law.................................. 17
(u) Monthly Financial Statements....................................... 18
(v) Opening Balance Sheet.............................................. 18
(w) Release of AMBI and N21............................................ 18
(x) Solvency Certificate............................................... 18
(y) Assignment of Stock and Partnership Interest Purchase
Agreement Rights................................................... 18
(z) Landlord's Waivers................................................. 18
(zy) Additional Waivers and Consents................................... 18
(zz) Excess Cash....................................................... 18
Section 6.02. Conditions Precedent to All Loans........................... 18
(a) Legality of Transactions........................................... 18
(b) Correctness of Warranties.......................................... 19
(c) No Default or Event of Default..................................... 19
(d) Notice of Borrowing; Borrowing Base Certificate.................... 19
ARTICLE VII.................................................................. 19
Section 7.01. Corporate Status............................................ 19
Section 7.02. Corporate Power and Authority............................... 20
Section 7.03. No Violation of Agreements.................................. 20
Section 7.04. No Burdensome Agreements.................................... 20
Section 7.05. No Litigation............................................... 20
Section 7.06. Financial Condition......................................... 21
Section 7.07. Good Title to Properties.................................... 21
Section 7.08. Trademarks, Patents, etc.................................... 21
Section 7.09. Tax Liability............................................... 21
Section 7.10. Governmental Action......................................... 21
Section 7.11. Disclosure.................................................. 21
Section 7.12. Regulations G, U and X...................................... 21
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<PAGE>
Section 7.13. Employee Benefit Plans...................................... 22
Section 7.14. Subsidiaries................................................ 23
Section 7.15. Permits, etc................................................ 23
Section 7.16. Solvency.................................................... 23
Section 7.17. Environmental Matters....................................... 23
Section 7.18. Ownership of the Borrowers.................................. 24
ARTICLE VIII................................................................. 24
Section 8.01. Financial Statements and Other Information.................. 25
Section 8.02. Corporate Existence, etc.................................... 27
Section 8.03. Compliance with Laws, etc................................... 27
Section 8.04. Payment of Taxes and Claims, etc............................ 27
Section 8.05. Keeping of Books, Visitation, Inspection, etc............... 27
Section 8.06. Insurance................................................... 27
Section 8.07. Properties in Good Condition................................ 28
Section 8.08. Maintenance of Liens........................................ 28
Section 8.09. Notice of Default........................................... 28
Section 8.10. Further Assurances.......................................... 29
Section 8.11. ERISA....................................................... 29
Section 8.12. Appraisals.................................................. 29
Section 8.13. Maintenance of Accounts..................................... 29
ARTICLE IX................................................................... 30
Section 9.01. Financial Covenants......................................... 30
A. Minimum Consolidated Net Income..................................... 30
B. Minimum Consolidated Adjusted EBITDA................................ 30
C. Minimum Consolidated Current Ratio.................................. 30
D. Minimum Consolidated Stockholders' Equity........................... 30
E. Minimum Consolidated Debt/Stockholders' Equity Ratio................ 31
F. Maximum Consolidated Debt/Stockholders' Equity Ratio................ 31
Section 9.02. Indebtedness................................................ 31
Section 9.03. Liens....................................................... 32
Section 9.04. Mergers, etc................................................ 32
Section 9.05. Sale of Assets, etc......................................... 32
Section 9.06. Dividends, etc.............................................. 32
Section 9.07. Investments, Acquisitions, Loans, etc....................... 33
Section 9.08. Lease-Backs................................................. 33
Section 9.09. Compromise of Receivables................................... 33
Section 9.10. Transactions with Affiliates and Agents..................... 33
Section 9.11. Compliance with ERISA....................................... 33
Section 9.12. Fiscal Year................................................. 34
Section 9.13. No Guarantees............................................... 34
Section 9.14. Arrangements between Borrowers and Burns Philp.............. 34
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<PAGE>
Section 9.15. Subsidiaries................................................ 34
Section 9.16. License Arrangements........................................ 34
ARTICLE X.................................................................... 34
Section 10.01. Events of Default.......................................... 34
Section 10.02. Suits For Enforcement...................................... 37
Section 10.03. Rights and Remedies Cumulative............................. 37
Section 10.04. Right of Setoff............................................ 37
ARTICLE XI................................................................... 37
Section 11.01. Notices.................................................... 38
Section 11.02. Amendments, etc............................................ 38
Section 11.03. No Waiver.................................................. 38
Section 11.04. Payment of Expenses, Indemnity, etc........................ 39
Section 11.05. Benefit of Agreement....................................... 39
Section 11.06. Governing Law, Submission to Jurisdiction, etc............. 40
Section 11.07. Counterparts............................................... 41
Section 11.08. Collection Costs........................................... 41
Section 11.09. Termination of Agreement................................... 41
Section 11.10. Headings Descriptive....................................... 42
Section 11.11. Entire Agreement........................................... 42
Section 11.12. Waiver of Rights Related to Damages........................ 42
Section 11.13. Certifications............................................. 42
Section 11.14. Severability............................................... 42
iv
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
Schedule 7.05 Litigation
Schedule 7.14 Subsidiaries
Schedule 7.18 Ownership Matters; Options, etc.
Schedule 9.02 Existing Indebtedness
Schedule 9.03 Existing Liens
Exhibit A Form of Revolving Note
Exhibit B Form of Term Note
Exhibit C Form of Borrowing Base Certificate
v
<PAGE>
REVOLVING CREDIT AND TERM LOAN AGREEMENT dated as of August 11, 1997
between STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company (the
"Lender"), AMBI Inc. (formerly known as Applied Micro Biology, Inc.), a New York
corporation ("AMBI"), and Nutrition 21, a California limited partnership
("N21"), as co-borrowers (each a "Borrower" and collectively, the "Borrowers").
WHEREAS, the Borrowers desire to borrow from the Lender hereunder
certain sums on a revolving and term loan basis and the Lender is willing,
subject to and upon the terms and conditions hereinafter set forth, to lend such
sums to the Borrowers; and
WHEREAS, all negotiations between the Lender and the Borrowers and
their respective agents and representatives have occurred, for all purposes, in
the Commonwealth of Massachusetts;
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
DEFINITIONS; CONSTRUCTION
Section 1.01. Definitions. As used herein, the following terms
shall have the meanings herein specified (to be equally applicable to both the
singular and plural forms of the terms defined):
"Accounts Payable" shall mean all accounts due and owing by the
Borrowers and their Subsidiaries on open account to trade creditors for goods or
services, and any accruals thereon, as determined on a consolidated basis.
"Acquisition" shall mean the acquisition of all of the issued and
outstanding individual limited partnership interests of N21 and the capital
stock of Selene Systems and JBE by AMBI, in accordance with the terms of that
certain Stock and Partnership Interest Purchase Agreement dated August 11, 1997
among AMBI, N21, Selene, JBE and the individuals named therein.
"Adjusted EBITDA" shall mean, for any period, Net Income, increased by
the sum of (i) Interest Expense for such period, (ii) Income Tax Expense for
such period, (iii) Depreciation Expense for such period, and (iv) Amortization
Expense for such period, as shown on the consolidated and consolidating balance
sheet of the Borrowers and their Subsidiaries in accordance with GAAP.
"Affiliate" shall mean, with respect to any Person, any other Person
which, directly or indirectly controls or is controlled by or is under common
control with such Person and, without limiting the generality of the foregoing,
includes (i) any Person which beneficially owns or holds 5% or more of any class
of voting securities of such Person or 5% or more of the equity interest in such
Person, (ii) any Person of which such Person beneficially owns or holds 5% or
more
1
<PAGE>
of any class of voting securities or in which such Person beneficially owns or
holds 5% or more of the equity interest and (iii) any director, officer or
employee of such Person. For the purposes of this definition, the term "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
"Agreement" shall mean this Revolving Credit and Term Loan Agreement,
as amended, supplemented or modified from time to time in accordance with its
terms.
"Amortization Expense" shall mean, for any period, the amortization
expense of the Borrowers and their Subsidiaries determined on a consolidated
basis in accordance with GAAP as of such date.
"Board" shall mean the Board of Governors of the Federal Reserve
System.
"Borrowers" shall have the meaning set forth in the preamble hereof.
"Borrowing Base Certificate" shall have the meaning set forth in
subsection 8.01(i) hereof.
"Borrowing Base" shall mean, at the relevant time of reference thereto,
an amount which is equal to (i) 85% of the aggregate Net Amount of Eligible
Accounts of Customers of the Borrowers who are located within the United States,
plus (ii) 70% of the aggregate Net Amount of Eligible Inventory of N21, up to
the Maximum N21 Inventory Advance, plus (iii) 30% of the aggregate Net Amount of
Eligible Inventory of AMBI, up to the Maximum AMBI Inventory Advance, plus (iv)
one hundred percent (100%) of any money market instruments pledged by the
Borrowers to the Lender, all as determined by the Lender by reference to the
most recent Borrowing Base Certificate delivered to the Lender pursuant to
subsection 8.01(i) hereof.
"Burns Philp" shall mean Burns Philp, Inc.
"Business Day" shall mean any day excluding Saturday, Sunday and any
other day on which the Lender is required or authorized to close in Boston,
Massachusetts.
"Capital Expenditures" shall mean, for any period, amounts paid or
indebtedness incurred by the Borrowers and their Subsidiaries determined on a
consolidated basis in connection with the acquisition, purchase, lease,
construction, improvement or replacement by the Borrowers and their Subsidiaries
of fixed assets, both tangible (such as land, buildings, fixtures, machinery and
equipment) and intangible (such as leaseholds, patents, copyrights, trademarks,
franchises and goodwill), that would be required to be capitalized and shown on
the consolidated and consolidating balance sheet of the Borrowers and their
Subsidiaries in accordance with GAAP, provided that Capital Expenditures shall
not include any item customarily charged directly to expense or depreciated over
a useful life of twelve (12) months or less in accordance with GAAP.
2
<PAGE>
"Capital Leases" shall mean, for any period, amounts paid or
indebtedness incurred by the Borrowers and their Subsidiaries in connection with
the lease of tangible property (such as leased buildings, fixtures, machinery
and equipment) that would be required to be capitalized and shown on the
consolidated and consolidating balance sheet of the Borrowers and their
Subsidiaries in accordance with GAAP.
"Closing Date" shall mean the date that all of the conditions precedent
set forth in Section 6.01 hereof have been met and the initial Loans have been
advanced hereunder.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall have the meaning set forth in Section 5.05 hereof.
"Commitment" shall mean the Lender's obligation under this Agreement to
make Revolving Loans to the Borrowers up to the Revolving Commitment Amount
pursuant to Article II hereof.
"Consolidated or consolidated" shall mean those terms as applied to the
accounts of the Borrowers and their Subsidiaries, consolidated in accordance
with generally accepted accounting principles.
"Current Assets" shall mean, at any date of determination thereof, all
current assets of the Borrowers and their Subsidiaries, including all Loans
hereunder by the Lender, determined on a consolidated basis in accordance with
GAAP as of such date.
"Current Liabilities" shall mean, at any date of determination thereof,
all outstanding current liabilities of the Borrowers and their Subsidiaries
determined on a consolidated basis in accordance with GAAP as of such date,
including, without limitation, the outstanding amounts borrowed under the
Revolving Loans and the
3
<PAGE>
Term Loan.
"Current Ratio" shall mean, at any date of determination thereof,
Consolidated Current Assets divided by Current Liabilities of the Borrowers and
their Subsidiaries.
"Customer" shall mean and include the account debtor or obligor with
respect to any of the Receivables and/or the prospective purchaser with respect
to any contract right, and/or any Person who enters into or proposes to enter
into any contract or other arrangement with the Borrowers or their Subsidiaries.
"Depreciation Expense" shall mean, for any period, the depreciation
expense of the Borrowers and their Subsidiaries determined on a consolidated
basis in accordance with GAAP as of such date.
"Debt" shall mean all liabilities of the Borrowers and their
Subsidiaries as shown on the consolidated and consolidating balance sheet of the
Borrowers and their Subsidiaries in accordance with GAAP.
"Default" shall mean any coition, act or event which, with notice or
lapse of time or both, would constitute an Event of Default.
"Dollar" and the sign "$" shall mean lawful money of the United States
of America.
"Eligible Accounts" shall mean (without duplication of accounts falling
into more than one of the following categories) the aggregate of the unpaid
portion of Receivables created by the Borrowers in the ordinary course of
business arising out of the sale of products by the Borrowers, and as to which
appropriate Uniform Commercial Code financing statements showing the Borrowers,
as the debtor and the Lender as the secured party with a first priority security
interest have been filed in the proper filing offices. Without limiting the
generality of the foregoing, a Receivable shall in no event be deemed to be an
Eligible Account unless: (i) such Receivable continues to be in full conformity
with the representations and warranties made by the Borrowers to the Lender with
respect thereto; (ii) no more than 60 days have elapsed from the invoice date
(subject to clause (iii) below); (iii) the Lender has not notified the Borrowers
that Lender is not satisfied with the credit standing of the Customer with
respect thereto in relation to the amount of credit extended and the Customer as
to which the Receivable relates is not known by the Borrowers to be insolvent or
involved in any case of proceeding, whether voluntary or involuntary, under any
bankruptcy, reorganization, arrangement, insolvency, liquidation or similar law
of any jurisdiction; (iv) the Customer with respect thereto is not an Affiliate
of the Borrowers; (v) the obligation is not subject to any pledge, restriction,
security interest or other Lien or encumbrance other than those created by the
Loan Documents; and (vi) the Borrowers are selling such product upon the same
terms as of the date of such borrowing under the Revolving Loans as they were at
the time the Receivable evidencing unpaid indebtedness for such product arose.
Notwithstanding the foregoing, eligibility of any account receivable of the
Borrowers shall be determined by the Lender in its sole discretion.
"Eligible Inventory" shall mean the gross book value, as reflected on
the Borrower's books in accordance with generally accepted accounting
principles, of all goods held for sale or lease or furnished or to be furnished
under contracts of service by the Borrower which in the reasonable opinion of
the Lender are merchantable and fit for the purpose for which they were
procured, located at the Borrower's chief executive offices in New York or
California or in transit under letters of credit issued by the Lender, and which
are not stale, obsolete or unmerchantable and at all times shall continue to be
acceptable to the Lender in all respects, as to which the Borrower has furnished
reasonably detailed information in a Borrower's Certificate, excluding inventory
which is held on consignment, not otherwise owned by the Borrower or of a type
no longer used by the Borrower, which has been returned by a customer or is
damaged or is subject to any Lien, which is not in the possession of the
Borrower or which is held by the Borrower on leased property with respect to
which the Lender has not received a waiver from the lessor and sublessor (if
any) in form and substance satisfactory to the Lender or which is not located
within the United States.
"Employee Plan" shall have the meaning set forth in Section 7.13(b)
hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
4
<PAGE>
"Event of Default" shall have the meaning set forth in Article X
hereof.
"FDA" shall mean the Food and Drug Administration.
"FTC" shall mean the Federal Trade Commission.
"FTC Order" shall mean that certain Decision and Order issued by the
FTC against N21, Selene and Herbert H. Boynton dated July 11, 1997 relating to
certain advertising and promotional claims made by N21 with respect to chromium
picolonate.
"GAAP" or "Generally Accepted Accounting Principles" shall mean, (a)
when used in Section 9.01 hereof, whether directly or indirectly through a
capitalized term used therein, principles which are (i) consistent with the
principles promulgated or adopted by the Financial Accounting Standards Board
and the Accounting Principles Board of the American Institute of Certified
Public Accountants, all as in effect for the most recently ended fiscal year of
the Borrowers, and (ii) to the extent consistent with such principles, the
accounting practices of the Borrowers reflected in the Financial Statements; and
(b) when used in general, other than as provided above, principles which are (i)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and the Accounting Principles Board of the American
Institute of Certified Public Accountants, as in effect from time to time, and
(ii) consistently applied with past financial statements of the Borrowers.
"General Partner" shall mean Selene Systems, Inc., a California
corporation.
"Indebtedness" of any Person shall mean (without duplication of
obligations falling into more than one of the following categories):
(i) all obligations of such Person, contingent or otherwise, which in
accordance with GAAP should be shown on the balance sheet of such Person as a
liability or to which reference should be made by footnotes thereto, including,
without limitation: (a) all debt and similar monetary obligations, whether
direct or indirect; (b) all liabilities secured by any mortgage, pledge,
security interest, lien, charge or other encumbrance existing on property owned
or acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; (c) all guarantees (direct or indirect), endorsements (other
than those as to checks and other similar negotiable instruments in the ordinary
course of business) and other contingent obligations whether direct or indirect
in respect of indebtedness of others; (d) all rental obligations of such Person
under leases required to be capitalized under GAAP; and (e) all obligations to
reimburse the issuer in respect of any letters of credit; and (ii) Indebtedness
of others secured by any lien upon property owned by such Person, whether or not
assumed.
"Income Tax Expense" shall mean, for any period, the aggregate of all
taxes paid or accrued based upon income and franchise tax expense of the
Borrowers and their Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP as of such date.
"Interest Expense" shall mean, for any period, the aggregate of all
Interest Expense paid or accrued on account of all Indebtedness of the Borrowers
and their Subsidiaries, determined
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on a consolidated basis in accordance with GAAP as of such date.
"JBE" shall mean J. Bie Enterprises, Inc.
"Lender" shall have the meaning set forth in the preamble hereof.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien, charge or deposit arrangement or other arrangement or condition having the
practical effect of any of the foregoing and shall include the interest of a
vendor or lessor under any conditional sale agreement, capitalized lease or
other title retention agreement.
"Loan Documents" shall mean and include this Agreement, the Notes, the
Security Documents, the Borrowing Base Certificates and all other agreements,
instruments and documents now and hereafter executed and/or delivered pursuant
hereto or thereto.
"Loans" shall mean and include the Revolving Loans and the Term Loan.
"Maintenance Fee" shall have the meaning set forth in Section 2.07
hereof.
"Margin Stock" shall have the meaning provided in Regulations G and U
of the Board.
"Maximum AMBI Inventory Advance" shall mean Four Hundred Thousand
Dollars ($400,000).
"Maximum N21 Inventory Advance" shall mean Five Hundred Thousand
Dollars ($500,000).
"Multiemployer Plan" shall have the meaning set forth in Section
7.13(d) hereof.
"NASDAQ" shall mean the NASDAQ Stock Market.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Net Amount of Eligible Accounts" for the Borrowers, shall mean, at any
time, the aggregate gross amount of outstanding Eligible Accounts of the
Borrower, at such time, less taxes or other amounts due to any third parties,
and less discounts, claims, credits, rebates, allowances, offsets, holdbacks or
other adjustments of any nature at any time issued, owing, granted, outstanding,
available or claimed thereunder.
"Net Amount of Eligible Inventory" for the Borrowers, shall mean the
aggregate gross amount of outstanding Eligible Inventory of the Borrower at such
time, less taxes or other amounts due to any third parties, and less discounts,
rebates, allowances, offsets, reserves for obsolete inventory, holdbacks or
other adjustments of any nature at any time issued, owing, granted,
outstanding, available or claimed thereunder.
"Net Income" shall mean, for any Person and for any period, the
consolidated net income
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or consolidated net (loss) of such Person for such period, determined in
accordance with GAAP as of such date.
"Notes" shall mean and include the Revolving Note and the Term Note.
"Notice of Borrowing" shall have the meaning set forth in Section
2.04(a) hereof.
"NSK" shall mean Nippon Shoji Kaisha, Ltd.
"Obligations" shall mean all obligations, liabilities and indebtedness
of the Borrowers and their Subsidiaries to the Lender, whether now existing or
hereafter created, joint or several, direct or indirect, arising out of contract
or tort (as limited by Section 11.12), due or not, whether created directly or
acquired by assignment or otherwise, including, without limitation, all
obligations, liabilities and indebtedness with respect to the principal of and
interest on the Loans and the payment or performance of all other obligations,
liabilities, and indebtedness of the Borrowers and their Subsidiaries to the
Lender hereunder, under any one or more of the other Loan Documents or with
respect to the Loans, including, without limitation, all fees, costs, expenses
and indemnity obligations.
"Oriola" shall mean Oriola oy, a Finnish corporation.
"OSHA" shall mean the Occupational Safety and Health Act, as amended
from time to time.
"Payment Office" shall mean the Lender's office located at 225 Franklin
Street, Boston, Massachusetts 02110.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Benefit Plan" shall have the meaning set forth in Section
7.13(a) hereof.
"Person" shall mean any individual, partnership, firm, corporation,
association, joint venture, trust or other entity, or any government or
political subdivision or agency, department or instrumentality thereof.
"Prime Rate" shall mean the rate of interest which the Lender announces
from time to time in Boston as its "Prime Rate", as in effect from time to time.
"Receivables" shall mean and include all accounts, contract rights,
instruments, documents, chattel paper, certificated and uncertificated
securities and general intangibles, whether secured or unsecured, now existing
or hereafter created, owned by the Borrowers, whether or not specifically sold
or assigned to the Lender, including, without limitation, all rights of the
Borrower, to payment for goods sold in the ordinary course of business and all
sums of money or other proceeds due thereon pursuant to transactions with
account debtors, except for that portion of the sums of money or other proceeds
due thereon that relate to sales, use or property taxes or amounts due to other
third parties in conjunction with such transactions,
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recorded on books of account in accordance with GAAP.
"Revolving Commitment Amount" shall mean $4,000,000, as such amount may
be reduced pursuant to Section 2.04 hereof.
"Revolving Loans" shall mean, collectively, the loans made or to be
made by the Lender to the Borrowers pursuant to Article II hereof; and
"Revolving Loan" shall mean any one of the Revolving Loans.
"Revolving Loan Termination Date" shall mean February 1, 1998, subject
to Section 2.07 hereof.
"Revolving Note" shall have the meaning set forth in Section 2.03
hereof.
"SEC" shall mean the Securities and Exchange Commission.
"Security Agreements" shall have the meaning set forth in Section
5.01 hereof.
"Security Documents" shall mean, collectively, the instruments and
documents required to be delivered pursuant to Sections 5.01, 5.02, 5.03, 5.04
and 6.01(k) and (l) hereof or pursuant to the instruments and documents referred
to in Sections 5.01, 5.02, 5.03, 5.04 and 6.01(k) and (l) hereof, including,
without limitation, the Security Agreements, the Collateral Assignment of
Licenses and the Pledge of partnership interests of N21.
"Selene Systems" shall mean Selene Systems, Inc., the sole general
partner of N21.
"Subordinated Indebtedness" shall mean any Indebtedness which is
subordinated to the Indebtedness to the Lender.
"Subsidiary" of any Person shall mean a corporation of which a majority
of the outstanding shares of stock of each class having ordinary voting power is
owned by such Person, by one or more Subsidiaries of such Person, or by such
Person and one or more of its Subsidiaries.
"Term Loan" shall mean the loan made or to be made by the Lender to the
Borrowers pursuant to Article III hereof.
"Term Loan Maturity Date" shall have the meaning set forth in Section
3.02 hereof.
"Term Note" shall have the meaning set forth in Section 3.02 hereof.
"USDA" shall mean the United States Department of Agriculture.
Section 1.02. Accounting Terms and Determinations. Unless otherwise
defined or specified herein, all accounting terms shall be construed herein, all
accounting determinations hereunder shall be made, all financial statements
required to be delivered hereunder shall be
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prepared and all financial records shall be maintained in accordance with GAAP
and shall be determined on a consolidated basis. All terms not specifically
defined herein which are defined in the Uniform Commercial Code as in effect
in the Commonwealth of Massachusetts shall have the same meanings herein as
therein.
Section 1.03. Other Definitional Terms. (a) The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Article, section, schedule, exhibit and like references are
to this Agreement unless otherwise specified.
(b) Each reference herein to a particular Person shall include
a reference to such Person's successors and permitted assigns.
(c) Any defined term which relates to a document, instrument
or agreement shall include within its definition any amendments, modifications,
renewals, restatements, extensions, supplements or substitutions which may have
been heretofore or may be hereafter executed in accordance with the terms hereof
and thereof.
ARTICLE II
REVOLVING LOANS
Section 2.01. Commitment to Lend. The Lender agrees, on the terms and
conditions hereinafter set forth, to make Revolving Loans to the Borrowers from
time to time on any Business Day during the period from the Closing Date to, but
not including, the Revolving Loan Termination Date, as requested by the
Borrowers, in an aggregate amount not to exceed at any one time outstanding the
lesser of (i) the Revolving Commitment Amount and (ii) the Borrowing Base.
Subject to the limitations set forth herein, each Revolving Loan made by the
Lender shall be in a principal amount equal to the principal amount of the
Revolving Loan requested on each occasion. The Borrowers may borrow Revolving
Loans no more than twice per week. Each request for a Revolving Loan shall
constitute a representation by the Borrowers that the conditions set forth in
Section 6.01 (if such request is for the initial Revolving Loan) and Section
6.02 have been satisfied on and as of the date of such request. Within the
limits of the provisions of this Section 2.01, and provided that no Event of
Default has occurred and is continuing, the Borrowers may borrow, prepay
pursuant to Section 2.06 and reborrow under this Section 2.01.
Section 2.02. Termination of Commitment. The commitment under this
Article II will terminate in full at 11:00 a.m., Boston time, on the Revolving
Loan Termination Date, unless earlier terminated as provided in this Agreement.
Section 2.03. The Revolving Note. The Revolving Loans shall be
evidenced by a promissory note of the Borrowers, in substantially the form of
Exhibit A hereto (the "Revolving Note"), dated the Closing Date and with
appropriate insertions. The Revolving Note shall be payable to the order of the
Lender in a principal amount equal to the Revolving Commitment
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Amount and shall represent the obligation of the Borrowers to pay to the Bank
the amount of the Revolving Commitment Amount or, if less, the outstanding
amount of the Revolving Loans to the Borrowers, plus interest accrued thereon,
as set forth below plus any fees, costs of collection and other amounts due
hereunder. The Lender will mark on the Revolving Note, or enter in a record
pertaining thereto, all Revolving Loans made thereunder and repayments thereof,
provided that the failure by the Lender to make any such notation, or any
error made in so doing, shall not limit or otherwise affect the unconditional
obligation of the Borrower hereunder or under the Revolving Note to make
payments of principal and interest on the Revolving Note as and when due. The
Revolving Note shall mature and be due and payable (subject to earlier
acceleration as herein provided) on the Revolving Loan Termination Date.
Section 2.04. Making the Revolving Loans.
(a) Each borrowing of a Revolving Loan shall be made on
telephonic notice (immediately confirmed in writing) given to the Lender by the
Borrowers not later than 11:00 a.m., Boston time, on the Business Day of the
proposed borrowing. Each such notice of a borrowing (a "Notice of Borrowing")
shall be irrevocable and shall specify (A) the requested date of such borrowing
and (B) the amount of such borrowing, which shall be in an amount equal to
$10,000 or an integral multiple thereof. A Notice of Borrowing shall be deemed
to have been made upon presentation to the Lender of a check drawn on the
Borrowers' account(s) at the Lender (a "Check Request").
(b) Without in any way limiting the Borrowers' obligation to
confirm in writing any Notice of Borrowing, the Lender may act without liability
upon the basis of telephonic notice believed by the Lender in good faith to be
from the Borrowers prior to receipt of written confirmation thereof. In each
such case, the Borrowers hereby waive the right to dispute the Lender's record
of the terms of such telephonic Notice of Borrowing, except for the Lender's
manifest error.
(c) The Lender will make available each requested Revolving
Loan to the Borrower by crediting the proceeds thereof to the Borrowers'
operating account at the Payment Office on the date and in the amount set forth
in the applicable Notice of Borrowing or Check Request.
Section 2.05. Interest on Revolving Loans. Except as otherwise provided
in Section 4.03 hereof, the unpaid principal amount of Revolving Loans
outstanding from time to time shall bear interest from the Closing Date until
repayment thereof in full (whether by acceleration or otherwise) at a rate per
annum which shall be equal to the Prime Rate plus one percent (1%). Interest on
the Revolving Loans shall be payable monthly in arrears, as provided in the
Revolving Note.
Section 2.06. Repayments and Prepayments of Revolving Loans.
(a) The Borrowers shall repay in full the Revolving Loans on
the Revolving Loan Termination Date. Such repayment shall be accompanied by all
accrued and unpaid interest on the Revolving Loans to the date of such repayment
and all accrued and unpaid fees
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and other amounts payable hereunder.
(b) The Borrowers shall prepay, from time to time, on demand
the amount by which the aggregate unpaid principal amount of the Revolving Loans
exceeds the limitations set forth in Section 2.01 hereof.
(c) The Borrowers shall have the right at any time and from
time to time, to prepay the Revolving Loans made to the Borrower hereunder, in
whole or in part, without premium or penalty, upon three (3) Business Days'
prior written or telephone notice to the Lender.
(d) The Borrowers shall, from time to time, cause all amounts
received by it in payment of or otherwise on account of Receivables to be
applied to the payment of the Revolving Loans of the Borrowers in accordance
with the procedures set forth in Article XI. Such amounts shall be credited by
the Lender to the Revolving Loans upon collection.
(e) Upon each repayment or prepayment of any principal of the
Revolving Loans made to the Borrowers pursuant to any of the provisions of this
Agreement or the Revolving Note, the Borrowers hereby absolutely and
unconditionally promise to pay to the Lender, and there shall become absolutely
due and payable on the date of each such repayment or prepayment, all of the
unpaid interest accrued to such date on the amount of the principal of the
Revolving Loans being repaid or prepaid on such date. Whenever any interest on
and any principal of the Revolving Loans are paid simultaneously hereunder, the
whole amount paid shall be applied first to interest then due and payable.
(f) Prior to the Revolving Loan Termination Date, the
Borrowers may reborrow amounts paid and prepaid under subsection 2.06(d),
subject to the terms and conditions hereof, including, without limitation, the
requirements of Section 2.01 hereof.
Section 2.07. Extension of Revolving Loan Termination Date.
Notwithstanding the foregoing, the Lender may elect, in its sole discretion, to
extend in writing the Revolving Loan Termination Date for an additional eighteen
(18) month period, provided that as of the Revolving Loan Termination Date, (i)
no Event of Default or other event which, but for the passage of time or the
giving of notice, would constitute an Event of Default shall have occurred, (ii)
the Term Loan and all accrued interest therein shall have been repaid in full,
(iii) the Borrower shall have prepared and presented to the Lender for its
review revised financial projections which shall indicate sufficient liquidity
for the following two (2) year period, as determined by the Lender in its sole
discretion, (iv) AMBI shall have incurred no violations and shall be in good
standing with the SEC, the FDA, the FTC, the NASD, NASDAQ, and any other
exchange in which its securities are then listed, together with any other
applicable governmental authorities and shall not have had any of its registered
securities delisted from any such exchange, (v) AMBI shall have made and filed
on a timely basis all required securities filings, (vi) the Borrowers and the
Lender shall have negotiated financial covenants for such extended term which
are acceptable to both parties, (vii) NSK shall have entered into a
Subordination Agreement with the Lender and the Borrowers, in form and
substance satisfactory to the Lender, (viii) the Borrowers shall have duly
executed and delivered to the Lender a Collateral
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Assignment of License with respect to its license arrangements with Oriola, in
form and substance satisfactory to the Lender and substantially in the form
attached hereto as Exhibit D, and (ix) Burns Philp shall have entered into a
Subordination Agreement with the Lender and the Borrowers, in form and
substance satisfactory to the Lender, and pursuant to which Burns Philp shall
have, inter alia, acknowledged the existence of the Loans from the Lender and
the first priority liens of the Lender with respect to the Collateral,
including, but not limited to, the patents, and (y) confirmed its willingness
to lend to AMBI up to the principal amount of Two Million Five Hundred Dollars
($2,500,000), provided no event shall have occurred which would constitute a
default under its credit arrangements with AMBI and that upon the advance of
such loan, Burns Philp shall be subordinated in right of payment, lien and
collection to the Lender and shall be subject to a standstill so long as any
of the Loans are outstanding.
Section 2.08. Fees. In addition to all other amounts due hereunder, the
Borrowers hereby agree to pay to the Lender (i) a non-refundable commitment fee
of One Hundred Thousand Dollars ($100,000), payable in full on or before the
Closing Date, (ii) a fee of one half of one percent (.50%) per annum on the
unused portion of the Revolving Facility based upon the difference between the
Borrowing Base and the average outstanding principal balance under the Loans
(the "Maintenance Fee") payable quarterly in arrears, (iii) all out-of-pocket
travel and related expenses incurred by the Lender and its auditors in
connection with the administration of the Loans, and (iv) all legal fees
incurred by counsel to the Lender in connection with the Loans, together with
any other customary fees associated with the Revolving Facility.
ARTICLE III
TERM LOAN
Section 3.01. Commitment to Lend. Subject to the terms and conditions
set forth in this Agreement, the Lender agrees to lend to the Borrowers on the
Closing Date the principal amount of $3,300,000 (the "Term Loan"). The Lender
shall advance the entire principal amount of the Term Loan to the Borrowers on
the Closing Date.
Section 3.02. The Term Note. The Term Loan shall be evidenced by a
promissory note of the Borrowers, in substantially the form of Exhibit B hereto
(the "Term Note"), dated the Closing Date and with appropriate insertions. The
Term Note shall be payable to the order of the Lender in a principal amount
equal to the original principal amount of the Term Loan and shall represent the
obligation of the Borrowers to pay to the Lender at such times as are provided
herein the original principal amount of the Term Loan to the Borrowers, plus
interest accrued thereon, as set forth below. The Lender will mark on the Term
Note, or enter in a record pertaining thereto, the original principal amount of
the Term Loan made thereunder and repayments thereof, provided that the failure
by the Lender to make any such notation, or any error made in so doing, shall
not limit or otherwise affect the unconditional obligation of the Borrowers
hereunder or under the Term Note to make payments of principal and interest on
the Term Note as and when due. The Term Note shall mature and be due and
payable (subject to earlier acceleration as herein provided) on February 1,
1998 (the "Term Loan Maturity Date").
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Section 3.03. Interest on Term Loan. Except as otherwise provided in
Section 4.02 hereof, the unpaid principal amount of the Term Loan outstanding
from time to time shall bear interest from the Closing Date until repayment
thereof in full (whether by acceleration or otherwise) at a rate per annum which
shall equal the Prime Rate plus one percent (1%). Interest on the Term Loan
shall be payable monthly in arrears, as provided in the Term Note.
Section 3.04. Repayments and Prepayments of Term Loan.
(a) The Borrowers promise to pay to the Lender the entire
unpaid principal amount of the Term Loan. Interest on the Term Loan shall be
payable monthly in arrears commencing September 1, 1997, on the Term Loan
Maturity Date, and thereafter on demand. Amounts repaid under the Term Loan
may not be reborrowed.
(b) The Borrowers shall have the right, at any time and from
time to time, to prepay the Term Loan made to the Borrowers hereunder, in whole
or in part, without premium or penalty, upon three (3) Business Days' prior
written or telephonic notice to the Lender. Any partial prepayment of the Term
Loan shall be in an amount equal to $10,000 or an integral multiple thereof and
shall be applied to the remaining principal installments of the Term Loan in the
inverse order of maturity. No optional prepayment of a portion of the Term Loan
shall relieve the Borrower from its obligation to make any other payment
hereunder.
(c) Upon each repayment or prepayment of any principal of the
Term Loan made to the Borrowers pursuant to any of the provisions of this
Agreement or the Term Note, the Borrowers hereby absolutely and unconditionally
promise to pay to the Lender, and there shall become absolutely due and payable
on the date of each such repayment or prepayment, all of the unpaid interest
accrued to such date on the amount of the principal of the Term Loan being
repaid or prepaid on such date. Whenever any interest on and any principal of
the Term Loan are paid simultaneously hereunder, the whole amount paid shall be
applied first to interest then due and payable.
ARTICLE IV
DEFAULT INTEREST; LATE PAYMENT FEE;
PAYMENT FROM INSURANCE PROCEEDS;
CERTAIN GENERAL PROVISIONS
Section 4.01. Default Interest. During the occurrence or continuance of
any Event of Default, and regardless of whether the Lender has given written
notice of default to the Borrower, the outstanding amounts of Revolving Loans
and the Term Loan shall bear interest, payable on demand, to the extent
permitted by law, compounded monthly at an interest rate equal to four percent
(4%) above the Prime Rate. Notwithstanding the foregoing provisions of this
Section 4.01, it is the intention of the Borrowers and the Lender that under no
circumstances shall the Borrowers pay more than the maximum amount of interest
permitted under applicable law on Loans made hereunder.
Section 4.02. Payment from Insurance and Condemnation Proceeds. Until
payment in
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full of the Loans and the termination of this Agreement, upon receipt by the
Borrowers of (a) any payment of proceeds of any insurance required to be
maintained pursuant to Section 8.06 hereof on account of each separate loss,
damage or injury to any tangible property subject to the Lender's Lien or (b)
any payment of proceeds of any condemnation or eminent domain proceedings in
respect of any such property, the Borrowers shall pay all such proceeds to the
Lender to be applied in the Lender's sole discretion to the Obligations in such
order as the Lender shall choose in its sole discretion. Notwithstanding the
foregoing, in the event that the insurance or condemnation proceeds resulting
from any individual loss of the Borrowers are no greater than $50,000 and so
long as no Event of Default shall have occurred hereunder or under any of the
other Loan Documents, Lender agrees to apply such proceeds to reimburse the
Borrowers for the reasonable costs incurred in the restoration, repair or
replacement of such property, all on such terms as the Lender shall reasonably
require.
Section 4.03. Place and Mode of Payments; Computations.
(a) Each payment made or caused to be made by the Borrowers to
the Lender under this Agreement or the Notes shall be made directly to the
Lender in lawful money of the United States of America at the Payment Office of
the Lender, not later than 2:00 p.m., Boston time, on the due date of such
payment, and in immediately available and freely transferable funds.
(b) If any sum would, but for the provisions of this
subsection 4.03(b), become due and payable to the Lender by the Borrowers under
this Agreement or the Notes on any day which is not a Business Day, then such
sum shall become due and payable on the Business Day next succeeding the day on
which such sum would otherwise have become due and payable hereunder or
thereunder, and interest payable to the Lender under this Agreement or the Notes
shall be adjusted by the Lender accordingly.
(c) All computations of interest and fees payable under this
Agreement or the Notes shall be made by the Lender on the basis of actual days
elapsed over a 360-day year. Each determination of an interest rate or fee by
the Lender pursuant to this Agreement or the Notes shall, except for manifest
error, be final, conclusive and binding for all purposes.
(d) The Lender will determine the Prime Rate in effect from
time to time. Any change in the Prime Rate shall, for all purposes of this
Agreement and the Notes, become effective on, and from the beginning of the day
on which such change shall first be announced by the Lender in accordance with
the Lender's customary banking practices.
(e) Each payment which shall become due and payable by the
Borrowers under this Agreement or the Notes shall be made without set-off and
free and clear of and without deduction or withholding of any kind.
Section 4.04. Use of Proceeds. The Borrowers agrees that the proceeds
of the Term Loan and the Initial Revolving Loans made on the Closing Date shall
be used by the Borrowers to support the purchase of the issued and outstanding
general and limited partnership interests of N21 and capital stock of Selene and
JBE, and then for general corporate purposes and
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working capital of the Borrowers.
ARTICLE V
SECURITY
Section 5.01. Security Agreements. The Borrowers shall duly execute and
deliver to the Lender as security for its obligations under the Notes, one or
more security agreements, including, without limitation, such intellectual
property security agreements relating to the patents, trademarks, copyrights an
other intellectual property rights of the Borrowers as the Lender shall deem
necessary (collectively, the "Security Agreements"), all consents of third
parties necessary to permit the effective granting of the liens created in such
security agreements, together with financing statements, pursuant to the Uniform
Commercial Code and such other security documents, including, but not limited
to, such filing notices with the U.S. Patent and Trademark Office, all in form
and substance satisfactory to the Lender, as may be required by the Lender to
grant to the Lender a valid, perfected and enforceable first priority lien on
and security interest in (subject only to the Liens permitted under Section 9.03
hereof) all present and future property and assets of the Borrowers of material
value wherever located and whether now owned or hereafter created or acquired,
including, without limitation, all accounts, Receivables, goods, inventory,
documents, instruments, general intangibles (including, without limitation, tax
refunds, trademarks, copyrights and patents (chooses in action), chattel paper,
machinery, equipment (excluding leased equipment), fixtures, real property (both
owned and leased) and all improvements thereon, and all proceeds and products of
all of the foregoing.
Section 5.02. Negative Pledge of USDA License. The Borrowers shall
covenant and agree with the Lender that they shall not at any time, for as long
as any of the Loans are outstanding to the Lender, convey an assignment of the
license rights maintained by the Borrowers with the USDA (the "Negative
Pledge").
Section 5.03. Collateral Assignment of Stock and Partnership Interests.
The Borrowers shall cause to be executed and delivered to the Lender a pledge of
all of the issued and outstanding general and limited partnership interests of
N21 and the capital stock of Selene and JBE.
Section 5.04. Consents. The Borrowers shall cause to be executed and
delivered to the Lender any and all necessary consents and waivers of third
parties, including, without limitation, the landlord's waivers referred to in
Section 8.14, and all necessary consents and waivers and estoppels, in
connection with any other agreement or arrangement to which the Borrowers are a
party or by which they are bound, all as the Lender shall require, and in form
and substance satisfactory to the Lender. In connection with the foregoing, the
Borrowers acknowledge and agree that any inventory which would otherwise qualify
as Eligible Inventory but which is located with vendors shall not be deemed
eligible until such time as such vendors have executed and delivered to the
Lender a waiver and estoppel in form and substance satisfactory to the Lender.
Section 5.05. Filing and Recording. The Borrowers shall, at their sole
cost and expense,
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cause all instruments and documents given as evidence of security pursuant to
this Agreement to be duly recorded and/or filed or otherwise perfected in all
places necessary, in the opinion of the Lender, and take such other actions as
the Lender may request, in order to perfect and protect the Liens or security
interests of the Lender in the property in which a Lien is granted pursuant to
the documents referred to in this Article V, together with all other property
in which the Borrowers and/or their Subsidiaries have now granted or will
hereafter grant a Lien in favor of the Lender (except for property subject to
a purchase money security interest permitted under Section 9.03 below)
(collectively, the "Collateral"). The Borrowers, to the extent permitted by
law, hereby authorize the Lender to file any financing statement or notice
with the U.S Patent and Trademark Office in respect of any Lien created
pursuant to such security agreements which may at any time be required or
which, in the opinion of the Lender, may at any time be desirable although the
same may have been executed only by the Lender or, at the option of the Lender,
to sign such financing statements and/or notices on behalf of the Borrowers
and their Subsidiaries and file the same, and the Borrowers hereby irrevocably
designate the Lender, its agents, representatives and designees as its agent
and attorney-in-fact for the Borrowers and their Subsidiaries for this purpose.
In the event that any re-recording or refiling thereof (or the filing of any
statements of continuation or assignment of any financing statement) is
required to protect and preserve such Lien or security interest, the Borrowers
shall, at the Borrowers' cost and expense, cause the same to be re-recorded
and/or refiled at the time and in the manner requested by the Lender.
Section 5.06. Additional Collateral. The Borrowers acknowledge that it
is their intention to provide the Lender with a Lien on all property of the
Borrowers (personal, real and mixed), whether now owned (or, as to real
property, leased) or hereafter acquired, subject only to Liens permitted under
Section 9.03 hereof. Without limiting the foregoing, in the event the Borrowers
acquire any assets or capital stock of any other Person (in accordance with
Article IX hereof), all assets and/or stock so acquired, including, without
limitation, all franchise rights, shall be assigned and transferred to the
Lender as collateral security for the Obligations. The Borrowers shall, from
time to time, promptly notify the Lender of the acquisition by the Borrowers of
any property in which the Lender does not then hold a Lien, or the creation or
existence of any such property, and the Borrowers shall, upon request by the
Lender, promptly execute and deliver to the Lender or cause to be executed and
delivered to the Lender such security agreements, pledge agreements, assignments
or other like agreements with respect to such property, together with such other
documents, certificates, opinions of counsel and the like as the Lender shall
request in connection therewith, in form and substance satisfactory to the
Lender, such that the Lender shall receive valid and perfected security
interests in and Liens on all such property.
ARTICLE VI
CONDITIONS TO BORROWINGS
Section 6.01. Conditions Precedent to Initial Loans. The obligation of
the Lender to make the Term Loan and the initial Revolving Loan hereunder on the
Closing Date shall be subject to the satisfaction, prior thereto or concurrently
therewith, of each of the following conditions precedent:
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(a) Loan Documents, etc. Each of the Loan Documents shall have
been duly and properly authorized, executed and delivered by the
respective party or parties thereto and shall be in full force and
effect on and as of the Closing Date. Executed original counterparts of
each of the Loan Documents shall have been furnished to the Lender.
(b) Security Documents. The Security Agreements and the other
Security Documents and the appropriate financing statements, notices
and other documents in respect thereof and necessary to enable the
Lender to perfect its security interest thereunder, shall have been
duly executed by the Borrowers and/or their Subsidiaries, as the case
may be, and shall have been filed or recorded, as applicable, in all
appropriate filing and recording offices, registries or other locations
necessary for the perfection of the Lender's security interests
therein, and all other actions necessary for the perfection of such
security interests shall have been duly taken, such evidence to be in
form satisfactory to the Lender.
(c) Lien Searches; Perfection Certificates. The Lender shall
have received the results of lien searches in the name of the Borrowers
and to the extent applicable, their Subsidiaries, in form and substance
satisfactory to the Lender, in each respective jurisdiction where the
Borrowers and/or their Subsidiaries engage or engaged in the five years
prior to the Closing Date in business or owns or owned, as the case may
be, property or assets of any kind and such lien searches shall reveal
no Liens on the assets of the Borrowers and/or their Subsidiaries other
than Liens permitted under Section 9.03 hereof. The Borrowers shall
have executed and delivered and shall have caused their Subsidiaries to
execute and deliver to the Lender perfection certificates, in form and
substance satisfactory to the Lender evidencing the jurisdiction or
jurisdictions in which the Borrowers and their Subsidiaries have
engaged in business or own or have owned property or assets of any
kind, as provided herein.
(d) Opinions of New York, California and General Counsel. The
Lender shall have received from each of (i) Oscar D. Folger, Esquire,
New York counsel to the Borrowers, (ii) Luce, Forward, Hamilton and
Scripps, California counsel to the Borrowers, and (iii) Benjamin Sporn,
general counsel of the Borrowers, an opinion addressed to the Lender,
dated the Closing Date, which opinions shall be in form and substance
satisfactory to the Lender.
(e) Proceedings; Receipt of Documents. All requisite corporate
action and proceedings on the part of the Borrowers and their
Subsidiaries in connection with the borrowings, the Loan Documents and
the Acquisition, as the case may be, shall be satisfactory in form and
substance to the Lender and its counsel, and the Lender and its counsel
shall have received all information and certified copies of all
documents, including, without limitation, records of requisite
corporate action and proceedings which
the Lender or its counsel may have requested in connection therewith,
such documents where requested by the Lender or its counsel to be
certified by appropriate persons or governmental authorities. All
conditions to the effectiveness of any documents required to be
executed or delivered pursuant to this Article VI, including, without
limitation, the delivery of documents required in connection therewith,
shall be completed to the
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satisfaction of the Lender at or prior to such execution or delivery.
(f) Organizational Documents. The Borrowers shall have
furnished and shall have caused their Subsidiaries and in the case of
N21, its General Partner, to furnish to the Lender certified copies of
all of the organizational documents, including charters and by-laws or
partnership documents, in form and substance satisfactory to the
Lender.
(g) Certificates of Legal Existence, Good Standing and Tax
Good Standing. The Borrowers shall have delivered and shall have caused
their Subsidiaries to deliver, to the Lender certificates from the
appropriate governmental officials evidencing their respective legal
existence and to the extent applicable, corporate and tax good standing
as of the most recent practicable date, as applicable.
(h) Incumbency Certificates. The Lender shall have received
from the Borrowers and each of their Subsidiaries and in the case of
N21, of its General Partner, incumbency certificates, dated the Closing
Date, signed by a duly authorized officer of each of the Borrowers, and
giving the name and bearing a specimen signature of each individual who
shall be authorized: (i) to sign, in the name and on behalf of the
Borrowers or their Subsidiaries each of the Loan Documents to which it
is or is to become a party; (ii) to make application for Loans; and
(iii) to give notices and to take other action on the behalf of the
Borrowers and their Subsidiaries under the Loan Documents.
(i) Examination of Books. The Lender shall have had the
opportunity, if the Lender chooses, during normal business hours and
upon reasonable notice provided that no Event of Default has occurred,
to examine the books of account and other records and files of the
Borrowers and their Subsidiaries and to make copies thereof, and the
results of such examination shall have been satisfactory to the Lender
in all respects.
(j) Material Litigation. There shall be no pending or, to the
best knowledge of the Borrowers and their Subsidiaries, threatened
litigation with respect to the Borrowers and their Subsidiaries before
any court, arbitrator or governmental or administrative body or agency
which challenges or relates to the transactions contemplated hereby, or
which may reasonably be expected to have a material adverse effect on
the business, operations, properties, assets, liabilities or condition,
financial or otherwise, of the Borrowers and/or their Subsidiaries.
(k) Negative Pledge. The Borrowers shall have covenanted and
agreed that they shall not grant any assignment of the license rights
with the USDA referred to in Section 5.02.
(l) Pledge of Stock and Partnership Interests. The Lender
shall have received a pledge of the stock and partnership interests
referred to in Section 5.03.
(m) Insurance. The Lender shall have received evidence, in
form and substance satisfactory to the Lender, of the insurance
coverage required pursuant to
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Section 8.06 hereof.
(n) Borrowing Base Certificate. The Borrowers shall have duly
executed and delivered to the Lender a Borrowing Base Certificate dated
the Closing Date which shall demonstrate availability under the
Borrowing Base as of such date of no less than $2,500,000.
(o) Aging of Receivables, etc. The Borrowers shall have
delivered to the Lender a current aging of Receivables, inventory
listing and a current aging of payables for each Borrower dated the
Closing Date.
(p) Disbursement Authorization Letter. The Borrowers shall
have executed and delivered to the Lender a disbursement authorization
letter with respect to the disbursement of the proceeds of the Loans
made on the Closing Date, in form and substance satisfactory to the
Lender.
(q) Payment of Fees and Disbursements. Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., counsel to the Lender, shall have
received payment in full for all legal fees charged, and all costs and
expenses incurred by such counsel through the Closing Date in
connection with the transactions contemplated under this Agreement and
the other Loan Documents.
(r) Warrants and Warrant Purchase Agreement. AMBI shall have
executed and delivered to the Lender a certain Warrant Purchase
Agreement and shall have duly authorized and issued to the Lender
warrants to purchase 100,000 shares of AMBI's voting Common Stock
(collectively, the "Warrants") and reserved adequate shares of its
Common Stock for issuance upon the exercise thereof.
(s) Consummation of the Acquisition. AMBI shall have provided
satisfactory evidence to the Lender of the consummation of the
Acquisition of N21, Selene and JBE and the Borrower shall have provided
the Lender with copies of all of the documents and instruments entered
into in connection with the Acquisition, including, but not limited to,
the Stock and Partnership Interest Purchase Agreement, the Registration
Rights and Restricted Resale Agreement, and the Consulting Agreement
with Herbert Boynton, all in form and substance satisfactory to the
Lender.
(t) Compliance with U.S. Law. The Borrowers shall have
furnished, to the Lender satisfactory evidence of the compliance of
the Acquisition, the financing contemplated hereby, the related grant
of the security interests described herein and the operation of the
business of the Borrowers and their Subsidiaries with all applicable
laws of the U.S., including, but not limited to, with respect to all
applicable regulatory requirements imposed by the SEC, the FDA, the
FTC, the NASD, NASDAQ or any other listing exchange, and any other
regulatory authorities.
(u) Monthly Financial Statements. The Borrowers shall have
furnished monthly financial statements from the commencement of the
Borrowers' current fiscal
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year to date, in form and substance satisfactory to the Lender.
(v) Opening Balance Sheet. The Borrowers shall have
furnished a consolidated and consolidating opening balance sheet of
the Borrowers and their Subsidiaries as of the Closing Date, in form
and substance satisfactory to the Lender.
(w) Release of AMBI and N21. The Lender shall have received
satisfactory evidence of the release of AMBI and N21 by Weinstein
Chemicals, Inc. in accordance with the Stock and Partnership Interest
Purchase Agreement.
(x) Solvency Certificate. The Lender shall have received from
the Borrowers an Officers' Certificate dated as of the Closing Date as
to the solvency of the Borrowers and their Subsidiaries following the
consummation of the Acquisition and the transactions contemplated
hereby, in form and substance satisfactory to the Lender.
(y) Assignment of Stock and Partnership Interest Purchase
Agreement Rights. AMBI shall have assigned its rights and remedies
under the Stock Purchase Agreement to the Lender, which assignment
shall have been consented to by the selling parties of N21 and shall
be in form and substance satisfactory to the Lender.
(z) Landlord's Waivers. The Lender shall have received from
the Borrowers, landlord's waivers executed by Keren Limited
Partnership, D.I.P. and Principal Mutual Life Insurance Company, as
successor in interest to John K. Norris, as Receiver in Case No.
640142, Superior Court of the State of California (collectively, the
"Landlords") with respect to the premises located in Tarrytown, New
York, and San Diego, California leased by the Landlords to the
Borrowers.
(zy) Additional Waivers and Consents. The Lender shall have
received from the Borrower such additional waivers and consents of such
third parties, including any vendors as may be reasonably required by
the Lender with respect to the Collateral.
(zz) Excess Cash. After giving effect to all closing costs
relating to the Acquisition and having paid its accounts payable and
accrued expenses on customary terms, the Borrowers shall have excess
cash as of the Closing Date of no less than $3,000,000.
Section 6.02. Conditions Precedent to All Loans. The obligation of the
Lender to make each Revolving Loan on and after the Closing Date shall be
subject to the following conditions precedent being met to the satisfaction of
the Lender in each instance:
(a) Legality of Transactions. No change in applicable law
shall have occurred as a consequence of which it shall have become and
continue to be unlawful (i) for the Lender to perform any of its
material agreements or obligations under any of the Loan Documents or
Subordination Agreements to which it is a party, or (ii) for the
Borrowers and their Subsidiaries to perform any of their material
agreements or obligations under any of the Loan Documents to which any
of them is a party or for any other party
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thereto to perform its agreements and obligations thereunder.
(b) Correctness of Warranties. All representations and
warranties contained herein (except, for purposes of Loans made after
the Closing Date, those representations and warranties which
specifically relate solely to facts in existence or actions to be taken
on the Closing Date), or otherwise made in any Loan Document, any
Borrowing Base Certificate or any agreement, instrument, certificate,
document or other writing delivered to the Lender in connection
herewith or therewith, shall be true and correct with the same effect
as though such representations and warranties had been made on and as
of the date of such Loan.
(c) No Default or Event of Default. There shall exist no
Default or Event of Default.
(d) Notice of Borrowing; Borrowing Base Certificate. The
Lender shall have received from the Borrowers in form and substance
satisfactory to the Lender (i) a Notice of Borrowing as required by
subsection 2.04(a), and (ii) the most recent Borrowing Base Certificate
required to be delivered to the Lender in accordance with subsection
8.01(i); provided; that the Borrowers shall notify the Lender of any
material deviation from the value of the Borrowing Base as reflected in
such Borrowing Base Certificate and as in effect at the time of such
borrowing.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to make
the Loans as herein provided for, the Borrowers jointly and severally make the
following representations and warranties, all of which shall survive the
execution and delivery of this Agreement and the making of the Loans and shall,
except to the extent such representations and warranties relate solely to facts
in existence or actions to be taken on the Closing Date, be deemed to be
incorporated in each Borrowing Base Certificate and be deemed repeated and
confirmed with respect to each borrowing hereunder as of the time of such
borrowing.
Section 7.01. Corporate and Partnership Status. Each of AMBI and its
Subsidiaries is a duly organized and validly existing corporation in good
standing under the laws of its respective jurisdiction of incorporation, with
perpetual corporate existence, and has the corporate power and authority to own
its respective properties and to transact the business in which it is engaged or
presently proposes to engage. N21 is a duly organized and validly existing
limited partnership under the laws of its jurisdiction of incorporation, with
perpetual partnership existence and has the partnership power and authority to
own its respective properties and to transact the business in which it is
engaged or presently proposes to engage. Each of the Borrowers and their
Subsidiaries is duly qualified as a foreign corporation or partnership and in
good standing in all jurisdictions where the failure to so qualify would have
a material adverse effect on the operations, properties, business or financial
condition of the Borrowers or their
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Subsidiaries.
Section 7.02. Corporate and Partnership Power and Authority. Each of
the Borrowers has the corporate or partnership power and authority to borrow and
to execute, deliver and carry out the terms and provisions of this Agreement,
the other Loan Documents executed and delivered by such parties and the
Borrowers and their Subsidiaries have taken or caused to be taken all necessary
corporate or partnership action (including, without limitation, the obtaining of
any consent of any stockholder or partner of such Borrowers and their
Subsidiaries required by law or their respective charters or by-laws or
partnership agreement), to authorize the execution, delivery and performance of
this Agreement, the borrowings hereunder, and the execution, delivery and
performance of the other Loan Documents executed and/or delivered by it. This
Agreement and each of the other Loan Documents executed and delivered by the
Borrowers and their Subsidiaries constitutes the legal, valid and binding
obligations of the Borrowers and their Subsidiaries and are enforceable in
accordance with their respective terms.
Section 7.03. No Violation of Agreements. Neither the Borrowers nor
their Subsidiaries are in material default under any indenture, mortgage, deed
of trust, agreement or other instrument to which any of them is a party or by
which they or any of their properties may be bound. Neither the execution and
delivery of this Agreement, or any of the other Loan Documents by the Borrowers
or any Subsidiary nor the consummation of the transactions herein and therein
contemplated, nor compliance with the provisions hereof or thereof will violate
any provision of the charter or by-laws of the Borrowers or any Subsidiary, or
any law, statute or regulation, or any order or decree of any court or
governmental instrumentality, or will conflict with, or result in the breach of,
or constitute a material default under, any indenture, mortgage, deed of trust,
agreement or other instrument to which the Borrowers or their Subsidiaries are a
party or by which they or any of their properties is bound, or, except as
contemplated under this Agreement, result in the creation or imposition of any
Lien upon any property of the Borrowers or their Subsidiaries.
Section 7.04. No Burdensome Agreements. Neither the Borrowers nor their
Subsidiaries is a party to any agreement or instrument or subject to any
restriction (including any restriction set forth in its charter or by-laws)
materially and adversely affecting their operations, properties, business or
condition, financial or otherwise.
Section 7.05. No Litigation. Except as set forth in Schedule 7.05,
there are no actions, suits or proceedings pending (nor, to the best knowledge
of the Borrowers and their Subsidiaries, is there any basis therefor) or, to the
best knowledge of the Borrowers and their Subsidiaries, threatened against or
affecting the Borrowers or any Subsidiary before any court, arbitrator or
governmental or administrative body or agency which challenges the validity or
propriety of the transactions contemplated under this Agreement or the other
Loan Documents or which is pending or threatened as of the date of this
Agreement and which is reasonably likely to result in any material adverse
change in the operations, properties, business, assets, liabilities or
condition, financial or otherwise, of the Borrowers or any Subsidiary. As of
the date of this Agreement, neither the Borrowers nor any Subsidiary is a
defendant in any action for money damages brought in any court, and no
unsatisfied judgment in connection with any such action has been docketed
against the Borrowers or any Subsidiary. The Borrowers are not in default
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under any applicable statute, rule, order, decree or regulation of any court,
arbitrator or governmental body or agency having jurisdiction over the Borrowers
or any Subsidiary which default is reasonably likely to result in a material
adverse effect on the Borrowers or any Subsidiary or any of their assets or
properties.
Section 7.06. Financial Condition. AMBI has delivered to the Lender the
audited consolidated and consolidating balance sheet of AMBI and its
Subsidiaries as at June 30, 1996 and June 30, 1995 and the unaudited balance
sheet of N21 as at December 31, 1996, December 31, 1995 and December 31, 1994
and the related statements of income, stockholders' equity and changes in cash
flows for the fiscal years then ended. Such financial statements described above
have been prepared in accordance with generally accepted accounting principles,
are all true and correct and present fairly the financial condition of the
Borrowers and its Subsidiaries as of the dates thereof. The Borrowers and their
Subsidiaries had no direct or contingent liabilities as of such dates which are
required to be reflected or reserved for in such financial statements or the
footnotes thereto which are not so reflected or reserved for therein. There has
been no material adverse change in the assets, liabilities, properties, business
and condition, financial or otherwise, of the Borrowers and their Subsidiaries
since June 30, 1997.
Section 7.07. Good Title to Properties. The Borrowers and their
Subsidiaries have good and marketable title to their respective properties and
assets, including, without limitation, the Collateral, subject to no Liens of
any kind, except such as are permitted under Section 9.03 hereof.
Section 7.08. Trademarks, Patents, etc. The Borrowers and their
Subsidiaries possess all the trademarks, trade names, copyrights, patents,
licenses, or rights in any thereof, adequate for the conduct of their
respective businesses as now conducted and presently proposed to be conducted,
without any conflict known to the Borrowers or such Subsidiaries with the
rights or, as of the date hereof, claimed rights of others.
Section 7.09. Tax Liability. The Borrowers and their Subsidiaries have
filed all tax returns which are required to be filed and paid all taxes prior to
delinquency which have become due pursuant to such returns or pursuant to any
assessment received by them.
Section 7.10. Governmental Action. No action of, or filing with, any
governmental or public body or authority (other than normal reporting
requirements or filings under the provisions of Article VI) is required to
authorize, or is otherwise required in connection with, the execution, delivery
and performance of this Agreement and the other Loan Documents.
Section 7.11. Disclosure. Neither the Schedules nor Exhibits hereto,
nor any certificate, statement, report or other document furnished to the
Lender by or on behalf of the Borrowers and their Subsidiaries in connection
herewith or in connection with any transaction contemplated hereby, nor this
Agreement, nor any other Loan Document, contains, at the time furnished, any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements contained therein not misleading.
Section 7.12. Regulations G, U and X. Neither the Borrowers nor any
Subsidiary own
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any "margin stock" as such term is defined in Regulations G and U, as amended,
of the Board. The proceeds of the borrowings made pursuant to Articles II, III,
IV and V hereof will be used by the Borrowers only for the purposes set forth
in Section 4.04 hereof. None of such proceeds will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin stock or for
the purpose of reducing or retiring any Indebtedness which was originally
incurred to purchase or carry margin stock or for any other purpose which
might constitute any of the Loans under this Agreement a "purpose credit"
within the meaning of said Regulations G and U or Regulation X of the Board.
Neither the Borrowers nor any Subsidiary have taken and none of them will take
any action which would be reasonably likely to cause this Agreement or any of
the other Loan Documents to violate any regulation of the Board or any state
securities laws, in each case as in effect on the date hereof, and neither the
Borrowers nor any Subsidiary have a class of securities registered under the
Securities Exchange Act of 1934.
Section 7.13. Employee Benefit Plans. (a) No "reportable event" (as
defined in Section 4043(b) of ERISA) (whether or not waived) has occurred or is
continuing with respect to any "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) maintained for employees of the Borrowers or their
Subsidiaries (a "Pension Benefit Plan").
(b) No prohibited transaction (within the meaning of Section
406 of ERISA) has occurred with respect to any Pension Benefit Plan or any other
"employee benefit plan" (as defined in Section 3(3) of ERISA) (together with a
Pension Benefit Plan, an "Employee Plan") maintained for employees of the
Borrowers or their Subsidiaries and covered by Part 4 of the Subtitle B of Title
I of ERISA.
(c) With respect to each Pension Benefit Plan, the amount for
which the Borrowers or their Subsidiaries would be liable pursuant to the
provisions of Sections 4062, 4063 or 4064 of ERISA would be zero if such Plans
had terminated as of the Closing Date.
(d) Neither the Borrowers nor their Subsidiaries are now, nor
have been during the preceding five years, a contributing employer to a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) (a
"Multiemployer Plan"). Neither the Borrowers nor their Subsidiaries have (i)
ceased operations at a facility so as to become subject to the provisions of
Section 4062(f) of ERISA, (ii) withdrawn as a substantial employer so as to
become subject to the provisions of Section 4063 of ERISA, (iii) ceased making
contributions on or before the Closing Date to any Pension Benefit Plan subject
to the provisions of Section 4064(a) of ERISA to which the Borrowers and their
Subsidiaries made contributions during any of the five years prior to the
Closing Date, (iv) incurred or caused to occur a "complete withdrawal" (within
the meaning of Section 4203 of ERISA) or a "partial withdrawal" (within the
meaning of Section 4205 of ERISA) from a Multiemployer Plan that is a Pension
Benefit Plan so as to incur withdrawal liability under Section 4201 of ERISA
(without regard to subsequent reduction or Waiver of such liability under
Sections 4207 or 4208 of ERISA), or (v) been a party to any transaction or
agreement under which the provisions of Section 4204 of ERISA were applicable.
(e) No notice of intent to terminate a Pension Benefit Plan
has been filed, nor has any Plan been terminated, pursuant to the provisions of
Section 4041(f) of ERISA.
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(f) The PBGC has not instituted proceedings to terminate (or
appoint a trustee to administer) a Pension Benefit Plan and no event has
occurred or condition exists which might constitute grounds under the provisions
of Section 4042 of ERISA for the termination of (or the appointment of a trustee
to administer) any such Plan.
(g) With respect to each Pension Benefit Plan that is subject
to the provisions of Title I, Subtitle B, Part 3 of ERISA, the funding method
used in connection with such Plan is acceptable under ERISA, and the actuarial
assumptions used in connection with funding such Pension Benefit Plan are, in
the aggregate, reasonable. The assets of each such Pension Benefit Plan (other
than the Multiemployer Plans) are at least equal to the present value of the
greater of (i) accrued benefits (both vested and non-vested) under such Plan, or
(ii) "benefit commitments" (within the meaning of Section 4001(a)(16) of ERISA)
under such Plan, in each case as of the latest actuarial valuation date for such
Plan (determined in accordance with the same actuarial assumptions and methods
as those used by the Borrowers' and their Subsidiaries actuaries in their
valuation of such Plan as of such valuation date). No such Pension Benefit Plan
has incurred any "accumulated funding deficiency" (as defined in Section 412 of
the Code), whether or not waived.
(h) There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the knowledge of the Borrowers or their
Subsidiaries, which could reasonably be expected to be asserted, against any
Employee Plan or the assets of any such plan. No civil or criminal action
brought pursuant to the provisions of Title I, Subtitle B, Part 5 of ERISA is
pending or, to the best of the Borrowers' knowledge, threatened against any
fiduciary of any Employee Plan. None of the Employee Plans or any fiduciary
thereof has been the direct or indirect subject of an audit, investigation or
examination by any governmental or quasi-governmental agency other than routine
audits or examinations.
(i) All of the Employee Plans comply currently, and have
complied in the past, both as to form and operation, with their terms and with
the provisions of ERISA and the Code, and all other applicable laws, rules and
regulations (including, but not limited to, each of the (1) Tax Equity and
Fiscal Responsibility Act of 1982, (2) Deficit Reduction Act of 1984, (3)
Retirement Equity Act of 1984, and (4) Consolidated Omnibus Budget
Reconciliation Act of 1985); all necessary governmental approvals for the
Employee Plans have been obtained and a favorable determination as to the
qualification under Section 401(a) of the Code of each of the Pension Benefit
Plans and each amendment thereto has been made by the Internal Revenue Service
and a recognition of exemption from federal income taxation under Section 501(a)
of the Code of each of the funded welfare benefit plans (within the meaning of
Section 3(1) of ERISA) has been made by the Internal Revenue Service, and
nothing has occurred since the date of each such determination or recognition
letter that would adversely affect such qualification.
(j) For purposes of all Sections of this Agreement dealing
with ERISA, the term "Borrowers and their Subsidiaries" shall include each trade
or business (whether or not incorporated) which together with the Borrowers and
their Subsidiaries would be treated as a single employer under the provisions of
Title I or IV of ERISA.
Section 7.14. Subsidiaries. Except as set forth on Schedule 7.14,
AMBI has no
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Subsidiaries. N21 has no subsidiaries.
Section 7.15. Permits, etc. Each of the Borrowers and their
Subsidiaries possesses all licenses, approvals and consents of Federal, state
and local governments and regulatory authorities as required to conduct properly
its business.
Section 7.16. Solvency. Each of the Borrowers and its Subsidiaries,
both before and after giving effect to the transactions contemplated hereby, are
solvent, and has assets with a fair salable value in excess of the amount
required to pay its probable liabilities on existing debts as they become
absolute and matured. Each of the Borrowers and its Subsidiaries has, and will
have, access to adequate capital for the conduct of its business and the ability
to pay its debts from time to time incurred in connection therewith as such
debts mature.
Section 7.17. Environmental Matters. (a) Except as set forth on
Schedule 7.17, neither the Borrowers nor their Subsidiaries has ever owned,
occupied or operated a site or vessel on which any hazardous material or oil was
or is stored without compliance with all statutes, regulations, ordinances,
directives and orders of every federal, state, municipal and other governmental
authority with jurisdiction relative thereto, or disposed of, transported, or
arranged for the transport of any hazardous material or oil without compliance
with all such statutes, regulations, ordinances, directives and orders, or
caused or been legally responsible for any release of any hazardous material or
oil; (b) the Borrowers and their Subsidiaries shall not dispose of any hazardous
material or oil on any site or vessel owned, occupied or operated by the
Borrowers and their Subsidiaries, nor store on any site or vessel owned,
occupied or operated by the Borrowers and their Subsidiaries, nor transport or
arrange for the transport of, any hazardous material or oil except if such
storage or transport is in the ordinary course of the Borrowers' and
Subsidiaries' business, and is in compliance with all such statutes,
regulations, ordinances, directives and orders and shall take all such action
(including, without limitation, engineering tests) as Lender may from time to
time reasonably require to confirm that there has been no release of any
hazardous material or oil on any site or vessel owned, occupied or operated by
the Borrower and their Subsidiaries; (c) the Borrowers shall indemnify, and
shall cause their Subsidiaries to indemnify, and hold the Lender harmless from
all loss, cost or expense (including reasonable attorneys' fees and expenses)
suffered by the Lender as a result of any claim brought against the Lender by
any governmental agency or authority or any other person on account of the
release of hazardous materials or oil on or from any site or vessel owned,
occupied or operated by the Borrowers or their Subsidiaries, or the failure by
the Borrowers or their Subsidiaries to comply with any environmental, health,
safety or sanitation law, code, ordinance, rule or regulation (each of which may
be defended, compromised, settled or pursued by the Lender in its reasonable
judgment with counsel of the Lender's selection, but at the expense of the
Borrowers or their Subsidiaries). Such indemnification shall survive payment of
the Obligations. As used herein the terms "site," "vessel" and "hazardous
material" shall have the meanings given to such terms in Chapter 21E of the
General Laws of Massachusetts.
Section 7.18. Ownership of the Borrowers. The authorized capital stock
of AMBI consists of 65,000,000 shares of Common Stock, $.005 par value per
share, and 5,000,000 shares of Preferred Stock, $.01 par value, of which 1,000
shares have been designated Series
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C Preferred Stock, and 100,000 shares have been designated Series D Preferred
Stock. As of the date hereof, 18,783,342 shares of Common Stock, 222 shares of
Series C Preferred Stock and 45,000 shares of Series D Preferred Stock have been
issued on a fully diluted basis. The authorized capital stock of Selene consists
of 75,000 shares of Common Stock, no par value, of which as of the date hereof,
50,000 shares have been issued on a fully diluted basis. The authorized capital
stock of JBE consists of 100 shares of Common Stock, no par value per share, of
which as of the date hereof, 100 shares have been issued on a fully diluted
basis. All of the foregoing shares have been duly and properly issued and are
outstanding and are fully paid-up and non-assessable. N21 is wholly owned by
AMBI. All of the partnership interests of N21 and the stock of Selene and JBE
are owned and held free and clear of all mortgages, liens, pledges, charges,
security interests and other encumbrances of every kind whatever.
(b) Except as disclosed on Schedule 7.18, there are no
outstanding commitments, options, warrants, calls or other agreements or
obligations (whether written or oral) binding on the Borrowers, Selene and/or
JBE which require or could require the Borrowers, Selene and/or JBE to issue,
sell, grant, transfer, assign, mortgage, pledge or otherwise dispose of (i) any
shares of any class in the capital of the Borrowers, (ii) any securities
exchangeable for or convertible into or carrying any rights to acquire any
shares of any class in the capital of the Borrowers, Selene and/or JBE or (iii)
any options, warrants or any other rights to acquire any shares of any class in
the capital of the Borrowers, Selene and/or JBE.
(c) Except as described on Schedule 7.18, no shares of any
class in the capital of the Borrowers, Selene and/or JBE are subject to (i) any
restrictions on transfer pursuant to any charter or incorporation documents or
by-laws, or (ii) any shareholder agreements, voting agreements, voting trusts,
trust agreements, trust deeds, irrevocable proxies or any other similar
agreements or instruments (whether written or oral).
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ARTICLE VIII
AFFIRMATIVE COVENANTS
Until the Obligations are paid and satisfied in full and this Agreement
has been terminated, the Borrowers covenant and agree that they will:
Section 8.01. Financial Statements and Other Information. Furnish to
the Lender:
(a) as soon as practicable, and in any event within 90 days
after the close of each fiscal year of the Borrowers thereafter, an audited
consolidated and consolidating balance sheet of the Borrowers and their
Subsidiaries, and a related audited consolidated and consolidating statement of
income and an audited consolidated and consolidating statement of cash flow of
the Borrowers, as at the end of and for the fiscal year just closed, setting
forth the corresponding figures of the previous fiscal year in comparative form,
all in reasonable detail and certified without any qualification or exception by
KPMG Peat Marwick, together with appropriate notes thereto, provided that within
75 days of the date hereof, the Borrowers shall furnish to the Lender audited
statements of income and cash flows of N21 for the prior three fiscal years all
in reasonable detail and certified, without any qualification or exception by
KPMG Peat Marwick, in accordance with the terms above;
(b) as soon as practicable, and in any event within 20 days
after the close of each calendar month, an unaudited consolidated and
consolidating balance sheet of the Borrowers and their Subsidiaries and a
related unaudited consolidated and consolidating statement of income and an
unaudited consolidated and consolidating statement of cash flows of the
Borrowers and their Subsidiaries, (i) as at the end of and for the period
commencing at the end of the previous month and ending with such month just
closed, and (ii) as at the end of and for the period commencing at the end of
the immediately preceding fiscal year and ending with such month just closed, in
each case prepared by the management of the Borrowers, all in reasonable detail
and certified by the Chairman, chief executive or financial officer(s) of the
Borrowers to be true and correct and fairly present the financial position of
the Borrowers and their Subsidiaries on such date and for such period, subject
to normal recurring year-end audit adjustments and the addition of year-end
notes and schedules and to have been prepared in accordance with generally
accepted accounting principles, such unaudited financial statements to set forth
in comparative form, the corresponding figures if any for the appropriate period
of the preceding fiscal year;
(c) promptly upon receipt thereof, copies of all final
financial reports (including, without limitation, management letters), if any,
submitted to the Borrowers and their Subsidiaries by their auditors, in
connection with each annual or interim audit or review of their books by such
auditors;
(d) promptly upon the issuance thereof, copies of all reports
to the Securities and Exchange Commission, NASDAQ or any other securities
exchange, including, but not limited to, Form 10-Q's, Form 10-K's and Form 8-K's
and any registration statements, and all reports, notices or statements sent by
the Borrowers or their Subsidiaries to the holders of any Indebtedness for
borrowed money of the Borrowers or their Subsidiaries or to the trustee under
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any indenture under which the same is issued;
(e) (i) concurrently with the delivery of the financial
statements required to be furnished pursuant to subsection 8.01(a) hereof, and
those of the financial statements required to be furnished pursuant to
subsection 8.01(b) hereof, the Borrowing Base Certificate delivered pursuant to
subsection (i) hereof;
(f) promptly upon the commencement thereof, written notice of
any claim, litigation, including arbitrations, and of any proceedings before any
governmental agency, in each case to which either of the Borrowers or any
Subsidiary is a party or by which either the Borrowers or any Subsidiary or
their respective properties may be bound, which would, if successful, materially
and adversely affect either of the Borrowers or any Subsidiary or where the
amount involved exceeds $25,000;
(g) with reasonable promptness, such other information
respecting the business, operations and financial condition of the Borrowers and
their Subsidiaries as the Lender may from time to time reasonably request;
(h) immediately upon becoming aware of any development or
other information which is reasonably likely to materially and adversely affect
the properties, business, prospects, profits or condition (financial or
otherwise) of the Borrowers or their Subsidiaries or the ability of the
Borrowers or their Subsidiaries to perform or comply with the Loan Documents or
to pay any of the Obligations, telephonic or telecopy notice specifying the
nature of such development or information and such anticipated effect;
(i) at the time of the first borrowing hereunder and monthly
thereafter by no later than the twentieth (20th) day of each month, a
certificate (a "Borrowing Base Certificate") dated such date substantially in
the form of Exhibit C hereto, such certificate to be signed by the chief
executive officer, chief financial officer or another duly authorized officer(s)
of the Borrowers, which shall include an updated inventory list and a then
current aging of Receivables of the Borrowers by date and upon request by the
Lender, a credit history thereof;
(j) from time to time when available and in any event at least
one month prior to the beginning of each fiscal year of the Borrowers and their
Subsidiaries, a summary of business plans and financial operating projections
and borrowing bases for such fiscal year (including monthly balance sheets,
statements of income and statements of cash flow) for the Borrowers and their
Subsidiaries in form and detail satisfactory to the Lender;
(k) monthly, an aging of accounts payable and an analysis by
date in form and detail satisfactory to the Lender;
(l) monthly, by no later than the twentieth (20th) day of each
month, a certificate signed by the chief executive officer or chief financial
officer(s) of the Borrowers evidencing whether the Borrowers are then in
compliance with the financial covenants set forth in Section 9.01 hereof (the
"Compliance Certificate");
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(m) at such times as the Lender may request, information
adequate to identify Receivables and the account debtors relating thereto and to
identify and value inventory in form and substance as may be requested by the
Lender, and, if the Lender so requests after the occurrence of an Event of
Default, pledges of inventory or assignments of Receivables in form and
substance satisfactory to the Lender which pledges and assignments shall give
the Lender full power to collect, compromise or otherwise deal with the assigned
Receivables and pledged inventory as the sole owner thereof; and
All nonpublic information obtained by the Lender pursuant to this
Section 8.01 shall be treated as confidential by the Lender and its internal and
external auditors and legal advisors. Notwithstanding the above, the Lender is
hereby authorized to deliver a copy of any financial statement or any other
information relating to the business, operations or financial condition of the
Borrowers and their Subsidiaries which may be furnished to it hereunder or
otherwise, to any court, regulatory body or agency having jurisdiction over the
Lender or to any Person which shall, or shall have any right or obligation to,
succeed to all or any part of the Lender's interest in any of the Loans, this
Agreement, the other Loan Documents or any Collateral.
Section 8.02. Corporate Existence, etc. Preserve and maintain, and
cause their Subsidiaries to preserve and maintain, their corporate existence,
rights and franchises.
Section 8.03. Compliance with Laws, etc. Comply, and cause their
Subsidiaries to comply, with all applicable laws, rules, regulations and orders,
and duly observe, all valid requirements of governmental authorities (including,
without limitation, ERISA and the rules and regulations promulgated thereunder),
and all applicable statutes, rules, regulations and orders relating to
environmental protection and to public and employee health and safety
(including, without limitation, OSHA and the rules and regulations promulgated
thereunder).
Section 8.04. Payment of Taxes and Claims, etc. Pay, and cause their
Subsidiaries to pay, (i) all taxes, assessments and governmental charges imposed
upon it or upon their property and (ii) all material claims (including, without
limitation, claims for labor, materials, supplies or services) which might, if
unpaid, become a Lien upon their property prior to becoming delinquent;
provided, however, that any such tax, assessment, charge or claim need not be
paid if the validity or amount thereof is being contested in good faith by
appropriate proceedings and if the Borrowers and their Subsidiaries have
established adequate reserves with respect thereto; and provided, further that
the Borrowers and their Subsidiaries shall pay all such taxes, assessments,
charges and claims forthwith upon the attachment of any Lien to the Collateral
or any portion thereof, which Lien shall not have been released within five days
of its attachment.
Section 8.05. Keeping of Books, Visitation, Inspection, etc.
(a) Keep, and cause their Subsidiaries to keep, proper books
of record and account, containing complete and accurate entries of all financial
and business transactions and such other information as may be necessary to
prepare the financial statements described in Section 8.01 hereof.
(b) Permit any representative of the Lender to visit and
inspect any of the
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Borrowers' property and that of their Subsidiaries, to examine their books and
records and to make copies and take extracts therefrom, and to discuss their
affairs, finances and accounts with its officers, all at such times and as often
as the Lender may request during normal business hours upon reasonable prior
notice to the Borrowers and their Subsidiaries provided no Event of Default has
occurred.
Section 8.06. Insurance. (a) (i) Keep, and cause their Subsidiaries to
keep, all of their properties adequately insured, at all times, with insurance
carriers satisfactory to the Lender, in amounts and pursuant to insurance
policies reasonably acceptable to the Lender, against loss or damage by fire and
other hazards, (ii) maintain, and cause their Subsidiaries to maintain, adequate
insurance, at all times with insurance carriers reasonably satisfactory to the
Lender, in amounts and pursuant to insurance policies reasonably acceptable to
the Lender against liability on account of damage to persons and property and
under all applicable workers' compensation laws, and (iii) maintain, and cause
their Subsidiaries to maintain, adequate insurance, covering such other risks as
the Lender may reasonably request. All insurance premiums shall be paid as they
become due or as may be permitted either through existing plans or through such
payment plans as are hereafter reviewed and approved by the Lender in its sole
discretion. All insurance covering tangible property subject to a Lien in favor
of the Lender granted pursuant to this Agreement or under any other Loan
Document shall provide that, in the case of each separate loss, the full amount
of insurance proceeds with respect thereto shall be payable to the Lender as
secured party or otherwise as its interests may appear, to be applied in
accordance with Section 4.02 hereof, and shall further (w) provide for at least
30 days' prior written notice to the Lender of the cancellation or substantial
modification thereof, (x) provide that, in respect of the interests of the
Lender and the Borrowers or any Person, such insurance shall not be invalidated
by any action or inaction of the Borrowers or any other Person, (y) insure the
Lender's interests regardless of any breach of or violation by the Borrowers or
any other Person of any warranties, declarations, or conditions contained in
such insurance, and (z) provide that the Lender shall have the right (but not
the obligation) to cure any default by the Borrowers or any Person under such
insurance. Each liability policy required pursuant to this Section 8.06 shall
name the Lender as an additional insured and loss payee and shall be primary
without right of contribution from any other insurance which is carried by the
Lender to the extent that such other insurance provides the Lender with
contingent and/or excess liability insurance with respect to its interest as
such in the Collateral and shall expressly provide that all of the provisions
thereof, except the limits of liability (which shall be applicable to all
insureds as a group) and except liability for premiums (which shall be solely a
liability of the Borrowers or such Subsidiary), shall operate in the same manner
as if there were a separate policy covering each insured.
(b) From time to time upon request of the Lender, promptly
furnish or cause to be furnished to the Lender evidence, in form and substance
satisfactory to the Lender, of the maintenance of all insurance required to be
maintained by Section 8.06(a) hereof, including, but not limited to, such
originals or copies as the Lender may request of policies, certificates of
insurance, riders and endorsements relating to such insurance and proof of
premium payments.
(c) Immediately upon receipt thereof, provide to the Lender
a copy of any notice of cancellation or suspension of any insurance coverage.
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Section 8.07. Properties in Good Condition. Keep, and cause their
Subsidiaries to keep, their leased properties in good repair, working order and
condition and, from time to time, make all needed and proper repairs, renewals,
replacements, additions and improvements thereto, in accordance with the terms
of the applicable leases so that the business carried on by the Borrowers and
their Subsidiaries may be properly and advantageously conducted at all times in
accordance with prudent business management.
Section 8.08. Maintenance of Liens. Except for the filing of
continuation statements and the making of other filings by the Lender as
secured party or assignee, at all times take all action necessary, and cause
their Subsidiaries to take all action necessary, to maintain the Liens and
security interests provided for under or pursuant to this Agreement or the
other Loan Documents as valid and perfected first Liens on the property
intended to be covered thereby (subject only to Liens expressly permitted
hereunder) and supply all information to the Lender necessary for such
maintenance.
Section 8.09. Notice of Default. Notify, and cause their Subsidiaries
to notify the Lender in writing promptly upon becoming aware of any default or
event, condition or occurrence which with notice or lapse of time, or both,
would constitute a default under any agreement for borrowed money to which the
Borrowers or any Subsidiary are parties or by which any of their assets are
bound or under any lease agreement to which the Borrowers or any Subsidiary are
parties.
Section 8.10. Further Assurances. At the expense of the Borrowers, upon
request of the Lender, duly execute and deliver, or cause to be duly executed
and delivered to the Lender such further instruments and take and cause to be
taken such further actions as may be necessary or proper in the reasonable
opinion of the Lender to carry out more effectually the provisions and purposes
of this Agreement and the other Loan Documents.
Section 8.11. ERISA.
(a) Pay and discharge, and cause their Subsidiaries to pay and
discharge promptly any liability imposed upon it pursuant to the provisions of
the Code and Title IV of ERISA; provided, however, that neither the Borrowers
nor any Subsidiary shall be required to pay any such liability if (1) the
amount, applicability or validity thereof shall be diligently contested in good
faith by appropriate proceedings and (2) the Borrowers or their Subsidiaries
shall have set aside on their books reserves which, in the opinion of the
Borrowers' independent certified public accountants, are adequate with respect
thereto.
(b) Deliver, and cause their Subsidiary to deliver to the
Lender promptly and in any event within 10 days, after (i) the occurrence of any
"reportable event" (within the meaning of Section 4043(b) of ERISA) with respect
to any Pension Benefit Plan, a copy of the materials that are filed with the
PBGC, or the materials that would have been required to be filed if the 30-day
notice requirement to the PBGC was not waived, (ii) the Borrowers or their
Subsidiaries or an administrator of any Pension Benefit Plan files with
participants, beneficiaries or the PBGC a notice of intent to terminate any such
Plan, a copy of any such notice, (iii) the receipt of notice by the Borrowers or
their Subsidiaries or an administrator of any Pension
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Benefit Plan from the PBGC of the PBGC's intention to terminate any Pension
Benefit Plan or to appoint a trustee to administer any such Plan, a copy of such
notice, (iv) the filing thereof with the Internal Revenue Service, copies of
each annual report that is filed on Treasury Form 5500 with respect to any
Pension Benefit Plan or Employee Plan, together with certified financial
statements (if any) for the Plan and any actuarial statements on Schedule B to
such Form 5500, (v) the Borrowers or their Subsidiaries know or have reason to
know of any event or condition which might constitute grounds under the
provisions of Section 4042 of ERISA for the termination of (or the appointment
of a trustee to administer) any Pension Benefit Plan, an explanation of such
event or condition, (vi) the receipt by the Borrowers of an assessment of
withdrawal liability under Section 4201 of ERISA from a Multiemployer Plan, a
copy of such assessment, or (vii) the Borrowers or their Subsidiaries know or
have reason to know that an application is to be, or has been made to the
Secretary of the Treasury for a waiver of the minimum funding standard under the
provisions of Section 412 of the Code, a copy of such application, in each case
together with a statement signed by the treasurer or controller of the Borrowers
or such Subsidiary setting forth details as to such reportable event, notice,
event or condition and the action which the Borrowers or their Subsidiaries
propose to take with respect thereto.
Section 8.12. Appraisals. Upon the reasonable request of the Lender no
more than once annually provided that no Event of Default shall have occurred,
deliver appraisals on all property owned and operated by the Borrowers and their
Subsidiaries, which appraisals shall be prepared by appraisers reasonably
satisfactory to the Lender at the expense of the Borrowers and shall be in form
reasonably satisfactory to the Lender.
Section 8.13. Maintenance of Accounts. Maintain their primary operating
accounts including, without limitation, cash management accounts, control
accounts, disbursement and distribution accounts and demand deposit accounts,
with the Lender.
ARTICLE IX
NEGATIVE COVENANTS
Until the Obligations are paid and satisfied in full and this Agreement
has been terminated, the Borrowers covenant and agree that they will not:
Section 9.01. Financial Covenants.
A. Minimum Consolidated Net Income. Permit Consolidated Net
Income at any time, measured monthly to be less than (except in the case of
January 1998, such number shall be a maximum) the amounts set forth below:
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Period Amount
August 1 - August 31, 1997 $100,000
September 1 - September 30, 1997 ($150,000)
October 1 - October 31, 1997 ($190,000)
November 1 - November 30, 1997 ($80,000)
December 1 - December 31, 1997 $150,000
January 1-January 31, 1998 ($140,000)
B. Minimum Consolidated Adjusted EBITDA. Permit Consolidated
Adjusted EBITDA at any time, measured at the end of each month and caLculated
on a rolling three-month basis and including at the end of each fiscal year of
the Borrowers to be less than the following:
Period Amount
October 1 - October 31, 1997 $200,000
November 1 - November 30, 1997 $ 20,000
December 1 - December 31, 1997 $320,000
January 1-January 31, 1998 $360,000
C. Minimum Consolidated Current Ratio. Permit the
Consolidated Current Ratio at any time, measured monthly to be less than the
ratio set forth opposite each such Period:
Period Ratio
August 1 - August 31, 1997 .80:1
September 1 - September 30, 1997 .80:1
October 1 - October 31, 1997 .80:1
November 1 - November 30, 1997 .80:1
December 1 - December 31, 1997 .80:1
January 1- January 31, 1998 .80:1
D. Minimum Consolidated Stockholders' Equity. Permit
Consolidated stockholder's equity at any time measured monthly to be less than
the amount set forth opposite each such Period:
Period Amount
August 1 - August 31, 1997 $ 8,100,000
September 1 - September 30, 1997 $ 7,950,000
October 1 - October 31, 1997 $ 8,750,000
November 1 - November 30, 1997 $ 8,700,000
December 1 - December 31, 1997 $ 8,850,000
January 1-January 31, 1998 $ 8,700,000
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E. Maximum Consolidated Debt/Stockholders' Equity Ratio.
Permit the ratio of Consolidated Debt to stockholders' equity to exceed the
following measured monthly:
Period Ratio
August 1 - August 31, 1997 1.55:1
September 1 - September 30, 1997 1.55:1
October 1 - October 31, 1997 1.30:1
November 1 - November 30, 1997 1:30:1
December 1 - December 31, 1997 1:30:1
January 1-January 31, 1998 1:30:1
F. Maximum Consolidated Capital Expenditures. Permit
Consolidated Capital Expenditures at any time to exceed the following amounts:
Period Amount
Section 9.02. Indebtedness. Create, incur, assume or suffer to exist,
or permit their Subsidiaries to create, incur, assume or suffer contingently
or otherwise, any Indebtedness, other than:
(a) Indebtedness to the Lender hereunder and under the Notes;
(b) unsecured Consolidated Current Liabilities (not the result
of borrowing) incurred in the ordinary course of business and not represented by
any note, bond, debenture or other evidence of Indebtedness;
(c) Indebtedness outstanding on the date hereof which is set
forth in Schedule 9.02 hereto, including Indebtedness to NSK but not the
increase, modification, refunding or extension of maturity thereof, in whole or
in part;
(d) purchase money Indebtedness secured by purchase money
security interests permitted by subsection 9.03(b);
(e) Indebtedness in respect of taxes, assessments and
governmental charges to the extent that payment therefor shall not at the time
be required to be made in accordance with the provisions of Section 8.04 hereof,
and Indebtedness secured by Liens of carriers, warehousemen, mechanics,
materialmen, and repairmen permitted under subsection 9.03(c) hereof; or
(f) Indebtedness for leased equipment and vehicles in amounts
not exceeding amounts currently shown on the Borrowers' financial statements as
of the Closing Date.
Section 9.03. Liens. Create, incur, assume or suffer to exist, or
permit their Subsidiaries to create, incur, assume or suffer to exist, any Lien
on any of their respective property or assets now owned or hereafter acquired,
other than:
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(a) Liens existing on the date hereof and disclosed in
Schedule 9.03 hereto, but not any extension, renewal or increase in the amount
thereof;
(b) Purchase money mortgages or other purchase money Liens
(including, without limitation, finance leases) upon any fixed or capital assets
hereafter acquired, or Liens (including, without limitation, finance leases) on
any such assets hereafter acquired or existing at the time of acquisition of
such assets, whether or not assumed, so long as (w) any such Lien does not
extend to or cover any other asset of the Borrowers or their Subsidiaries
(except with respect to proceeds of such asset), (x) such Lien secures the
obligation to pay the purchase price of such asset (or the obligation under such
finance lease) only, (y) the principal amount secured by each such Lien does not
exceed the unpaid purchase price for such asset and (z) the aggregate amount of
Indebtedness secured by such purchase money Liens shall not exceed $25,000 at
any time;
(c) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, or other like Liens arising in the ordinary course of business
securing sums which are not overdue;
(d) pledges or deposits to secure obligations under worker's
compensation laws or similar legislation;
(e) pledges or deposits to secure performance in connection
with bids, tenders, contracts (other than contracts for the payment of money) or
leases made in the ordinary course of business by the Borrower, as lessee;
(f) deposits to secure public or statutory obligations of
the Borrowers or their Subsidiaries;
(g) Liens in favor of the Lender.
Section 9.04. Mergers, etc. Merge or consolidate, or permit their
Subsidiaries to merge or consolidate, into or with any other Person, or change
the nature of its business, or change its name, or wind up, liquidate or
dissolve, or agree to do any of the foregoing, subject to Section 9.07 below.
Section 9.05. Sale of Assets, etc. Assign, transfer, sell, lease or
otherwise dispose of, or permit their Subsidiaries to assign, transfer, sell,
lease or otherwise dispose of, all or any part of their property or assets, or
any stock, to any other Person, other than (i) sales of inventory in the
ordinary course of business, (ii) dispositions of obsolete equipment the
aggregate value of which shall not exceed $25,000 in any fiscal year of the
Borrowers and their Subsidiaries and (iii) vehicles disposed of in the ordinary
course of business, without the Lender's consent which may be withheld in its
sole discretion.
Section 9.06. Dividends, etc. Declare or pay, or permit their
Subsidiaries to declare or pay, any dividend on their capital stock now or
hereafter outstanding, or make any payment to purchase, redeem, retire or
acquire any of their capital stock or any option, warrant (other than certain
warrants issued to the Lender), or other right to acquire such capital stock, or
apply or
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set apart any of its assets therefor, or make any other distribution in respect
of any such shares, or make any principal payment or prepayment on account of,
or purchase, redeem or defease any Subordinated Indebtedness (other than
prepayments and payments permitted under the Subordination Agreements) or agree,
to do any of the foregoing, without the Lender's consent which may be withheld
in its sole discretion.
Section 9.07. Investments, Acquisitions, Loans, etc. Lend or advance
money, credit or property to any Person, or invest in (by capital contribution,
creation of subsidiaries or otherwise), or purchase or repurchase the stock or
Indebtedness, or all or a substantial part of the assets or properties, of any
Person (or any division or subunit of any Person), or enter into any exchange of
securities with any Person, or guarantee, assume, endorse or otherwise become
responsible for (directly or indirectly or by any instrument having the effect
of assuring any person's payment or performance or capability) the Indebtedness,
performance, obligations, stock or dividends of any Person, or agree to do any
of the foregoing or permit any Subsidiary to do or agree to do any of the
foregoing (collectively, "Restricted Payments"), without the Lender's prior
written consent which may be withheld in its sole discretion, except
endorsements of negotiable instruments for deposit or collections in the
ordinary course of business or investments in money market or cash equivalent
instruments, provided that the Lender's prior written consent shall not be
required in connection with acquisitions of stock or assets or the entering into
a material licensing agreement where (i) the total consideration is paid less
than One Million Dollars ($1,000,000), (ii) the total cash consideration paid is
less than Two Hundred and Fifty Thousand Dollars ($250,000) and (iii) the
operations of the acquired party can be incorporated directly into those of one
of the Borrowers.
Section 9.08. Lease-Backs. Enter, or permit their Subsidiaries to
enter, into any arrangements, directly or indirectly, with any Person, whereby
the Borrowers or their Subsidiaries shall sell or transfer any property, whether
now owned or hereafter acquired, used or useful in its business, in connection
with the rental or lease of the property so sold or transferred or of other
property which the Borrowers or their Subsidiaries intend to use for
substantially the same purpose or purposes as the property so sold or
transferred.
Section 9.09. Compromise of Receivables. Compromise or adjust, or
permit their Subsidiaries to compromise or adjust, any of the Receivables (or
extend the time for payment thereof) or grant any discounts, allowances or
credits thereon, in each case other than in the normal course of business.
Section 9.10. Transactions with Affiliates and Agents. Directly or
indirectly purchase, acquire or lease any property from, or sell, transfer or
lease any property to, loan or advance any money or credit to, or sell any
product or provide any service on more favorable terms than would be provided to
any third-party in an arm's length transaction or enter into any other
transaction with, any stockholder, officer, Affiliate or agent of the Borrowers,
or any relative thereof, or permit their Subsidiaries to do any of the
foregoing.
Section 9.11. Compliance with ERISA.
(a) Engage, or permit their Subsidiaries to engage, in any
transaction in
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connection with which the Borrowers or their Subsidiaries could be subject to
either a material civil penalty assessed pursuant to the provisions of Section
502 of ERISA or a material tax imposed under the provisions of Section 4975 of
the Code; or
(b) Terminate, or permit their Subsidiaries to terminate, any
Pension Benefit Plan in a "distress termination" under Section 4041 of ERISA, or
take any other action which could result in a material liability of the
Borrowers to participants, beneficiaries or the PBGC; or
(c) Fail to make, or permit their Subsidiaries to fail to
make, payment when due of all amounts which, under the provisions of any Pension
Benefit Plan or Employee Plan, the Borrowers are required to pay as
contributions thereto, or, with respect to any Pension Benefit Plan, permit to
exist any material "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA and Section 412 of the Code), whether or not waived, with
respect thereto.
Section 9.12. Fiscal Year. Have, or permit their Subsidiaries to have,
a fiscal year ending other than June 30 in any year for AMBI, provided that N21
may have a fiscal year ending December 31.
Section 9.13. No Guarantees. Neither the Borrowers nor any Subsidiary
shall enter into any guarantee of indebtedness of any Person.
Section 9.14. Arrangements between Borrowers and Burns Philp. Borrow
any amounts under its existing revolving credit facility with Burns Philp until
such time as Burns Philp shall have subordinated its security interest in the
Collateral and its payment, collection and related rights to the Lender, upon
terms satisfactory to the Lender in its sole discretion in accordance with
Section 10.01(s).
Section 9.15. Subsidiaries. Acquire or create, or permit their
Subsidiaries to acquire and create, any Subsidiaries.
Section 9.16. License Arrangements. During the period in which the Term
Loan is outstanding, the Borrowers shall not sublicense any of their respective
licenses, and shall not license any patent, trademark, copyright or other
intangible asset, without the approval of the Borrower's Board of Directors (in
the case of AMBI) or partners (in the case of N21). If the outstanding principal
amount of the Term Loan is greater than $1,500,000 and a license includes any
payments during the life of the Term Loan, the Lender shall have the right to
have 50% of the payments applied by the Borrowers to reduce the principal amount
of the Term Loan.
ARTICLE X
EVENTS OF DEFAULT
Section 10.01. Events of Default. If any one or more of the following
events
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(herein called "Events of Default") shall occur for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body), that is to say:
(a) if default shall be made in the due and punctual payment
of the principal of or interest on any of the Loans or in the due and punctual
payment of any fees (including the Maintenance fees) or other amounts payable
hereunder when and as the same shall become due and payable (whether at
maturity, by acceleration or otherwise) and such default shall continue
unremedied for a period of five (5) or more days; or
(b) if (i) a default shall be made in the performance or
observance of, or shall occur under, any material covenant, agreement or
provision contained in this Agreement, any other Loan Document, and such default
shall continue unremedied for a period of thirty (30) or more days after written
notice thereof is given from the Lender to the Borrowers or any Subsidiary, or
(ii) this Agreement, or any other Loan Document, shall terminate or be
terminated or become void or unenforceable for any reason whatsoever without the
prior written consent of the Lender; or
(c) if a default, taking into consideration any applicable
grace or notice period, shall occur (i) in the payment of any principal,
interest or premium with respect to any Indebtedness for borrowed money of the
Borrowers or any Subsidiary or (ii) under any agreement or instrument under or
pursuant to which any such Indebtedness may have been issued, created, assumed,
guaranteed or secured by the Borrowers and such default shall not have been
expressly waived in writing, shall permit (assuming the giving of appropriate
notice if required) the acceleration of such Indebtedness (without giving effect
to any standstill or acceleration blockage period) or if any such Indebtedness
shall be declared due and payable prior to the stated maturity thereof or shall
not be paid in full at the stated maturity thereof; or
(d) if any representation, warranty or other statement of fact
given herein, in any other Loan Document of the Borrowers, or any Subsidiary, or
in any writing, certificate, report or statement at any time furnished to the
Lender pursuant to or in connection with this Agreement, or any Loan Document,
or otherwise, shall be false or misleading in any material respect when given;
or
(e) if the Borrowers or any Subsidiary shall be unable to pay
its or their respective debts generally as they become due; file a petition to
take advantage of any insolvency act; make an assignment for the benefit of its
or their creditors; commence a proceeding for the appointment of a receiver,
trustee, liquidator or conservator of itself or of the whole or any substantial
part of its property; file a petition or answer seeking reorganization or
arrangement or similar relief under the federal bankruptcy laws or any other
applicable law or statute of the United States of America, any state thereof or
any foreign country; or
(f) if a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee, liquidator or
conservator of the Borrowers or any Subsidiary, or of the whole or any
substantial part of their respective properties, or approve a
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petition filed against the Borrowers or any Subsidiary, seeking reorganization
or arrangement or similar relief under the Federal bankruptcy laws or any other
applicable law or statute of the United States of America, any state thereof or
any foreign country; or if, under the provisions of any other law for the relief
or aid of debtors, a court of competent jurisdiction shall assume custody or
control of the Borrowers or any Subsidiary or of the whole or any substantial
part of their respective properties; or if there is commenced against the
Borrowers or any Subsidiary any proceeding for any of the foregoing relief and
such proceeding continues for a period of sixty (60) days, whether or not
consecutive; or if the Borrowers or any Subsidiary, by any act, indicates its or
their consent to or approval of any such proceeding or petition; or
(g) if (i) any final and unappealable judgment in excess of
$25,000 is rendered against the Borrowers or any Subsidiary, (ii) there is any
injunction, attachment or execution against any of the properties of the
Borrowers or any Subsidiary for any amount in excess of $25,000, and such
judgment, attachment or execution remains unsatisfied, unstayed or undischarged
for any period of thirty (30) consecutive days unless contested by the Borrowers
in good faith and bonded over; or
(h) if (i) a reportable event (within the meaning of Section
4043(b) of ERISA) (whether or not waived) shall have occurred with respect to a
Pension Benefit Plan which could, in the opinion of the Lender, have a material
adverse effect on the financial condition of the Borrowers or any Subsidiary;
(ii) the Borrowers or any Subsidiary or an administrator of any Pension Benefit
Plan shall file a notice of intent to terminate such a Plan in a "distress
termination" under the provisions of Section 4041 of ERISA; (iii) the Borrowers
or any Subsidiary or an administrator of a Pension Benefit Plan shall receive
notice that the PBGC has instituted proceedings to terminate (or appoint a
trustee to administer) such a Plan; (iv) any other event or condition exists
which might, in the opinion of the Lender, constitute grounds under the
provisions of Section 4042 of ERISA for the termination of (or the appointment
of a trustee to administer) any Pension Benefit Plan by the PBGC; (v) a Pension
Benefit Plan shall fail to maintain the minimum funding standard required by
Section 412 of the Code for any plan year or a waiver of such standard is sought
or granted under the provisions of Section 412(d) of the Code which could, in
the opinion of the Lender, have a material adverse effect on the financial
condition of the Borrowers or any Subsidiary; or (vi) the Borrowers or any
Subsidiary has incurred, or is likely to incur, a liability under the provisions
of Sections 4062, 4063, 4064 or 4201 of ERISA which could, in the opinion of the
Lender, have an adverse effect on the financial condition of the Borrowers or
any Subsidiary; or
(i) if there shall occur any issuance or transfer of any
partnership interests of N21 or capital stock of any Subsidiary or any other
change in the legal or beneficial ownership of N21 or any Subsidiary from that
existing on the Closing Date without the prior written consent in each case of
the Lender, except for transfers of the outstanding shares of Common Stock of
the Borrowers or any Subsidiary to existing shareholders; or
(j) if the Lender shall be served with a writ of levy or
attachment, or named as defendant in a trustee process action for the Borrowers
or any Subsidiary, or of any other similar process of attachment;
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(k) if there shall occur any default under any other
obligation of the Borrowers or any Subsidiary to the Lender or any other third
party lender;
(l) [Intentionally omitted.]
(m) if the Borrower shall borrow funds from Burns Philp's at
any time prior to such date as Burns Philp shall have subordinated their loans
in accordance with Section 2.07(ix);
(n) if AMBI and its subsidiaries shall own less than 100% of
the issued and outstanding partnership interests of N21 or less than 100% of the
issued and outstanding stock of Selene or JBE or shall hold a lesser economic
interest in the business and assets of N21, Selene or JBE than it currently
maintains;
(o) except as permitted in this Agreement, if either of the
Borrowers shall either sublicense any of their respective intellectual property
rights to any third party or shall license any of their respective intellectual
property, without the prior written consent of the Lender (exclusive of certain
existing license arrangements with the USDA and Oriola in effect as of the date
of this Agreement);
(p) if AMBI shall fail to file any required securities filings
with the SEC, NASDAQ or other exchange on which its securities are then listed
on a timely basis;
(q) if AMBI shall fail to provide the Lender with prompt
notice of any NASD or similar regulatory proceedings or inquiries, whether
written or oral;
(r) any delisting of AMBI's securities; or
(s) any violation by AMBI or any of its officers, employees,
consultants or directors or agents of the FTC Order;
then, and in any such event and at any time thereafter, if such or any other
Event of Default shall then be continuing,
(A) either or both of the following actions may be taken: (i)
the Lender may declare any obligation to lend hereunder terminated whereupon the
obligation of the Lender to make further Loans hereunder shall terminate
immediately, and/or (ii) the Lender may declare any or all of the Obligations to
be due and payable, and the same, all interest accrued thereon and all other
obligations of the Borrowers to the Lender hereunder and under the Loan
Documents shall immediately become due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything contained herein or in any instrument evidencing the Obligations to the
contrary notwithstanding; provided, however, that notwithstanding the above, if
there shall occur an Event of Default under clauses (e) or (f) above, then the
obligation of the Lender to lend hereunder shall automatically terminate and any
and all of the Obligations shall be immediately due and payable without any
necessary action or notice by the Lender;
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(B) the Lender shall have all of the rights and remedies
available to it hereunder, under the other Loan Documents, at law and in
equity; and
(C) the Lender may determine which rights, security, Liens,
security interests or remedies at any time shall be pursued, relinquished,
subordinated, modified or what other action shall be taken with respect thereto,
without in any way modifying or affecting any of them or any of the Lender's
rights hereunder; and any moneys, deposits, Receivables, balances, or other
property of the Borrowers which may come into the Lender's hands at any time or
in any manner, may be retained by the Lender and applied to any of the
Obligations.
Section 10.02. Suits For Enforcement. In case any one or more Events of
Default shall occur and be continuing, the Lender may proceed to protect and
enforce its rights or remedies either by suit in equity or by action at law, or
both, whether for the specific performance of any covenant, agreement or other
provision contained herein or in any document or instrument delivered in
connection with or pursuant to this Agreement, or to enforce the payment of the
Obligations or any other legal or equitable right or remedy.
Section 10.03. Rights and Remedies Cumulative. No right or remedy
herein conferred upon the Lender is intended to be exclusive of any other
right or remedy contained herein or in any instrument or document delivered in
connection with or pursuant to this Agreement, and every such right or remedy
shall be cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.
Section 10.04. Right of Setoff. In addition to and not in limitation of
all rights of offset that the Lender may have under applicable law, the Lender
shall, upon the occurrence and during the continuance of any Event of Default
and whether or not the Lender has made any demand or any Obligations are
matured, have the right to appropriate and apply to the payment of the
Obligations, all deposits (general or special, time or demand, provisional or
final) then or thereafter held by and other indebtedness or property then or
thereafter owing to the Borrowers by the Lender, whether or not related to this
Agreement, the other Loan Documents or any transaction hereunder regardless of
the existence or sufficiency of any other Collateral therefor.
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ARTICLE XI
MISCELLANEOUS
Section 11.01. Notices. All notices, requests and other communications
to any party hereunder or under any of the Loan Documents shall be in writing
(except for telephonic Notices of Borrowing) and shall be personally delivered
or sent by certified mail, postage prepaid, return receipt requested, or by a
reputable courier delivery service and shall be given,
if to the Borrowers: AMBI Inc.
771 Old Saw Mill Road
Tarrytown, NY 10591
Attn: Fredric D. Price
with a copy to: AMBI Inc.
771 Old Saw Mill Road
Tarrytown, NY 10591
Attn: Benjamin T. Sporn, Esq.
Vice President and General Counsel
Oscar D. Folger, Esquire
521 Fifth Avenue, 24th Floor
New York, NY 10175
if to the Lender: State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Attn: Basem W. Pharaon, Loan Officer
with a copy to: Steven P. Rosenthal, Esquire
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
or such other address as such party may hereafter specify by notice to the
Lender and the Borrower. Each such notice, request or other communication shall
be effective (i) if given by certified mail, 72 hours after such communication
is deposited with the post office, addressed as aforesaid or (ii) if given by
any other means (including, without limitation, by air courier), when delivered
at the address specified in this Section.
Section 11.02. Amendments, etc. No amendment or waiver of any provision
of this Agreement or any other Loan Document, nor consent to any departure by
the Borrowers or any Subsidiary therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Lender and the Borrowers
or such Subsidiary, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
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Section 11.03. No Waiver. No failure or delay on the part of the Lender
in exercising any right, power or remedy hereunder or under any other Loan
Document and no course of dealing between the Borrowers or any Subsidiary and
the Lender shall operate as a waiver of any thereof, nor shall any single or
partial exercise of any right, power or remedy hereunder or under any other Loan
Document or any abandonment or discontinuance of steps to enforce any such
right, power or remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy hereunder. No notice to or demand
on the Borrowers or any Subsidiary not required hereunder or under any other
Loan Document in any case shall entitle the Borrowers or any Subsidiary to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Lender to any other or further action
in any circumstances without notice or demand.
Section 11.04. Payment of Expenses, Indemnity, etc. The Borrowers
shall:
(a) except as specifically limited herein, whether or not the
transactions hereby contemplated are consummated, pay all out-of-pocket costs
and expenses of the Lender in the administration (both before and after the
execution hereof and including advice of counsel as to the rights and duties of
the Lender with respect thereto) of, and in connection with the preparation,
execution and delivery of, preservation of rights under, enforcement of, and
refinancing, renegotiation or restructuring of, this Agreement, the Notes, the
other Loan Documents and the documents and instruments referred to herein and
therein and any amendment, waiver or consent relating thereto (including,
without limitation, the fees and disbursements of counsel for the Lender in each
instance and all reasonable travel, lodging and related costs of Lender in
connection with any periodic site visits to the Borrowers during the term of the
Loans in connection with its review of the Borrowers' business);
(b) pay and hold the Lender harmless from and against any and
all present and future stamp and other similar taxes with respect to the
foregoing matters and hold the Lender harmless from and against any and all
liabilities with respect to or resulting from any delay or omission to pay such
taxes;
(c) indemnify, defend and hold harmless the Lender and its
directors, officers, agents, employees and counsel from and against any and all
losses, claims, damages, liabilities, deficiencies, judgments or expenses
incurred by any of them (except to the extent that it is finally judicially
determined to have resulted from their own gross negligence or willful
misconduct) arising out of or by reason of any litigations, investigations,
claims or proceedings, pending or threatened, which arise out of or are in any
way related to (i) any actual or proposed use by the Borrowers of the proceeds
of the Loans or (ii) the Lender's entering into this Agreement, any of the other
Loan Documents including, without limitation, amounts paid in settlement, court
costs and the fees and disbursements of counsel incurred in connection with any
such litigation, investigation, claim or proceeding.
If and to the extent that the obligations of the Borrowers under this
Section 11.04 are unenforceable for any reason, the Borrowers hereby agree to
make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law. The Borrowers'
obligations under this Section 11.04 shall survive any termination of this
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Agreement and the payment in full of the Obligations.
Section 11.05. Benefit of Agreement. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, provided that the Borrowers may
not assign or transfer any of their interest hereunder without the prior written
consent of the Lender.
(b) The Lender may make, carry or transfer Loans at, to or
for the account of, any of its branch offices or the office of an Affiliate of
the Lender.
(c) (i) The Lender may assign its rights, but may not delegate
its obligations, under this Agreement and further may assign, or sell
participations in, all or any part of any Loan or Loans made by it or any other
interest herein or in its Notes to another bank or insurance company or pension
fund, in which event (A) in the case of an assignment, upon notice thereof by
the Lender to the Borrowers, the assignee shall have, to the extent of such
assignment (unless otherwise provided therein), the same rights and benefits as
it would have if it were the Lender hereunder and the holder of a Note, and (B)
in the case of a participation, the participant shall not have any rights under
this Agreement or any Note or any other Loan Document, except as set forth in
this Section 11.05(c) (the participant's rights against the Lender in respect of
such participation to be those set forth in the agreement executed by the Lender
in favor of the participant relating thereto). The Lender may furnish any
information concerning the Borrowers in the possession of the Lender from time
to time to assignees and participants (including prospective assignees and
participants). In the event that the Lender assigns or sells a participation in
all or any part of the Notes or the Loans or any interest in the Collateral in
connection therewith to any Person other than an Affiliate of the Lender, the
Lender shall endeavor to give the Borrowers prompt notice thereof, provided that
the failure of the Lender to give such notice shall not result in any liability
to the Lender.
(ii) The Borrowers hereby grant to each participant in the
Loans, and each such participant shall have and is hereby given, a continuing
lien on and security interest in any and all monies, securities, and other
property of the Borrowers and the proceeds thereof, now or hereafter held or
received by such participant, and also upon any and all deposits (general or
special) and credits of the Borrowers with, and any and all claims of the
Borrowers against, such participant, at any time existing, including the right
of setoff, to the extent of such participant's participation in the Loans, and
such participant shall be deemed to have, the same right of setoff to the extent
of such participant's participation in the Loans as it would if it were a direct
lender.
Section 11.06. Governing Law, Submission to Jurisdiction, etc.
(a) This Agreement and the rights and obligations of the
parties hereunder and under the Notes shall be construed in accordance with and
be governed by the laws of the Commonwealth of Massachusetts (without giving
effect to the conflict of law principles thereof).
(b) Any legal action or proceeding with respect to this
Agreement or the Notes or any other Loan Document may be brought in the courts
of The Commonwealth of Massachusetts or of the United States of America for the
District of Massachusetts, and, by
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execution and delivery of this Agreement, the Borrowers hereby accept for itself
and their Subsidiaries and in respect of their respective property, generally
and unconditionally, the jurisdiction of the aforesaid courts.
(c) The Borrowers hereby irrevocably waive, in connection with
any such action or proceeding, (i) any objection, including, without limitation,
any objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any such
action or proceeding in such respective jurisdictions, (ii) the right to
interpose any setoff, non-compulsory counterclaim or cross-claim and (iii) to
the maximum extent not prohibited by law, the Borrowers, and the Lender each
hereby knowingly, voluntarily and intentionally waive any right they may have to
a trial by jury in respect of any litigation directly or indirectly arising out
of, under or in connection with this Agreement, the other Loan Documents, or the
transactions contemplated hereby or thereby.
(d) The Borrowers irrevocably consent to the service of
process of any of the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail, postage prepaid,
to the Borrowers at their address set forth in Section 11.01 hereof.
(e) Nothing herein shall affect the right of the Lender to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Borrowers in any other
jurisdiction.
Section 11.07. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same agreement.
Section 11.08. Collection Costs. In the event that the Lender shall
retain an attorney or attorneys to collect, enforce, protect, maintain, preserve
or foreclose its interests with respect to this Agreement, the Loans, the Notes,
any other Loan Document, any Obligations, any Receivable, or the lien or
security interest in any Collateral or any other security for the Obligations or
under any instrument or document delivered pursuant to this Agreement, or in
connection with any Obligations, or to protect the rights of any holder or
holders with respect thereto, the Borrowers shall pay all of the reasonable
costs and expenses actually incurred of such collection, enforcement or
protection, including, without limitation, reasonable attorneys' fees, which
amounts shall be part of the Obligations, and the Lender may take judgment for
all such amounts.
Section 11.09. Termination of Agreement. (a) The Borrowers may
terminate this Agreement at any time upon (i) the delivery to the Lender of
irrevocable notice of its intention to terminate this Agreement and (ii) payment
of all Obligations of the Borrowers to the Lender under or in respect of this
Agreement, the Notes and the other Loan Documents, including, without
limitation, the principal amount of all Loans outstanding as of the date of such
payment, all interest accrued thereon through the date of such payment, and all
fees and expenses accrued and unpaid through the date of such payment.
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(b) The Lender may terminate this Agreement immediately, at
any time during the continuance of an Event of Default under Article X;
provided, however, that this Agreement shall automatically terminate if there
shall occur an Event of Default under Section 10.01(e) or 10.01(f) hereof.
(c) The termination of this Agreement shall not affect any
rights of the Borrowers or the Lender arising prior to the effective date of
such termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into, rights created or Obligations incurred
prior to such termination have been fully disposed of, concluded or liquidated.
Upon the termination of this Agreement, all Obligations (including, without
limitation, the Loans) shall be due and payable without notice or demand. The
security interests, liens and rights granted to the Lender hereunder and under
the Loan Documents shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that the Borrowers' accounts may from
time to time be temporarily in a credit position, until all of the Obligations
have been paid in full after the termination hereof. All representations,
warranties, covenants, waivers and agreements contained herein shall survive
termination hereof unless otherwise provided. Notwithstanding the foregoing, if
after receipt of any payment of all or any part of the Obligations, the Lender
is for any reason compelled to surrender such payment to any Person or entity
because such payment is determined to be void or voidable as a preference,
impermissible setoff, a diversion of trust funds or for any other reason, this
Agreement shall continue in full force and the Borrowers shall be liable to, and
shall indemnify and hold the Lender harmless for, the amount of such payment
surrendered until the Lender shall have been finally and irrevocably paid in
full. The provisions of the foregoing sentence shall be and remain effective
notwithstanding any contrary action which may have been taken by the Lender in
reliance upon such payment, and any such contrary action so taken shall be
without prejudice to the Lender's rights under this Agreement and shall be
deemed to have been conditioned upon such payment having become final and
irrevocable.
Section 11.10. Headings Descriptive. The headings of the several
articles and sections of this Agreement, and the Table of Contents, are inserted
for convenience only and shall not in any way affect the meaning or construction
of any provision of this Agreement.
Section 11.11. Entire Agreement. This Agreement, together with the
other Loan Documents and the Subordination Agreements, embodies the entire
agreement and understanding among the parties relating to the subject matter
hereof and supersedes all prior proposals, negotiations, agreements and
understandings relating to such subject matter. Each of the Borrowers certifies
that it is relying on no statement, representation, warranty, covenant or
agreement of any kind except for those set forth in this Agreement and the other
Loan Documents.
Section 11.12. Waiver of Rights Related to Damages. To the maximum
extent not prohibited by law, the Borrowers and the Lender each hereby
knowingly, voluntarily and intentionally waives any right it may have to claim
or recover in any litigation directly or indirectly arising out of, under or in
connection with this Agreement, the other Loan Documents, or the transactions
contemplated hereby or thereby any special, exemplary, punitive or consequential
damages or any damages other than, or in addition to, actual damages, unless
such
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claim is with respect to the willful misconduct or gross negligence of the
Lender.
Section 11.13. Certifications. The Borrowers and the Lender each hereby
certifies that neither any representative or agent of the Lender nor the
Lender's counsel has represented, expressly or otherwise, or implied that the
Lender would not, in the event of litigation, seek to enforce the waivers set
forth in subsection 11.06(c) and Section 11.12 hereof. The Borrowers and the
Lender each acknowledge that they have been induced to enter into this Agreement
by, among other things, the mutual waivers and certifications herein.
Section 11.14. Severability. In the event that any court of competent
jurisdiction shall determine that any provision, or any portion thereof,
contained in this Agreement shall be unreasonable or unenforceable in any
respect, then such provision shall be deemed limited to the extent that such
court deems it reasonable and enforceable, and as so limited shall remain in
full force and effect. In the event that such court shall deem any such
provision, or portion thereof, wholly unenforceable, the remaining provisions of
this Agreement shall nevertheless remain in full force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed by its duly authorized officer as an instrument
under seal in The Commonwealth of Massachusetts as of the day and year first
above written.
AMBI INC., a New York corporation
(formerly known as Applied Micro Biology, Inc.)
By: _________________________________________
Title:_______________________________________
hereunder duly authorized
NUTRITION 21, a California limited partnership
By: SELENE SYSTEMS, INC., a California
corporation, its General Partner
By:__________________________________________
Title:_______________________________________
hereunder duly authorized
STATE STREET BANK AND TRUST COMPANY
By:__________________________________________
Basem W. Pharaon, Loan Officer
48
