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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)
December 1, 1999
NUTRITION FOR LIFE INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Texas
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(State or other jurisdiction of incorporation)
0-26362 76-0416176
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(Commission File Number) (IRS Employer Identification Number)
9101 Jameel, Suite 180, Houston, TX 77040
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (713) 460-1976
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(Former address, if changed since last report)
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NUTRITION FOR LIFE INTERNATIONAL, INC.
INFORMATION TO BE INCLUDED IN THE REPORT
Item 2. Acquisition or Disposition of Assets
------------------------------------
On December 1, 1999, Nutrition For Life International, Inc. (the "Company")
finalized the acquisition of Ash Corp. ("ASH"). The acquisition of ASH was
completed through a merger with the Company's wholly-owned subsidiary, Bactolac
Pharmaceutical Inc. (Bactolac).
ASH, headquartered in Gulfport, Mississippi, manufactures primarily liquid
pharmaceutical and nutraceutical products. ASH will be operated as a stand-alone
division of Bactolac. Prior to the Company's acquisition of ASH, the principal
shareholders of ASH were Allan I. Sirkin and his son, Neil Sirkin. Bactolac has
entered into employment agreements for a term of three years with each of Allan
I. Sirkin and Neil Sirkin. Allan I. Sirkin will serve as Chief Executive Officer
of the ASH division of Bactolac, and Neil Sirkin will serve as President of the
ASH division of Bactolac.
The purchase price of the ASH acquisition consisted of $750,000 in cash, a
note payable in the amount of $500,000 and 49,296 shares of Series A Preferred
Stock. Additionally, up to 105,634 shares of Series A Preferred Stock may be
issued pursuant to an earnout agreement. Each one share of Series A Preferred
Stock will be automatically converted into 10 shares of the Company's common
stock upon approval of the Company's shareholders. Assets acquired from ASH
consisted primarily of accounts receivable, inventory, machinery and equipment.
The nature and value of the assets acquired, including the going concern value
of ASH, were factors utilized in determining the amount of consideration to be
paid to the shareholders of ASH. Prior to the merger with ASH, there was no
material relationship between ASH and the Company or Bactolac. The Company
intends to continue the operations of ASH and to use its inventory, machinery
and equipment in connection with the manufacture of liquid pharmaceutical and
nutraceutical products. Financing for the acquisition of ASH was provided
primarily through a financing arrangement entered into on November 17, 1999 with
General Electric Capital Corporation, described in the Company's Report on Form
8-K reporting the events of that date.
ITEM 7. Financial Statements and Exhibits.
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(a) Financial Statements of Business Acquired.
It is impractical to provide the required financial information at the
time of filing this Report. The required financial information will be filed by
amendment to this Report within the 60 day extended period for reporting.
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(b) Pro forma Financial Information.
It is impractical to provide the required pro forma financial information at
the time of filing this Report. The required pro forma financial information
will be filed by amendment to this Report within the sixty-day extended
reporting period.
(c) Exhibits.
2.1(c) Agreement and Plan of Merger dated as of October 25, 1999 among
Nutrition For Life International, Inc., Advanced Nutraceuticals, Inc., Ash
Acquisition Company, Allan I. Sirkin and Neil Sirkin (the "Ash Merger
Agreement").
2.1(d) Amendment to Agreement and Plan of Merger, dated November 24,
1999, to the Ash Merger Agreement.
2.2(b) Earnout Agreement, dated November 30, 1999, among Nutrition For
Life International, Inc. and the former shareholders of Ash Corp.
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.
NUTRITION FOR LIFE INTERNATIONAL, INC.
Dated: December 14, 1999 By: /s/ David P. Bertrand
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David P. Bertrand, President
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EXHIBIT 2.1(c)
AGREEMENT AND PLAN OF MERGER
Dated as of OCTOBER 25, 1999
among
NUTRITION FOR LIFE INTERNATIONAL, INC.,
ADVANCED NUTRACEUTICALS, INC., AC ACQUISITION COMPANY
and
ASH CORP., ALLAN I. SIRKIN and NEIL SIRKIN
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TABLE OF CONTENTS
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THE MERGER........................................................................ 3
1.1 The Merger.................................................................. 3
1.2 Effective Time Of The Merger................................................ 3
1.3 Articles Of Incorporation, Bylaws, Board Of Directors And Officers Of
The Surviving Corporation................................................... 3
1.4 Certain Information With Respect To The Capital Stock Of Newco and ASH...... 4
1.5 Effect Of Merger............................................................ 4
2. CONVERSION OF STOCK......................................................... 5
2.1 Conversion of ASH Stock..................................................... 5
2.2 Effect Of Merger On Newco Stock............................................. 5
3. DELIVERY OF MERGER CONSIDERATION............................................ 5
3.1 Exchange Procedure.......................................................... 5
3.2 Delivery of Certificates.................................................... 5
4 CLOSING..................................................................... 5
5 REPRESENTATIONS AND WARRANTIES OF ASH....................................... 6
5.1 Due Organization............................................................ 6
5.2 Authorization............................................................... 6
5.3 Capital Stock Of ASH........................................................ 6
5.4 Transaction In Capital Stock; Organization Accounting....................... 7
5.5 No Bonus Shares............................................................. 7
5.6 Subsidiaries................................................................ 7
5.7 Predecessor Status; Etc..................................................... 7
5.8 Spin-Off By ASH............................................................. 7
5.9 Financial Statements........................................................ 7
5.10 Liabilities And Obligations................................................. 8
5.11 Accounts And Notes Receivable............................................... 8
5.12 Permits And Intangibles..................................................... 9
5.13 Environmental Matters....................................................... 10
5.14 Personal Property........................................................... 10
5.15 Significant Customers; Material Contracts And Commitments................... 11
5.16 Real Property............................................................... 13
5.17 Insurance................................................................... 16
5.18 Compensation; Employment Agreements; Organized Labor Matters................ 16
5.19 Employee Benefit Plans...................................................... 17
5.20 Compliance With ERISA....................................................... 17
5.21 Conformity With Law; Litigation............................................. 18
5.22 Taxes....................................................................... 19
5.23 No Violations............................................................... 19
5.24 Government Contracts........................................................ 19
5.25 Company Products............................................................ 20
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5.26 Absence of Changes.......................................................... 20
5.27 Deposit Accounts; Powers of Attorney........................................ 21
5.28 Validity of Obligations..................................................... 22
5.29 Relations With Governments.................................................. 22
5.30 Disclosure.................................................................. 22
5.31 Prohibited Activities....................................................... 22
5.32 Ownership of Shares......................................................... 22
5.33 Authorization of Shareholders............................................... 22
5.34 No Conflicts................................................................ 22
5.35 Restrictions on Transfer of the Merger Consideration Under Securities Laws.. 23
5.36 Advice of Counsel........................................................... 24
6. REPRESENTATIONS OF NDI AND NEWCO............................................ 24
6.1 Due Organization............................................................ 24
6.2 Authorization............................................................... 24
6.3 Capital Stock Of Newco...................................................... 24
6.4 Capital Stock of NFLI....................................................... 24
6.5 No Violations............................................................... 25
6.6 SEC Filings; Financial Statements........................................... 25
7. COVENANTS PRIOR TO CLOSING.................................................. 26
7.1 Access And Cooperation; Due Diligence....................................... 26
7.2 Conduct Of Business Pending Closing......................................... 26
7.3 Prohibited Activities....................................................... 27
7.4 No Shop..................................................................... 28
7.5 Notice To Bargaining Agents................................................. 28
7.6 Notification Of Certain Matters............................................. 28
7.7 Cooperation................................................................. 29
7.8 Final Financial Statements.................................................. 29
7.9 Further Assurances.......................................................... 29
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF ASH.................................. 29
8.1 Representations And Warranties; Performance Of Obligations.................. 29
8.2 Satisfaction................................................................ 30
8.3 No Litigation............................................................... 30
8.4 Opinion Of Counsel.......................................................... 30
8.5 Consents and Approvals...................................................... 30
8.6 Good Standing Certificates.................................................. 30
8.7 No Material Adverse Change.................................................. 30
8.8 Officer's Certificate....................................................... 30
8.9 Incumbency Certificate and Other Documents.................................. 30
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF NFLI,
ANI AND NEWCO............................................................... 31
9.1 Representations And Warranties; Performance Of Obligations.................. 31
9.2 Satisfaction................................................................ 31
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9.3 No Litigation............................................................... 31
9.4 Opinion Of Counsel.......................................................... 31
9.5 Consents And Approvals...................................................... 31
9.6 Good Standing Certificates.................................................. 31
9.7 No Material Adverse Change.................................................. 32
9.8 Officer's Certificate....................................................... 32
9.9 Incumbency Certificates And Other Documents................................. 32
9.10 Employment Agreements....................................................... 32
9.11 Financing................................................................... 32
9.12 Other Agreements............................................................ 32
9.13 Shareholder Approvals....................................................... 32
9.14 Release of Obligations and Pledge........................................... 32
10. ADDITIONAL AGREEMENTS....................................................... 32
10.1 Reasonable Best Efforts..................................................... 32
10.2 Public Announcements........................................................ 33
10.3 Further Assurances.......................................................... 33
11. TERMINATION OF AGREEMENT.................................................... 33
11.1 Termination................................................................. 33
11.2 Liabilities In Event Of Termination......................................... 33
12. INDEMNIFICATION............................................................. 33
12.1 Indemnification By NFLI, ANI And NEWCO...................................... 33
12.2 Indemnification By ASH And The Shareholders................................. 34
12.3 Indemnification Notice...................................................... 34
12.4 Matters Involving Third Parties............................................. 34
13. GENERAL PROVISIONS.......................................................... 35
13.1 Survival Of Representations, Warranties And Agreements...................... 35
13.2 Assignment.................................................................. 35
13.3 Entire Agreement............................................................ 35
13.4 Counterparts................................................................ 36
13.5 Brokers and Agents.......................................................... 36
13.6 Expenses.................................................................... 36
13.7 Notices..................................................................... 36
13.8 Governing Law............................................................... 37
13.9 Enforcement................................................................. 37
13.10 Exercise Of Rights And Remedies............................................. 37
13.11 Time........................................................................ 38
13.12 Reformation And Severability................................................ 38
13.13 Remedies Cumulative......................................................... 38
13.14 Captions; Construction...................................................... 38
13.15 Amendment................................................................... 38
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LIST OF EXHIBITS
Exhibit....................................................................Title
2.1(a) Form of Earnout Agreement
2.1(b) Form of Statement of Designation of Preferred Stock
9.10 Employment Agreements - Allan I. Sirkin and Neil Sirkin
9.12(i) Covenant Not to Compete Agreements - Allan I. Sirkin and Neil Sirkin
9.12(ii) Lock-Up Agreements - All Shareholders of Ash Corp.
9.12(iii) Shareholder Releases - Allan I. Sirkin and Neil Sirkin
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of October
25, 1999, among Nutrition For Life International, Inc., a Texas corporation
("NFLI"), Advanced Nutraceuticals, Inc., a Delaware corporation ("ANI"), AC
Acquisition Company, a Delaware corporation ("Newco"), ASH Corp., a Mississippi
corporation ("ASH"), Allan I. Sirkin and Neil Sirkin (collectively the
"Shareholders").
WHEREAS, NFLI and ANI have entered into an agreement and plan of merger
pursuant to which ANI will become a wholly owned subsidiary of NFLI;
WHEREAS, Newco is a wholly owned subsidiary of NFLI;
WHEREAS, the respective Boards of Directors of NFLI, ANI, Newco and ASH
deem it advisable and in the best interest of each corporation and their
respective stockholders that ASH merge with and into Newco pursuant to this
Agreement;
WHEREAS, unless the context otherwise requires, capitalized terms used in
this Agreement or in any schedule or exhibit attached hereto and not otherwise
defined shall have the following meanings for all purposes of this Agreement:
"Acquired Party" means ASH (ASH Corp.).
"ANI" has the meaning set forth in the first paragraph of this Agreement.
"Articles of Merger" shall mean those Articles or Certificates or Agreement
of Merger with respect to the Merger as may be required by applicable state
laws.
"ASH" has the meaning set forth in the first paragraph of this Agreement.
"ASH Disclosure Letter" shall mean the disclosure letter delivered by ASH
and the Shareholders to NFLI, ANI and Newco concurrently with the execution and
delivery of this Agreement by ASH and the Shareholders and all Schedules
attached thereto.
"ASH Products" means all products manufactured, marketed, sold or licensed
by ASH since January 1, 1994.
"ASH Stock" has the meaning set forth in Section 2.1.
"Balance Sheet Date" shall mean June 30, 1999.
"Business Day" shall mean any day other than (i) a Saturday, (ii) a Sunday
or (iii) a day on which the United States federal government has a legal
holiday.
"Charter Documents" has the meaning set forth in Section 5.1.
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"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" shall mean the Internal Revenue Code of 1986, as amended and all
regulations and rules promulgated thereunder.
"Effective Time of the Merger" shall mean the time the Merger becomes
effective as set forth in Section 1.2.
"Environmental Laws" has the meaning set forth in Section 5.13.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Knowledge" shall mean with respect to NFLI, ANI, Newco or ASH the
knowledge of its directors or officers, which such persons would have had if he
or she had conducted a reasonable inquiry into the relevant subject matter.
"Leased Real Property" has the meaning set forth in Section 5.16.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Contracts" has the meaning set forth in Section 5.15.
"Material Documents" has the meaning set forth in Section 5.23.
"Merger" means the merger of ASH with and into Newco pursuant to this
Agreement.
"Merger Consideration" has the meaning set forth in Section 2.1.
"Newco" has the meaning set forth in the first paragraph of this Agreement.
"Newco Charter Documents" has the meaning set forth in Section 6.1.
"Newco Stock" means the common stock, par value $.001 per share, of Newco.
"NFLI" has the meaning set forth in the first paragraph of this Agreement.
"NFLI Common Stock" means the common stock, $.01 par value, of NFLI.
"NFLI Common Stock Trading Price" means the average of the closing prices
of the NFLI Common Stock as reported by The Nasdaq Stock Market for the five
trading days which immediately precede the trading day before the Closing.
"NFLI Preferred Stock" means the Series A preferred stock, $.001 par value,
of NFLI.
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"Owned Real Property" has the meaning set forth in Section 5.16.
"Prohibited Activities" has the meaning set forth in Section 7.3.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Real Property" has the meaning set forth in Section 5.16.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached to the ASH Disclosure Letter, which
shall reference the relevant sections of this Agreement, on which parties hereto
disclose information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Security Act" means the Securities Act of 1933, as amended.
"Surviving Corporation" shall mean Newco as the surviving party in the
Merger.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, or other taxes, assessments, duties,
fees, levies or other governmental charges of any nature whatever, whether
disputed or not, together with any interest, penalties, additions to tax or
additional amounts with respect thereto.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, ASH shall be merged with and into Newco at the Effective Time of
the Merger. Following the Merger, the separate corporate existence of ASH shall
cease and Newco shall continue as the Surviving Corporation.
1.2 Effective Time Of The Merger. At the Closing, Newco and ASH shall
file Articles of Merger in such form as is required by and executed in
accordance with the relevant provisions of the corporate laws of the States of
Delaware and Mississippi. The Merger shall become effective at such time as the
Articles of Merger are duly filed with the Delaware Secretary of State or at
such subsequent time as Newco and ASH shall agree and as shall be specified in
the Articles of Merger.
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1.3 Certificate Of Incorporation, Bylaws, Board Of Directors And Officers
Of The Surviving Corporation.
(i) The Certificate of Incorporation of Newco as in effect
immediately prior to the Effective Time of the Merger shall be the Articles of
Incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law, except that the name of the Surviving
Corporation shall be changed to Ash Corp.
(ii) At the Effective Time of the Merger, the Bylaws as in effect
immediately prior to the Effective Time of the Merger shall be the Bylaws of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law.
(iii) Directors and officers of Newco in office immediately prior to
the Effective Time of the Merger, shall be the directors and officers,
respectively, of the Surviving Corporation, and each shall hold his or her
respective office or offices from and after the Effective Time of the Merger
until his or her successor shall have been elected and shall have qualified or
as otherwise provided in the Bylaws of the surviving corporation.
1.4 Certain Information With Respect To The Capital Stock Of Newco and
ASH. The respective designations and numbers of outstanding shares and voting
rights of each class of outstanding capital stock of Newco and ASH as of the
date of this Agreement are as follows:
(i) As of the date of this Agreement, the authorized and
outstanding capital stock of ASH consists of30,000000 shares of common stock,
$.001 par value of which 10,000,000 shares are issued and outstanding.
(ii) As of the date of this Agreement, the authorized capital stock
of Newco consists of 10,000 shares of common stock, $.001 par value, of which
100 shares are issued and outstanding.
1.5 Effect Of Merger. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the Delaware
General Corporation Law and the Mississippi Business Corporation Act. Except as
herein specifically set forth, the identity, existence, purposes, powers,
objects, franchises, privileges, rights and immunities of Newco shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of ASH shall be merged with and into Newco, and Newco, as the
Surviving Corporation, shall be fully vested therewith. At the Effective Time of
the Merger, the separate existence of ASH shall cease and, in accordance with
the terms of this Agreement, the Surviving Corporation shall possess all the
rights, privileges, immunities and franchises, of a public, as well as of a
private, nature, and all property, real, personal and mixed, and all debts due
on whatever account, including subscriptions to shares, and all and every other
interest of or belonging to or due to Newco and ASH shall be taken and deemed to
be transferred to, and vested in, the Surviving Corporation without further act
or deed. The name of the Surviving Corporation from and after the Effective
Time of the Merger shall be
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"ASH Acquisition Company" which name shall be changed after the Closing to ASH
Corporation in accordance with applicable law.
2. CONVERSION OF STOCK
2.1 Conversion Of ASH Stock. At the Effective Time of the Merger and
without any action on the part of the holders of ASH Stock, the ASH Stock shall
be converted into the right to receive (i) $1,400,000 in NFLI Preferred Stock,
(ii) $1,250,000 in cash, without interest, and (iii) up to $3,000,000 in NFLI
Preferred Stock as set forth in the Earnout Agreement substantially in the form
attached hereto as Exhibit 2.1(a). The method for determining the number of
shares of NFLI Preferred Stock to be received by each holder of ASH Stock prior
to the Effective Time of the Merger is set forth in Schedule 2.1. The form of
Statement of Designation of Series A Preferred Stock is attached hereto as
Exhibit 2.1(b).
2.2 Effect Of Merger On Newco Stock. At the Effective Time of the Merger
without any action on the part of the holders of Newco Stock, each share of
Newco Stock issued and outstanding immediately prior to the Effective Time of
the Merger shall remain outstanding as one share of Newco Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 Exchange Procedure. At the Effective Time of the Merger the holders
of the ASH Stock shall, on surrender of certificates representing the ASH Stock
("Certificates"), receive their respective percentages of the shares of NFLI
Preferred Stock which constitute the Merger Consideration as set forth on
Schedule 2.1 hereto.
3.2 Delivery Of Certificates. Each holder shall deliver to Newco, ANI and
NFLI at the Closing the Certificates representing the shares of ASH Stock owned
by him or her, duly endorsed in blank by the holder, or accompanied by blank
stock powers. Each holder agrees promptly to cure any deficiencies with respect
to the endorsement of his or her Certificates or other documents of conveyance
with respect to such ASH Stock or with respect to the stock powers accompanying
any ASH Stock. All shares of NFLI Preferred Stock issued upon conversion of
shares of ASH Stock shall be deemed to have been issued in full satisfaction of
all rights pertaining to the ASH Stock. Until surrender as contemplated by this
Section 3, each Certificate shall be deemed at any time after the Effective Time
of the Merger to represent only the right to receive upon such surrender the
Merger Consideration.
4. CLOSING
Subject to the terms and conditions of this Agreement, the closing of the
Merger and the transactions contemplated by this Agreement (the "Closing") will
take place on the second business day after the satisfaction or waiver (subject
to applicable law) of the conditions set forth in Sections 8 and 9, unless
another time or date is agreed to in writing by the parties hereto (the actual
time and date of the Closing being referred to herein as the "Closing Date").
The Closing shall be held at the offices of Patton Boggs, LLP, 1660 Lincoln
Street, Suite
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1900, Denver, Colorado 80264, unless another place is agreed to in writing by
the parties hereto.
5. REPRESENTATIONS AND WARRANTIES OF ASH AND THE SHAREHOLDERS
ASH and the Shareholders jointly and severally represent and warrant that
all of the following representations and warranties in this Section 5 are true
at the date of this Agreement and shall be true at the time of Closing.
5.1 Due Organization. ASH is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and has the requisite power and authority to carry on its business as it is now
being conducted. ASH is duly qualified to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except (i) as set
forth on Schedule 5.1 to the ASH Disclosure Letter or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of ASH taken as a whole (as used herein with respect to ASH, or with respect to
any other person, a "Material Adverse Effect"). Schedule 5.1 to the ASH
Disclosure Letter sets forth the jurisdiction in which ASH is incorporated and
contains a list of all jurisdictions in which ASH is authorized or qualified to
do business. True, complete and correct copies of the Articles of Incorporation
and By-laws, each as amended, of ASH (the "Charter Documents") are all attached
to Schedule 5.1 to the ASH Disclosure Letter. The stock records of ASH, as
heretofore made available to Newco, are correct and complete in all material
respects. There are no minutes or other records or proceedings in the possession
of ASH which have not been made available to Newco, and all of such minutes or
other records of proceedings are correct and complete in all respects.
5.2 Authorization. The representatives of ASH executing this Agreement
have the authority to enter into and bind ASH to the terms of this Agreement and
ASH has the full legal right, power and authority to enter into this Agreement
and the Merger, subject to any required approval of the shareholders and the
Board of Directors of ASH as set forth on Schedule 5.2 to the ASH Disclosure
Letter, executed copies of which are attached thereto.
5.3 Capital Stock Of ASH. The authorized capital stock of ASH is as set
forth in Section 1.4(i). All of the issued and outstanding shares of the capital
stock of ASH are owned by the holders in the amounts set forth in Schedule 2.1
and further, except as set forth on Schedule 5.3 to the ASH Disclosure Letter,
are owned free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind. All of the
issued and outstanding shares of the capital stock of ASH have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the holders listed and further, such shares were
offered, issued, sold and delivered by ASH in compliance with all applicable
state and Federal laws concerning the issuance of securities. Further, none of
such shares was issued in violation of any preemptive rights of any past or
present stockholder.
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5.4 Transactions In Capital Stock; Organization; Accounting. Except as
set forth on Schedule 5.4 to the ASH Disclosure Letter, (i) ASH has not acquired
any ASH Stock since its inception; (ii) no option, warrant, call, conversion
right or commitment of any kind exists which obligates ASH to issue any of its
authorized but unissued capital stock; (iii) ASH has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interests therein or to pay any dividend or make any
distribution in respect thereof; and (iv) neither the voting stock structure of
ASH nor the relative ownership of shares among any of its respective
stockholders has been altered or changed in contemplation of the Merger.
Schedule 5.4 to the ASH Disclosure Letter also includes complete and accurate
copies of all stock option or stock purchase plans, including a list of all
outstanding options, warrants or other rights to acquire shares of ASH's stock.
5.5 No Bonus Shares. Except as set forth on Schedule 5.5 to the ASH
Disclosure Letter, none of the shares of ASH Stock was issued pursuant to
awards, grants or bonuses in contemplation of the Merger.
5.6 Subsidiaries. Except as set forth on Schedule 5.6 to the ASH
Disclosure Letter, ASH (i) has no subsidiaries and (ii) does not presently own,
of record or beneficially, or control, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity interest in
any corporation, association or business entity nor is ASH, directly or
indirectly, a participant in any joint venture, partnership or other non-
corporate entity.
5.7 Predecessor Status; Etc. Set forth in Schedule 5.7 to the ASH
Disclosure Letter is an accurate list of all names of all predecessor companies
of ASH, including the names of any entities acquired by ASH (by stock purchase,
merger or otherwise) or owned by ASH or from whom ASH previously acquired
material assets, in any case, from the earliest date upon which any person
acquired his or her stock in ASH. Except as disclosed on Schedule 5.7 to the
ASH Disclosure Letter, ASH has not been, within such period of time, a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 Spin-Off By ASH. Except as set forth on Schedule 5.8 to the ASH
Disclosure Letter, there has not been any sale, spin-off or split-up of material
assets of either ASH or any other person or entity that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, ASH ("Affiliates") since its inception.
5.9 Financial Statements. Schedule 5.9 to the ASH Disclosure Letter
includes copies of the following financial statements (the "ASH Financial
Statements") of ASH: ASH's audited Balance Sheets as of December 31, 1998 and
1997 and audited Statements of Operations, Shareholders' Equity and Cash Flows
for each of the fiscal years ended December 31, 1998 and 1997, unaudited Balance
Sheets as of June 30, 1999 and 1998 and unaudited Statements of Operations,
Shareholders' Equity and Cash Flows for each of the six month periods ended June
30, 1999 and 1998 (June 30, 1999 being hereinafter referred to as the "Balance
Sheet Date"). Such ASH Financial Statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods indicated (except as noted thereon or on Schedule
5.9 to the ASH
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Disclosure Letter). Except as set forth on Schedule 5.9 to the ASH Disclosure
Letter, such Balance Sheets present fairly in all material respects the
financial position of ASH as of the dates indicated thereon, and such Statements
of Operations, Shareholders' Equity and Cash Flows present fairly in all
material respects the results of operations for the periods indicated thereon.
5.10 Liabilities And Obligations. Schedule 5.10 to the ASH Disclosure
Letter includes accurate lists as of the Balance Sheet Date of (i) all material
liabilities of ASH which are not reflected on the Balance Sheet of ASH at the
Balance Sheet Date or otherwise reflected in the ASH Financial Statements at the
Balance Sheet Date which by their nature would be required in accordance with
GAAP to be reflected in the Balance Sheet, and (ii) all loan agreements,
indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other
security agreements. Except as set forth on Schedule 5.10 to the ASH Disclosure
Letter, since the Balance Sheet Date ASH has not incurred any material
liabilities of any kind, character and description, whether accrued, absolute,
secured or unsecured, contingent or otherwise, other than liabilities incurred
in the ordinary course of business. Schedule 5.10 to the ASH Disclosure Letter
also includes, in the case of those contingent liabilities related to pending or
threatened litigation, or other liabilities which are not fixed or otherwise
accrued or reserved, a good faith and reasonable estimate of the maximum amount
which ASH reasonably expects will be payable. For each such contingent
liability or liability for which the amount is not fixed or is contested, ASH
has provided to Newco the following information:
(a) A summary description of the liability together with the
following:
(i) copies of all relevant documentation relating thereto;
(ii) amounts claimed and any other action or relief sought;
and
(iii) name of claimant and all other parties to the claim, suit
or proceeding;
(b) The name of each court or agency before which such claim, suit
or proceeding is pending; and
(c) The date such claim, suit or proceeding was instituted; and
(d) A good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability. If
no estimate is provided, the estimate shall for purposes of this Agreement be
deemed to be zero.
5.11 Accounts And Notes Receivable. Schedule 5.11 to the ASH Disclosure
Letter includes an accurate list of the accounts and notes receivable of ASH, as
of the Balance Sheet Date, including any such amounts which are not reflected in
the Balance Sheet as of the Balance Sheet Date, and including receivables from
and advances to employees and the stockholders. Except to the extent reflected
on Schedule 5.11 to the ASH Disclosure Letter, to the Knowledge of ASH and the
Shareholders, such accounts, notes and other receivables
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are collectible in the amounts shown on Schedule 5.11 to the ASH Disclosure
Letter, net of reserves reflected in the Balance Sheet as of the Balance Sheet
Date.
5.12 Permits And Intangibles.
(i) ASH and/or its employees hold all licenses, franchises, permits
and other governmental authorizations the absence of any of which could have a
Material Adverse Effect on ASH's business and Schedule 5.12 to the ASH
Disclosure Letter includes an accurate list and summary description of all such
licenses, franchises, permits and other governmental authorizations, including
permits (it being understood and agreed that a list of all environmental permits
and other environmental approvals is set forth on Schedule 5.13 to the ASH
Disclosure Letter), titles (including motor vehicle titles and current
registrations), fuel permits, licenses, franchises and certificates, as well as
(a) registered or unregistered trademarks, trade names, patents, patent
applications and inventions and discoveries that may be patentable, (b)
copyrights owned or held by ASH or any of its employees (including interests in
software or other technology systems, programs and intellectual property). To
the Knowledge of ASH and the Shareholders, the licenses, franchises, permits and
other governmental authorizations listed on Schedules 5.12 and 5.13 to the ASH
Disclosure Letter are valid, and ASH has not received any notice that any
governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. ASH has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the licenses, franchises,
permits and other governmental authorizations listed on Schedules 5.12 and 5.13
of the ASH Disclosure letter and is not in violation of any of the foregoing
except where such non-compliance or violation would not have a Material Adverse
Effect on ASH. Except as specifically provided in Schedule 5.12 to the ASH
Disclosure Letter, the transactions contemplated by this Agreement will not
result in a default under or a breach or violation of, or adversely affect the
rights and benefits afforded to ASH by, any such licenses, franchises, permits
or government authorizations.
(ii) The patents, the marks and copyrights, as well as the know how,
trade secrets, confidential information, customer lists, software, technical
information, data, process technology, plans and drawings owned, used or
licensed by ASH (collectively, the "Trade Secrets") are all those necessary to
enable ASH to conduct and to continue to conduct its business as it is currently
conducted. Schedule 5.12 of the ASH Disclosure Letter also contains a
description of all material Trade Secrets owned or used by ASH. Except as set
forth on Schedule 5.12 to the ASH Disclosure Letter (a) all of the patents,
marks, copyrights and Trade Secrets (collectively, the "Intellectual Property")
are owned, or used under valid licenses, by ASH, and, are free and clear of all
liens and other adverse claims; (b) to the Knowledge of ASH and the
Shareholders, ASH has not infringed on or misappropriated, is not now infringing
on or misappropriating, and has not received any notice that it is infringing
on, misappropriating, or otherwise conflicting with the intellectual property
rights of any third parties; (c) there is no claim pending or, to the Knowledge
of ASH and the Shareholders, threatened against ASH with respect to the alleged
infringement or misappropriation by ASH or a conflict with, any intellectual
property rights of others; (d) to the Knowledge of ASH and the Shareholders, the
operation of any aspect of the business in the manner in which it has
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heretofore been operated or is presently operated does not give rise to any such
infringement or misappropriation; and (e) to the Knowledge of ASH and the
Shareholders, there is no infringement or misappropriation of the Intellectual
Property by a third party or claim, pending or threatened, against any third
party with respect to the alleged infringement or misappropriation of the
Intellectual Property by such third party.
5.13 Environmental Matters. Except as set forth on Schedule 5.13 to the
ASH Disclosure Letter, and except where any failure to comply or action would
not have a Material Adverse Effect, (i) ASH has complied with and is in
compliance with all Federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes and
Hazardous Substances including petroleum and petroleum products (as such terms
are defined in any applicable Environmental Laws); (ii) ASH has obtained and
adhered to all necessary permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous
Substances, an accurate list of all of which permits and approvals is set forth
on Schedule 5.13 to the ASH Disclosure Letter, and have reported to the
appropriate authorities, to the extent required by all Environmental Laws, all
past and present sites owned and operated by ASH where Hazardous Wastes or
Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (iii) there have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in or on any property owned or operated by ASH
except as permitted by Environmental Laws; (iv) to the Knowledge of ASH and the
Shareholders there is no on-site or off-site location to which ASH has
transported or disposed of Hazardous Wastes and Hazardous Substances or arranged
for the transportation of Hazardous Wastes and Hazardous Substances, which site
is the subject of any Federal, state, local or foreign enforcement action or any
other investigation which is reasonably likely to lead to any claim against ASH
for any clean-up cost, remedial work, damage to natural resources, property
damage or personal injury, including, but not limited to, any claim under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended; and (v) to the Knowledge of ASH and the Shareholders, ASH has no
contingent liability in connection with any release of any Hazardous Waste or
Hazardous Substance into the environment.
5.14 Personal Property. Schedule 5.14 to the ASH Disclosure Letter
includes an accurate list of (i) all personal property included (or that will be
included) in "depreciable plant, property and equipment" on the Balance Sheets
of ASH, (ii) all other personal property owned by ASH with an individual value
in excess of $25,000 (a) as of the Balance Sheet Date and (b) acquired since the
Balance Sheet Date and (iii) all leases and agreements in respect of personal
property, including, in the case of each of (i), (ii) and (iii), (1) true,
complete and correct copies of all such leases and (2) an indication as to which
assets are currently owned, or were formerly owned, by stockholders, relatives
of stockholders, or Affiliates of ASH. Except as set forth on Schedule 5.14 to
the ASH Disclosure Letter, (x) all material personal property used by ASH in its
business is either owned by ASH or leased by ASH pursuant to a lease included on
Schedule 5.14 to the ASH Disclosure Letter, (y) all of the personal property
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listed on Schedule 5.14 to the ASH Disclosure Letter is in good working order
and condition, ordinary wear and tear excepted and (z) all leases and agreements
included on Schedule 5.14 to the ASH Disclosure Letter are in full force and
effect and constitute valid and binding agreements of the parties (and their
successors) thereto in accordance with their respective terms.
5.15 Significant Customers; Material Contracts And Commitments.
(i) Schedule 5.15 to the ASH Disclosure Letter includes an accurate
list of (i) all significant customers of ASH, it being understood and agreed
that a "significant customer," for purposes of this Section 5.15 means a
customer (or person or entity) representing 5% or more of ASH's annual revenues
as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.15
to the ASH Disclosure Letter, none of ASH'S significant customers has canceled
or substantially reduced or, to the Knowledge of ASH and the Shareholders, are
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by ASH.
(ii) Schedule 5.15 to the ASH Disclosure Letter includes an accurate
list as of or on the date hereof, of all material written or oral leases,
agreements or other contracts or legally binding contractual rights or
contractual obligations or contractual commitments relating to or in any way
affecting the operation or ownership of the business of ASH (the "Material
Contracts"), including but not limited, those of a type described below:
(a) Any consulting agreement, employment agreement,
change-in-control agreement, and collective bargaining arrangements with any
labor union and any such agreements currently in negotiation or proposed;
(b) Any contract for capital expenditures or the acquisition
or construction of fixed assets in excess of $25,000.
(c) Any contract for the purchase, maintenance or
acquisition, or the sale or furnishing, of materials, supplies, merchandise,
machinery, equipment, parts or other property or services (except if such
contract is made in the ordinary course of business and requires aggregate
future payments of less than $25,000);
(d) Any contract other than trade payables in the ordinary
course of business relating to the borrowing of money, or the guaranty of
another person's borrowing of money, including, without limitation, any notes,
mortgages, indentures and other obligations, guarantees of performance,
agreements and instruments for or relating to any lending or borrowing,
including assumed indebtedness;
(e) Any contract granting any person a lien on all or any
part of the assets of ASH or any of its subsidiaries;
(f) Any contract for the cleanup, abatement or other actions
in connection with hazardous materials as defined under any Environmental Laws,
the
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remediation of any existing environmental liabilities or relating to the
performance of any environmental audit or study;
(g) Any contract granting to any person an option or a first
refusal, first-offer or similar preferential right to purchase or acquire any
material assets of ASH or any ASH Subsidiary;
(h) Any contract with any agent, distributor or
representative which is not terminable by ASH upon ninety calendar days' or less
notice without penalty;
(i) Any contract under which ASH is (1) a lessee or sublessee
of any machinery, equipment, vehicle or other tangible personal property, or (2)
a lessor of any tangible personal property owned by ASH, in either case having
an original value in excess of $25,000;
(j) Any contract under which ASH has granted or received a
license or sublicense or under which it is obligated to pay or has the right to
receive a royalty, license fee or similar payment;
(k) Any contract concerning any Affiliates;
(l) Any contract providing for the indemnification or holding
harmless of any officer, director, employee or other person, other than as
provided in the by-laws of ASH;
(m) Any contract for purchase or sale by ASH or the granting
of any options with respect to, or providing for any labor, services or
materials (including brokerage or management services) involving any real
property on which ASH conducts any aspect of its business involving aggregate
future payments of more than $25,000;
(n) Any contract limiting, restricting or prohibiting ASH
from conducting business anywhere in the United States or elsewhere in the
world;
(o) Any joint venture or partnership agreement;
(p) Any lease, sublease or associated agreements relating to
the property leased by ASH;
(q) Any material contract requiring prior notice, consent or
other approval upon a change of control in the equity ownership of ASH, which
contracts shall be separately identified on Schedule 5.15 to the ASH Disclosure
Letter;
(r) Any other contract, whether or not made in the ordinary
course of business, which involves future payments in excess of $25,000.
ASH has provided Newco a true and complete copy of each written Material
Contract and a
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true and complete summary of each oral Material Contract, in each case including
all amendments or other modifications thereto. Except as set forth on Schedule
5.15 to the ASH Disclosure Letter, each Material Contract is a valid and binding
obligation of, and enforceable in accordance with its terms against, ASH, and,
to the Knowledge of ASH and the Shareholders, the other parties thereto, and is
in full force and effect, subject only to bankruptcy, reorganization,
receivership and other laws affecting creditors' rights generally. Except as set
forth on Schedule 5.15 of the ASH Disclosure Letter, ASH has performed all
obligations required to be performed by it as of the date hereof and will have
performed all obligations required to be performed by it as of the Closing Date
under each Material Contract and neither ASH, nor, to the Knowledge of ASH and
the Shareholders, any other party to any Material Contract is in breach or
default thereunder, and to the Knowledge of ASH and the Shareholders, there
exists no condition which would, with or without the lapse of time or the giving
of notice, or both, constitute a breach or default thereunder. ASH has not been
notified that any party to any Material Contract intends to cancel, terminate,
not renew, or exercise an option under any Material Contract, whether in
connection with the transactions contemplated hereby or otherwise.
5.16 Real Property. Schedule 5.16 to the ASH Disclosure Letter is a
correct and complete list, and a brief description of, all real estate in which
ASH has an ownership interest (the "Owned Real Property") and all real property
leased by ASH (the "Leased Real Property"), and all facilities thereon. Except
as lessee of Leased Real Property, ASH is not a lessee under or otherwise a
party to any lease, sublease, license, concession or other agreement, whether
written or oral, pursuant to which another person or entity has granted to ASH
the right to use or occupy all or any portion of any real property.
ASH has good and marketable fee simple title to the Owned Real
Property and, assuming good title in the landlord, a valid leasehold interest in
the Leased Property (the Owned Real Property and the Leased Real Property are
sometimes referred to as the "Real Property"), in each case free and clear of
all liens, assessments or restrictions (including, without limitation, inchoate
liens arising out of the provision of labor, services or materials to any such
Real Property) other than (a) mortgages shown on the ASH Financial Statements as
securing specified liabilities or obligations, with respect to which no default
(or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) liens for current taxes not yet due, and (c) minor
imperfections of title, such as utility and access easements that do not impair
the intended use of the Real Property, none of which is substantial in amount,
materially detracts from the value or impairs the use of the property subject
thereto, or impairs the operations of ASH, and zoning laws and other land use
restrictions or restrictive covenants that do not materially impair the present
use of the property subject thereto. The Real Property constitutes all the real
properties reflected on ASH Financial Statements or used or occupied by ASH in
connection with its business or otherwise.
With respect to the Owned Real Property, except as reflected on
Schedule 5.16 to the ASH Disclosure Letter:
(i) ASH is in exclusive possession thereof and no easements,
licenses or rights are necessary to the conduct of its business thereon in
addition to those which exist as
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of the date hereof;
(ii) No portion thereof is subject to any pending condemnation
proceeding or proceeding by any public or quasi-public authority materially
adverse to the Owned Real Property and, to the Knowledge of ASH and the
Shareholders, there is no threatened condemnation or proceeding with respect
thereto;
(iii) The buildings, plants, improvements, structures and fixtures
owned, leased or used by ASH at the Owned Real Property, including, without
limitation, heating, ventilation and air conditioning systems, roofs,
foundations and floors, are in good operating condition and repair; the Owned
Real Property is properly zoned for its use by ASH (without being a legal
nonconforming use or subject to a conditional use permit), and is not, to the
Knowledge of ASH and the Shareholders, in violation of any zoning, subdivision,
health, safety, landmark preservation, wetlands preservation, building,
environmental, land use or other ordinances, laws, codes or regulations or any
covenants, restrictions or other documents of record; nor has any notice of any
claimed violation of any such ordinances, laws, codes or regulations or any
covenants, restrictions or other documents of record been served on ASH; and ASH
has not received notice of, and to the Knowledge of ASH and the Shareholders
there has not been, any change in such zoning, subdivision, health, safety,
landmark preservation, wetlands preservation, building, environmental, land use
or other ordinances, laws, codes or regulations that affects ASH's use of such
Owned Real Property (without regard to any non-conforming use or other so-called
"grandfather" provision);
(iv) Since January 1, 1998, ASH has not received notice of any
increase in the assessed valuation of the Owned Real Property or of any
contemplated special assessment; Schedule 5.16 to the ASH Disclosure Letter
contains a true and correct description of all pending proceedings to reduce the
general real estate taxes against the Owned Real Property; none of the Owned
Real Property is located in a special service district, special service area,
tax increment financing district or similar district or area, or to the
Knowledge of ASH and the Shareholders, subject to a threatened special
assessment; and, to the Knowledge of ASH and the Shareholders, none of the Owned
Real Property is located in an area for which federal flood risk insurance is
necessary;
(v) All facilities located on any parcel of the Owned Real Property
are supplied with utilities and other third-party services, such as water,
sewer, electricity, gas, roads, rail service and garbage collection, necessary
for the current operation of such facilities, all of which services are adequate
to conduct that portion of ASH's business conducted at each of such facilities
and such facilities are, to the Knowledge of ASH and the Shareholders,
maintained in accordance with all laws, ordinances, rules and regulations
applicable to ASH or the Owned Real Property;
(vi) ASH is not a party to any written or oral agreements or
undertakings with owners or users of properties adjacent to any facility located
on any parcel of the Owned Real Property relating to the use, operation or
maintenance of such facility or any adjacent real property;
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(vii) ASH is not a lessor under or otherwise a party to any
lease, sublease, license, concession or other agreement, whether written or
oral, pursuant to which ASH has granted to any party or parties the right to use
or occupy all or any portion of the Owned Real Property;
(viii) To the Knowledge of ASH and the Shareholders, the
buildings, plants, improvements, structures, and fixtures on the Owned Real
Property are free from regulated quantities of asbestos;
(ix) There are no material defects in any improvements on or
to the Owned Real Property;
(x) No portion of any parcel of the Owned Real Property is
subject to any roll-back tax, dual or exempt valuation tax, or contains any
omitted parcel;
(xi) All assessments and taxes currently due and payable on
the Owned Real Property have been paid; and
(xii) The buildings, plants, and structures on the Owned Real
Property are free from flooding and leaks.
With respect to the Leased Real Property, except as reflected on
Schedule 5.16 to the ASH Disclosure Letter:
(i) ASH is in exclusive possession thereof and, to the
Knowledge of ASH and the Shareholders, no easements, licenses or rights are
necessary to conduct ASH's business thereon in addition to those which exist as
of the date hereof;
(ii) To the Knowledge of ASH and the Shareholders, no portion
thereof is subject to any pending condemnation proceeding or proceeding by any
public or quasi-public authority materially adverse to the Leased Real Property
and there is no threatened condemnation or proceeding with respect thereto;
(iii) To the Knowledge of ASH and the Shareholders (a) the
buildings, plants, improvements, structures and fixtures at the Leased Real
Property, including, without limitation, heating, ventilation and air
conditioning systems, roofs, foundations and floors, are in good operating
condition and repair; (b) the Leased Real Property is not in violation of any
health, safety, building, or environmental ordinances, laws, codes or
regulations; nor has any notice of any claimed violation of any such ordinances,
laws, codes or regulations been served on ASH;
(iv) The Leased Real Property is supplied with utilities and
other third-party services, such as water, sewer, electricity, gas, roads, rail
service and garbage collection, necessary for the current operation of ASH's
business, and such Leased Real Property is, to the Knowledge of ASH and the
Shareholders, maintained in all material respects in accordance with all laws
applicable to ASH or the Leased Real Property;
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(v) ASH is not a party to any written or oral agreement or
undertaking with owners or users of properties adjacent to the Leased Real
Property relating to the use, operation or maintenance of such facility or any
adjacent real property;
(vi) ASH is not a party to any lease, sublease, license,
concession or other agreement, whether written or oral, pursuant to which ASH
has granted to any party or parties the right to use or occupy all or any
portion of the Leased Real Property;
(vii) To the extent that ASH has responsibility under the
lease(s) for the Leased Real Property for compliance with the provisions of the
ADA, to the Knowledge of ASH and the Shareholders, all alterations,
rehabilitations, structures, or improvements in the Leased Property comply with
the ADA;
(viii) To the Knowledge of ASH and the Shareholders (a) there
are no material defects in any improvements on or to the Leased Real Property;
(b) the Leased Real Property is free from regulated quantities of asbestos; and
(c) the Leased Real Property is free from flooding and leaks.
5.17 Insurance. Schedule 5.17 to the ASH Disclosure Letter includes (i)
an accurate list of all insurance policies carried by ASH for the past three
years, and (ii) an accurate list of all insurance loss runs or workers
compensation claims received for the past five policy years and complete copies
of the foregoing items have been delivered to Newco. Such insurance policies
evidence all of the insurance that ASH has been required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws.
All insurance policies for the current policy periods are in full force and
effect and shall remain in full force and effect through the Closing Date. Since
January 1, 1995, no insurance carried by ASH has been canceled by the insurer
and ASH has not been denied coverage.
5.18 Compensation; Employment Agreements; Organized Labor Matters.
Schedule 5.18 to the ASH Disclosure Letter includes an accurate list of (i) all
officers, directors and key employees of ASH, (ii) all employment agreements
with such officers, directors and key employees and the rate of compensation
(and the portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date and the date
hereof. ASH has provided to Newco true, complete and correct copies of any
employment agreements for persons listed on Schedule 5.18 to the ASH Disclosure
Letter. Since the Balance Sheet Date, there have been no increases in the
compensation payable or any special bonuses to any officer, director, key
employee or other employee, except ordinary salary increases implemented on a
basis consistent with past practices. Except as set forth on Schedule 5.18 to
the ASH Disclosure Letter, (i) ASH is not bound by or subject to (and none of
its assets or properties is bound by or subject to) any arrangement with any
labor union, (ii) no employees of ASH are represented by any labor union or
covered by any collective bargaining agreement, (iii) to the Knowledge of ASH
and the Shareholders, no campaign to establish such representation is in
progress and (iv) there is no pending or, to the Knowledge of ASH and the
Shareholders, threatened labor dispute involving ASH and any group of its
employees nor has ASH experienced any labor
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interruptions over the past three years. ASH believes its relationship with its
employees to be good.
5.19 Employee Benefit Plans. Schedule 5.19 to the ASH Disclosure Letter
sets forth all employee benefit plans of ASH, including all employment
agreements and other agreements or arrangements containing "golden parachute" or
other similar provisions, and deferred compensation agreements. ASH has
delivered to Newco true, complete and correct copies of such plans, agreements
and any trusts related thereto, and classifications of employees covered thereby
as of the Balance Sheet Date. Except for the employee benefit plans, if any,
described on Schedule 5.19 to the ASH Disclosure Letter, ASH does not sponsor,
maintain or contribute to any plan program, fund or arrangement that constitutes
an "employee pension benefit plan," nor has ASH any obligation to contribute to
or accrue or pay any benefits under any deferred compensation or retirement
funding arrangement on behalf of any employee or employees (such as, for
example, and without limitation, any individual retirement account or annuity,
any "excess benefit plan" (within the meaning of Section 3(36) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any non-
qualified deferred compensation arrangement). For the purposes of this
Agreement, the term "employee pension benefit plan" shall have the same meaning
as is given that term in Section 3(2) of ERISA. ASH has not sponsored,
maintained or contributed to any employee pension benefit plan other than the
plans set forth on Schedule 5.19 to the ASH Disclosure Letter, nor is ASH
required to contribute to any retirement plan pursuant to the provisions of any
collective bargaining agreement establishing the terms and conditions or
employment of any of the ASH's employees. All accrued contribution obligations
of ASH with respect to any plan listed on Schedule 5.19 to the ASH Disclosure
Letter have either been fulfilled in their entirety or are fully reflected on
the balance sheet of the ASH as of the Balance Sheet Date.
5.20 Compliance With ERISA. All plans listed on Schedule 5.19 to the ASH
Disclosure Letter that are intended to qualify (the "Qualified Plans") under
Section 401(a) of the Code are, and have been so qualified and have been
determined by the Internal Revenue Service to be so qualified, and copies of
such determination letters are included as part of Schedule 5.19 to the ASH
Disclosure Letter. Except as disclosed on Schedule 5.20 to the ASH Disclosure
Letter, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries
(including, but not limited to, actuarial reports, audits or tax returns) have
been timely filed or distributed, and copies thereof are included as part of
Schedule 5.19 to the ASH Disclosure Letter. None of the stockholders has
engaged in any transaction prohibited under the provisions of Section 4975 of
the Code or Section 406 of ERISA. No plan listed in Schedule 5.19 to the ASH
Disclosure Letter has incurred an accumulated funding deficiency, as defined in
Section 412(a) of the Code and Section 302(1) of ERISA; and ASH has not incurred
any liability for excise tax or penalty due to the Internal Revenue Service nor
any liability to the Pension Benefit Guaranty Corporation. ASH and the
Shareholders further represent that:
(i) There have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to qualify
under Section 401(a) of the Code without notice to and approval by the Internal
Revenue Service;
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(ii) No plan listed in Schedule 5.19 to the ASH Disclosure
Letter, subject to the provisions of Title IV of ERISA, has been terminated;
(iii) There have been no "reportable events" (as that phrase
is defined in Section 4043 of ERISA) with respect to any such plan listed in
Schedule 5.19 to the ASH Disclosure Letter;
(iv) ASH has not incurred liability under Section 4062 of
ERISA; and
(v) No circumstances exist pursuant to which ASH could have
any direct or indirect liability whatsoever (including, but not limited to, any
liability to any multiemployer plan or the PBGC under Title IV of ERISA or to
the Internal Revenue Service for any excise tax or penalty, or being subject to
any statutory lien to secure payment of any such liability) with respect to any
plan now or heretofore maintained or contributed to by any entity other than ASH
that is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes ASH.
5.21 Conformity With Law; Litigation.
(i) Except to the extent set forth on Schedule 5.21 to the
ASH Disclosure Letter, ASH is not in violation of any law or regulation or any
order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over it which would have a Material Adverse Effect.
(ii) Except as set forth on Schedule 5.21 to the ASH
Disclosure Letter (which shall disclose the parties to, nature of and relief
sought for each matter to be disclosed), other than collection actions by ASH in
the ordinary course of business on its own behalf, none of which is greater than
$10,000 and which in the aggregate do not exceed $25,000:
(a) There is no suit, action, proceeding,
investigation, claim or order pending or, to the Knowledge of ASH and the
Shareholders, threatened against ASH, or with respect to any Employee Plan, or
any fiduciary of any such plan (or pending or, to the Knowledge of ASH and the
Shareholders, threatened against any of the officers, directors or employees of
ASH with respect to the business or currently proposed business activities of
ASH, or to which ASH is otherwise a party, or which may have or is likely to
have a Material Adverse Effect, before any court, or before any governmental
authority, department, commission, bureau, agency or other governmental
department or arbitrator (collectively, "Claims"), nor, to the Knowledge of ASH
and the Shareholders is there any basis for any such Claims.
(b) ASH is not subject to any unsatisfied or
continuing judgment, order or decree of any court or governmental authority, and
to the Knowledge of ASH and the Shareholders, ASH is not otherwise exposed, from
a legal standpoint, to any liability or disadvantage which could have a Material
Adverse Effect. Schedule 5.21 to the ASH
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Disclosure Letter sets forth all closed litigation matters to which ASH was a
party during the preceding five years, the dates such litigation was commenced
and concluded, and the nature of the resolution thereof (including amounts paid
in settlement or judgment).
5.22 Taxes. ASH has timely filed all requisite federal, state and other
tax returns or extension requests for all fiscal periods ended on or before the
Balance Sheet Date; and except as set forth on Schedule 5.22 to the ASH
Disclosure Letter, there are no examinations in progress or claims against any
of them for federal, state and other Taxes (including penalties and interest)
for any period or periods prior to and including the Balance Sheet Date and no
notice of any claim for taxes, whether pending or threatened, has been received.
All Taxes, including interest and penalties (whether or not shown on any tax
return) owed by ASH, any member of an affiliated or consolidated group which
includes or included ASH, or with respect to any payment made or deemed made by
ASH herein have been paid. The amounts shown as accruals for Taxes on the ASH
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date. Copies of (i) any tax examinations, (ii) extensions of
statutory limitations and (iii) the federal and local income tax returns and
franchise tax returns of ASH for the last three fiscal years, are attached as
Schedule 5.22 to the ASH Disclosure Letter.
5.23 No Violations. ASH is not in violation of any of its Charter
Documents. Neither ASH nor, to the Knowledge of ASH and the Shareholders, any
other party thereto, is in default under any lease, instrument, agreement,
license, or permit set forth on the Schedules to the ASH Disclosure Letter, or
any other material agreement to which it is a party or by which its properties
are bound (the "Material Documents"); and, except as set forth in Schedule 5.23
to the ASH Disclosure Letter, (a) the rights and benefits of ASH under the
Material Documents will not be adversely affected by the transactions
contemplated hereby and (b) the execution of this Agreement and the performance
of the obligations hereunder and the consummation of the transactions
contemplated hereby will not result in any violation of, or breach of, or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents. Except as set forth on Schedule 5.23 to the
ASH Disclosure Letter, none of the Material Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. Except as set forth on Schedule 5.23 to the ASH
Disclosure Letter, none of the Material Documents prohibits the use or
publication by ASH or Newco of the name of any other party to such Material
Document, and none of the Material Documents prohibits or restricts ASH from
freely providing services to any other customer or potential customer of ASH or
Newco.
5.24 Government Contracts. Except as set forth on Schedule 5.24 to the
ASH Disclosure Letter, ASH is not now a party to any governmental contracts
subject to price redetermination or renegotiation.
5.25 Company Products. Except as set forth on Schedule 5.25 to the ASH
Disclosure Letter, there have been no ASH Products which have been recalled,
withdrawn or
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suspended in, or outside of, the United States (whether voluntarily or
otherwise) since January 1, 1994 and ending on the date hereof, or (ii)
proceedings in the United States and/or outside of the United States pending
against ASH at any time since January 1, 1994 and ending on the date hereof
(whether such proceedings have since been completed or remain pending) seeking
the recall, withdrawal, suspension or seizure of any ASH Product or seeking to
enjoin ASH from engaging in any activities pertaining to such ASH Products or to
affirmatively perform activities pertaining to such ASH Products prior to
shipping such products. To the Knowledge of ASH and the Shareholders except as
set forth in Schedule 5.25 to the ASH Disclosure Letter, there exists no facts
which could reasonably be expected to furnish a basis for the recall or
withdrawal of any ASH Product or the suspension of any product registration,
product license, manufacturing license, wholesale dealers license, export
license or other governmental license, approval or consent of any governmental
regulatory agency with respect to any of the ASH Products and there are no facts
which could reasonably be expected to form the basis for the issuance of an
injunction pertaining thereto or to cause ASH to cease further distribution or
marketing of any of the ASH Products. The ASH Products have been manufactured,
marketed and distributed in accordance with the specifications under which such
ASH Products have normally been manufactured and in accordance with all
requirements of law. Since January 1, 1994, ASH has not received or been subject
to consent decrees, orders, settlement agreements or similar matters relating in
any fashion to the ASH Products or received any warning letter or other
correspondence from the Food and Drug Administration, Federal Trade Commission
or other governmental agencies, federal, state or local, or any governmental
officials concerning the ASH Products or which have in any manner asserted that
the operations of ASH have not, or may not, be in compliance with applicable
laws, regulations, rules or guidelines. ASH has complied in all respects with
current reporting requirements relating to the ASH Products;
5.26 Absence Of Changes. Since the Balance Sheet Date, except as set
forth on Schedule 5.26 to the ASH Disclosure Letter, there has not been:
(i) Any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of ASH;
(ii) Any damage, destruction or loss (whether or not covered
by insurance) materially adversely affecting the properties or business of ASH;
(iii) Any change in the authorized capital of ASH or its
outstanding securities or any change in its ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments;
(iv) Any declaration or payment of any dividend or
distribution in respect of the capital stock or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock of ASH;
(v) Any increase in the compensation, bonus, sales
commissions or fee arrangement payable or to become payable by ASH to any of its
officers, directors,
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stockholders, employees, consultants or agents, except for ordinary and
customary bonuses and salary increases for employees in accordance with past
practice;
(vi) Any work interruptions, labor grievances or claims
filed, or any event or condition of any character, materially adversely
affecting the business of ASH;
(vii) Any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of ASH to any person,
including, without limitation, any of the stockholders and their affiliates;
(viii) Any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the ASH, including without limitation
any indebtedness or obligation of any stockholder or any affiliate thereof;
(ix) Any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the assets,
property or rights of ASH or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(x) Any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside of
the ordinary course of ASH's business;
(xi) Any waiver of any material rights or claims of ASH;
(xii) Any amendment or termination of any Material Documents
or other right to which ASH is a party;
(xiii) Any transaction by ASH outside the ordinary course of
its business;
(xiv) Any cancellation or termination of a Material Contract
with a customer or client prior to the scheduled termination date; or
(xv) Any other distribution of property or assets by ASH
other than in the ordinary course of business.
5.27 Deposit Accounts; Powers Of Attorney. Schedule 5.27 to the ASH
Disclosure Letter includes an accurate list as of the date of the Agreement of:
(i) the name of each financial institution in which ASH has accounts or safe
deposit boxes; (ii) the names in which the accounts or boxes are held; (iii)
the type of account and account number; and (iv) the name of each person
authorized to draw thereon or have access thereto. Schedule 5.27 to the ASH
Disclosure Letter also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from ASH and a
description of the terms of such power.
5.28 Validity Of Obligations. The execution and delivery of this
Agreement by ASH and the performance of the transactions contemplated herein
have been duly and validly
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authorized by the Board of Directors of ASH and this Agreement has been duly and
validly authorized by all necessary corporate action and is a legal, valid and
binding obligation of ASH.
5.29 Relations With Governments. Except for political contributions made
in a lawful manner which, in the aggregate, do not exceed $10,000 per year for
each year in which the stockholders have been stockholders of ASH, ASH has not
made, offered or agreed to offer anything of value to any governmental official,
political party or candidate for government office nor has it otherwise taken
any action which would cause ASH to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended or any law of similar effect. If political
contributions made by ASH have exceeded $10,000 per year for each year in which
any person has been a stockholder of ASH, each contribution in the amount of
$5,000 or more is described on Schedule 5.29 to the ASH Disclosure Letter.
5.30 Disclosure. This Agreement, including the Exhibits and ASH
Disclosure Letter and the Schedules thereto, together with the other information
furnished to NFLI, ANI and Newco by ASH in connection herewith, do not contain
an untrue statement of a material fact or omit to state a material fact
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading.
5.31 Prohibited Activities. Except as set forth on Schedule 5.31 to the
ASH Disclosure Letter, ASH has not, between the Balance Sheet Date and the date
hereof, taken any of the actions (Prohibited Activities) set forth in Section
7.3.
5.32 Ownership Of Shares. The Shareholders owns of record and
beneficially all of the issued and outstanding shares of ASH Stock and has, and
at all times prior to and as of the Closing, will have, good and marketable
title to such shares free and clear of all liens and adverse claims.
5.33 Authorization Of Shareholders. The Shareholders has the power and
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform his obligations under this Agreement. This
Agreement, upon its execution and delivery by the Shareholders (assuming the due
authorization, execution and delivery hereof by the other parties hereto), will
constitute the legal, valid and binding obligation of the Shareholders,
enforceable against Shareholders in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency and similar
laws relating to creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
5.34 No Conflicts. The execution, delivery and performance of this
Agreement by the Shareholders and the consummation by the Shareholders of the
transactions contemplated hereby will not conflict with or result in a breach or
violation of any term or provision of, or (with or without notice or passage of
time, or both) constitute a default under, any indenture, mortgage, deed of
trust, trust (constructive and other), loan agreement or other agreement or
instrument to which the Shareholders is a party or by which the Shareholders or
the Shareholders' shares are bound, or violate the provisions of any statute, or
any order, rule or
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regulation of any governmental body or agency or instrumentality thereof, or any
order, writ, injunction or decree of any court or any arbitrator, having
jurisdiction over the Shareholders or the property of the Shareholders.
5.35 Restrictions On Transfer Of the Merger Consideration Under
Securities Laws.
(i) Each of the Shareholders understands and agrees that the
shares of NFLI Preferred Stock that the Shareholders will acquire in the Merger
have not been registered under the Securities Act and that, accordingly, such
shares will not be fully transferable except as permitted under various
exemptions contained in the Securities Act or upon satisfaction of the
registration and prospectus delivery requirements of the Securities Act. Each of
the Shareholders acknowledges that each Shareholder must bear the economic risk
of his investment in such shares for an indefinite period of time as such shares
have not been registered under the Securities Act and therefore cannot be sold
unless they are subsequently registered or an exemption from registration is
available. Each of the Shareholders hereby represents and warrants that each
Shareholder is an Accredited Investor as defined under Rule 501(a) of the
Securities Act and is acquiring the shares in the Merger for investment purposes
only, for each Shareholder's own account, and not as nominee or agent for any
other person, and not with the view to, or for resale in connection with, any
distribution thereof within the meaning of the Securities Act.
(ii) Each of the Shareholders understands and agrees that the
certificate evidencing the shares of NFLI Preferred Stock he will acquire in the
Merger, and each instrument or certificate issued in transfer thereof, will bear
substantially the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE
BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO THE
DISTRIBUTION THEREOF, AND SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT COVERING SUCH SECURITIES OR AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. IF THE SECURITIES ARE TO BE SOLD OR
TRANSFERRED PURSUANT TO AN EXEMPTION THE CORPORATION MAY REQUIRE AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER STATING
THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND WILL NOT VIOLATE
SUCH ACT OR ANY OTHER APPLICABLE SECURITIES LAWS.
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(iii) Each of the Shareholders consents to a notation on the
records of NFLI and its transfer agent in order to implement the restrictions on
transfer set forth in this Section 5.35.
5.36 Advice Of Counsel. Each of the Shareholders acknowledges that each
of the Shareholders has obtained advice from independent counsel with respect to
this Agreement to the extent each of the Shareholders desired to do so. Each
of the Shareholders is not relying on any representations, except those set
forth herein, or advice from NFLI, ANI or Newco, or any of their respective
officers, directors, attorneys or other representatives regarding this
Agreement, its content or effect.
6. REPRESENTATIONS OF NFLI, ANI AND NEWCO
NFLI, ANI and Newco represent and warrant that all of the following
representations and warranties in this Section 6 are true at the date of this
Agreement and shall be true at the time of Closing.
6.1 Due Organization. Each of NFLI, ANI and Newco is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, and has the requisite power and authority to carry on its
business as it is now being conducted. Each of NFLI, ANI and Newco is duly
qualified to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary, except where the failure to be so authorized or
qualified would not have a material adverse effect on the business, operations,
properties, assets or condition (financial or otherwise), of NFLI, ANI and Newco
taken as a whole (as used herein with respect to NFLI, ANI and Newco, or with
respect to any other person, a "Material Adverse Effect"). True, complete and
correct copies of the Certificate of Incorporation and Bylaws (the "Newco
Charter Documents") have been provided to ASH.
6.2 Authorization. The representatives of each of NFLI, ANI and Newco
executing this Agreement have the authority to enter into and bind each
respective corporation to the terms of this Agreement. Each of NFLI, ANI and
Newco has the full legal right, power and authority to enter into this Agreement
and the Merger.
6.3 Capital Stock Of Newco. The authorized capital stock of Newco is as
set forth in Section 1.4. All of the issued and outstanding shares of the
capital stock of Newco have been duly authorized and validly issued, are fully
paid and nonassessable, and further, such shares were offered, issued, sold and
delivered by Newco in compliance with all applicable state and Federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of any preemptive rights of any past or present stockholder.
6.4 Capital Stock Of NFLI. The authorized capital stock of NFLI consists
of 20,000,000 shares of NFLI Common Stock of which 5,808,595 shares are issued
and outstanding, and 1,000,000 shares of NFLI Preferred Stock, of which no
shares are issued and outstanding. All of the issued and outstanding shares of
NFLI Common Stock have been duly authorized and validly issued and are fully
paid and nonassessable. As of June 30, 1999,
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585,880 shares of NFLI Common Stock were reserved for issuance upon the exercise
of stock options, 811,103 shares of NFLI Common Stock were reserved for issuance
upon the exercise of certain warrants, and 79,000 shares of NFLI Common Stock
were held by NFLI in its treasury.
6.5 No Violations. Each of NFLI, ANI and Newco is not in violation of
any of its Charter Documents. Neither NFLI, ANI nor Newco, to the Knowledge of
NFLI, ANI and Newco, is in default under any material lease, instrument,
agreement, license, or permit; and, (a) the rights and benefits of NFLI, ANI and
Newco under such documents will not be adversely affected by the transactions
contemplated hereby and (b) the execution of this Agreement and the performance
of the obligations hereunder and the consummation of the transactions
contemplated hereby will not result in any violation of, or breach of, or
constitute a default under, any of the terms or provisions of such documents.
None of such documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect and consummation
of the transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any right or benefit.
6.6 SEC Filings; Financial Statements.
(i) NFLI has filed all forms, reports and documents required to be filed
with the SEC and has made available to ASH and the Shareholders (a) its Annual
Reports on Form 10-K for the fiscal years ended September 30, 1998 and 1997, (b)
its Quarterly Reports on 10-Q for the periods ended December 31, 1998, March 31,
1999 and June 30, 1999, and (c) all proxy statements relating to NFLI's meetings
of shareholders held since January 1, 1998 (collectively, the "NFLI SEC
Reports"). To the knowledge of NFLI, the NFLI SEC Reports (a) were prepared in
all material respects in accordance with the requirements of the Exchange Act,
as in effect on the date such NFLI SEC Reports were filed, and (b) did not at
the time they were filed (or if amended or superceded by a filing prior to the
date of this Agreement, then on the date of such filing), contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(ii) Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the NFLI SEC
Reports was prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto), and each fairly presents in all material
respects the consolidated financial position of NFLI and its subsidiaries as at
the respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
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7. COVENANTS PRIOR TO CLOSING.
7.1 Access And Cooperation; Due Diligence.
(a) Between the date of this Agreement and the Closing Date,
ASH will afford to the officers and authorized representatives of NFLI, ANI and
Newco access to all of ASH's sites, properties, books and records and will
furnish NFLI, ANI and Newco such additional financial and operating data and
other information as to the business and properties of ASH as NFLI, ANI and
Newco may from time to time reasonably request. ASH will cooperate with NFLI,
ANI and Newco, their representatives, auditors and counsel in the preparation of
any documents or other material which may be required in connection with any
documents or materials required by this Agreement or necessary to complete the
Merger.
(b) Between the date of this Agreement and the Closing Date,
NFLI, ANI and Newco will afford to the officers and authorized representatives
of ASH access to all of NFLI, ANI and Newco's sites, properties, books and
records and will furnish ASH such additional financial and operating data and
other information as to the business and properties of NFLI, ANI and Newco as
ASH may from time to time reasonably request. NFLI, ANI and Newco will cooperate
with ASH, its representatives, auditors and counsel in the preparation of any
documents or other material which may be required in connection with any
documents or materials required by this Agreement or necessary to complete the
Merger.
7.2 Conduct Of Business Pending Closing. Between the date of this
Agreement and the Closing, ASH will, except as set forth on Schedule 7.2 to the
ASH Disclosure Letter:
(i) Carry on its business in substantially the same manner
as it has heretofore and not introduce any material new method of management,
operation or accounting;
(ii) Maintain its respective properties and facilities in as
good working order and condition as at present, ordinary wear and tear excepted;
(iii) Perform in all material respects all of its respective
obligations under agreements relating to or affecting its respective assets,
properties or rights;
(iv) Use all reasonable efforts to keep in full force and
effect present insurance policies or other comparable insurance coverage;
(v) Use its reasonable efforts to maintain and preserve its
business organization intact, retain its present key employees and maintain its
relationships with suppliers, customers and others having business relations
with it;
(vi) Maintain compliance with all material permits, laws,
rules and regulations, consent orders, and all other orders of applicable
courts, regulatory agencies and similar governmental authorities;
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(vii) Maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, without the Knowledge and consent of
Newco (which consent shall not be unreasonably withheld), provided that debt
and/or lease instruments may be replaced without the consent of Newco if such
replacement instruments are on terms at least as favorable to ASH as the
instruments being replaced; and
(viii) Maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for ordinary and customary
bonus and salary increases for employees in accordance with past practices.
7.3 Prohibited Activities. Between the date hereof and the Closing Date,
ASH will not, without the prior written consent of Newco, engage in any of the
following (the "Prohibited Activities"):
(i) Make any change in its Charter Documents;
(ii) Issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed in Schedule 5.4 to
the ASH Disclosure Letter;
(iii) Declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of its stock;
(iv) Enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) and involves an amount
not in excess of $25,000;
(v) Create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except (1) with respect to purchase money liens incurred in
connection with the acquisition of equipment with an aggregate cost not in
excess of $25,000 necessary or desirable for the conduct of the businesses of
ASH, (2) (A) liens for taxes either not yet due or being contested in good faith
and by appropriate proceedings (and for which contested taxes adequate reserves
have been established and are being maintained) or (B) materialmen's, mechanics'
or other like liens arising in the ordinary course of business (the liens set
forth in clause (2) being referred to herein as "Statutory Liens"), or (3) liens
set forth on Schedule 5.10 and/or 5.15 to the ASH Disclosure Letter;
(vi) Sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) Negotiate for the acquisition of any business or the start-up
of any new business;
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(viii) Merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) Waive any material rights or claims of ASH, provided that ASH
may negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice, provided, further, that
such adjustments shall not be deemed to be included in Schedule 5.11 to the ASH
Disclosure Letter unless specifically listed thereon;
(x) Commit a breach or amend or terminate any Material Documents
or right of ASH; or
(xi) Enter into any other transaction outside the ordinary course
of its business or prohibited hereunder.
7.4 No Shop. Neither ASH, nor any agent, officer, director, trustee or
any representative of any of the foregoing will, during the period commencing on
the date of this Agreement and ending with the earlier to occur of the Closing
Date or the termination of this Agreement in accordance with its terms, directly
or indirectly: (i) solicit or initiate the submission of proposals or offers
from any person for; (ii) participate in any discussions pertaining to; or (iii)
furnish any information to any person other than NFLI, ANI and Newco or their
authorized agents relating to, any acquisition or purchase of all or a material
amount of the assets of, or any equity interest in, ASH or a merger,
consolidation or business combination of ASH. Furthermore, ASH and the
Shareholders shall not, and the Shareholders shall not permit ASH to, directly
or indirectly, through any officer, director, agent or otherwise, engage in
negotiations concerning any such transaction with, or provide information to,
any person other than NFLI, ANI or Newco, and their respective representatives,
with a view to engaging, or preparing to engage, that person with respect to any
matters referenced in this Section 7.4. The Shareholders shall insure that ASH
shall not commence any proceeding to merge, consolidate or liquidate or dissolve
or obligate itself to do so.
7.5 Notice To Bargaining Agents. Prior to the Closing Date, ASH shall
satisfy any requirement for notice of the transactions contemplated by this
Agreement under any applicable collective bargaining agreements, and shall
provide Newco written proof that any required notice has been sent.
7.6 Notification Of Certain Matters. ASH shall give prompt notice to
Newco of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
of ASH contained herein or in the ASH Disclosure Letter to be untrue or
inaccurate in any material respect at or prior to the Closing and (ii) any
material failure of ASH to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such person hereunder. Newco
shall give prompt notice to ASH of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of Newco contained herein to be untrue or inaccurate
in any material respect at or prior to the Closing and (ii) any material failure
of Newco to comply with or satisfy any covenant, condition or
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agreement to be complied with or satisfied by it hereunder. The delivery of any
notice pursuant to this Section 7.6 shall not be deemed to (i) modify the
representations or warranties of the party delivering such notice, (ii) modify
the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.7 Cooperation. ASH shall furnish or cause to be furnished to NFLI, ANI
and Newco all of the information concerning ASH required to reasonably inform
prospective lenders and investors of NFLI, ANI and Newco who are interested in
financing the Merger, and will cooperate with NFLI in the preparation of a
Report on Form 8-K for filing with the SEC (including audited and unaudited
financial statements of ASH, prepared in accordance with GAAP, in form suitable
for inclusion in the Report on Form 8-K).
7.8 Final Financial Statements. ASH shall provide to NFLI, ANI and Newco
prior to the Closing Date, the unaudited consolidated balance sheets of ASH as
of the end of all months following the Balance Sheet Date, and the unaudited
consolidated statement of income, cash flows and retained earnings for all
months ended after the Balance Sheet Date, disclosing no material adverse change
in the financial condition or the results of its operations from the financial
statements as of the Balance Sheet Date. Such financial statements shall have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods indicated (except as noted therein). Except as noted in such
financial statements, all of such financial statements will present fairly the
results of operations for the periods indicated therein.
7.9 Further Assurances. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents, or
to take such other action as may be reasonably necessary or convenient to carry
out the transactions contemplated hereby.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF ASH
The obligations of ASH with respect to actions to be taken on the Closing
Date are subject to the satisfaction or waiver on or prior to the Closing Date
of all of the following conditions.
8.1 Representations And Warranties; Performance Of Obligations. All
representations and warranties of NFLI, ANI and Newco contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date as though such representations and warranties had been made as of that
time; all the terms, covenants and conditions of this Agreement to be complied
with and performed by NFLI, ANI and Newco on or before the Closing Date shall
have been duly complied with and performed in all material respects; and
certificates to the foregoing effect dated the Closing Date, and signed by the
President of each of NFLI, ANI and Newco shall have been delivered to ASH.
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8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to ASH and its counsel.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger and no governmental agency or body shall have taken any
other action or made any request of ASH as a result of which the management of
ASH deems it inadvisable to proceed with the transactions hereunder.
8.4 Opinion Of Counsel. ASH shall have received an opinion from counsel
for Newco, dated the Closing Date, in form and substance satisfactory to counsel
for ASH and the Shareholders.
8.5 Consents And Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transaction contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
the Merger and no governmental agency or body shall have taken any other action
or made any request of ASH as a result of which ASH deems it inadvisable to
proceed with the transactions hereunder.
8.6 Good Standing Certificates. Newco shall have delivered to ASH a
certificate, dated as of a date no later than ten days prior to the Closing
Date, duly issued by the Secretary of State of its state of incorporation that
Newco is in good standing and that all state franchise and/or income tax returns
and taxes for Newco for all periods prior to the Closing have been filed and
paid.
8.7 No Material Adverse Change. No event or circumstance shall have
occurred with respect to NFLI, ANI or Newco which would constitute a Material
Adverse Effect.
8.8 Officer's Certificate. ASH shall have received a certificate or
certificates, dated the Closing Date and signed by the President of each of
NFLI, ANI and Newco, certifying the truth and correctness of attached copies of
their respective Articles of Incorporation (including amendments thereto),
Bylaws (including amendments thereto), and resolutions of the boards of
directors and the stockholders (if required) adopting this Agreement.
8.9 Incumbency Certificate And Other Documents. ASH shall have received
an incumbency certificate or certificates, dated the Closing Date and signed by
the Secretary of each of NFLI, ANI and Newco, certifying the names, titles and
signatures of the officers authorized to execute the documents referred to in
this Section 8 and such additional supporting documentation and other
information with respect to the Merger as ASH or its counsel may reasonably
request.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF NFLI, ANI AND NEWCO. The obligations
of NFLI, ANI and Newco with respect to actions to be taken on
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the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions.
9.1 Representations And Warranties; Performance Of Obligations. All the
representations and warranties of ASH contained in this Agreement and in the ASH
Disclosure Letter shall be true and correct in all material respects as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date; all of the terms, covenants and conditions
of this Agreement to be complied with or performed by ASH on or before the
Closing Date shall have been duly performed or complied with in all material
respects; and ASH shall have delivered to Newco certificates dated the Closing
Date and signed by the President of ASH to the foregoing effect.
9.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to Newco and its counsel.
9.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger and no governmental agency or body shall have taken any
other action or made any request of NFLI, ANI or Newco as a result of which the
management of NFLI, ANI or Newco deems it inadvisable to proceed with the
transactions hereunder.
9.4 Opinion Of Counsel. NFLI, ANI and Newco shall have received an opinion
from counsel to ASH, dated the Closing Date, in form and substance reasonably
satisfactory to Newco and its counsel.
9.5 Consents And Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transaction contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
the Merger and no governmental agency or body shall have taken any other action
or made any request of NFLI, ANI or Newco as a result of which NFLI, ANI or
Newco deems it inadvisable to proceed with the transactions hereunder.
9.6 Good Standing Certificates. ASH shall have delivered to NFLI, ANI and
Newco a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Secretary of State of its state of
incorporation that ASH is in good standing and that all state franchise and/or
income tax returns and taxes for ASH for all periods prior to the Closing have
been filed and paid.
9.7 No Material Adverse Change. No event or circumstance shall have
occurred with respect to ASH which would constitute a Material Adverse Effect.
9.8 Officer's Certificate. NFLI, ANI and Newco shall have received a
certificate, dated the Closing Date and signed by the President of ASH,
certifying the truth and correctness of attached copies of ASH's Articles of
Incorporation (including amendments thereto), Bylaws (including amendments
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thereto), and resolutions of the board of directors and the stockholders of ASH
adopting this Agreement.
9.9 Incumbency Certificates And Other Documents. NFLI, ANI and Newco
shall have received an incumbency certificate, dated the Closing Date and signed
by the Secretary of ASH certifying the name, titles and signatures of the
officers authorized to execute the documents referred to in this Section 9 and
such additional supporting documentation and other information with respect to
the Merger as NFLI, ANI or Newco or their counsel may reasonably request.
9.10 Employment Agreements. Each of Allan I. Sirkin and Neil Sirkin
shall have entered into an employment agreement with Newco effective as of the
effective Time of the Merger substantially in the form annexed hereto as Exhibit
9.10.
9.11 Financing. NFLI, ANI and Newco shall have received from third
parties financing in amounts sufficient for them to complete the Merger and the
other acquisitions disclosed to ASH as well as to provide working capital in
amounts deemed reasonably sufficient by NFLI, ANI and Newco.
9.12 Other Agreements. Each of the Shareholders shall have entered into
covenants not to compete and lock-up agreements effective as of the Effective
Time of the Merger substantially in the form attached as Exhibits 9.12(i),
9.12(ii), and 9.12(iii).
9.13 Shareholder Approvals. This Agreement, the Merger and the
transactions contemplated by this Agreement shall have been approved and adopted
by the Shareholders of ASH in accordance with the corporate laws of the State of
Mississippi.
9.14 Release of Obligations and Pledge. ASH shall have obtained a
release of ASH and the Shareholders from Seymour Glaser and Herbert Mendelson
(or their respective representatives) related to all matters involving ASH,
including ASH's obligation to guarantee the note made payable to Messrs. Glaser
and Mendelson or their designees and a release of the pledge to them of the ASH
Stock owned by the Shareholders.
10. ADDITIONAL AGREEMENTS
10.1 Reasonable Best Efforts. Subject to the terms and conditions of
this Agreement, each party will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate the Merger and the other transactions contemplated by this Agreement
as soon as practicable after the date hereof
10.2 Public Announcements. ASH and Newco shall use reasonable best
efforts to develop a joint communications plan and each party shall use
reasonable best efforts to (i) insure that all press releases and other public
statements with respect to this Agreement or the transactions contemplated
hereby shall be consistent with such joint communications plan, and (ii) unless
otherwise required by applicable law, to consult with each other and provide
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each other a reasonable opportunity to review and comment before issuing any
press release or otherwise making any public statement with respect to this
Agreement or the transactions contemplated hereby.
10.3 Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, common, proper or advisable under applicable legal
requirements, to consummate and make effective the transactions contemplated by
this Agreement. If at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, the
Shareholders, ASH, NFLI, ANI or Newco, as the case may be, shall take or cause
to be taken all such necessary or convenient action and execute, and deliver and
file, or cause to be executed, delivered and filed, all necessary or convenient
documentation.
11. TERMINATION OF AGREEMENT
11.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) By mutual consent of all of the parties hereto;
(ii) By ASH, on the one hand, or by Newco on the other hand, if
the transactions contemplated by this Agreement to take place at the Closing
shall not have been consummated by November 5, 1999, unless the failure of such
transactions to be consummated is due to the failure of the party seeking to
terminate this Agreement to perform any of its obligations under this Agreement
to the extent required to be performed by it prior to or on the Closing Date; or
(iii) By ASH, on the one hand, or by Newco, on the other hand, if a
material breach of the representations or a material breach or default shall be
made by the other party in the observance or in the due and timely performance
of any of the covenants or agreements contained herein, and the curing of such
default shall not have been made on or before the Closing Date or by ASH, if the
conditions set forth in Section 8 hereof have not been satisfied or waived as of
the Closing Date, or by Newco, if the conditions set forth in Section 9 hereof
have not been satisfied or waived as of the Closing Date.
11.2 Liabilities In Event Of Termination. Termination of this Agreement
will in no way limit any obligation or liability of any party based on or
arising from a breach or default by such party with respect to any of its
representations, warranties, covenants or agreements contained in this Agreement
or in the Schedules delivered by such party, including, but not limited to,
legal and audit costs and out of pocket expenses.
12. INDEMNIFICATION
12.1 Indemnification By NFLI, ANI And NEWCO. NFLI, ANI and NEWCO,
jointly and severally, agree to indemnify and hold harmless ASH, the officers,
directors,
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employees and agents of ASH and the Shareholders, against any and all losses,
claims, damages, liabilities, costs and expenses (including but not limited to,
attorneys' fees and other expenses of investigation and defense of any claims or
actions), directly or indirectly resulting from, relating to or arising out of:
(i) any breach of any covenant, agreement, warranty or representation of NFLI,
ANI or NEWCO contained in this Agreement, (ii) any misstatement of a material
fact contained in this Agreement or in any of the documents executed in
connection with the transactions contemplated by this Agreement, but only if the
misstatement relates to information concerning NFLI, ANI, NEWCO or their
operations, or (iii) the omission to state any fact necessary to make the
statements contained in this Agreement or in any of the documents executed in
connection with the transactions contemplated by this Agreement not misleading,
but only if the omission relates to information concerning NFLI, ANI, NEWCO or
their operations.
12.2 Indemnification By ASH And The Shareholders. ASH and the
Shareholders, jointly and severally, agree to indemnify and hold harmless NFLI,
ANI, NEWCO and the officers, directors, employees and agents of NFLI, ANI and
NEWCO, against any and all losses, claims, damages, liabilities, costs and
expenses (including but not limited to, attorneys' fees and other expenses of
investigation and defense of any claims or actions) directly or indirectly
resulting from, relating to or arising out of: (i) any breach of any covenant,
agreement, warranty or representation of ASH or the Shareholders contained in
this Agreement, (ii) any misstatement of a material fact contained in this
Agreement or in any of the documents executed in connection with the
transactions contemplated by this Agreement, but only if the misstatement
relates to information concerning ASH or its operations or the Shareholders, or
(iii) the omission to state any fact necessary to make the statements contained
in this Agreement or in any of the documents executed in connection with the
transactions contemplated by this Agreement not misleading, but only if the
omission relates to information concerning ASH or its operations or the
Shareholders.
12.3 Indemnification Notice. Should any party (the "Indemnified Party")
suffer any loss, damage or expense for which another party (the "Indemnifying
Party") is obligated to indemnify and hold such Indemnified Party harmless
pursuant to this Section 12 of this Agreement, the following shall apply: If an
Indemnified Party intends to exercise its right to indemnification provided in
this Section 12, such Indemnified Party shall notify each Indemnifying Party in
writing of such Indemnified Party's intention to do so and the facts or
circumstances giving rise to the claim (the "Indemnification Claim"). An
Indemnification Claim, at the option of the Indemnified Party, may be asserted
as soon as any situation, event or occurrence has been noticed by the
Indemnified Party regardless of whether actual harm has been suffered or out-of-
pocket expenses incurred. During the period of 15 days after notice by the
Indemnified Party, each Indemnifying Party shall be entitled to cure the defect
or situation giving rise to the Indemnification Claim to the satisfaction of the
Indemnified Party. If the Indemnifying Parties are unwilling or unable to cure
the defect giving rise to the Indemnification Claim during the 15-day period,
the Indemnified Party shall thereafter be entitled to indemnification as
provided in this Section 12.
12.4 Matters Involving Third Parties. If any third party shall notify
any Indemnified Party with respect to any matter (a "Third Party Claim") which
may give rise to a
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claim for indemnification against any Indemnifying Party under this Section 12,
then the Indemnified Party shall promptly notify each Indemnifying Party thereof
in writing. Provided, however, that no delay on the part of the Indemnified
Party in notifying any Indemnifying Party shall relieve the Indemnifying Party
from any obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced. Any Indemnifying Party will have the
right to defend the Indemnified Party against the Third Party Claim with counsel
of its choice reasonably satisfactory to the Indemnified Party so long as (i)
the Indemnifying Party notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from any adverse
consequences the Indemnified Party may suffer resulting from or caused by the
Third Party Claim, (ii) the Indemnifying Party provides the Indemnified Party
with evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, and (iii) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. The Indemnifying Party shall not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party, which consent shall
not be withheld unreasonably.
13. GENERAL PROVISIONS
13.1 Survival Of Representations, Warranties And Agreements. The
representations and warranties of the parties hereto contained in this Agreement
or in any writing delivered pursuant hereto or at the Closing shall survive the
execution and delivery of this Agreement and the Closing and the consummation of
the transactions contemplated hereby (and any examination or investigation by or
on behalf of any party hereto) until the date three years after the Closing Date
except for claims in respect thereof pending at such time, which shall survive
until finally resolved or settled). No action may be commenced with respect to
any representation, warranty, covenant or agreement in this Agreement, or in any
writing delivered pursuant hereto, unless written notice, setting forth in
reasonable detail the claimed breach thereof, shall be delivered pursuant to
Section 13.7 to the party or parties against whom liability for the claimed
breach is charged on or before the termination of the survival period specified
in Section 13.1 for such representation, warranty, covenant or agreement.
13.2 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other parties, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
13.3 Entire Agreement. This Agreement and any attachments hereto, the ASH
Disclosure letter and the Schedules thereto (including the schedules, exhibits
and annexes attached hereto and thereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the parties and
supersede any prior agreement and
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understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by all parties, acting through their respective
officers or trustees, duly authorized by their respective Boards of Directors.
13.4 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
13.5 Brokers And Agents. Each party represents and warrants that it
employed no broker or agent in connection with this transaction, except that a
fee will be paid to Ron Bleckiki.
13.6 Expenses. Except as otherwise specifically provided herein, each
party to this Agreement shall bear its own direct and indirect expenses incurred
in connection with the negotiation and preparation of this Agreement and the
consummation and performance of the transactions contemplated hereby, including,
without limitation, all legal fees and fees of any brokers, finders or similar
agents; provided, however, that ASH may advance such expenses on behalf of the
Shareholders which such advances the Shareholders shall repay to ASH at, or
prior to, the Closing; provided, further, that the fees of independent auditors
to audit ASH's financial statements shall be paid by ANI.
13.7 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (i) on the date of delivery if delivered
personally, or by telecopy or facsimile upon confirmation of receipt, (ii) on
the first business day following the date of dispatch if delivered by a
recognized next-day courier service, or (iii) on the 5th business day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
(a) If to Newco, ANI or NFLI to:
AC Acquisition Company
2715 Bissonnet, Suite 303
Houston, Texas 77005
Facsimile: (713) 874-1443
Attention: Gregory Pusey, President
with a copy to:
Patton Boggs, L.L.P.
1660 Lincoln Street, Suite 1900
Denver, Colorado 80264
Facsimile No.: (303) 894-9239
Attention: Robert M. Bearman, Esq.
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Nutrition For Life International, Inc.
9101 Jameel
Houston, Texas 77040
Facsimile No.: (713) 895-8927
Attention: David Bertrand, President
(b) If to ASH to:
ASH Corp.
3600 25th Avenue
Gulfport, Mississippi 39501
Facsimile: (228) 865-0842
Attn: Neil Sirkin
(c) If to the Shareholders:
Allan I. Sirkin
Neil Sirkin
3600 25th Avenue
Gulfport, Mississippi 39501
Facsimile: (228) 865-0842
with a copy to:
Alfred R. Koenenn, Esq.
1109 Hancock Bank Building
Post Office Box 1886
Gulfport, Mississippi 39502
Facsimile No.: (228) 864-9052
13.8 Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Texas.
13.9 Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
13.10 Exercise Of Rights And Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
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13.11 Time. Time is of the essence with respect to this Agreement.
13.12 Reformation And Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
13.13 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive, but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
13.14 Captions; Construction. The headings of this Agreement are inserted
for convenience only, and shall not constitute a part of this Agreement or be
used to construe or interpret any provision hereof. This Agreement has been
fully reviewed and negotiated by the parties and no uncertainty or ambiguity in
any term or provision of this Agreement shall be construed strictly against any
party under any rule of construction or otherwise.
13.15 Amendment. This Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NUTRITION FOR LIFE INTERNATIONAL, INC.
By:
Name:
Title:
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ADVANCED NUTRACEUTICALS, INC.
By:
Name:
Title:
AC ACQUISITION COMPANY
By:
Name:
Title:
ASH CORP.
By:
Name:
Title:
ALLAN I. SIRKIN
NEIL SIRKIN
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EXHIBIT 2.1(D)
Amendment To Agreement And Plan Of Merger
THIS AMENDMENT (the "Amendment") is made as of November 24, 1999 to the
Agreement and Plan of Merger (the "Agreement") among Nutrition For Life
International, Inc., a Texas corporation ("NFLI"), NL Acquisition Company, a
Delaware corporation which is the successor in interest to Advanced
Nutraceuticals, Inc. ("NL"), AC Acquisition Company, a Delaware corporation
("AC"), Ash Corp., a Mississippi corporation ("ASH"), Allan I. Sirkin and Neil
Sirkin (collectively, the "Shareholders").
WHEREAS, NFLI, NL, AC, ASH and the Shareholders entered into the Agreement
as of October 25, 1999;
WHEREAS, subsequent to the date of the Agreement, a merger transaction was
completed in which Bactolac Pharmaceutical Inc. merged into BPI Acquisition
Company, a wholly-owned subsidiary of NFLI and, in connection with the merger,
the name of BPI Acquisition Company was changed to Bactolac Pharmaceutical
Inc.;
WHEREAS, the parties have determined that it would be in their respective
best interests to amend the Agreement to, among other things, include Bactolac
Pharmaceutical Inc. ("BPI") as a party to the Agreement and to provide for the
merger of ASH with and into BPI.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. The Agreement is amended by the addition of BPI as a party to the
Agreement.
2. Sections 1, 2, 3 and 4 of the Agreement is hereby deleted in its
entirety, and the following substituted therefor:
1. THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, ASH shall be merged with and into BPI at the Effective Time of
the Merger. Following the Merger, the separate corporate existence of ASH shall
cease and BPI shall continue as the Surviving Corporation.
1.2 Effective Time Of The Merger. At the Closing, BPI and ASH shall file
Articles of Merger in such form as is required by and executed in accordance
with the relevant provisions of the corporate laws of the States of Delaware and
Mississippi. The Merger shall become effective at such time as the Articles of
Merger are duly filed with the Delaware Secretary of State or at such subsequent
time as BPI and ASH shall agree and as shall be specified in the Articles of
Merger.
<PAGE>
1.3 Certificate Of Incorporation, Bylaws, Board Of Directors And Officers
Of The Surviving Corporation.
(i) The Certificate of Incorporation of BPI as in effect immediately
prior to the Effective Time of the Merger shall be the Articles of Incorporation
of the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
(ii) At the Effective Time of the Merger, the Bylaws as in effect
immediately prior to the Effective Time of the Merger shall be the Bylaws of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law.
(iii) Directors and officers of BPI in office immediately prior to
the Effective Time of the Merger, shall be the directors and officers,
respectively, of the Surviving Corporation, and each shall hold his or her
respective office or offices from and after the Effective Time of the Merger
until his or her successor shall have been elected and shall have qualified or
as otherwise provided in the Bylaws of the surviving corporation.
1.4 Certain Information With Respect To The Capital Stock Of BPI and ASH.
The respective designations and numbers of outstanding shares and voting rights
of each class of outstanding capital stock of BPI and ASH as of the date of this
Agreement are as follows:
(i) As of the date of this Agreement, the authorized and outstanding
capital stock of ASH consists of 30,000000 shares of common stock, $.001 par
value of which 10,000,000 shares are issued and outstanding.
(ii) As of the date of this Agreement, the authorized capital stock
of BPI consists of 10,000 shares of common stock, $.001 par value, of which 100
shares are issued and outstanding.
1.5 Effect Of Merger. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the Delaware
General Corporation Law and the Mississippi Business Corporation Act. Except as
herein specifically set forth, the identity, existence, purposes, powers,
objects, franchises, privileges, rights and immunities of BPI shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of ASH shall be merged with and into BPI, and BPI, as the Surviving
Corporation, shall be fully vested therewith. At the Effective Time of the
Merger, the separate existence of ASH shall cease and, in accordance with the
terms of this Agreement, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises, of a public, as well as of a private,
nature, and all property, real, personal and mixed, and all debts due on
whatever account, including subscriptions to shares, and all and every other
interest of or belonging to or due to BPI and ASH shall be taken and deemed to
be transferred to, and vested in, the Surviving Corporation without further act
or deed.
2. CONVERSION OF STOCK
2.1 Conversion Of ASH Stock. At the Effective Time of the Merger and without
any action on the part of the holders of ASH Stock, the ASH Stock shall be
converted into the right to receive (i) $1,400,000 in NFLI Preferred Stock, (ii)
$750,000 in cash, without interest, (iii) a subordinated
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promissory note (the "Note"), in substantially the form attached as Exhibit
2.1(iii), having an aggregate principal amount of $500,000, and (iv) up to
$3,000,000 in NFLI Preferred Stock as set forth in the Earnout Agreement
substantially in the form attached hereto as Exhibit 2.1(a). The amount of cash,
principal amount of the Note and number of shares of NFLI Preferred Stock to be
received by each holder of ASH Stock prior to the Effective Time of the Merger
is set forth in Schedule 2.1. The Statement of Designation of Series A Preferred
Stock is attached hereto as Exhibit 2.1(b).
2.2 Effect Of Merger On BPI Stock. At the Effective Time of the Merger
without any action on the part of the holders of BPI Stock, each share of BPI
Stock issued and outstanding immediately prior to the Effective Time of the
Merger shall remain outstanding as one share of BPI Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 Exchange Procedure. At the Effective Time of the Merger the holders
of the ASH Stock shall, on surrender of certificates representing the ASH Stock
("Certificates"), receive their respective number of shares of NFLI Preferred
Stock which constitute the Merger Consideration as set forth on Schedule 2.1
hereto.
3.2 Delivery Of Certificates. Each holder shall deliver to BPI, ANI and
NFLI at the Closing the Certificates representing the shares of ASH Stock owned
by him or her, duly endorsed in blank by the holder, or accompanied by blank
stock powers. Each holder agrees promptly to cure any deficiencies with respect
to the endorsement of his or her Certificates or other documents of conveyance
with respect to such ASH Stock or with respect to the stock powers accompanying
any ASH Stock. All shares of NFLI Preferred Stock issued upon conversion of
shares of ASH Stock shall be deemed to have been issued in full satisfaction of
all rights pertaining to the ASH Stock. Until surrender as contemplated by this
Section 3, each Certificate shall be deemed at any time after the Effective Time
of the Merger to represent only the right to receive upon such surrender the
Merger Consideration.
4. CLOSING
Subject to the terms and conditions of this Agreement, the closing of the
Merger and the transactions contemplated by this Agreement (the "Closing") will
take place on the second business day after the satisfaction or waiver (subject
to applicable law) of the conditions set forth in Sections 8 and 9, unless
another time or date is agreed to in writing by the parties hereto (the actual
time and date of the Closing being referred to herein as the "Closing Date").
The Closing shall be held at the offices of NFLI, 9101 Jameel, Houston, Texas
77040, unless another place is agreed to in writing by the parties hereto.
3. Section 6 of the Agreement is amended by the addition of the
following:
6.7 Due Organization of BPI. BPI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
the requisite corporate power and authority to carry on its business as it is
now being conducted. BPI is duly qualified to do business
3
<PAGE>
and is in good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties make such qualification necessary,
except where the failure to be so authorized or qualified would not have a
material adverse effect on the business, operations, properties, assets or
condition (financial or otherwise), of NFLI, NL and BPI taken as a whole (as
used herein with respect to NFLI, NL and BPI, or with respect to any other
person, a "Material Adverse Effect"). True, complete and correct copies of the
Certificate of Incorporation and Bylaws (the "BPI Charter Documents") have been
provided to ASH and the Shareholders.
6.8 Authorization. The representatives of BPI executing this Agreement
have the authority to enter into and bind BPI to the terms of this Agreement.
BPI has the full legal right, corporate power and authority to enter into this
Agreement and the Merger.
6.9 Capital Stock of BPI. The authorized capital stock of BPI is as set
forth in Section 1.4. All of the issued and outstanding shares of the capital
stock of BPI have been duly authorized and validly issued, are fully paid and
non-assessable, and further, such shares were offered, issued, sold and
delivered by BPI in compliance with all applicable state and federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of any pre-emptive rights of any past or present stockholder.
4. Sections 7, 8, 9, 10, 11, 12 and 13 of the Agreement are amended by
deletion of the word "Newco" in each place appearing in those sections, and the
substitution of "BPI," in each place where Newco previously appeared.
5. Section 11.1(ii) of the Agreement is amended by deletion of the date,
November 5, 1999, and substitution of the date, December 3, 1999.
6. Section 13.7(a) is amended to provide that notice to BPI shall be
provided at 51 Brooklyn, Westbury, New York 11590, Facsimile: (516) 333-4714,
Attention: President.
Except as expressly set forth herein, the Agreement is unamended and
remains in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
NUTRITION FOR LIFE INTERNATIONAL, INC.
By:__________________________________
Name:
Title:
4
<PAGE>
NL ACQUISITION COMPANY
By:__________________________________
Name:
Title:
AC ACQUISITION COMPANY
By:__________________________________
Name:
Title:
BACTOLAC PHARMACEUTICAL INC.
By:__________________________________
Name:
Title:
ASH CORP.
By:__________________________________
Name:
Title:
_____________________________________
ALLAN I. SIRKIN
_____________________________________
NEIL SIRKIN
5
<PAGE>
Schedule 2.1
The holders of ASH Stock shall receive cash, Notes and NFLI Preferred Stock
as follows:
<TABLE>
<CAPTION>
Shares of NFLI
Preferred Stock to Cash to be Notes to be
be Received by Received by Received by
Number of Shares Former Holders of Former Holders Former Holders of
Name of ASH Stock ASH Stock at of ASH Stock at ASH Stock at
Closing Closing Closing
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Seymour Glaser 1,000,000 4,929.6 $125,000
- ---------------------------------------------------------------------------------------------------------
Joan Mendelson, Trustee 1,000,000 4,929.6 125,000
- ---------------------------------------------------------------------------------------------------------
Allan I. Sirkin 5,500,000 27,112.8 345,000 345,000
- ---------------------------------------------------------------------------------------------------------
Neil Sirkin 2,500,000 12,324 155,000 155,000
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 2.2(B)
EARNOUT AGREEMENT
-----------------
This Earnout Agreement ("Agreement") is entered into this 30th day of
November, 1999, among Seymour Glaser, Joan Mendelson, Trustee, Allan I. Sirkin
and Neil Sirkin (the "Shareholders") and Nutrition For Life International, Inc.
("NFLI"). The Shareholders and NFLI are collectively referred to as the
"Parties".
RECITALS
--------
A. On October 25, 1999, NFLI, Advanced Nutraceuticals, Inc., AC
Acquisition Company, Ash Corp. ("Ash"), Allan I. Sirkin and Neil Sirkin entered
into an Agreement and Plan of Merger (the "Merger Agreement"). An Amendment to
the Agreement was made November 24, 1999 which, among other things, added
Bactolac Pharmaceutical Inc. ("BPI") as a party to the Merger Agreement. All
references to the Merger Agreement in this Agreement give effect to the
Amendment.
B. A condition to the closing of the merger transaction contemplated by
the Merger Agreement (the "Closing") is the execution and delivery of this
Agreement.
C. The Shareholders are all of the shareholders of Ash. As provided in
the Merger Agreement, the Shareholders, as the shareholders of Ash, shall
receive for the conversion of their shares of Ash, $750,000 in cash, $500,000 in
a Promissory Note, stock in NFLI valued at $1,400,000 and up to $3,000,000 in
NFLI stock as an earnout payment, the determination and payment of which shall
be in accordance with the terms and conditions of this Agreement.
D. Subsequent to the Closing, the business operations of Ash will be
conducted as a division of BPI. For purposes of this Agreement, the operations
of that division will be referred to as operations of "Ash."
STATEMENT OF AGREEMENT
----------------------
NOW THEREFORE, in consideration of the premises and of the respective
covenants and provisions herein contained, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
EARNOUT PAYMENT
---------------
1.1 Nature of Earnout Payment.
--------------------------
(a) NFLI shall reserve for issuance as an earnout payment to the
Shareholders up to 105,634 shares of NFLI's $.001 par value Series A
Preferred Stock (the "Convertible Preferred Stock") and 1,056,340 shares of
NFLI's $.01 par value common stock (the "Common Stock"). The 105,634
shares of Convertible
<PAGE>
Preferred Stock are automatically convertible into 1,056,340 shares of the
Common Stock pursuant to the terms of the Statement of Designation for the
Series A Preferred Stock. The value of the 1,056,340 shares of Common Stock
is $3,000,000. The maximum of 1,056,340 shares of Common Stock which may be
received by The Shareholders as an earnout payment pursuant to this
Agreement has been determined by dividing $3,000,000 by the average of the
closing prices per share of the Common Stock on The Nasdaq Stock Market for
the five trading days preceding November 16, 1999.
(b) For purposes of this Agreement, it is assumed that the NFLI
shareholders will approve the conversion of Series A Preferred Stock to
Common Stock prior to the time that The Shareholders would be entitled to
receive their earnout payments pursuant to this Agreement. Accordingly, it
is provided in this Agreement that shares of Common Stock will be issued to
The Shareholders. In the event that the shareholders have not approved the
conversion of Series A Preferred Stock to Common Stock prior to the time
that The Shareholders would be entitled to receive their earnout payments,
then NFLI shall issue Convertible Preferred Stock instead of Common Stock
to The Shareholders. In that event, The Shareholders shall receive one
share of Convertible Preferred Stock for every ten shares of Common Stock
that they would have received pursuant to this Agreement if the
shareholders had approved the conversion.
(c) The Shareholders shall receive from NFLI 1,056 shares of Common
Stock for each $1,000 in Pre-Tax Income in Year One which is in excess of
$500,000. However, in no event, will the Shareholders be entitled to
receive more than 792,000 shares of Common Stock as an earnout payment
based on Year One results.
(d) The Shareholders shall receive from NFLI 1,056 shares of Common
Stock for each $1,000 in Pre-Tax Income in Year Two in excess of $500,000.
In addition, if Year One income exceeded $750,000, then the difference
between Pre-Tax Income for Year One and $750,000, will be applied for
purposes of calculating Pre-Tax Income for Year Two.
(e) Notwithstanding anything herein to the contrary, the maximum
number of shares of Common Stock which may be issued as an earnout payment
pursuant to this Agreement to the Shareholders shall be 1,056,340.
(f) Any earnout payments made to the Shareholders pursuant to this
Agreement shall be in accordance with the percentage of stock the
Shareholders held in Ash prior to the Closing as provided in Schedule 2.1
to the Merger Agreement.
1.2 Period for Payment. For purposes of calculation of the earnout
-------------------
payment, Year One will begin on December 1, 1999 and end on November 30, 2000,
Year Two will
2
<PAGE>
begin on December 1, 2000 and end on November 30, 2001 and Year Three will begin
on December 1, 2001 and end on November 30, 2002.
1.3 Registration Obligation. Prior to the issuance of shares of Common
-----------------------
Stock to The Shareholders as an earnout payment pursuant to this Agreement, the
Company shall prepare and file with the Securities and Exchange Commission (the
"SEC") a registration statement with respect to such Common Stock. The Company
shall use its best efforts to cause such registration statement to become
effective, and, upon the request of The Shareholders, keep such registration
statement effective for a period of up to one year. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
registration obligation that The Shareholders shall furnish to the Company such
information regarding themselves and the intended method of disposition of the
Common Stock as shall be required to effect the registration for resale by The
Shareholders of the Common Stock received by them pursuant to this Agreement.
NFLI shall be entitled to postpone for a reasonable period of time (not to
exceed 180 days) the filing of any registration statement if, in the good faith
judgment of NFLI's Board of Directors, such registration would materially
interfere with NFLI's own impending financing.
1.4 Withholding Taxes. NFLI or its affiliates may take such steps as they
-----------------
deem necessary or appropriate for the withholding of any taxes which they may be
required by law or regulation or any governmental authority, whether federal,
state or local, domestic or foreign, to withhold in connection with the earnout
payment, including, but not limited to, the withholding of all or any portion of
any payment owed by them to any of The Shareholders, or the withholding of the
issuance of NFLI stock to be issued in connection with the earnout payment.
ARTICLE II
COMPUTATION OF PRE-TAX INCOME
-----------------------------
2.1 Manner of Computation. For purposes of this Agreement, "Pre-Tax
----------------------
Income" of Ash for each of Year One, Year Two and Year Three shall mean Ash's
aggregate earnings net of losses from operations, calculated as if it were being
operated as a separate and independent corporation, after deduction of all
appropriate expenses, charges, and reserves, but before adjustment for federal,
state, and local income or franchise taxes. Pre-Tax Income shall be determined
in accordance with generally accepted accounting principles (GAAP") consistently
applied by NFLI after consultation with the firm of independent certified public
accountants engaged by NFLI for purposes of its own audit ("NFLI's
Accountants"); provided, however, that in determining such Pre-Tax Income:
(a) Pre-Tax Income shall be computed without regard to "extraordinary
items" of gain or loss as that term shall be defined in GAAP;
3
<PAGE>
(b) Pre-Tax Income shall not include any gains, losses or profits
realized from the sale of any assets other than in the ordinary
course of business;
(c) No deduction shall be made for any management fees, general
overhead expenses or other intercompany or divisional charges, of
whatever kind or nature, charged by NFLI to Ash, except (i) for a
fixed charge of $10,000 per month and (ii) NFLI may charge
interest on any loans or advances made by NFLI to Ash or to BPI
in connection with the business operations of Ash at a rate of
9%;
(d) No deduction shall be made for legal or accounting fees and
expenses arising out of this Agreement or the Merger Agreement;
(e) The purchase and sales prices of goods and services sold by Ash
to NFLI or its affiliates or purchased by Ash from NFLI or its
affiliates shall be adjusted to reflect the amounts that Ash
would have realized or paid if dealing with an independent party
in an arm's length commercial transaction; however, it is
understood that NFLI or its affiliates may offer special
arrangements to Ash. Any such arrangements which modify this
Agreement shall be in writing and signed by both NFLI and either
or both Allan I. Sirkin or Neil Sirkin; and
(f) Depreciation and amortization of assets acquired from Ash shall
be computed under the straight-line method, using the carrying
value of depreciable assets less applicable reserves, as shown on
the books and records of Ash, and the useful lives for such
assets, or categories thereof as though the merger of Ash and
NFLI had not been effected.
2.2 Time of Determination.
----------------------
(a) The Pre-Tax Income of Ash shall be determined as soon as
reasonably practicable after filing of NFLI's Annual Report on
Form 10-K for the close of Year One, Year Two and Year Three by
NFLI. Copies of the reports setting forth the computation of the
Pre-Tax Income of Ash shall be submitted in writing to The
Shareholders and, unless The Shareholders who own at least a
majority of the NFLI Preferred Stock issued to the Shareholders
at the Closing notify NFLI within 15 business days after receipt
of the report that they object to the computation of Pre-Tax
Income set forth therein, the reports shall be binding and
conclusive for the purposes of this Agreement. The Shareholders
shall have access to the books and records of Ash and to NFLI's
Accountant's workpapers (to the extent that NFLI can facilitate
such access) during regular business hours to verify the
computation of Pre-Tax Income made by NFLI.
4
<PAGE>
(b) If The Shareholders who own at least a majority of the NFLI
Preferred Stock issued to the Shareholders at the Closing notify
NFLI in writing within 15 business days after receipt of NFLI's
report that they object to the computation of Pre-Tax Income set
forth therein, the amount of Pre-Tax Income for the Year (or
other period) for which such report relates shall be determined
by negotiation between The Shareholders who have provided notice
of objection to NFLI and NFLI. If these persons are unable to
reach agreement within 20 business days after such notification,
the determination of the amount of Pre-Tax Income for the period
in question shall be submitted to a mutually agreeable third
party firm of independent certified public accountants ("Special
Accountants") for determination, whose determination shall be
binding and conclusive on the parties. If the Special Accountants
determine that the Pre-Tax Income has been understated by 10% or
more, then NFLI shall pay the Special Accountants' fees, costs
and expenses. If Pre-Tax Income has not been understated or has
been understated by less than 10%, then The Shareholders shall
pay the Special Accountants' fees, costs and expenses.
ARTICLE III
-----------
MISCELLANEOUS
-------------
3.1 Benefit of Parties. All the terms and provisions of this
-------------------
Agreement shall be binding upon and inure to the benefit of the parties and
their respective permitted representatives, successors and assigns.
3.2 Entire Agreement. This Agreement contains the entire
----------------
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings between the parties with
respect thereto.
3.3 Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
3.4 Cooperation. During the Term each party will cooperate with and
-----------
assist the other party in taking such acts as may be appropriate to enable all
parties to effect compliance with the terms of this Agreement and to carry out
the true intent and purposes hereof.
3.5 Notices. All notices, elections, request, demands or other
-------
communications hereunder shall be in writing and shall be deemed given at the
time delivered personally or by fax or upon receipt if deposited in the United
States mail, certified or registered, return receipt requested, postage prepaid
addressed to the parties as follows (or to such other person or place, written
notice of which any party hereto shall have given to the other):
5
<PAGE>
If to the Shareholders: Allan I. Sirkin
----------------------
3600 25th Avenue
Gulfport, MS 39501
Fax: 228-865-0842
Seymour Glaser
c/o Charles W. Wright, Esq.
1208 22nd Avenue
Meridian, MS 39302-1677
Fax: (601) 485-6571
Joan Mendelson, Trustee
c/o Charles W. Wright, Esq.
1208 22nd Avenue
Meridian, MS 39302-1677
Fax: (601) 485-6571
With a Copy to: Alfred R. Koenenn, Esq.
--------------
1109 Hancock Bank Building
Gulfport, MS 39502
Fax: 228-864-9052
Charles W. Wright, Jr.
1208 22nd Avenue
Meridian, MS 39302-1677
Fax: (601) 485-6571
(b) If to NFLI: Nutrition For Life International, Inc.
----------
9101 Jameel
Houston, TX 77040
Fax: 713-895-8927
Attention: Gregory Pusey, Chairman of the
Board of Directors
With a Copy to: Patton Boggs, LLP
--------------
1660 Lincoln Street, Suite 1900
Denver, CO 80264
Fax: 303-894-9239
Attention: Robert M. Bearman, Esq.
3.6 Waiver of Compliance. The party for whose benefit a warranty,
---------------------
representation, covenant or condition is intended may in writing waive any
inaccuracies in the warranties, representations, covenants or conditions
contained in this Agreement or waive compliance with any of the foregoing and so
waive performance of any of the obligations of the other party hereto and any
defaults hereunder; provided however, that
6
<PAGE>
such waiver shall not affect or impair the waiving party's rights in respect to
any other warranty, representation, covenant, condition or default hereunder.
3.7 Index and Captions The captions of the Articles and Sections of this
------------------
Agreement are solely for convenient reference and shall not be deemed to affect
the meaning or interpretation of any Article or Section hereof.
IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to
be executed in multiple original counterparts as of the date set forth above.
_______________________________________
Seymour Glaser
_______________________________________
Joan Mendelson, Trustee
_______________________________________
Allan I. Sirkin
_______________________________________
Neil Sirkin
NUTRITION FOR LIFE INTERNATIONAL, INC.
By:____________________________________
Authorized Officer
7
