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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) January 21, 1999
AMBI Inc.
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(Exact Name of Registrant as Specified in its Charter)
New York 1-12106 11-2653613
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
4 Manhattanville Road, Purchase, New York 10577
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including Area Code: (914) 701-4500
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Item 2. Acquisition of Assets
On January 21, 1999, AMBI Inc. (the "Company") acquired substantially
all of the assets and assumed certain of the liabilities of Optimum Lifestyle,
Inc. ("Seller") relating to the business (the "Business") of developing,
producing, and marketing dietary supplements, primarily nutrition bars which are
marketed under the trademark "Lite-Bites" through the QVC Inc. television
network. These products are manufactured to proprietary specifications under
agreements with third party manufacturers. The purchase price paid by the
Company at the closing was $6,000,000 in cash (the "Cash Purchase Price") and
1,304,347 shares of common stock of the Company. Additional contingent payments
will be made to the Seller depending primarily on sales levels of the Business
achieved during the five year period following the closing, payable in preferred
stock of the Company and up to $5,500,000 in cash. A portion 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"), which Loan Agreement also amended and restated a prior agreement with
the Bank, and the balance was funded from internal working capital. Loans from
the Bank bear interest at the prime rate plus 1% and are due February 1, 2002.
Dean Radetsky and Cheryl Radetsky, who prior to the closing were not affiliated
with the Company, own all of the shares of capital stock of Seller and have
entered into consulting and non-competition agreements with the Company.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
Financial statements of Seller 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
2.1. Agreement of Purchase and Sale of Assets made on January 19, 1999
by and among Dean Radetsky and Cheryl Radetsky, Optimum Lifestyle,
Inc., a California corporation, and AMBI Inc., a New York corporation.
2.2. Amended and Restated Revolving Credit and Term Loan Agreement
dated as of January 21, 1999 between the Bank as Lender and the Company
as Borrower.
20.1 Press release of the Company dated January 22, 1999.
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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
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Fredric D. Price
President and Chief Executive Officer
Date: February 3, 1999
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Exhibit 2.1
AGREEMENT OF PURCHASE AND SALE OF ASSETS
AGREEMENT OF PURCHASE AND SALE OF ASSETS ("Agreement") is made January 19, 1999
by and among DEAN RADETSKY and CHERYL RADETSKY (each, a "Shareholder" and
collectively the "Shareholders"), OPTIMUM LIFESTYLE, INC., a California
corporation (the "Seller"), and AMBI INC., a New York corporation ("Purchaser").
Shareholders own all of the outstanding shares of capital stock of Seller.
W I T N E S S E T H:
IN CONSIDERATION of the mutual covenants and agreements hereinafter set forth,
the parties hereby agree as follows:
1. Purchase and Sale of Business and Assets.
(a) Purchase and Sale.
(i) Subject to and upon the terms and conditions set forth in
this Agreement, Seller will sell, transfer, convey, assign and deliver
to Purchaser, and Purchaser will purchase, at the closing described in
Section 6 (the "Closing"), all of the business, assets, properties,
goodwill and rights of Seller as a going concern, of every nature, kind
and description, tangible and intangible, wheresoever located and
whether or not carried or reflected on the books and records of Seller,
except for the Excluded Assets (as defined in Section 1(d)). Such
business, assets, properties, goodwill and rights other than the
Excluded Assets are hereinafter sometimes collectively called "Seller's
Assets."
(ii) The purchase and sale hereunder shall be deemed made as
of the opening of business on January 1, 1999 (the "Effective Date"),
so that, once the Closing has occurred, the economic benefits of
Seller's business from and after the Effective Date shall be deemed to
have accrued to the benefit of Purchaser, and the economic burdens of
Seller's business from and after the Effective Date shall be deemed to
be for the account of Purchaser. The parties will at the Closing make
such payments among themselves as shall be necessary to put the parties
in the same economic position they would have occupied had the Closing
occurred on the Effective Date (the "As-Of Adjustments").
(b) Except as set forth in Section 1(d), Seller's Assets include,
without limitation:
(i) All of Seller's merchandise, inventories, materials and
supplies used in the business of Seller including items in transit from
vendors (hereinafter collectively referred to as "Inventory");
(ii) All accounts receivable, notes receivable and all accrued
or unaccrued payments or obligations which have inured or shall inure
to the benefit of Seller as of the date of Closing (the "Closing
Date");
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(iii) All machinery, equipment, office equipment, leasehold
improvements, fixtures, and supplies of Seller existing as of the
Closing Date, including any replacements thereof but excluding any
office equipment and furniture currently located in the personal
residence of the Shareholders;
(iv) All of the right, title and interest of Seller in and to
all United States and foreign patents, trademarks and copyrights,
application for any of the foregoing, if any, all inventions and
technology of Seller, including, but not limited to, manufacturing
information, know-how and processes, quality control and quality
assurance information, testing specifications and procedures, product
formulations, and other trade secrets, and any and all variations or
derivations thereof, and in and to all logos, insignias and advertising
materials of Seller bearing the name "LITE BITES" or "HEALTHY BITES"
and/or relating to the Seller's Assets, and all trade dress, trade
names, and trademarks and trademark applications of Seller in any way
related to the business of making, having made, using, selling and
furnishing dietary supplements and other nutrition food products (the
"Business");
(v) All of the right, title and interest in and to all leases
of real and personal property to which Seller is a party with respect
to the Business; Purchaser will succeed to the current month-to-month
lease and will seek to amend the term thereof to a six-month or other
term;
(vi) All of the right, title and interest of Seller in and to
all agreements, contracts and orders, license agreements, franchise and
all other agreements and contracts with respect to the Business,
including but not limited to those described on the Disclosure Schedule
(as hereinafter defined) as "Assumed Contracts";
(vii) The lists of Seller of suppliers and of clients which
exist as of the Closing Date;
(viii) To the extent dated from and after January 1, 1997 or
relating to any period from and after January 1, 1997, all of Seller's
files, records and correspondence, including without limitation,
employee lists and files, and sales and advertising materials and
records, sales and purchase correspondence (reference is made to
Section 7(f) for Purchaser's rights with respect to all files and
materials prior to January 1, 1997);
(ix) All deposits, credits and prepaid items related to or
arising from the Business;
(x) The goodwill of Seller;
(xi) The assets referred to in the form of Bill of Sale
attached hereto as Exhibit A to this Agreement;
(xii) The assets (except for Excluded Assets, as defined in
Section 1(d)) reflected on the December Balance Sheet (as defined in
Section 10(f)), with only such dispositions of such assets reflected on
the December Balance Sheet as shall have occurred in the ordinary
course of Seller's business between the date thereof and the Closing
and the existence of which shall not constitute a breach of any
representation or warranty by Seller or either Shareholder hereunder;
(xiii) All other assets, properties, rights and businesses of
every kind and nature owned or held by Seller relating to the Business,
or in which Seller has an interest, on the
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date hereof, known or unknown, fixed or unfixed, choate or inchoate,
accrued, absolute, contingent or otherwise, whether or not specifically
referred to in this Agreement.
(c) Seller's Assets shall be conveyed free and clear of all
liabilities, obligations, liens and encumbrances excepting
only those liabilities and obligations which are expressly to
be assumed by Purchaser hereunder and those liens and
encumbrances securing the same which are specifically
disclosed herein or expressly permitted by the terms hereof.
(d) Prior to the Closing, Seller shall distribute to its
shareholders an amount of cash and accounts receivable (if
necessary) equal to its good faith estimate of undistributed
profits (including amounts in its "AAA" account, if any, but
excluding any bonus awarded to Marvin Segel in 1998) through
the Effective Date, except to the extent that such
distributions would reduce estimated working capital as of the
Effective Date to less than $50,000. Any such undistributed
profit which is not distributed by Seller to its shareholders
prior to the Closing is considered an Undistributed Amount.
The Undistributed Amount will be verified by Purchaser within
thirty days of Closing. Purchaser shall pay the Undistributed
Amount, if any, to Seller according to the following schedule:
(i) if the Undistributed Amount is less than $100,000,
Purchaser shall pay Seller the full amount promptly upon
verification of the amount, (ii) if the Undistributed Amount
is between $100,000 and $250,000, the Purchaser shall pay
Seller half each within 30 and 60 days of Closing, (iii) if
the Undistributed Amount is between $250,000 and $400,000,
then Purchaser shall pay one-third each within 30, 60 and 90
days of Closing, and (iv) if the Undistributed Amount is
greater than $400,000, then Purchaser shall pay one-fourth
each within 30, 60, 90 and 120 days of Closing. All payments
of Undistributed Amounts shall be offset by the Purchaser
against the First Contingent Payment (as hereinafter defined)
in the manner provided in Section 2(e)(i). Cash or receivables
distributed by Seller to its shareholders to satisfy
undistributed profit distribution prior to the Closing (the
"Pre-Closing Dividend"), the assets reflected on the December
Balance Sheet (as hereinafter defined) as "Non-Assumed
Accounts Receivables" and the assets designated on Schedule
1(d) (collectively the "Excluded Assets") are excluded from
Seller's Assets. The term "working capital" means the amount,
determined as of the Effective Date by which cash, accounts
receivable and inventory exceed trade accounts payable. If,
upon verification of the Undistributed Amount it is determined
that Seller has distributed assets in excess of actual profits
through the Effective Date, then Seller shall repay Purchaser
pursuant to the same terms and schedule as stated above.
2. Purchase Price.
(a) In consideration of the sale, transfer, conveyance, assignment
and delivery by Seller of the Seller's Assets to Purchaser,
and in reliance upon the representations and warranties made
herein by Seller and Shareholders, Purchaser will, in full
payment thereof, pay to Seller a purchase price (the "Purchase
Price") which shall be payable as and to the extent provided
in Sections 2(b) through 2(i) and which shall consist of:
(i) $6,000,000 (the "Cash Payment"), plus
(ii) the Post-Closing Cash Adjustment (as defined in Section
2(c)), plus
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(iii) a number of shares of Purchaser's fully paid and
nonassessable Common Stock (hereinafter "Purchase Price Shares")
calculated under Section 2(d)), plus
(iv) the First Contingent Payments (as defined in Section
2(e)), plus
(v) the Second Contingent Payments (as defined in Section
2(f)), plus
(vi) the Third Contingent Payment (as defined in Section 2(g).
(b) Purchaser shall pay the Cash Payment at the Closing by wire
transfer to accounts designated by Seller.
(c) The Post-Closing Cash Adjustment is as follows:
(i) The "Post-Closing Cash Adjustment" shall equal the amount,
if any, by which net sales of the Business during the period from
October 1, 1998 through March 31, 1999 shall exceed $3,430,000, but in
no event shall the Post-Closing Cash Adjustment be greater than
$1,500,000. By mutual written agreement, in the event of the occurrence
of material, non-ordinary events, the parties may determine that an
alternative means of calculating the Post-Closing Cash Adjustment is
necessary; but in the absence of such agreement, such calculation shall
be made as provided in the preceding sentence.
(ii) The Post-Closing Cash Adjustment shall be determined by
Purchaser's chief financial officer or other designated officer subject
to the provisions of Section 3. Within 30 days after such
determination, Purchaser shall pay the Post-Closing Cash Adjustment by
wire transfer to accounts designated by Seller.
(iii) "Net sales" means sales of Products (as hereinafter
defined) net of returns, discounts and allowances consistent with past
practices. "Products" means products currently marketed by Seller under
the name "Lite Bites" or "Healthy Bites" or the same product or any
substantially similar product marketed under any name by Purchaser.
(d) Purchase Price Shares.
(i) The Purchase Price Shares means 1,304,347 shares of common
stock of Purchaser ("Common Stock").
(ii) [omitted]
(iii) The Purchase Price Shares shall be issued to Seller
and/or its designees (the "Designees") at the Closing, provided that
each stock recipient has made customary investor representations to
Purchaser.
(iv) By mutual written agreement, the parties may agree that,
in lieu of the Purchase Price Shares or any agreed portion thereof,
Purchaser will at the Closing pay to Seller cash in an agreed amount.
(e) First Contingent Payments.
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(i) With respect to each of the first three anniversaries of
the Closing, at the times and as otherwise set forth in Section
2(e)(iii), Purchaser will be obligated to pay to Seller:
(1) a percentage of $1,000,000 which is equal to the
percentage that (x) the number of days in which
Purchaser engaged in the Base Business (as
hereinafter defined) during the 12-month period prior
to such anniversary is of (y) 365; and
(2) if Purchaser on any date (the "termination date")
before the third anniversary of the Closing ceases to
engage in the Base Business, then on each of such
anniversaries which occurs thereafter, Purchaser will
be obligated to pay to Seller an amount equal to
$1,000,000 times the Base Arms Sales Ratio (as
hereinafter defined) for (x) the 12-month period
prior to such anniversary or (y), if the termination
date occurred during such 12-month period, for the
period beginning after the termination date.
(ii) In no event shall Purchaser be obligated to pay to Seller
an aggregate amount in excess of $1,000,000 with respect to any
anniversary aforesaid.
(iii) Payments under this Section 2(e) are referred to herein
as "First Contingent Payments."
(iv) The "Base Business" means the business of selling
Products through (1) on-air sales over any television shopping network
which has substantially the market reach of QVC or HSN (a "television
shopping network"), (2) any non- on-air distribution arms of any
television shopping network, including, for example, the internet,
direct mail, telephone sales, reorders, and catalog etc. arms of any
television shopping network (collectively, "television shopping arms"),
and (3) infomercials on any television station, provided that:
(1) If Purchaser at its discretion terminates on-air
sales over television shopping networks as a channel
for the sale of Products, then the Base Business
shall also include sales of Products in any business
channel; and
(2) If television shopping networks terminate on-air
television sales of Products or refuse to engage in
the on-air sale of Products on terms substantially
similar to those in effect on the date hereof in
Seller's sales through QVC, Purchaser shall no longer
be deemed to be engaged in the Base Business whether
or not it sells Products through television shopping
arms, or through infomercials, or through other
business channels.
(v) The "Base Arms Business" means the business of selling
Products through television shopping arms, but only so long as such
sales are at the annual rate of not less than $2,000,000.
(vi) The "Base Arms Sales Ratio" for any period means sales of
the Base Arms Business in such period (net of returns, discounts and
allowances consistent with past practice), divided by (1) $500,000,
multiplied by (2) the number of whole calendar months in such period.
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(vii) The First Contingent Payment for each anniversary date
aforesaid shall be determined within 30 days after such anniversary,
and shall be paid promptly thereafter by wire transfer to accounts
designated by Seller. However, by notice given by Seller to Purchaser
not less than 20 days before a payment is due hereunder, Seller may
elect to receive all or 50% of such payment in shares of Common Stock
valued at the average closing price of the Common Stock during the 10
trading days prior to the anniversary for which such payment is being
made.
(viii) In the event that Purchaser's chief financial officer
or other designated officer shall determine, subject to the provisions
of Section 3, that Seller's working capital as of the Effective Date
(after giving effect to the distributions permitted under Section 1(d))
is less than $50,000, the amount of such deficiency shall be deducted
from the first payment which would otherwise be made in respect of the
First Contingent Payment.
(f) Second Contingent Payments.
(i) For each of the first two years after the Closing Date,
Purchaser will make a payment (a "Second Contingent Payment") to Seller
in an amount equal to such year's Base Business Ratio (as defined
below), multiplied by $1,500,000.
(ii) The Base Business Ratio for the first year shall be
determined as follows: If the quotient (the "Quotient") of (i) Base Net
Sales (as hereinafter defined) in such year, divided by (ii)
$7,500,000, is at least equal to one, the Base Business Ratio for such
year is the Quotient. If the Quotient is less than one, the Base
Business Ratio for such year is the Quotient squared (the Quotient
times the Quotient).
(iii) The Base Business Ratio for the second year shall be
determined as follows: If the quotient (the "Quotient") of (i) Base Net
Sales (as hereinafter defined) in such year, divided by (ii)
$8,400,000, is at least equal to one, the Base Business Ratio for such
year is the Quotient. If the Quotient is less than one, the Base
Business Ratio for such year is the Quotient squared.
(iv) The term "Base Net Sales" means sales of Products through
the Base Business, net of returns, discounts and allowances consistent
with past practice; provided that during periods in which the Company
does not engage in the Base Business, the term "Base Net Sales" shall
mean sales of Products through the Base Arms Business, net of returns,
discounts and allowances consistent with past practice.
(v) If during the first two years after the Closing Purchaser
records revenues from the sale of Products through mass consumer
markets (i.e., grocery, drug, discount, and other retail outlets with
"shelves," etc.) ("Additional Net Sales") and such Additional Net Sales
are not included in the term "Base Net Sales" because Purchaser has not
theretofore at its discretion terminated on-air sales over television
shopping networks as a channel for the sale of Products, then such
Additional Net Sales shall nevertheless be included in the calculation
of Base Net Sales for the applicable year, but only to the extent that
the Base Business Ratio as calculated in strict accordance with
Sections 2(f)(ii) or 2(f)(iii) above would otherwise be less than 1.00.
For such purpose, the Base Business Ratio will be calculated including
Additional Net Sales in the numerator of the ratio, but in no event
shall the Base Business Ratio exceed 1.00.
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(vi) By way of example, assume that Base Net Sales during the
first year are $13,000,000 and during the second year are $7,000,000.
The Quotient for the first year would be 1.7333 and the Quotient for
the second year would be .8333. The Second Contingent Payment for the
first year would be 1.7333 times $1,500,000, or $2,599,950. The Second
Contingent Payment for the second year would be 0.6943 (.8333 squared)
times $1,500,000, or $1,041,450. If, however, Purchaser records
Additional Net Sales of $2,000,000 in the second year of this example
and the Additional Net Sales are not included in the term "Base Net
Sales," then the full $2,000,000 Additional Net Sales would be added to
the $7,000,000 and the resulting $9,000,000 total would then be divided
by $8,400,000 yielding a quotient in excess of 1.00 (of which the
excess over 1.0 is disregarded) and a Second Contingent Payment of
$1,5000,000.
(vii) 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.
(viii) The amount of each Second Contingent Payment shall be
determined by Purchaser's chief financial officer subject to the
provisions of Section 3. Within 30 days after the final determination
of a Second Contingent Payment, Purchaser shall make such payment by
issuing to Seller and its Designees one share of 5% Series G Preferred
Stock of Purchaser (the "Preferred Stock") for each full $1,000 payable
in respect of the Second Contingent Payment, together with a cash
payment for any fractional share which would otherwise be issued
hereunder. The Certificate of Amendment of Purchaser's Certificate of
Incorporation in respect of the Preferred Stock shall be in the form of
Exhibit B to this Agreement.
(g) Third Contingent Payment.
(i) Purchaser will pay to Seller $1,000,000 (the "Third
Contingent Payment") within 30 days after the end of the first 12
consecutive month period which ends before the fifth anniversary of the
Closing during which:
(1) net sales of the Products in "mass consumer markets"
(i.e., grocery, drug, discount, and other retail
outlets with "shelves", etc.) are equal to or exceed
net on-air sales of the Products on the QVC
television network during such 12-month period, and
(2) net on-air sales of the Products on the QVC
television network or any other television channel
are at least equal to such net sales in the 12
consecutive whole calendar months prior to the
Closing.
(h) Imputed Interest Gross-up. To the extent that Seller shall
incur federal and state income tax based on imputed interest
on any portion of the Purchase Price paid after the Closing,
Purchaser shall gross up such payments in order to make Seller
whole in respect of the tax rate differential applicable to
ordinary income versus capital gain.
(i) The Purchase Price shall be allocated among the Seller's
Assets as set forth on Schedule 2(i) to this Agreement, and
the parties agree to report this transaction in all required
filings and reports to taxing authorities in accordance with
said allocation.
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3. Financial Reports, Audit Rights, Non-Circumvention.
(a) During the period beginning on the Closing Date and ending
upon the earlier of the Third Contingent Payment or the fifth
anniversary of the Closing (the "Contingent Payment Period"),
Purchaser shall make available to Seller and its
representatives: (i) copies of Purchaser's annual and
quarterly reports to the SEC within a reasonable time after
such reports are filed; and (ii) within 45 days after the end
of each quarter, detailed information regarding the number and
type of Products sold during the preceding quarter.
(b) Seller or its representative will have the right at Seller's
expense reasonably to audit Purchaser's records which are
relevant to Purchaser's obligations to make payments under
Section 2.
(c) If there is a dispute between Seller and Purchaser as to the
determination of any portion of the Purchase Price, the
undisputed portion (if any) shall be paid promptly as provided
in Section 2, and the dispute shall be submitted to Price
Waterhouse Coopers, which shall review Purchaser's books and
records and make a final determination within 30 days. The
determination of Price Waterhouse Coopers shall be final and
binding on all parties. The fees of Price Waterhouse Coopers
shall be paid (i) by Purchaser, if such firm determines that
Purchaser underpaid Seller by 3% or more, (ii) by Seller, if
such firm determines that Purchaser overpaid Seller by 3% or
more, and (iii) equally by Purchaser and Seller in all other
cases.
(d) Payments under Section 2 which are not made when due shall
accrue interest at the lesser of (i) 3.5 points over the
"Prime Rate" (as quoted in the Wall Street Journal) or (ii)
the highest rate permitted by law.
(e) During the Contingent Payment Period, Purchaser shall not take
actions which are designed to reduce payments to Seller
hereunder unless such actions are primarily intended to
benefit Purchaser economically other than by merely reducing
such payments to Seller.
4. Assumption of Certain Liabilities.
(a) Purchaser will at the Closing assume the liabilities of Seller
which are referred to in Seller's disclosure schedule
("Seller's Disclosure Schedule" or "Disclosure Schedule") as
"Assumed Liabilities." Purchaser is not assuming any
liabilities of Shareholders.
(b) Anything in this Agreement to the contrary notwithstanding,
Purchaser shall not assume, or in any way be liable or
responsible for:
(i) any liability under any contracts which arises out of
Seller's failure to perform its obligations thereunder to the extent
such performance is due on or prior to the Effective Date;
(ii) any liabilities or obligations for any foreign, federal,
state, county or local income, franchise, gross receipts or value added
taxes, or any interest, additions to tax or penalties thereon, accrued
for, applicable to or arising from any period prior to the Effective
Date;
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(iii) any liability or obligation arising in connection with
Excluded Assets or the operation thereof;
(iv) any liability to the extent covered by insurance of
Seller pursuant to a policy in effect on or prior to Closing; or
(v) any profit sharing or incentive bonuses or sales
commissions or similar bonuses or payments (including, without
limitation, the liability in the amount of $61,353 to Marvin Segel
which is reflected on the December Balance Sheet as a Non-Assumed
Commission Payable, and any other profit sharing or incentive bonuses,
or sales commissions or similar bonuses or payments to Marvin Segel )
allocable to the period prior to the Effective Date, it being
understood that where such bonuses or payments are measured by results
during a period which straddles the Effective Date, the amount of such
bonus or payment shall be allocated to the periods before and after the
Effective Date on a pro rata basis based on the number of days in such
period before and after the Effective Date, and an estimate of the
amount due for the period through the Effective Date shall be paid by
Seller at the Effective Date; or
(vi) any payments to employees or others under
incentive/profit sharing arrangements; or
(vii) liabilities reflected on the December Balance Sheet as
"Non-Assumed Accounts Payable."
5. Securities Covenants, Lock-Ups and Registration Rights.
(a) Seller covenants that at the Closing each of Seller and its
Designees shall deliver to Purchaser a certificate in form
reasonably satisfactory to Purchaser in which it absolutely
and unconditionally represents and warrants to Purchaser that:
(i) It will acquire the shares of Common Stock and Preferred
Shares issuable hereunder, and the shares of common stock issuable on
conversion of the Preferred Stock (collectively, the "Shares") only for
its own account, for investment, and without a view to the distribution
thereof (except in compliance with applicable securities laws).
(ii) It understands that it may sell or otherwise transfer the
Shares only if such transaction is duly registered under the Securities
Act of 1933, as amended (the "Act"), or an exemption from such
registration is available. It has been advised or is aware of the
provisions of Rule 144 promulgated under the Act, which permits limited
resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, (1)
the availability of certain current public information about the
Purchaser, (2) the passage of required holding periods under Rule 144
and (3) compliance with limitations on the volume of shares which may
be sold during any three-month period.
(iii) It acknowledges that the certificates representing the
Shares will be legended to reflect these restrictions.
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(b) Without limiting Purchaser's other rights or remedies which
shall arise out of any breach of the aforesaid covenant, no
certificates for the Shares will be delivered if any of Seller
or its Designees fails to confirm the foregoing
representations as of the Closing.
(c) Seller will not, and will cause its Designees not to: (1) sell
or otherwise dispose of the shares of common stock issued at
Closing for a period of six months from and after the Closing;
(2) sell the common stock issued in respect of the First
Contingent Payment for a period of six months from and after
the date of such First Contingent Payment; or (3) convert the
Preferred Stock into common stock during the first six months
after the issuance of the Preferred Stock. No restriction is
imposed by this Section 5(d) on the sale of any shares of
common stock which are issued upon conversion of the Preferred
Stock, to the extent such sale is otherwise permitted
hereunder. Certificates for the Shares shall be legended to
reflect the provisions of this Section.
(d) Registration Rights.
(i) Purchaser will on or before the 45th day after the Closing
file a registration statement with the Securities and Exchange
Commission (the "SEC") for the public sale by the Seller and its
Designees of the shares of Common Stock issued to Seller and its
Designees at the Closing. Purchaser will also on or before the 90th day
after the issuance of the Preferred Stock file a registration statement
with the Securities and Exchange Commission (the "SEC") for the public
sale by the Seller and its Designees of the shares of Common Stock
issuable on conversion of the Preferred Stock. The term "Registration
Statement" means each registration statement referred to in this
Section.
(ii) If Purchaser shall at any time propose the registration
under the Act of any shares of common stock, Purchaser shall give
notice as promptly as possible (but no less than 15 days before filing
a registration statement with respect to such registration) of such
proposed registration to Seller, and Purchaser shall use its best
efforts to include in such registration statement such number of shares
of common stock as Seller and its Designees shall request within 10
days after the receipt of such notice to be included in any such
offering; provided, however, that
(1) Purchaser shall not be required to give notice or
include such shares in any such registration which is
(A) a registration of a stock option or compensation
plan or of securities issued or issuable pursuant to
any such plan, or (B) a registration of securities
proposed to be issued in exchange for securities or
assets of, or in connection with a merger or
consolidation with, another corporation;
(2) Purchaser shall not be required to include such
shares in any such registration if Purchaser is
advised in writing by its investment banking firm
that the inclusion of such shares would in its
opinion have a materially adverse effect on such
proposed offering of its common stock; provided,
however, that such exclusion shall be made in
proportion to the number of shares proposed to be
included in such offering other than by Purchaser,
and in no case shall such exclusion be more than 10%
of the total number of shares proposed to be sold in
any such offering; and
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(3) Purchaser may, without the consent of Seller,
withdraw such registration statement and abandon the
proposed offering in which Seller had requested to
participate.
(iii) Purchaser shall use commercially reasonable efforts to
cause the Registration Statement to become effective not later than 60
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 Seller and its Designees may reasonably request and in which
there is no applicable exemption from the requirement to register.
(iv) Purchaser shall pay all expenses of the registration
hereunder including reasonable fees of any one law firm which alone
represents Seller and all of its Designees, but Purchaser shall not pay
Seller's underwriting discounts.
(v) Purchaser shall supply to Seller and its Designees a
reasonable number of copies of all registration materials and
prospectuses. Purchaser and Seller shall execute and deliver to each
other indemnity agreements which are set forth in Schedule 5(d)(v). The
Shareholders shall reasonably cooperate with Purchaser in the
preparation and filing of the Registration Statement and appropriate
amendments thereto.
(vi) Whether or not any shares have been registered, neither
Seller nor either Shareholder shall engage (or cause others, including
without limitation Seller's employees, to engage) in the trading of
securities of Purchaser prior to the Closing.
6. Closing. The Closing shall take place at 10:00 A.M., local time, on
January __, 1999 at the offices of Oscar D. Folger, Esq., 521 Fifth
Avenue, New York NY 10175, or such other time and place as the parties
may agree upon. The day on which the Closing actually takes place is
herein sometimes referred to as the Closing Date. The Closing shall be
deemed to have taken place immediately prior to the opening of
business, East Coast time, on the Closing Date.
7. Other Transactions at Closing; Further Assurances.
(a) At the Closing, Seller and Shareholders will deliver to
Purchaser:
(i) Bills of Sale duly executed by Seller in the form of an
Exhibit to this Agreement;
(ii) such other good and sufficient instruments of conveyance,
assignment and transfer including trademark registrations and
applications, in form and substance satisfactory to Purchaser's
counsel, as shall be effective to vest in Purchaser good and marketable
title to Seller's Assets;
(iii) all contracts, files and other data included in Seller's
Assets;
(iv) all documents required to be delivered to Purchaser under
the provisions of this Agreement;
(v) a copy of the Articles of Incorporation of Seller
certified as of a date within 10 days of the Closing Date by an
appropriate government official of its jurisdiction of incorporation
and certified by its respective Secretary as to the absence of any
amendments between the dates of certification by the official and the
Closing Date;
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(vi) a certificate from the appropriate governmental official
as to the good standing of Seller as of a date within ten days of the
Closing Date;
(vii) copies of the bylaws of Seller, certified by its
Secretary as a true and correct copy thereof as of the Closing Date;
(viii) [omitted]
(ix) the certificates referred to in Section 13;
(x) the opinion of Seller's counsel referred to in Section 13;
and
(xi) such other documents as may be required pursuant to this
Agreement or as may reasonably be requested by Purchaser and its
counsel.
(b) On the Closing Date, Purchaser shall deliver or cause to
be delivered to Seller and the shareholders, as applicable,
the following:
(i) payment of the cash and stock amounts which under Section
2 are required to be paid at the Closing;
(ii) a copy of the resolutions of the Board of Directors of
Purchaser, together with any and all required resolutions or consents
of the shareholders thereof, approving the execution and delivery of
this Agreement and the consummation of all of the transactions
contemplated hereby, duly certified by an officer of Purchaser;
(iii) the certificates referred to in Section 14;
(iv) a copy of the Certificate of Amendment of Purchaser's
Certificate of Incorporation in respect of the Preferred Stock in the
form attached as Exhibit C, certified as filed by the Secretary of
State of the State of New York;
(v) a certificate from the appropriate governmental official
as to the good standing of Purchaser as of a date within ten days of
the Closing Date;
(vi) the opinion of Purchaser's counsel referred to in Section
14; and
(vii) such other documents as may be required pursuant to this
Agreement or as may reasonably be requested by Seller and its counsel.
(c) At the Closing, Purchaser will execute and deliver, and each
Shareholder will execute and deliver, a consulting agreement
with Purchaser in the form of Exhibit D to this Agreement.
(d) At the Closing, Seller and each Shareholder shall execute and
deliver to Purchaser a Non-Competition Agreement in the form
of Exhibit E to this Agreement.
(e) At the Closing, the parties will make the As-Of Adjustments.
(f) At any time and from time to time after the Closing, at
Purchaser's request and without further consideration, Seller
and Shareholders will execute and deliver such other
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instruments of sale, transfer, conveyance, assignment and
confirmation and take such action as Purchaser may reasonably
deem necessary or desirable in order to more effectively
transfer, convey and assign to Purchaser, and to confirm
Purchaser's title to, all of Seller's Assets, to put Purchaser
in actual possession and operating control thereof and to
assist Purchaser in exercising all rights with respect
thereto. Without limiting the generality of the foregoing,
Seller and each Shareholder agree that after the Closing, each
will execute any documents which may be required to vest all
right, title and interest to the Intangible Property (Section
10 (n)) acquired by Purchaser, including but not limited to,
confirmatory assignments and other documents, as well as all
documents as may be needed to record in the United States
Patent, Trademark and Copyright Offices and in foreign
countries, as well as in any States, the transfer to Purchaser
of Seller's and each Shareholder's right, title and interest
in the Intangible Property.
(g) After the Closing, at reasonable times and on reasonable
notice, Seller shall have access to the books and records
included in the Seller's Assets, and Purchaser shall have
access to Seller's books and records for the period prior to
the Closing to the extent that the same are not included in
Seller's Assets, and Purchaser shall have the right at its
expense to make copies of any of such records. Each party
shall retain such books and records for a period of not less
than three years after the Closing, and shall not dispose of
or destroy such books and records without in writing first
offering to deliver such books and records to the other party.
(h) Seller agrees that after the Closing Purchaser shall have the
right and authority to collect for its own account all
receivables and other items which shall be transferred to
Purchaser as provided herein and to endorse with the name of
Seller any checks received on account of any such receivables
or other items. Seller agrees that it will promptly transfer
and deliver to Purchaser any cash or other property which
Seller may receive in respect of such receivables or other
items.
8. Board Position. So long as Seller and the Shareholders own more than 10% of
the total number of outstanding shares of Common Stock (including in such
calculation that number of shares of Common Stock into which Preferred
Stock held by Seller and the Shareholders is convertible), Seller and the
Shareholders shall have the right jointly to nominate one member of
Purchaser's Board of Directors, subject to Purchaser's approval, which will
not be unreasonably withheld. Purchaser shall in Purchaser's annual proxy
statement to its shareholders submit such nominee to Purchaser's
shareholders for election as a management nominee.
9. License. Seller and Shareholders shall at the Closing grant to Purchaser a
non-exclusive, fully paid-up license in the form of Exhibit F to use the
name "Optimum Lifestyle" for a one-year period beginning on the Closing
Date. Seller represents and warrants that it will promptly cause its
trademark for "Optimum Lifestyle" to be cancelled, and that in any event
Seller will not use such term as a trademark or in connection with the
dietary supplement or nutrition food products business.
10. Representations and Warranties by Seller and Shareholders. Except as set
forth in the Disclosure Schedule with respect to specifically identified
subsections of this Section 10 or except where a disclosure with respect to
a specifically identified subsection manifestly is also an exception to
another one or more subsections, Seller and each Shareholder jointly and
severally represent and warrant to Purchaser as follows:
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(a) Organization, Standing and Qualification. Seller is a
corporation duly organized, validly existing and in good
standing under the laws of the State of California and has
full corporate power and authority to carry on its business as
now being conducted and to own, lease or operate its
properties; and it is duly qualified, licensed or domesticated
and in good standing as a foreign corporation authorized to do
business in the states listed on Seller's Disclosure Schedule,
which are the only states where the nature of the activities
conducted by it or the character of the properties owned,
leased or operated by it require such qualification, licensing
or domestication and where the failure to be so qualified
would cause a material adverse effect on Seller's business.
(b) Subsidiaries. Seller has no subsidiaries. Seller has no
interest, direct or indirect, and has no commitment to
purchase any interest, direct or indirect, in any other
corporation or in any partnership, joint venture or other
business enterprise or entity. The business carried on by
Seller has not been conducted through any other direct or
indirect subsidiary or affiliate of any Shareholder.
(c) Transactions with Certain Persons.
(i) During the past three years Seller 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 Seller), in the ordinary
course of business or otherwise, (i) any shareholder of Seller 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 Seller or any shareholder of Seller.
(ii) Seller does not owe any amount to, or have any contract
with or commitment to, any of its shareholders, directors, 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 Seller.
(iii) Seller does not use any property or assets of any
Shareholder or any direct or indirect subsidiary or affiliate of any
Shareholder.
(d) Execution, Delivery and Performance of Agreement; Authority.
Neither the execution, delivery nor performance of this
Agreement by Seller or any Shareholder will, with or without
the giving of notice or the passage of time, or both, conflict
with, result in a default, right to accelerate or loss of
rights under, or result in the creation of any lien, charge or
encumbrance pursuant to, any provision of Seller's articles of
incorporation or by laws or any franchise, mortgage, deed of
trust, lease, license, agreement, understanding, law, rule or
regulation or any order, judgment or decree to which Seller or
any Shareholder is a party or by which any of them may be
bound or affected. Seller and each Shareholder have the full
power and authority to enter into this Agreement and to carry
out the transactions contemplated hereby, all proceedings
required to be taken by them or its shareholders to authorize
the execution, delivery and performance of this Agreement and
the agreements relating hereto have been properly taken and
this Agreement constitutes a valid and binding obligation of
Seller and each Shareholder.
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(e) Capitalization. Each Shareholder owns of record and
beneficially 50% of the authorized, issued and outstanding
shares of capital stock of Seller, free and clear of any
liens, claims, encumbrances or restrictions of any kind, and
all of such shares are validly issued and outstanding, fully
paid and nonassessable. There are no outstanding
subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or
arrangements of any character or nature whatsoever under which
Seller or any Shareholder is or may become obligated to issue,
assign or transfer any shares of the capital stock of Seller,
and there are no rights of first refusal or similar rights
with respect to any such shares.
(f) Financial Statements.
(i) The following financial statements of Seller (hereinafter
collectively called the "Financial Statements") which are attached as
Exhibit G have been prepared from the books and records of Seller in
accordance with accounting principles which have been consistently
applied and maintained throughout the periods indicated and which
differ from generally accepted accounting principles ("GAAP") only as
set forth on the Disclosure Schedule:
(1) unaudited balance sheet of Seller as at December 31,
1997 and unaudited statements of earnings and source
and application of funds (or trial balance) for the
year then ended; and
(2) unaudited balance sheet of Seller (the "December
Balance Sheet") as at December 31, 1998 (the
"December Balance Sheet Date") and Seller's
unaudited statements of earnings and source and
application of funds (or trial balance) for the 12
months then ended.
(ii) The Financial Statements fairly present the financial
condition of Seller as at their respective dates and the results of its
operations for the periods covered thereby.
(iii) The statements of earnings included in the 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, which consist only of normal
recurring accruals, necessary for such fair presentation.
(g) Absence of Undisclosed Liabilities. Except as and to the
extent reflected or reserved against on the December Balance
Sheet, as of the December Balance Sheet Date, Seller 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
Seller's income, or its property or authorized or outstanding
capital stock, for any period prior to the close of business
on the December 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 December Balance Sheet
Date, whether or not then known, due or payable.
(h) Taxes. All tax returns required to be filed by Seller have
been accurately prepared in all material respects and have
been duly and timely filed. All taxes, including, without
limitation, income, property, sales, use, franchise, added
value, employees' income withholding and social security
taxes, imposed by the United States or by any foreign
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country or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign
country, or by any other taxing authority, which are due or
payable by Seller, and all interest and penalties thereon,
whether disputed or not, have been paid in full . All deposits
required by law to be made by Seller with respect to
employees' withholding taxes have been duly made. Seller has
not been delinquent in the payment of any foreign or domestic
tax, assessment or governmental charge or deposit and has no
tax deficiency or claim outstanding, proposed or assessed
against it, and there is no basis for any such deficiency or
claim. The audit status of Seller's federal income tax returns
is as set forth in the Disclosure Schedule, and there is not
now in force any extension of time with respect to the date on
which any tax return was or is due to be filed by or with
respect to Seller, or any waiver or agreement by it for the
extension of time for the assessment of any tax.
(i) Absence of Changes or Events. Since the December Balance Sheet
Date, Seller has conducted its business only in the ordinary
course and has not:
(1) incurred any obligation or liability, absolute,
accrued, contingent or otherwise, whether due or 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
Seller;
(2) discharged or satisfied 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 December Balance
Sheet and current liabilities incurred since the
December Balance Sheet Date in the ordinary course of
business and consistent with its prior practice;
(3) except for the Pre-Closing Dividend, declared or made
any payment of dividends or other distribution to its
shareholders or upon or in respect of any shares of
its capital stock, or purchased, retired or redeemed,
or obligated itself to purchase, retire or redeem,
any of its shares of capital stock or other
securities;
(4) mortgaged, pledged or subjected to lien, charge,
security interest or any other encumbrance or
restriction any of its property, business or assets,
tangible or intangible;
(5) except for the Pre-Closing Dividend, sold,
transferred, leased to others or otherwise disposed
of any of its assets, except for inventory sold in
the ordinary course of business, or canceled or
compromised any debt or claim, or waived or released
any right of substantial value;
(6) received any notice of termination of any contract,
lease or other agreement or suffered any damage,
destruction or loss (whether or not covered by
insurance) which, in any case or in the aggregate,
has had or may have a materially adverse effect on
the assets, operations or prospects of Seller;
(7) encountered any labor union organizing activity, had
any actual or threatened employee strikes,
work-stoppages, slow-downs or lock-outs, or had or
may have
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any material change in its relations with its
employees, agents, customers or suppliers;
(8) transferred or granted any rights under, or entered
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;
(9) except as reflected in the Disclosure Schedule, made
any change in the rate of compensation, commission,
bonus or other direct or indirect remuneration
payable, or paid or agreed or orally promised to pay,
conditionally or otherwise, any bonus, extra
compensation, pension or severance or vacation pay,
to any shareholder, director, officer, employee,
salesman, distributor or agent of Seller;
(10) made any capital expenditures or capital additions or
betterments in excess of an aggregate of $50,000;
(11) changed its banking or safe deposit arrangements;
(12) instituted, settled or agreed to settle any
litigation, action or proceeding before any court or
governmental body relating to Seller or its property;
(13) failed 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 made 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 made any change in its selling, pricing,
advertising or personnel practices inconsistent with
its prior practice and prudent business practices
prevailing in the industry;
(14) suffered any change, event or condition which, in any
case or in the aggregate, has had or could reasonably
be expected to have a materially adverse effect on
Seller's condition (financial or otherwise),
properties, assets, liabilities, operations or
prospects, including, without limitation, any change
in Seller's revenues, costs, backlog or relations
with its employees, agents, customers or suppliers;
(15) entered into any transaction, contract or commitment
other than in the ordinary course of business; or
(16) entered into any agreement or made any commitment to
take any of the types of action described in
subparagraphs (1) through (15) above.
(j) Litigation. There is no claim, legal action, suit,
arbitration, governmental investigation or other legal or
administrative proceeding, nor any order, decree or judgment
in progress, pending or in effect, or to the knowledge of
Seller or any Shareholder threatened, against or relating to
Seller, its officers, directors or employees, its properties,
assets or business or the transactions contemplated by this
Agreement.
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(k) Compliance with Laws and Other Instruments. To the knowledge
of Seller and the Shareholders, Seller has complied with all
existing laws, rules, regulations, ordinances, orders,
judgments and decrees applicable to its business, properties
or operations as presently conducted, including without
limitation, all federal Occupational Safety and Health
Administration ("OSHA") and California Department of Health
requirements, and has all permits, licenses and other
authorizations applicable to its business, properties or
operations as presently conducted. To the knowledge of Seller
and the Shareholders, neither the ownership nor use of
Seller's properties nor the conduct of its business as
currently conducted conflicts with the rights of any other
person, firm or corporation or violates, or with or without
the giving of notice or the passage of time, or both, will
violate, conflict with or result in a default, right to
accelerate or loss of rights under, any terms or provisions of
its articles of incorporation or bylaws as presently in
effect, or any lien, encumbrance, mortgage, deed of trust,
lease, license, agreement, understanding, law, ordinance, rule
or regulation, or any order, judgment or decree to which
Seller is a party or by which it may be bound or affected; and
Seller is not aware of any proposed laws, rules, regulations,
ordinances, orders, judgments, decrees, governmental takings,
condemnations or other proceedings which would be applicable
to its business, operations or properties and which might
adversely affect its properties, assets, liabilities,
operations or prospects, either before or after the Closing.
(l) Title to Properties.
(i) Seller has good, marketable and insurable title to or
(where expressly disclosed in the Disclosure Schedule) valid leasehold
interests in and to all the properties and assets it owns or uses in
its business or purports to own, including, without limitation,
Seller's Assets and those assets and properties which are reflected in
the December Balance Sheet (except inventory sold after the December
Balance Sheet Date in the ordinary course of business and, effective
immediately prior to the Closing, the Pre-Closing Dividend).
(ii) None of such properties and assets is subject to any
mortgage, pledge, lien, charge, security interest, encumbrance,
restriction, lease, license, easement, liability or adverse claim of
any nature whatsoever, direct or indirect, whether accrued, absolute,
contingent or otherwise, except:
(1) as expressly set forth in the December Balance Sheet
or in the Disclosure Schedule as securing specific
liabilities or as otherwise expressly permitted by
the terms hereof, or
(2) liens for taxes not yet due and other statutory
liens arising in the ordinary course of business, or
(3) those imperfections of title and encumbrances, if
any, which
(a) are not substantial in character, amount or
extent and do not materially detract from
the value of the properties subject thereto,
(b) do not interfere with either the present and
continued use of such property or the
conduct of Seller's normal operations, and
(c) have arisen only in the ordinary course
of business.
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(iii) All of the properties and assets owned, leased
or used by Seller are in good operating condition and repair,
are suitable for the purposes used, are adequate and
sufficient for all current operations of Seller and are
directly related to the business of Seller.
(m) Schedules.
(i) Seller's Disclosure Schedule includes a separate schedule
containing an accurate and complete list and description of:
(1) All inventions and technology used by or possessed by
Seller, including, but not limited to, manufacturing
information, know-how and processes, quality control
and quality assurance information, testing
specifications and procedures, product formulations,
and other trade secrets, and any and all variations
or derivations thereof.
(2) All real property in which Seller has a leasehold or
other interest or which is used by Seller in
connection with the operation of its business.
(3) As of a date no earlier than December 31, 1998, all
of Seller'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.
(4) All property included within Seller's Assets as of a
date no earlier than the December Balance Sheet Date.
(5) All patents, patent applications, patent licenses,
trademarks, trademark registrations, and applications
therefor, service marks, service names, trade names,
copyrights and copyright registrations, and
applications therefor, wholly or partially owned or
held by Seller or currently used in the operation of
Seller's business.
(6) All contracts, agreements, commitments or licenses
relating to patents, trademarks, trade names,
copyrights, inventions, processes, know-how, formulae
or trade secrets to which Seller is a party or by
which it is bound.
(7) All contracts, agreements and commitments, whether or
not fully performed, in respect of the issuance, sale
or transfer of the capital stock of Seller.
(8) All contracts, agreements, commitments or other
understandings or arrangements to which Seller is a
party or by which it or any of its property is bound
or affected, but excluding:
(a) contracts entered into in the ordinary
course of business and involving payments or
receipts by Seller of less than $10,000 in
the case of any single contract but not more
than $50,000 in the aggregate, and
(b) contracts entered into in the ordinary
course of business which are terminable by
Seller on less than 30 days' notice without
any penalty or consideration.
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(9) 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,
including, without limitation, holiday, vacation,
Christmas and other bonus practices, to which Seller
is a party or is bound which relate to the operation
of Seller's business.
(10) The names and current compensation of all persons
(including independent commission agents) whose
compensation (direct or indirect) is from Seller, and
showing separately for each such person the amounts
paid or payable as salary, bonus and/or
incentive/profit sharing or other payments, and any
indirect compensation for the year ended December 31,
1997, their current rates of compensation, and
anticipated total compensation, including the
aforesaid components thereof, for the year ending
December 31, 1998.
(11) The names of all of Seller's directors and officers;
the name of each bank in which Seller 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 Seller and a summary of
the terms thereof, and
(12) The names of all of employees of Seller or other
persons with knowledge of any of Seller's technology,
know-how or trade secrets ("Key Employees"), and
copies of non-disclosure or similar agreements.
(ii) All of the contracts, agreements, leases, licenses and
commitments required to be listed on Seller's Disclosure Schedule
(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 validly assignable to Purchaser without the
consent of any other party so that, after the assignment thereof to
Purchaser pursuant hereto, Purchaser will be entitled to the full
benefits thereof. There is not under any such contract, agreement,
lease, license or commitment any existing default by Seller or (to the
knowledge of Seller and Shareholders) any other party thereto, or event
which, after notice or lapse of time, or both, would constitute a
default by Seller or (to the knowledge of Seller and Shareholders) any
other party thereto, or result in a right to accelerate or loss of
rights. True and complete copies of all such contracts, agreements,
leases, licenses and other documents listed on Seller's Disclosure
Schedule (together with any and all amendments thereto) have been
delivered to Purchaser.
(n) Intangible Property.
(i) Seller's Disclosure Schedule sets forth a complete list of
the following:
(1) all of the following ("Proprietary Rights") which are
currently owned or currently used by Seller or
applicable to the business of Seller or in any way
relate to Seller's Assets (pursuant to license
agreements or otherwise): inventions, trademarks,
service marks, trade dress, trade names, label
filings,
20
<PAGE>
patents, copyrights, royalty rights, logos,
insignias, and advertising materials bearing the name
"LITE BITES" OR "HEALTHY BITES";
(2) all applications for and registrations of Proprietary
Rights and the jurisdictions in which the Proprietary
Rights have been registered, filed or issued;
(3) contracts, agreements or understandings pursuant to
which Seller has authorized any person to use any of
the Proprietary Rights; and
(4) all inventions and technology used by or possessed by
Seller, including, but not limited to, manufacturing
information, know-how and processes, quality control
and quality assurance information, testing
specifications and procedures, product formulations,
and other trade secrets, and any and all variations
or derivations thereof (collectively, the "Trade
Secrets").
(ii) Seller has not received notice of any claims or demands
of any person pertaining to the Proprietary Rights or the Trade Secrets
or the rights of Seller thereunder, and to the knowledge of Seller or
any Shareholder, no proceedings have been instituted or are pending or
threatened which challenge the rights of Seller in respect thereof. To
the knowledge of Seller and Shareholders none of the issued trademarks,
service marks, trade names, trade dress, label filings, patents,
copyrights, logos, registrations thereof, or, as the case may be, the
rights granted to Seller in respect thereof and to be listed in
Seller's Disclosure Schedule, infringes on or is being infringed upon
by others, and none is subject to any outstanding order, decree,
judgment, stipulation, injunction, restriction or agreement restricting
the scope of the use by Seller.
(iii) To the knowledge of Seller and Shareholders, Seller is
not infringing or violating, and during the past five years, Seller has
not infringed or violated, any Proprietary Rights of others, nor, to
the knowledge of Seller and Shareholders, used any confidential
information or trade secrets or patentable or unpatentable inventions
of any former employer of any employee of Seller.
(iv) Seller and Shareholders have no knowledge of any patented
device or application therefor owned or held by others which could
materially and adversely affect the operation of the businesses of
Seller, as now conducted.
(v) The Trade Secrets have not been, and will not be,
disclosed by Seller to any person other than Purchaser and its agents
and representatives, and comprise all of the same necessary to permit
the continued operation of the business of Seller.
(o) No Guaranties. None of the obligations or liabilities of
Seller is guaranteed by any other person, firm or corporation,
nor has Seller guaranteed the obligations or liabilities of
any other person, firm or corporation.
(p) Inventory. All items of Seller's inventory and related
supplies (including raw materials, work-in-process and
finished goods) reflected on the December Balance Sheet or
thereafter acquired and not subsequently disposed of in the
ordinary course of business ( except for obsolete items and
items of below-standard quality, all of which have been
written off or written down in value as reflected on the
December Balance Sheet or which have not been written off or
written down but are reflected on the December Balance Sheet
at an aggregate of no more than $50,000) are merchantable, or
suitable and usable
21
<PAGE>
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 December Balance Sheet and the books and records of Seller
is so reflected on the basis of a complete physical count and
is valued at the lower of cost (on a first-in, first-out
basis) or market in accordance with generally accepted
accounting principles consistently applied. Seller's Assets
include a sufficient but not an excessive quantity of each
type of such inventory and supplies in order to meet the
normal requirements of Seller's business.
(q) Receivables. All receivables of Seller (including accounts
receivable, loans receivable and advances) which are reflected
in the December 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
Seller's business.
(r) Labor Matters. Seller is not a party to any collective
bargaining agreement and there are no material or formal
complaints, charges, cases or controversies or any
conciliation agreement, consent or decree pending or, to the
knowledge of Seller or Shareholders, threatened against Seller
and any of its employees acting individually or in concert and
to the knowledge of Seller and Shareholders no organization is
presently attempting to gain, petitioning for or asserting
representational status with respect to any group or groups of
employees of Seller, and Seller is in material compliance with
Federal and state laws respecting employment practices, terms
and conditions of employment, wages and hours, and is not
presently engaged in any unfair labor practice. All employees
of the Company are legally employed, and those who are not
U.S. citizens have appropriate U.S. governmental
authorizations. There is no labor strike or other labor
dispute and there is no complaint, proceeding or other action
instituted under the Equal Opportunity Act pending or, to the
knowledge of Seller or Shareholders, threatened against
Seller.
(s) Environmental Matters.
(i) Seller is, and at all times has been, in material
compliance with, and has not been in violation of, any federal, state,
foreign, or local laws, statutes, ordinances, regulations, rules and
orders pertaining to the environment, pollution and/or the health and
safety of human beings (collectively "Environmental Law"). Neither
Shareholder nor Seller has any basis to expect or has received, any
actual or threatened order, notice, or other communication from (A) any
governmental body or private citizen acting in the public interest, or
(B) 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 properties or assets
(whether real, personal, or mixed) in which Seller has or has had an
interest, or with respect to any property at or to which any hazardous
or toxic waste or substance ("Hazardous Materials") was generated,
manufactured, refined, transferred, imported, used, or processed by
Seller, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(ii) To the knowledge of Seller and Shareholders, there are no
pending or 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
22
<PAGE>
properties and assets (whether real personal or mixed) in which Seller
has or had an interest.
(iii) Neither Shareholder nor Seller has permitted or
conducted, or is aware of, any Hazardous Materials activity conducted
with respect to the properties or assets (whether real, personal, or
mixed) in which Seller has or had an interest.
(iv) To the knowledge of Seller and the Shareholders, there
has been no release or threat of release of any Hazardous Materials at
or from the locations where any Hazardous Materials were generated,
manufactured, refined, transferred, produced, imported, used or
processed from or by the properties and assets (whether real, personal,
or mixed) in which Seller has or had an interest.
(v) Seller has delivered to Purchaser true and complete copies
and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by Seller pertaining to Hazardous Materials or
Hazardous Materials activities in, on, or under the properties of
Seller, or concerning compliance by Seller with respect to
Environmental Laws.
(t) Proceedings re Employee Benefit Plans. 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 Seller or any person, firm or
corporation ("Affiliate") which is under "common control"
(within the meaning of Section 4001(b) of ERISA) with Seller,
or (ii) commencement of any proceeding to terminate any such
plan pursuant to ERISA, or otherwise or (iii) written notice
given to Seller or any Affiliate of the intention to commence
or seek the commencement of any such proceeding. All accrued
benefits under each pension plan of Seller covering employees
who are to be transferred to the employ of Purchaser 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
Purchaser, (ii) the transfer to a successor plan established
or maintained by Purchaser 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, (iii) in
the case of any multi-employer plan or any single employer
plan which Purchaser 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 and/or (iv) the termination of such
plan and the distribution of total account balances to
participants. Seller 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. In the
case of each pension plan to which Seller 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. Each funded
pension plan maintained by Seller 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.
23
<PAGE>
(u) Absence of Certain Business Practices. Neither Seller nor
either Shareholder, nor any other person acting on its or
their behalf, has, directly or indirectly, within the past
three years given or agreed to give any gift or similar
benefit, to any customer, supplier, governmental employee or
other person who is or may be in a position to help or hinder
the business of Seller (or assist Seller in connection with
any actual or proposed transaction) which (i) might subject
Seller to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (ii), if not given in
the past, might have had an adverse effect on the assets,
business or operations of Seller as reflected in the Financial
Statements or (iii), if not continued in the future, might
adversely affect Seller's assets, business, operations or
prospects or which might subject Seller to suit or penalty in
any private or governmental litigation or proceeding.
(v) Certain Representations
(i) To the knowledge of Seller and Shareholders, no supplier
or customer is considering termination, non-renewal or adverse
modification of its agreements or arrangements with Seller and the
transactions contemplated by this Agreement will not have a material
adverse effect on Seller's relationships with its suppliers and
customers. In particular, Seller's representative has notified
Shareholders that QVC intends to increase both the quantity and quality
of air time in 1999 as compared to 1998.
(ii) Within the past three years, Seller has not entered into
any agreement with, or been investigated by, any governmental
authority, community group or other third party that could restrict the
operation of its business.
(iii) No Key Employee of Seller has indicated to either
Shareholder that he or she is considering terminating his or her
employment.
(iv) No shareholder has any direct or indirect interest of any
kind in any business or entity which is competitive with Seller.
(w) Disclosure. No representation or warranty by Seller or any
Shareholder contained in this Agreement nor any statement or
certificate furnished or to be furnished by Seller or any
Shareholder to Purchaser or its representatives in connection
herewith or pursuant hereto contains or will contain any
untrue statement of a material fact, or omits or will omit to
state any material fact, in light of the circumstances when
made, required to make the statements herein or therein
contained not misleading. The representations and warranties
contained in this Section 10 shall not be affected or deemed
waived by reason of the fact that Purchaser and/or its
representatives knew or should have known that any such
representation or warranty is or might be inaccurate in any
respect, but any such representation or warranty shall be
deemed waived if Seller clearly and unambiguously demonstrates
that Purchaser's officers prior to the date of this Agreement
had actual knowledge that such representation or warranty was
inaccurate.
11. Representations and Warranties by Purchaser. Purchaser represents and
warrants to Seller and the Shareholders as follows:
(a) Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of New
York and has full corporate power and authority to carry on
its business as now being conducted and to own, lease or
operate its properties.
24
<PAGE>
(b) Authorization and Approval of Agreement. All proceedings or
corporate action required to be taken by Purchaser relating to
the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall
have been taken.
(c) Execution, Delivery and Performance of Agreement. Neither the
execution, delivery nor performance of this Agreement by
Purchaser will, with or without the giving of notice or the
passage of time, or both, conflict with, result in a default,
right to accelerate or loss of rights under, or result in the
creation of any lien, charge or encumbrance pursuant to, any
provision of Purchaser's certificate of incorporation or
by-laws or any franchise, mortgage, deed of trust, lease,
license, agreement, understanding, law, ordinance, rule or
regulation or any order, judgment or decree to which Purchaser
is a party or by which it may be bound or affected. Purchaser
has full power and authority to enter into this Agreement and
to carry out the transactions contemplated hereby, all
proceedings required to be taken by Purchaser to authorize the
execution, delivery and performance of this Agreement and the
agreements relating hereto have been properly taken and this
Agreement constitutes a valid and binding obligation of
Purchaser.
(d) Litigation. There is no legal action, suit, arbitration,
governmental investigation or other legal or administrative
proceeding, nor any order, decree or judgment in progress,
pending or in effect, or to the knowledge of Purchaser
threatened, against or relating to Purchaser in connection
with or relating to the transactions contemplated by this
Agreement or otherwise, that could have a material adverse
effect upon Purchaser or its business or financial condition.
(e) Reports and Financial Statements.
(i) Purchaser has previously furnished to Seller copies of
Purchaser's (i) Annual Report on Form 10-K/A for the year ended June
30, 1998, as filed with the SEC (the "Purchaser Annual Report"), (ii)
Quarterly Report on Form 10-Q filed for the fiscal quarters ended
September 30, 1998 (the "Purchaser Quarterly Report"), (iii) proxy
statements relating to all meetings of its stockholders (whether annual
or special) since December 31, 1996, and (iv) all other reports,
registration statements and other written materials filed by Purchaser
with the SEC since December 31, 1996.
(ii) The financial statements included in such reports were
prepared in accordance with generally accepted accounting principles,
consistently applied, and present fairly the financial position and the
results of operations of Purchaser for the periods indicated. There has
been no material adverse change in Purchaser's business or financial
condition since September 30, 1998.
(iii) As of their respective dates, such reports, statements
and other written materials did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) Capitalization. The capitalization of Purchaser as of
September 30, 1998 was as set forth in the Purchaser Quarterly
Report. As of June 30, 1998, except as reflected in the
Purchaser Annual Report, there were no outstanding
subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or
arrangements of any character or nature whatsoever under which
Purchaser is or may become to issue, assign or transfer any
shares of the capital stock of Purchaser.
25
<PAGE>
(g) Absence of Undisclosed Liabilities. Except as and to the
extent reflected in the Purchaser Quarterly Report, as of the
September 30, 1998, Purchaser had no debts, liabilities or
obligations which were not reflected in the Purchaser
Quarterly Report and which should have been reflected thereon
under GAAP as consistently applied by Purchaser.
(h) Taxes. All taxes, including, without limitation, income,
property, sales, use, franchise, added value, employees'
income withholding and social security taxes, imposed by the
United States or by any foreign country or by any state,
municipality, subdivision or instrumentality of the United
States or of any foreign country, or by any other taxing
authority, which are due or payable by Purchaser, and all
interest and penalties thereon, whether disputed or not, have
been paid in full, all tax returns required to be filed in
connection therewith have been accurately prepared and duly
and timely filed and all deposits required by law to be made
by Purchaser with respect to employees' withholding taxes have
been duly made. Purchaser has not been delinquent in the
payment of any foreign or domestic tax, assessment or
governmental charge or deposit and has no tax deficiency or
claim outstanding, proposed or assessed against it, and there
is no basis for any such deficiency or claim. The audit status
of Purchaser's federal income tax returns is as Purchaser has
advised by separate document. There is not now in force any
extension of time with respect to the date on which any tax
return was or is due to be filed by or with respect to
Purchaser, or any waiver or agreement by it for the extension
of time for the assessment of any tax.
(i) Labor Matters. Purchaser is not a party to any collective
bargaining agreement and there are no material or formal
complaints, charges, cases or controversies or any
conciliation agreement, consent or decree pending or, to the
knowledge of Purchaser, threatened against Purchaser and any
of its employees acting individually or in concert and to the
knowledge of Purchaser no organization is presently attempting
to gain, petitioning for or asserting representational status
with respect to any group or groups of employees of Purchaser,
and Purchaser is in material compliance with Federal and state
laws respecting employment practices, terms and conditions of
employment, wages and hours, and is not presently engaged in
any unfair labor practice. All employees of Purchaser are
legally employed, and those who are not U.S. citizens have
appropriate U.S. governmental authorizations. There is no
labor strike or other labor dispute and there is no complaint,
proceeding or other action instituted under the Equal
Opportunity Act pending or, to the knowledge of Purchaser,
threatened against Purchaser.
(j) Environmental Matters.
(i) Purchaser is, and at all times has been, in material
compliance with, and has not been in violation of, any federal, state,
foreign, or local laws, statutes, ordinances, regulations, rules and
orders pertaining to the environment, pollution and/or the health and
safety of human beings (collectively "Environmental Law"). Purchaser
has no basis to expect or has 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 properties or assets (whether real, personal, or mixed)
in which Purchaser has or has had an interest, or with respect to any
property at or to which any hazardous or toxic waste or substance
("Hazardous Materials") was generated, manufactured, refined,
transferred, imported, used, or processed by Purchaser, or
26
<PAGE>
from which Hazardous Materials have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
(ii) To the knowledge of Purchaser, there are no pending or
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 personal or mixed) in which Purchaser has or had an
interest.
(iii) Purchaser has not permitted or conducted, or is aware
of, any Hazardous Materials activity conducted with respect to the
properties or assets (whether real, personal, or mixed) in which
Purchaser has or had an interest. (iv) To the knowledge of Purchaser,
there has been no release or threat of release of any Hazardous
Materials at or from the locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used
or processed from or by the properties and assets (whether real,
personal, or mixed) in which Purchaser has or had an interest.
(k) Proceedings re Employee Benefit Plans. 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 Purchaser or any person, firm or
corporation ("Affiliate") which is under "common control"
(within the meaning of Section 4001(b) of ERISA) with
Purchaser, or (ii) commencement of any proceeding to terminate
any such plan pursuant to ERISA, or otherwise or (iii) written
notice given to Purchaser or any Affiliate of the intention to
commence or seek the commencement of any such proceeding.
Purchaser 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. Each funded
pension plan maintained by Purchaser 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.
(l) Compliance with Laws and Other Instruments. To the knowledge
of Purchaser, Purchaser has complied with all existing laws,
rules, regulations, ordinances, orders, judgments and decrees
applicable to its business, properties or operations as
presently conducted, including without limitation, all federal
OSHA and California Department of Health requirements, and has
all permits, licenses and other authorizations applicable to
its business, properties or operations as presently conducted.
To the knowledge of Purchaser, neither the ownership nor use
of Purchaser's properties nor the conduct of its business as
currently conducted conflicts with the rights of any other
person, firm or corporation or violates, or with or without
the giving of notice or the passage of time, or both, will
violate, conflict with or result in a default, right to
accelerate or loss of rights under, any terms or provisions of
its certificate of incorporation or bylaws as presently in
effect, or any lien, encumbrance, mortgage, deed of trust,
lease, license, agreement, understanding, law, ordinance, rule
or regulation, or any order, judgment or decree to which
Purchaser is a party or by which it may be bound or affected;
and Purchaser is not aware of any proposed laws, rules,
regulations, ordinances, orders, judgments, decrees,
governmental takings, condemnations or other proceedings which
would be applicable to
27
<PAGE>
its business, operations or properties and which might
adversely affect its properties, assets, liabilities,
operations or prospects, either before or after the Closing.
(m) Disclosure. No representation or warranty by Purchaser
contained in this Agreement nor any statement or certificate
furnished or to be furnished by Purchaser to Seller or the
Shareholders or their representatives in connection herewith
or pursuant hereto contains or will contain any untrue
statement of a material fact, or omits or will omit to state
any material fact, in light of the circumstances when made,
required to make the statements herein or therein contained
not misleading. The representations and warranties contained
in this Section 11 shall not be affected or deemed waived by
reason of the fact that Seller and/or its representatives or
the Shareholders knew or should have known that any such
representation or warranty is or might be inaccurate in any
respect, but any such representation or warranty shall be
deemed waived if Purchaser clearly and unambiguously
demonstrates that Seller or the Shareholders prior to the date
of this Agreement had actual knowledge that such
representation or warranty was inaccurate.
12. [omitted]
13. Conditions Precedent to Purchaser's Obligations. All obligations of
Purchaser hereunder are subject at the option of Purchaser, to the
fulfillment of each of the following conditions at or prior to the Closing,
and Seller and Shareholders shall exert their best efforts to cause each
such condition to be so fulfilled:
(a) All representations and warranties of Seller and the
Shareholders contained herein or in any document delivered
pursuant to this Agreement shall be true and correct in all
material respects when made.
(b) All covenants, agreements and obligations required by the
terms of this Agreement to be performed by Seller or by
Shareholders at or before the Closing shall have been duly and
properly performed in all material respects.
(c) [omitted]
(d) There shall be delivered to Purchaser a certificate executed
by the President and Secretary of Seller and by each
Shareholder, individually, dated the date of the Closing,
certifying that the conditions set forth in paragraphs (a) and
(b) of this Section have been fulfilled.
(e) All agreements, instruments and documents required to be
delivered to Seller and the Shareholders at or prior to the
Closing (including without limitation all agreements,
instruments and documents referred to in Section 7 as to be
delivered at the Closing) shall have been so delivered.
(f) Purchaser shall have received an opinion of Seller's counsel,
dated the date of the Closing, substantially in accordance
with Exhibit H to this Agreement.
(g) Seller shall have obtained a written consent to the transfer
or assignment to Purchaser, of Seller's manufacturing
agreement with Five Star Brands, Inc., and such agreement
shall have been amended to provide for a term ending on
December 31, 2001.
28
<PAGE>
(h) Seller shall have obtained written confirmation from Lundeen,
Inc. a written consent to the transfer or assignment to
Purchaser of Seller's manufacturing agreement with Lundeen,
Inc.
(i) The parties shall have made the As-Of Adjustments.
14. Conditions Precedent to Seller's and Shareholders' Obligations. All
obligations of Seller and Shareholders at the Closing are subject, at the
option of Seller and the Shareholders, to the fulfillment of each of the
following conditions at or prior to the Closing, and Purchaser shall exert
its best efforts to cause each such condition to be so fulfilled:
(a) All representations and warranties of Purchaser contained
herein or in any document delivered pursuant to this Agreement
shall be true and correct in all material respects when made.
(b) All covenants, agreements and obligations required by the
terms of this Agreement to be performed by Purchaser at or
before the Closing shall have been duly and properly performed
in all material respects.
(c) [omitted]
(d) There shall be delivered to Seller and the Shareholders a
certificate executed by the President and Secretary of
Purchaser, dated the date of the Closing, certifying that the
conditions set forth in paragraphs (a) and (b) of this Section
have been fulfilled.
(e) Purchaser shall have paid the cash and stock amounts which
under Section 2 are required to be paid at the Closing.
(f) All agreements, instruments and documents required to be
delivered to Seller and the Shareholders at or prior to the
Closing (including without limitation all agreements,
instruments and documents referred to in Section 7 as to be
delivered at the Closing) shall have been so delivered.
(g) Seller and the Shareholders shall have received an opinion of
Purchaser's counsel, dated the date of the Closing,
substantially in accordance with Exhibit I to this Agreement.
(h) The parties shall have made the As-Of Adjustments.
15. Indemnification.
(a) Seller and Shareholders, jointly and severally, hereby
undertake and agree to indemnify Purchaser and its affiliates
and hold it and them harmless against and in respect of (and
shall on demand reimburse Purchaser for) the following:
(i) all claims, debts, liabilities and obligations of Seller
whether absolute or contingent arising out of the conduct of Seller's
business as conducted by Seller on or prior to the Closing Date, except
for such liabilities and obligations as are expressly assumed by
Purchaser pursuant to this Agreement;
(ii) any and all loss, liability or damage suffered or
incurred by Purchaser by reason of any untrue representation, breach of
warranty or non-fulfillment of any covenant
29
<PAGE>
by Seller or any Shareholder contained herein or in any certificate,
document or instrument delivered to Purchaser pursuant hereto or in
connection herewith;
(iii) any and all loss, liability or damage suffered or
incurred by Purchaser in respect of or in connection with any liability
of Seller not specifically assumed by Purchaser pursuant to the terms
of this Agreement;
(iv) any and all loss, liability or damage suffered or
incurred by Purchaser by reason of or in connection with any claim for
finder's fee or brokerage or other commission arising by reason of any
services alleged to have been rendered to or at the instance of Seller
with respect to this Agreement or any of the transactions contemplated
hereby;
(v) any and all loss, liability or damage suffered or incurred
by Purchaser by reason of any claim for severance pay accruing or
incurred at any time on or after the date hereof and prior to the
Closing except to the extent any one or more specific employees are
discharged prior to the Closing hereunder with the prior written
consent of Purchaser and such consent contains the name(s) of such
specific employee(s);
(vi) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs, and expenses, including, without
limitation, legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to
oppose the imposition of any claims by third parties, or in enforcing
this indemnity.
(b) Purchaser hereby undertakes and agrees to indemnify Seller and
the Shareholders and their respective affiliates and to hold
them harmless against and in respect of (and shall on demand
reimburse them for) the following:
(i) all claims, debts, liabilities and obligations of Seller
whether absolute or contingent arising out of the conduct of Seller's
business as conducted by Purchaser from and after the Closing Date,
except for such liabilities and obligations as are not assumed by
Purchaser pursuant to this Agreement;
(ii) any and all loss, liability or damage suffered or
incurred by Seller or Shareholders by reason of any untrue
representation, breach of warranty or non-fulfillment of any covenant
by Purchaser contained herein or in any certificate, document or
instrument delivered to Seller and Shareholders pursuant hereto or in
connection herewith;
(iii) any and all loss, liability or damage suffered or
incurred by Seller or Shareholders in respect of or in connection with
any liability of Seller specifically assumed by Purchaser pursuant to
the terms of this Agreement;
(iv) any and all loss, liability or damage suffered or
incurred by Seller or Shareholders by reason of or in connection with
any claim for finder's fee or brokerage or other commission arising by
reason of any services alleged to have been rendered to or at the
instance of Purchaser with respect to this Agreement or any of the
transactions contemplated hereby; and
30
<PAGE>
(v) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs, and expenses, including, without
limitation, legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to
oppose the imposition of any claims by third parties, or in enforcing
this indemnity.
(c) Indemnity Procedure.
(i) In the event any person indemnified under this Section (an
"Indemnified Party") seeks indemnification pursuant to this Agreement,
the Indemnified Party shall give prompt notice to the party or parties
from whom such indemnification is sought (the "Indemnifying Party") of
the assertion of any claim, or the commencement of any action or
proceeding, in respect of which indemnity may be sought hereunder.
(ii) The Indemnifying Party shall have the right to, and shall
at the request of the Indemnified Party, assume the defense of any such
action or proceeding at its own expense.
(iii) In any such action or proceeding, the Indemnified Party
shall have the right to retain its own counsel; but the fees and
expenses of such counsel shall be at its own expense unless (A) the
Indemnifying Party and Indemnified Party shall have mutually agreed to
the retention of such counsel or (B) the named parties to any suit,
action or proceeding (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party and representation of all
parties by the same counsel would be inappropriate due to actual or
potential conflicts of interest between them. An Indemnifying Party
shall not be liable under this Agreement for any settlement effected
without its consent of any claim, litigation or proceeding in respect
of which indemnity may be sought hereunder, but such consent shall not
be unreasonably withheld or delayed.
(iv) The Indemnifying Party may settle any claim without the
consent of the Indemnified Party, but only if the sole relief awarded
is monetary damages that are paid in full by the Indemnifying Party.
(d) The following limitations shall apply to any and all claims
for indemnification by any party under this Agreement:
(i) The representations and warranties of the parties
contained in Sections 10 and 11 of this Agreement (including the
Disclosure Schedule) shall survive the Closing until August 31, 2000,
provided that if written notice of a claim meeting the requirements of
this Section has been made during such period, the relevant
representations shall survive as to such claim until the claim has been
finally resolved. Notwithstanding the foregoing, the representations
and warranties set forth in Sections 10(h) and 10(s) shall survive
until 30 days after the applicable statutes of limitation.
(ii) No Indemnified Party listed in Section 15(a) shall be
entitled to assert any right to indemnification hereunder unless and
until the aggregate of all claims for indemnification equals or exceeds
$75,000. Once such claims equal or exceed the $75,000 threshold, such
Indemnified Party shall be entitled to the full amount of all
indemnified claims in excess of such threshold; provided that no claim
for
31
<PAGE>
indemnification hereunder may be asserted by an indemnified party
unless such claim (or series of related claims) equals or exceeds
$5,000 individually.
(iii) No Indemnified Party listed in Section 15(b) shall be
entitled to assert any right to indemnification hereunder unless and
until the aggregate of all claims for indemnification equals or exceeds
$75,000. Once such claims equal or exceed the $75,000 threshold, such
Indemnified Party shall be entitled to the full amount of all
indemnified claims in excess of such threshold; provided that no claim
for indemnification hereunder may be asserted by an indemnified party
unless such claim (or series of related claims) equals or exceeds
$5,000 individually.
Except in the case of fraud or intentional misrepresentations, the aggregate
liability under this Section 15 of Seller and the Shareholders shall not at any
time exceed an amount equal to (1) 30% of the initial or current value
(whichever is greater) of all cash and Common Stock theretofore paid by
Purchaser to Seller and Seller's Designees, plus (2) a 100% offset against all
payments which might otherwise subsequently become payable to Seller under
Section 2.
16. Bulk Sales Compliance. Purchaser hereby waives compliance by Seller
with the provisions of the Bulk Sales Law of any state, and Seller
warrants and agrees to pay and discharge when due all claims of
creditors which could be asserted against Purchaser by reason of such
non-compliance to the extent that such liabilities are not specifically
assumed by Purchaser under this Agreement. Seller and each of the
Shareholders, jointly and severally hereby indemnify and agree to hold
Purchaser harmless from, against and in respect of (and shall on demand
reimburse Purchaser for) any loss, liability, cost or expense,
including, without limitation, attorneys' fees, suffered or incurred by
Purchaser by reason of the failure of Seller to pay or discharge such
claims.
17. Termination. This Agreement may, by notice given prior to the Closing,
be terminated:
(a) by Purchaser if a material breach of any provision of this
Agreement has been committed by Seller or the Shareholders and
such breach has not been waived;
(b) by Seller if material breach of any provision of this
Agreement has been committed by Purchaser and such breach has
note been waived;
(c) by Purchaser if any condition in Section 13 has not been
satisfied as of the Closing Date and Purchaser has not waived
such condition on or before the Closing Date;
(d) by Seller if any condition in Section 14 has not been
satisfied as of the Closing Date and Seller has not waived
such condition on or before the Closing Date;
(e) by mutual consent of the parties; or
(f) by either Purchaser or Seller 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 January 31, 1999, or such
later date as the parties may agree upon.
18. Nature and Survival of Representations and Warranties.
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<PAGE>
(a) Each statement, representation, warranty, indemnity, covenant
and agreement made by Seller or any Shareholder in this
Agreement or in any document, certificate or other instrument
delivered by or on behalf of Seller or any Shareholder
pursuant to this Agreement or in connection herewith shall be
deemed the joint and several statement, representation,
warranty, indemnity, covenant and agreement of Seller and each
such Shareholder.
(b) All covenants and agreements made by each of the parties
hereto shall survive the Closing. Representations and
warranties shall survive the Closing only to the extent
provided in Section 15.
19. Notices. Any and all notices or other communications required or permitted
to be given under any of the provisions of this Agreement shall be in
writing and shall be deemed to have been duly given when personally
delivered, three business days after being sent by certified mail, or one
business day after being forwarded for priority delivery by Federal Express
or other recognized courier, addressed to the parties at the addresses set
forth below (or at such other address as any party may specify by notice to
all other parties given as aforesaid):
If to the Shareholders or to Seller, to them at
38 Miller Avenue
Suite 143
Mill Valley, CA 94941
With a copy (which shall not constitute notice) to:
Jeffrey Zimman, Esq.
Cooley Godward LLP
One Maritime Plaza
20th floor
San Francisco, CA 94111-3580
If to Purchaser, to it at:
4 Manhattanville Road
Purchase, New York 10577
With a copy (which shall not constitute notice) to:
Oscar D. Folger, Esq.
Law Offices of Oscar D. Folger
521 Fifth Avenue
New York, New York 10175
20. Miscellaneous.
(a) This writing constitutes the entire agreement of the parties with
respect to the subject matter hereof and may not be modified, amended
or terminated except by a written agreement specifically referring to
this Agreement signed by all of the parties hereto. It supersedes all
prior agreements, instruments and documents between Purchaser on the
one hand and Seller and the Shareholders on the other hand, including
the letter of intent dated October 15, 1998. However, the
Confidentiality Agreement signed by the parties on July 15 and July 16,
1998 shall remain in full force and effect until the Closing.
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<PAGE>
(b) In the event of any controversy, claim or dispute between the parties
hereto arising out of or relating to this Agreement or any of the
documents provided for herein, or the breach thereof, the prevailing
party shall be entitled to recover from the losing party reasonable
attorney's fees, expenses and costs.
(c) No waiver of any breach or default hereunder shall be considered valid
unless in writing and signed by the party giving such waiver, and no
such waiver shall be deemed a waiver of any subsequent breach or
default of the same or similar nature.
(d) This Agreement shall be binding upon and inure to the benefit of each
corporate party hereto, its successors and assigns, and each individual
party hereto and his heirs, personal representatives, successors and
assigns. No person (including without limitation any employee of
Seller) shall have any rights as a third party beneficiary under this
Agreement.
(e) The paragraph headings contained herein are for the purposes of
convenience only and are not intended to define or limit the contents
of said paragraphs.
(f) Each party hereto shall cooperate, shall take such further action and
shall execute and deliver such further documents as may be reasonably
requested by any other party in order to carry out the provisions and
purposes of this Agreement.
(g) Seller will pay all sales, transfer and documentary taxes, if any,
payable in connection with the sale, conveyances, assignments,
transfers and deliveries to be made to Purchaser hereunder.
(h) This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed one original.
(i) This Agreement and all amendments thereof shall be governed by and
construed in accordance with the law of the State of California
applicable to contracts made and to be performed therein, provided that
the consulting and non-competition agreements referred to herein shall
be governed by and construed in accordance with the law of the State of
New York applicable to contracts made and to be performed therein.
(j) Any dispute, controversy or claim arising out of or relating to this
Agreement that cannot be resolved between the parties hereto shall be
resolved only by an action, suit or proceeding brought in any court of
competent jurisdiction located in Westchester County, New York or in
San Francisco, California, and, by execution and delivery of this
Agreement, each party (i) accepts, generally and unconditionally, the
exclusive jurisdiction of such courts and related appellate courts, and
irrevocably agrees to be bound by any judgement rendered thereby in any
such action, suit or proceeding, and (ii) irrevocably waives any
objection it may now or hereafter have as to the venue of
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<PAGE>
any such action, suit or proceeding brought in such a court or that
such court is an inconvenient forum. Each party hereto further agrees
that the service of process or of any other papers upon it or him in
the manner provided for notices hereunder shall be deemed good proper
and effective service upon it or him.
(k) Except as required by law and then only after discussion with the other
parties, until the Closing no party to this Agreement shall make any
public announcements in respect of this Agreement or the transactions
contemplated hereby or otherwise communicate with any news media about
the same, without first consulting with the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
Purchaser:
AMBI Inc.
By: /s/ Fredric D. Price
- --------------------------
Name and Title: Fredric D. Price, President & CEO
Seller:
OPTIMUM LIFESTYLE, INC.
By /s/ Dean Radetsky
- --------------------------
Name and Title: Dean Radetsky, CEO
Shareholders:
/s/ Dean Radetsky
- --------------------------
Dean Radetsky
/s/ Cheryl Radetsky
- --------------------------
Cheryl Radetsky
<PAGE>
Exhibit 2.2
AMENDED AND RESTATED
REVOLVING CREDIT
AND TERM LOAN AGREEMENT
DATED AS OF JANUARY 21, 1999
BETWEEN
STATE STREET BANK AND TRUST COMPANY, AS LENDER
AND
AMBI INC.
AND
NUTRITION 21
AS CO-BORROWERS
<PAGE>
THIS AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT
dated as of January 21, 1999 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 entered into that certain Revolving Credit and
Term Loan Agreement dated as of August 11, 1997, as amended by that certain
Amended and Restated Revolving Credit and Term Loan Agreement dated as of
December 31, 1997 (the "Loan Agreement"), pursuant to which the Lender has
agreed to make certain revolving and term loans to the Borrowers;
WHEREAS, simultaneously herewith, AMBI has acquired the assets of OLI
(as hereinafter defined);
WHEREAS, the Borrowers desire to extend the maturity date of the
revolving loans and to refinance the existing term loan and the Lender has
agreed to the foregoing, upon the terms and conditions set forth herein; 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 assets of OLI in
accordance with the terms of that certain Agreement of Purchase and Sale of
Assets dated January __, 1999 among AMBI, OLI, 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
<PAGE>
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 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 Amended and Restated Revolving Credit and
Term Loan Agreement, as amended, restated, 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 N21 and AMBI's OLI division who are located within the
United States, plus (ii) 70% of the aggregate Net Amount of Eligible Inventory
of N21, plus (iii) 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
2
<PAGE>
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.
"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.
"Computing Devices" shall have the meaning set forth in Section 7.19
hereof.
"Consolidated or consolidated" shall mean those terms as applied to the
accounts of the Borrowers and their Subsidiaries, consolidated in accordance
with GAAP.
"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 condition, 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 N21 and AMBI's OLI Division 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
3
<PAGE>
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
from US domiciled companies (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 which 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; (vi) the
Customer is a US domiciled business; and (vii) 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. In addition, in the event that 20% or more of amounts due
from any Customer are more than 90 days past the invoice date, then the entire
amount of Receivables owing from such Customer shall be excluded from any
calculation of Eligible Accounts hereunder. The Lender may in its sole
discretion if so requested by the Borrowers consider allowing certain amounts
due from any such Customer and certain other Receivables of AMBI to be included
as Eligible Accounts.
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 N21 which in the reasonable opinion of the Lender
are merchantable and fit for the purpose for which they were procured, located
either at (a) N21's chief executive offices in California or (b) Useful
Products, Inc. in Goodland, Indiana, as to which N21 has furnished reasonably
detailed information in a Borrower's Certificate and which at all times shall
continue to be acceptable to the Lender in all respects, excluding inventory
which is (i) stale, obsolete or unmerchantable, (ii) held on consignment, (iii)
located at vendor sites (unless the Lender has received a waiver from such
vendor in form and substance satisfactory to the Lender) or against which
vendors have a right of offset, (iv) not otherwise owned by N21, (v) of a type
no longer used by N21, (vi) has been returned by a customer or is damaged, (vii)
is subject to any Lien, (viii) not in the possession of N21, (ix) held by the
N21 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 (x) 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.
"Event of Default" shall have the meaning set forth in Article X
hereof.
4
<PAGE>
"Excess Cash Flow" shall mean Net Income plus Depreciation Expense plus
Amortization Expense minus the scheduled principal payments made under the Term
Loan minus the N21 Scheduled Contingency Payments minus one hundred percent
(100%) of the OLI Scheduled Contingency Payments for Fiscal Year 1999 minus
fifty percent (50%) of the OLI Scheduled Contingency Payments for Fiscal Year
2000 and Fiscal Year 2001 minus Permitted Capital Expenditures determined on a
consolidated basis. For purposes of the foregoing, Excess Cash Flow shall
include (i) thirty-five percent (35%) of the Net Cash Proceeds (including any
future performance-based or milestone payments) received from the sale of or
joint venture (or similar transaction) involving AMBI's Pharmaceutical Business
to any Person after the date hereof, and (ii) twenty-five percent (25%) of the
cash proceeds received by AMBI upon the issuance of newly- created additional
AMBI stock for an additional Two Million Dollars ($2,000,000) to American Home
Products, acting through its Whitehall-Robins Healthcare division (`AHP"), in
connection with AHP's rights to license certain Option Products and Additional
Products, as defined in and in accordance with that certain License, Option and
Marketing Agreement dated October 8, 1998 by and between AMBI and AHP.
Notwithstanding the foregoing, in the event that total indebtedness of the
Borrowers outstanding under the Revolving Loans and the Term Loan shall be less
than $1,500,000, the Lender may consider in its sole discretion the possible
amendment of the foregoing definition of Excess Cash Flow, if so requested in
writing by the Borrowers.
"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):
5
<PAGE>
(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 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.
"Multiemployer Plan" shall have the meaning set forth in Section
7.13(d) hereof.
"N21 Scheduled Contingency Payments" shall mean any scheduled
contingency payments incurred in connection with the acquisition of N21 and made
in accordance with that certain Stock and Partnership Interest Purchase
Agreement dated August 11, 1997 among AMBI, N21, Selene Systems, JBE and the
individuals named therein.
6
<PAGE>
"Napa Documents" shall have the meaning set forth in Section 6.01(t)
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 Cash Proceeds" with respect to the sale of or joint venture (or
similar transaction) involving AMBI's Pharmaceutical Business shall mean the
up-front cash proceeds received by AMBI upon any such sale plus any future
performance-based or milestone payments minus reasonable cash costs associated
with the severance of employees within the pharmaceutical division and
reasonable cash costs associated with the cancellation of AMBI's current
manufacturing contract with respect to its "Wipe-Out" product line.
"Net Income" shall mean, for any Person and for any period, the
consolidated net income 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 Azwell, Inc., formerly known as Nippon Shoji Kaisha,
Ltd.
"OLI Scheduled Contingency Payments" shall mean the scheduled
contingency payments made to the sellers of OLI in accordance with that certain
Agreement of Purchase and Sale of Assets dated January __, 1999 by and among
OLI, AMBI and the individuals named therein.
"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
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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.
"OLI" shall mean Optimum Lifestyle, Inc., a California corporation.
"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.
"Permitted Capital Expenditures" shall mean those capital expenditures
of the Borrower determined on a consolidated basis which are permitted under
Section 9.01E 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.
"Pharmaceutical Business" shall mean the portion of AMBI's business
which relates to the sale of animal or human Nisin or Nisin-related products or
technology, including, without limitation, its "Wipe-Out" product line.
"Prepayment Premium" shall have the meaning set forth in Section 2.08
hereof.
"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.
"Quick Ratio" for the Borrowers shall mean all cash plus all accounts
due and payable to the Borrowers plus all inventory of the Borrowers divided by
the sum of the then outstanding advances made to the Borrowers under the
Revolving Loans plus outstanding accounts payable.
"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, 2002, subject
to Section 2.06 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 Commitment Amount" shall have the meaning set forth in
Section 3.01 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.
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"Year 2000 Problem" shall have the meaning set forth in Section 7.19
hereof.
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 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.
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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 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.
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(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 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, subject to Section 2.08 hereof.
(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. 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 Seventy-Five Thousand Dollars ($75,000), (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.
Section 2.08 Prepayment Payment. Notwithstanding anything to the
contrary set forth herein, in the event that any prepayment of the Revolving
Loans and the Term Loan occurs, (i) on or prior to the first anniversary of the
date hereof, the Borrowers agree to pay to the Lender a
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prepayment fee in the amount of $100,000 in connection with the Revolving
Commitment Amount and the Term Loan Commitment Amount or (ii) after the first
anniversary of the date hereof and on or prior to the second anniversary of the
date hereof, the Company hereby agrees to pay to the Lender a prepayment fee in
the amount of $45,000 in connection with the Revolving Commitment Amount and the
Term Loan Commitment Amount (the "Prepayment Premium").
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 $5,500,000 (the "Term Loan"). The Lender
shall advance the entire principal amount of the Term Loan (the "Term Loan
Commitment Amount") to the Borrowers on the Closing Date.
Section 3.02. The Term Note. The Term Loan shall be evidenced by an
amended and restated 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, 2002 (the "Term Loan Maturity Date").
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 in thirty-seven (37) consecutive
monthly installments as follows: (i) the first through the thirty-sixth monthly
installments shall be each in the amount of $125,000, and (ii) the
thirty-seventh and final installment which shall be due and payable on the Term
Loan Maturity Date shall be in an amount equal to the unpaid principal balance
of the Term Loan. Interest on the Term Loan shall be payable monthly in arrears
commencing February 1, 1999, on the Term Loan Maturity Date, and thereafter on
demand. Amounts repaid under the Term Loan
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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, subject to Section 2.08 hereof. 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 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
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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 first to refinance the existing term loan in the
original principal amount of $2,800,000, then to finance the acquisition of OLI,
and then for general corporate purposes and working capital of the Borrowers.
ARTICLE V
SECURITY
Section 5.01. Amended and Restated Security Agreements. The Borrowers
shall duly execute and deliver to the Lender as security for its obligations
under the Notes, one or more amended and restated security agreements,
including, without limitation, such amended and restated intellectual property
security agreements relating to the patents, trademarks, copyrights and other
intellectual property rights of the Borrowers, including, without limitation,
those
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relating to OLI, 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 and/or to confirm the prior
grant to the Lender of 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, including,
without limitation, those of OLI, 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. Confirmation of Collateral Assignment of Stock and
Partnership Interests. The Borrowers shall cause to be executed and delivered to
the Lender a confirmation of 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, 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, protect
and/or confirm the prior perfection of 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
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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:
(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 or confirm the prior
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perfection of 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 OLI and to the extent applicable, their Subsidiaries, in form and
substance satisfactory to the Lender, in each respective jurisdiction
where the Borrowers and OLI 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 OLI
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 OLI 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) Benjamin Sporn, general counsel
of the Borrowers, and (iii) Cooley Godward LLP, California counsel to
OLI 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 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
OLI and their respective Subsidiaries
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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, OLI 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, OLI and their respective 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, OLI and/or their respective 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) Confirmation of Pledge of Stock and Partnership Interests.
The Lender shall have received a confirmation of 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 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 after giving effect to the Acquisition,
including all estimated expenses and assuming normal payable and
accrued expense levels, shall demonstrate excess availability under the
Borrowing Base as of such date of no less than $3,000,000 and cash on
hand of no less than $2,800,000.
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(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) First Amendment to Warrant Purchase Agreement and Warrant.
AMBI shall have executed and delivered to the Lender a certain First
Amendment to Warrant Purchase Agreement and First Amendment to Warrant
(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 OLI and the Borrowers 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
Agreement of Purchase and Sale of Assets, the Bill of Sale,
Registration Rights and Restricted Resale Agreement, the Consulting
Agreements and Non-Competition Agreements with Dean Radetsky and Cheryl
Radetsky, and the Sales Representative Agreement with Marvin L.
Segel 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, OLI 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, including, without limitation, those
imposed under that certain Final Judgment Pursuant to Stipulation
relating to Napa County Superior Court Action No. 26-03997 and the
related documents (collectively, the "Napa Documents").
(u) Monthly Financial Statements. The Borrowers shall have
furnished monthly financial statements from the commencement of the
Borrowers' current fiscal 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
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Subsidiaries as of the Closing Date, in form and substance satisfactory
to the Lender.
(w) 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.
(x) Assignment of Asset Purchase Agreement Rights. AMBI shall
have assigned to the Lender its rights and remedies under the Agreement
of Purchase and Sale of Assets relating to OLI, which assignment shall
have been consented to by the selling parties of OLI and shall be in
form and substance satisfactory to the Lender.
(y) Landlord's Waivers. The Lender shall have received from
the Borrowers such landlord's waivers and confirmations of such other
landlord waiver's previously provided to the Lender as the Lender may
request.
(z) Additional Waivers and Consents. The Lender shall have
received from the Borrower such additional waivers and consents of such
third parties, including, without limitation, Five Star Brands, Inc. of
Grand Rapids, Michigan and Useful Products, Inc. of Goodland, Indiana,
and such other vendors as may be reasonably required by the Lender with
respect to the Collateral.
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 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.
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(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 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.
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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, OLI 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, OLI or any Subsidiary. As
of the date of this Agreement, neither the Borrowers, OLI 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, OLI or any Subsidiary. The Borrowers nor OLI are in
default under any applicable statute, rule, order, decree or regulation of any
court, arbitrator or governmental body or agency having jurisdiction over the
Borrowers, OLI or any Subsidiary which default is reasonably likely to result in
a material adverse effect on the Borrowers, OLI 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, 1998 and June 30, 1997 and the unaudited balance
sheet of OLI as at November 30, 1998 and December 31, 1997, 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, OLI 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
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change in the assets, liabilities, properties, business and condition, financial
or otherwise, of the Borrowers, OLI and their Subsidiaries since June 30, 1998.
The Borrowers represent that as of the date hereof, the remaining outstanding
principal balance under that certain Promissory Note dated March 18, 1996 issued
by AMBI in favor of NSK does not exceed [$2,000,000].
Section 7.07. Good Title to Properties. The Borrowers, OLI 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, OLI 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, OLI 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, OLI nor
any Subsidiary own 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.
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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, OLI 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, OLI 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, OLI 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, OLI 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, OLI 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.
(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
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assumptions and methods as those used by the Borrowers', OLI's 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, OLI 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, OLI and their Subsidiaries" shall include each
trade or business (whether or not incorporated) which together with the
Borrowers, OLI 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 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.
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Section 7.17. Environmental Matters. (a) Except as set forth on
Schedule 7.17, neither the Borrowers, OLI 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, OLI and their Subsidiaries shall not dispose of any
hazardous material or oil on any site or vessel owned, occupied or operated by
the Borrowers, OLI and their Subsidiaries, nor store on any site or vessel
owned, occupied or operated by the Borrowers, OLI 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', OLI's
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, OLI 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, OLI or their Subsidiaries, or the failure
by the Borrowers, OLI 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, OLI 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. [To be updated] 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, 100,000 shares have been designated Series D Preferred Stock, 1,500
shares have been designated Series E Preferred Stock, and 575 shares have been
designated Series F Preferred Stock and 5,000 shares have been designated Series
G Preferred Stock. As of the date hereof, 27,397,493 shares of Common Stock, 0
shares of Series D Preferred Stock, 1,500 shares of Series E Preferred Stock,
and 0 shares of Series G Preferred Stock have been issued on a fully diluted
basis. In addition, 5,500,000 shares of Common Stock are reserved for issuance
pursuant to AMBI's stock option and purchase plans and 2,500,000 shares of
Common Stock are issuable and reserved for issuance pursuant to securities
(other than the Preferred Shares and the shares of Series F Stock) exercisable
or exchangeable for, or convertible into, shares of Common Stock and 633,000
shares of Common Stock are reserved for issuance upon conversion of the Series F
Preferred Stock and 1,500,000 shares of Common Stock are reserved for payment to
NSK. 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
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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).
Section 7.19 Year 2000 Compliance. The Borrowers have made a
comprehensive review and assessment of their computers and similar devices,
including embedded microchips in non-computing devices (collectively, "Computing
Devices"), and have made inquiry of their material suppliers, vendors and
customers with respect to their Computing Devices concerning the possibility
that such Computing Devices may not properly perform date-sensitive functions on
and after December 31, 1999 or with respect to dates occurring on and after
December 31, 1999 (the "Year 2000 Problem"). Based on such review and
assessment, and upon such inquiries, the Borrowers believe that either (i) the
Year 2000 Problem will not affect such Computing Devices, or (ii) the Year 2000
Problem, including any costs of remediation, could not reasonably be expected to
result in an Event of Default or a material adverse change in the Borrrower's
business, operations, financial condition or prospects. The Borrowers have
developed feasible contingency plans adequate to ensure uninterrupted and
unimpaired business operation in the event of failure of its own or a third
party's Computing Devices due to the Year 2000 Problem, as well as in the event
of a general failure of or interruption in their communications and delivery
infrastructure.
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:
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(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
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,
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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");
(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
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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 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
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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.
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
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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 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
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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.
Section 8.14. Excess Cash Flow. Apply fifty percent (50%) of any Excess
Cash Flow generated during each of Fiscal Year 1999, Fiscal Year 2000 and Fiscal
Year 2001 to the reduction of the outstanding principal balance of the Term
Loan, such amounts to be applied in the inverse order of maturity. Excess Cash
Flow, for purposes of the foregoing, shall be calculated on an annual basis
based on the audited financial statements for Fiscal Year 1999, Fiscal Year 2000
and Fiscal Year 2001, respectively and shall be due within no more than one
hundred and twenty (120) days after completion of such audited financial
statements.
Section 8.15 Assignment of Life Insurance. In the event that the
Borrowers obtain life insurance policies on the life of Marvin Segel at any time
after the Closing Date, the Borrowers shall within thirty (30) days of the
issuance of any such policies assign such policies in favor of the Lender, such
assignment(s) to be in form satisfactory to the Lender.
Section 8.16 Landlord's Waivers. In the event that the Borrowers enter
into a lease with Harbor Drive Associates or any other landlord with respect to
any premises leased by the Borrowers, the Borrowers shall, concurrently upon
entering into such lease, obtain a waiver of such landlord's rights to the
Collateral in a form satisfactory to 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.
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A. Minimum Consolidated Quick Ratio. Permit Consolidated Quick
Ratio at any time, measured quarterly to be less than the amounts set forth
below:
Fiscal Quarter Ended Amount
-------------------- ------
December 31, 1998 N/A
March 31, 1999 4.00:1.00
June 30, 1999 4.50:1.00
September 30, 1999 4.00:1.00
December 31, 1999 4.50:1.00
March 31, 2000 5.00:1.00
June 30, 2000 5.50:1.00
September 30, 2000 5.00:1.00
December 31, 2000 5.50:1.00
March 31, 2001 5.50:1.00
June 30, 2001 6.00:1.00
September 30, 2001 5.50:1.00
December 31, 2001 6.50:1.00
B. Minimum Consolidated Adjusted EBITDA. Permit Consolidated
Adjusted EBITDA at any time, measured quarterly and including at the end of each
fiscal year of the Borrowers to be less than the following:
Fiscal Quarter Ended Amount
-------------------- ------
December 31, 1998 $1,500,000
March 31, 1999 $1,800,000
June 30, 1999 $1,900,000
September 30, 1999 $2,100,000
Thereafter $2,300,000
C. Minimum Stockholders' Equity. Permit stockholders' equity
to be less than the following, measured quarterly:
Fiscal Quarter Ended Amount
-------------------- ------
December 31, 1998 $16,193,000
March 31, 1999 $18,193,000
June 30, 1999 $18,693,000
September 30, 1999 $19,193,000
December 31, 1999 $19,693,000
March 31, 2000 $20,193,000
June 30, 2000 $20,693,000
September 30, 2000 $21,193,000
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December 31, 2000 $21,693,000
March 31, 2001 $22,193,000
June 30, 2001 $22,693,000
September 30, 2001 $23,193,000
December 31, 2001 $23,693,000
E. Maximum Consolidated Capital Expenditures. Permit
Consolidated Capital Expenditures at any time to exceed (i) $250,000 for Fiscal
Year 1999, (ii) $300,000 for Fiscal Year 2000, and (iii) $350,000 for Fiscal
Year 2001, measured annually.
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:
(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
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(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.
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 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
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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.
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 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
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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.
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.
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.
Section 9.17 NSK Arrangements. Agree to reduce the principal amount of
the existing indebtedness to NSK (i) in the case of the first $1,000,000
principal payment due, other than solely by payment in AMBI stock, and (ii) in
the case of payment of the remaining principal amount of $1,000,000 due to NSK,
other than solely by payment in cash or stock, provided that in no event shall
the Borrowers make any agreement as to repayments, subordination or other terms
of repayment or make any other agreement with NSK (or other third party)
relating thereto, including, without limitation, any agreement to sell its
Pharmaceutical Business, without the Lender's prior written consent in its sole
discretion in each instance.
ARTICLE X
EVENTS OF DEFAULT
Section 10.01. Events of Default. If any one or more of the following
events (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
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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 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
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(g) if (i) any final and unappealable judgment in excess of
$100,000 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 $100,000, 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;
(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) if AMBI shall agree to reduce the remaining principal
balance of its existing indebtedness to NSK or make any scheduled payment
thereunder, other than by (i) paying the first $1,000,000 of such indebtedness
to NSK solely in AMBI stock, and (ii) by paying the remaining $1,000,000 due to
NSK solely in cash or stock, or if AMBI shall enter into any agreement as to
such repayment terms, or if AMBI shall enter into any other agreement with NSK
or any other third party in connection therewith, including any agreement to
sell its
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Pharmaceutical Business without the prior written consent of the Lender
in its sole discretion as to the terms thereof in each instance;
(m) if the Borrower shall borrow funds from Burns Philp;
(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;
(s) any violation by AMBI or any of its officers, employees,
consultants or directors or agents of the FTC Order or the Napa Settlement or if
the FTC or any other pharmaceutical agency or state or municipality or persons
shall obtain a judgment for unfair and deceptive trade practices or any
settlement requiring payment by AMBI or any other Borrower in excess of $50,000
or injunctive relief resulting in substantial interference with the Borrowers
ability to do business; or
(t) if AMBI shall make any payment under the Napa Documents,
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
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of the Obligations shall be immediately due and payable without any necessary
action or notice by the Lender;
(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.
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,
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if to the Borrowers: AMBI Inc.
4 Manhattanville Road
Purchase, NY 10577
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, Assistant Vice President
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.
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
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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
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,
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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 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
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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.
(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
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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 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,
48
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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.
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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: /s/ Gerald A. Shapiro
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Title: Vice President
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hereunder duly authorized
NUTRITION 21, a California limited partnership
By: SELENE SYSTEMS, INC., a California
corporation, its General Partner
By: /s/ Gerald A. Shapiro
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Title: Vice President
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hereunder duly authorized
STATE STREET BANK AND TRUST COMPANY
By: /s/ Basem W. Pharaon
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Basem W. Pharaon, Assistant Vice President
<PAGE>
Exhibit 20.1
AMBI ACQUIRES LITE BITES(R) NUTRITION BARS
ACQUISITION OF PROFITABLE BRAND NAME PRODUCT SOLD ON THE QVC TELEVISION
NETWORK ADDS TO AMBI'S DIRECT-TO-CONSUMER NUTRITION BUSINESS
Purchase, New York, January 22, 1999 --- AMBI Inc. (NASDAQ: AMBI)
announced that it purchased the business and assets of Optimum Lifestyle, Inc.
(OL), a Sausalito, California company engaged in the development and marketing
of premium nutrition bars sold on the QVC television network under the trademark
Lite Bites(R). Terms of the transaction included the payment by AMBI of $6
million in cash and 1.3 million shares of AMBI common stock. In addition, AMBI
has agreed to make contingent payments based upon the achievement of certain
future sales levels of Lite Bites(R).
AMBI noted that Lite Bites(R) had sales of approximately $5.5 million,
generated Earnings Before Interest, Taxes, Depreciation, and Amortization
(EBITDA) of about $1.3 million in the year ended December 31, 1998, and that the
acquisition would be accretive to earnings.
Fredric D. Price, AMBI's President and Chief Executive Officer, said,
"The acquisition of Lite Bites(R) offers AMBI an ideal fit with our products and
distribution channels in the following three ways. First, it enables us to enter
one of the fastest growing segments of the nutritional supplement business with
a proven consumer-accepted, brand name product. Second, it adds a leading
Direct-to-Consumer distribution channel, the QVC television network, to our
catalog (Heart's Content(TM)) and internet e-commerce site
(www.CardiaNutrition.com) initiatives, which are expected to be up and running
later this year. Third, it forms the basis for developing and launching new and
improved proprietary bar products that will include one or more of our patented
nutrition ingredients.
"AMBI has positioned itself strategically to be in all three segments
- --- Retail, Direct-to-Consumer, and Ingredients --- of the nutrition business.
Our mission is both to develop and acquire new, proprietary nutrition products
to market in each of these business segments."
According to the Nutrition Business Journal, sales of nutrition bars
increased 40% in 1997 and reached a sales level in excess of $300 million in
1998.
<PAGE>
Lite Bites(R) nutrition bars contain a custom herbal blend and
twenty-two important vitamins and minerals. They are sold as part of a total
lifestyle system for weight management, come in twelve flavors, and have a
reputation for great taste.
Obesity and fat intake are major risk factors for cardiovascular
diseases and Type 2 diabetes, and the control of weight and fat intake is
recommended by the American Diabetes Association, the American Heart
Association, and the National Institutes of Health. The Lite Bites(R) products
have been designed for use as part of a fat fighting system for people concerned
about these risk factors. This approach is consistent with AMBI's other products
such as CARDIA(R) SALt and ChromAx(R) chromium picolinate.
Commenting on the acquisition, Cheryl and Dean Radetsky, creators of
Lite Bites(R), said, in a joint statement, "We are pleased to have joined forces
with AMBI, as they share our commitment to creating high quality nutrition
products that address unmet consumer needs, especially in the area of weight
control and living a healthier lifestyle. As consultants to AMBI, we will work
with senior management in the development of new, patented Lite Bites(R)
products."
The Company noted that this was the third major nutrition transaction
it had entered into in the last year and a half. The previous two were the
August 1997 acquisition of Nutrition 21, a leading nutrition supplements
ingredients developer and marketer, and the October 1998 strategic alliance with
the Whitehall-Robins Healthcare Division of American Home Products Corporation
(NYSE: AHP), concerning the retail distribution of CARDIA(R) SALT as well as
rights to distribute additional AMBI nutrition products in the retail channel in
the future.
Financing for the acquisition came from both AMBI's own cash resources
as well as a loan from State Street Bank and Trust (SSBT.) The Company noted
that the loan from SSBT that was secured in August 1997 to finance the
acquisition of Nutrition 21 has been completely repaid.
AMBI develops and markets proprietary nutrition products.
The statements in this press release that are not historical facts are
forward-looking statements based upon current expectations. Such forward-looking
statements involve risks and uncertainties, including risks and uncertainties
set forth in "Risk Factors" and elsewhere in AMBI's Registration Statement on
Form S-3 and the Prospectus dated January 13, 1999 and AMBI's Form 10-K/A for
the year ended June 30, 1998. Actual results and timing of certain events could
differ materially from those indicated in the forward-looking statements as a
result of these and other factors.
Contacts:
AMBI: Gerald Shapiro, VP Finance and Admin and CFO (914) 701-4505
AMBI: Investor Relations (914) 701-4545
AMBI: Website www.AMBIINC.com
