ASSET PURCHASE AGREEMENTAsset Purchase Agreement |
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ASSET PURCHASE AGREEMENT
This Asset Purchase
Agreement (“Agreement”) is entered into effective
as of February 8th, 2008 (the “Effective Date”),
by and among Pacific Sands, Inc., a Nevada corporation
(“Buyer”); Natural Choices Home Safe Products,
LLC, a Wisconsin limited liability company
(“NCLLC”); and Catherine Myers and Dr. Marion
Mack Myers II, owners of all issued and outstanding
membership interests in NCLLC and its sole managers and
members (hereinafter referred to individually as a
“Member” and collectively as
“Members”).
R E C I T A L S:
A. NCLLC
is engaged in the business of offering quality household
cleaning products that are environmentally safe (the
“Business”) from leased premises commonly known
as 9525 South 60 th
Street, Franklin, Wisconsin 53132
(“Premises”).
B. NCLLC
desires to sell to Buyer, and Buyer desires to purchase from
NCLLC, on a going-concern basis, the hereinafter defined
Purchased Assets of NCLLC, all on the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in
consideration of the mutual covenants and agreements
hereinafter set forth, it is hereby agreed as
follows:
ARTICLE I
PURCHASE AND SALE
1.1
Purchased
Assets. Pursuant to the terms and
conditions of this Agreement, on the Closing Date, NCLLC shall
sell, transfer, assign, convey, and deliver to Buyer, and
Buyer shall purchase from NCLLC, on a going-concern basis,
free and clear of all Liens (except for hereinafter defined
Permitted Liens), all of the operations of NCLLC related to
the Business and, except for the Excluded Assets as set forth
in Section 1.2 hereof, all of the assets and properties of
NCLLC of every kind and description, wherever located,
tangible or intangible, used or useable in connection with the
Business as the same shall exist on the Effective Date
(collectively, the “Purchased Assets”), including,
without limitation, all right, title, and interest of NCLLC
in, to, and under:
The
Assets also include any cash, cash equivalents, securities or
bank accounts or deposits in existence as of the Closing Date,
all accounts receivable in existence as of the Closing
Date.
1.2
Excluded
Assets. Notwithstanding the provisions of
Section 1.1, the Purchased Assets shall not include any
Member’s personal property located at the Premises or
any other item specifically identified in Schedule 1.2
(“Excluded Assets”).
1.3
Assumed
Liabilities. As of the Effective Date,
Buyer shall assume and agree to discharge only those customary
operating expenses NCLLC specifically identified in Schedule
1.3. All of the foregoing liabilities and
obligations to be assumed by Buyer hereunder (excluding any
Excluded Liabilities) are referred to herein as the
“Assumed Liabilities.”
1.4
Excluded
Liabilities. Buyer shall not assume or be
obligated to pay, perform, or otherwise discharge any
liability or obligation of NCLLC, direct or indirect, known or
unknown, absolute or contingent, not expressly assumed by
Buyer (all such liabilities and obligations not being assumed
are herein referred to as the “Excluded
Liabilities”) and, notwithstanding anything to the
contrary in Section 1.3, none of the following shall be
“Assumed Liabilities” for purposes of this
Agreement:
ARTICLE II
PURCHASE PRICE
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2.1
Purchase
Price. The purchase price for the Assets
shall be $890,000.00, plus or minus customary closing
pro-rations, if any, and subject to a minimum inventory
existing and acceptable to Buyer of at least $60,000 within
five days of the Closing Date. The purchase price
stated herein has been determined by Buyer based upon
information made available to Buyer as of the date of this
Agreement, including Seller’s and Members’
representation of current annualized sales of $620,000 and
existing inventory information. The amount to be paid at
Closing shall be increased or decreased at Closing by the
amount by which the inventory, valued at cost as of Closing,
varies from $2,000. To insure the integrity of the inventory
through the Closing Date, Seller and Buyer shall each, at
their respective cost, maintain a representative at the
Premises to monitor incoming and outgoing inventory pursuant
to an agreed upon inventory logging system and Seller shall
not order any additional inventory from now through the
Closing Date without prior written notice to and consent of
Buyer. The Purchase Price shall be paid through delivery of
cash and shares of Company restricted common stock over a
three-year period. Earnest money of $50,000 in the form of
500,000 shares of Company’s restricted common stock
shall be payable upon execution of this Agreement. An
additional 500,000 shares of Company’s restricted common
stock, as well as $60,000 in cash, shall be paid at
closing. The balance of the Purchase Price shall be
paid in semi-annual installments of restricted common shares
and cash beginning on August 1, 2008 as
follows: $50,000 in additional shares of
Company’s restricted common stock, as well as $40,000 in
cash, on August 1, 2008; $50,000 in additional shares of
Company’s restricted common stock, as well as $50,000 in
cash, on February 1, 2009; $100,000 in additional shares of
Company’s restricted common stock, as well as $100,000
in cash, on August 1, 2009; $200,000 in cash, on
February 1, 2010; and $140,000 in cash, on August 1,
2010. Any late cash payment is subject to a late
charge not to exceed 1.5% per month. Seller and each Member
acknowledge and agree that any breach of this Agreement by
Seller or either Member, shall constitute a breach of each of
the hereinafter defined Employment Agreements, and any breach
of either of said Employment Agreements by either Member shall
constitute a breach of this Agreement, which shall entitle
Buyer to offset any unpaid balance of the Purchase Price
outstanding as of the date of such breach, as well as
indemnification under Article VI. Each Member
acknowledges that shares issued in connection
with this transaction are being acquired for investment and
not for distribution or resale, the shares have not been
registered under the Securities Act of 1933 or the Nevada
Uniform Securities Act as amended, or any other applicable
state securities laws, and the shares cannot be sold unless
subsequently registered under the Securities Act of 1933, and
such state laws or an exemption from such registration is
available.
2.2 Allocation of Purchase
Price. The Purchase Price shall be
allocated for tax purposes among the Purchased Assets in such
amounts as Buyer may reasonably request, in accordance with
generally accepted accounting principles and as set forth in
Schedule 2.2. Such allocations shall be accepted
by the parties in writing at Closing and shall be binding on
the parties. NCLLC shall sign and submit all
necessary forms to report this transaction for federal and
state income tax purposes in accordance with that allocation
and shall not take a position for tax purposes inconsistent
therewith.
ARTICLE III
CLOSING
3.1 Closing Date.
The closing (“Closing”) of the
transactions contemplated by this Agreement shall be held on
February 8th, 2008 (“Closing Date”) at the office
of Buyer, 1509 Rapids Drive, Racine, Wisconsin
53404. The Closing shall be deemed to be effective
as of 12:01 A.M., Chicago Time, on the Effective
Date.
3.3 Buyer’s
Deliveries. At Closing, Buyer shall
deliver to NCLLC all of the following:
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(a) A
certificate of the Secretary of Buyer, dated no earlier than
five (5) days prior to the Closing Date, in form and
substance reasonably satisfactory to NCLLC, as to the
resolutions of the Board of Directors of Buyer authorizing the execution and performance of this
Agreement, and the transactions contemplated
thereby;
(b) Such other
documents as NCLLC may reasonably request or as may be
otherwise necessary to evidence and effect the sale,
assignment, transfer, conveyance and delivery of the
Purchased Assets to Buyer;
(c) An
employment agreement for each Member, in substantially the
form of the copy attached as Exhibit A (“Employment
Agreement”), executed by an authorized officer of Buyer,
providing for the retention of each Member for a three-year
period commencing on the Closing Date, and subject to
extension for an additional 1-year period upon written notice
from Buyer not less than 90 days prior to the first
anniversary date of the Closing Date. Employment
Agreements shall provide for a combined annual salary of
$101,460 during the first year, $105,518 during the second
year of the service payable consistent with Buyer’s
payroll practices and procedures. Each Employment
Agreement shall also contain such additional terms and
conditions acceptable to Buyer including, but not limited to,
non-disclosure and non-competition agreements extending
through the period of service and continuing for a period of
five years thereafter, as well as provide each Member employee
benefits on the same basis as now maintained and provided to
Buyer’s current employees. The non-competition agreement
shall apply only to North America.
3.4 NCLLC’s and
Members’ Deliveries. At Closing,
NCLLC and Members shall deliver to Buyer the
following:
(a) A
certificate of the Secretary of NCLLC, dated no earlier than
five (5) days prior to the Closing Date, in form and
substance reasonably satisfactory to Buyer, as to the
resolutions of the managers and members of Buyer authorizing
the execution and performance of this Agreement, and the
transactions contemplated thereby;
(b) Such other
documents as Buyer may reasonably request or as may be
otherwise necessary to evidence and effect the sale,
assignment, transfer, conveyance and delivery of the
Purchased Assets to Buyer;
(c) A
Certificate of Good Standing issued by the Secretary of State
of Wisconsin, with respect to Buyer dated no earlier than
thirty (30) days prior to the Closing Date;
(d)
An Employment Agreement for each Member executed by each
Member; and
(e) The Bill
of Sale, duly executed by an authorized officer of NCLLC, and
in substantially the form of the copy attached as Exhibit
B.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NCLLC AND MEMBERS
As
a material inducement to Buyer to enter into this Agreement
and to consummate the transactions contemplated hereby, NCLLC
and each Member hereby makes the following representations and
warranties to Buyer, as of the date hereof and as of the
Effective Date:
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4.1 Status.
NCLLC is a limited liability company duly
organized, legally existing and in good standing, and has
filed all required annual reports and paid all required
franchise and other taxes and fees, under the laws of the
State of Wisconsin. NCLLC has the requisite power
and authority to own or lease its property and to carry on
its Business as now being conducted. NCLLC is
legally qualified to transact business as a foreign
corporation in all jurisdictions where the nature of its
respective properties and the conduct of its business
requires such qualification, and is in good standing in each
of the jurisdictions in which it is so
qualified. There is no pending or threatened
proceeding for the dissolution, liquidation, insolvency, or
rehabilitation of NCLLC.
4.2 Power and
Authority. NCLLC and each Member have the
power and authority to execute and deliver this Agreement, to
perform their respective obligations hereunder and to
consummate the transactions contemplated
hereby. NCLLC and each Member have taken all
action necessary to authorize the execution and delivery of
this Agreement, the performance of its respective obligations
hereunder and the consummation of the transactions
contemplated hereby.
4.3 Enforceability.
This Agreement has been or will have been at the time of
Closing duly executed and delivered by NCLLC and Members and
constitutes or will constitute the legal, valid, and binding
obligation of each of them, enforceable against each of them
in accordance with its terms.
4.4 No Restrictions.
There are no proxies, voting rights, Contracts,
or other agreements or understandings with respect to the
voting of membership interests in NCLLC or the transfer of
the Purchased Assets other than as set forth in this
Agreement.
4.5 No Violation.
The execution and delivery of this Agreement by
NCLLC, the performance of its respective obligations
hereunder and the consummation of the transactions
contemplated by this Agreement will not:
(a) contravene
any provision of the Articles of Organization or Operating
Agreement of NCLLC;
(b) violate or
conflict with any law, statute, ordinance, rule, regulation,
decree, writ, injunction, judgment or order of any
Governmental Authority or of any arbitration award which is
either applicable to, binding upon or enforceable against
NCLLC;
(c) conflict
with, result in any breach of, or constitute a default (or an
event which would, with the passage of time or the giving of
notice or both, constitute a default) under, or give rise to
a right to terminate, amend, modify, abandon or accelerate,
any Contract which is applicable to, binding upon or
enforceable against NCLLC;
(d) result in
or require the creation or imposition of any Lien upon or
with respect to any of the property or assets of NCLLC;
or
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(e) require
the consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Authority, any
court or tribunal or any other Person.
4.6 Financial
Statements. NCLLC has delivered to
Buyer the unaudited financial statements of NCLLC, as of
December 31, 2007 and December 31, 2006 and for the interim
period ended January 31, 2008, and the related statements of
income and retained earnings for said
periods (collectively, the “Financial
Statements”). The balance sheet dated as of December
31, 2007, included in the Financial Statements is referred to
herein as the “Balance Sheet” and the
“Balance Sheet Date” shall mean December 31,
2007. The Financial Statements fairly present the
financial position of NCLLC at each of the balance sheet
dates and the results of operations for the periods covered
thereby. The books and records of NCLLC fully and
fairly reflect the transactions, properties, assets, and
liabilities of NCLLC and there are no material, special or
non-recurring items of income or expense during the periods
covered by the Financial Statements. The Financial
Statements reflect all adjustments necessary for a fair
presentation of the financial information contained
therein.
4.7 Liabilities.
NCLLC does not have any liabilities or
obligations, whether accrued, absolute, contingent, or
otherwise, except:
(a) to the
extent reflected or taken into account in the Current Balance
Sheet and not heretofore paid or discharged;
(b) to the
extent specifically set forth in or incorporated by express
reference in any of the Schedules attached
hereto;
(c) liabilities
incurred in the ordinary course of business consistent with
past practice since the date of the Current Balance Sheet
(none of which relates to breach of contract, breach of
warranty, tort, infringement, or violation of law, or which
arose out of any action, suit, claim, governmental
investigation or arbitration proceeding); and
(d) normal
accruals, reclassifications, and audit adjustments which
would be reflected on an audited financial statement and
which would not be material in the aggregate.
4.8 Litigation.
There is no action, suit, or other legal or
administrative proceeding or governmental investigation
pending or threatened by or against NCLLC or anticipated or
contemplated by NCLLC, nor is there any such action, suit, or
other legal or administrative proceeding or governmental
investigation anticipated or contemplated against NCLLC,
affecting NCLLC or any of its respective properties or
assets, or which question the validity or enforceability of
this Agreement or the transactions contemplated hereby,
and there is no basis for any of the
foregoing. There are no outstanding orders,
decrees or stipulations issued by any Governmental Authority
in any proceeding to which NCLLC is or was a party which have
not been complied with in full or which continue to impose
any material obligations on NCLLC.
4.9 Good Title to, Condition
of, and Adequacy of Purchased Assets.
(a) NCLLC has
good and marketable title to all of the Purchased Assets,
free and clear of any Liens (other than Permitted Liens) or
restrictions on use.
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(b) The
Purchased Assets are in good operating condition, normal wear
and tear excepted, and have been maintained in accordance
with sound industry practices.
(c) The
Purchased Assets constitute all of the assets and properties
necessary for the conduct of the Business of NCLLC in the
manner in which and to the extent to which such Business is
currently being conducted.
(a) NCLLC is
and has been in compliance in all material respects with all
laws, regulations, and orders applicable to it, its
respective Business and operations (as conducted by it now
and in the past), and the Purchased Assets. NCLLC has not
been cited, fined, or otherwise notified of any asserted past
or present failure to comply with any laws, regulations or
orders which have not been permanently cured and no
proceeding with respect to any such violation is pending or
threatened.
(b) NCLLC has
not made any payment of funds in connection with its Business
that is prohibited by law, and no funds have been set aside
to be used in connection with its Business for any payment
prohibited by law.
(c) NCLLC is
not subject to any Contract, decree or injunction which
restricts the continued operation of any Business or the
expansion thereof to other geographical areas, customers and
suppliers, or lines of Business.
4.11 Labor and Employment
Matters. NCLLC has complied with
applicable laws, rules, and regulations relating to
employment, civil rights and equal employment opportunities,
including, but not limited to, the Civil Rights Act of 1964,
and the Fair Labor Standards Act.
4.12 Employee Benefit
Plans. NCLLC does not maintain any
employee benefit plan or arrangement subject to the
provisions of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”), except only for the
NCLLC group medical plan covering NCLLC employees, their
spouses or dependents (the “Employee Benefit
Plan”). With respect to each Employee
Benefit Plan:
(a) each
has been administered in all material respects in compliance
with its terms and with all applicable laws, including, but
not limited to, ERISA and the Internal Revenue Code of 1986,
as amended (the “Code”);
(b) no
actions, suits, claims or disputes are pending or
threatened;
(c) no audits,
inquiries, reviews, proceedings, claims, or demands are
pending with any governmental or regulatory
agency;
(d) there are
no facts which could give rise to any material liability in
the event of any such investigation, claim, action, suit,
audit, review, or other proceeding;
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(e) all
reports, returns, and similar documents required to be filed
with any governmental agency or distributed to any plan
participant have been duly or timely filed or distributed;
and
(f) no
“prohibited transaction” has occurred within the
meaning of the applicable provisions of ERISA or
the Code.
Other than as disclosed
herein, NCLLC is not obligated under any employee welfare
benefit plan as described in Section 3(1) of ERISA
(“Welfare Plan”) to provide medical or death
benefits with respect to any employee or former employee of
NCLLC or its predecessors after termination of
employment. All required or discretionary (in
accordance with historical practices) payments, premiums,
contributions, reimbursements, or accruals for all periods
ending prior to or as of the Effective Date shall have been
made or properly accrued on the Current Balance
Sheet.
4.13 Tax Matters.
All Tax returns required to be filed prior to the
date hereof with respect to NCLLC or any of its respective
income, properties, franchises, or operations have been
filed, each such Tax Return has been prepared in compliance
with all applicable laws and regulations, and all such Tax
Returns are true, complete, and accurate in all
respects. All Taxes due and payable by or with
respect to NCLLC have been paid or accrued on the Current
Balance Sheet or will be accrued on its books and records as
of the Closing.
4.14 Inventory.
NCLLC’s inventory consists of good and
marketable products, is fully paid for and as of Closing will
be in an aggregate amount equal to at least the amount set
forth in the Current Balance Sheet.
4.15
Licenses and
Permits. NCLLC possesses all licenses and
required governmental or official approvals, permits or
authorizations (collectively, the “Permits”) for
its Business and operations. All such Permits are
valid and in full force and e
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