CONTRACT FOR SALE OF BUSINESS AND ASSETS
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This
agreement
("Agreement") is made as of June 30, 2006, between Marshall
Distributing, L.L.C.,
a Utah limited liability company and EMS Business
Development, Inc.,
a California corporation
(collectively "Seller"), Terry D.
Nielsen ("Property Owner") and Gateway Distributors, Ltd., a Nevada
corporation,
("Buyer").
RECITALS
A.
The
Seller is the owner and operator of a herbal and
health food
supplement
distributing business (the 'Business Operations") with its
principal
business office
located at 3085 West 1100 South Salt Lake
City, Utah, 84104,
(the "Property").
Sellers assets relating to the Business Operations are
hereinafter referred
to as the "Business Assets" and are
described in Exhibit
"A" attached
hereto.
B.
Property Owner
owns the Property and
currently leases the Property
to Seller.
C.
Seller desires
to sell and Buyer desires to purchase
the Business
Operations and
Business Assets from Seller upon the terms and
conditions set
forth herein.
D.
Property Owner
desires to sell and Buyer desires to purchase
the
Property from the Property Owner upon the terms and conditions set
forth herein.
NOW,
THEREFORE,
in consideration of the promises and for other good
and
valuable
consideration, the
receipt and adequacy of which are hereby
acknowledged, Buyer,
Seller and Property Owner agree as follows:
1.
Purchase and Sale.
Upon the terms and subject to the conditions set
-----------------
forth in this Agreement, Seller and
Property Owner shall sell, convey, assign,
transfer and
deliver to Buyer and
Buyer shall purchase and acquire from Seller
and Property
Owner the following:
a.
The Business
Operations as
conducted by Seller as of June 30,
2006.
b.
The Business
Assets of the Seller which are utilized in
conjunction with the
Business Operations as of June 30, 2006, specifically
including all
right, title and interest in and to the assets,
personal
properties, goodwill
and rights as a going
concern, of every nature, kind
and
description,
tangible and
intangible, wherever located and whether or
not
carried or reflected on the books and records of the Seller. The
Business Assets
shall include, without
limitation, all items reflected on
the
Seller's June 30, 2006 balance sheet (the
"Balance Sheet") a copy of
which is attached hereto as Exhibit "A". The Business
assets shall only
include those
assets of E.M.S. Business Development, Inc., which are
described on
Exhibit "A" attached hereto. All other assets of E.M.S.
Business Development,
Inc., are excluded
from the Business Assets. Except
as
otherwise provided in this Agreement, the Business Assets shall be
conveyed at the
Closing (as defined below) free and clear of any mortgage,
pledge, lien, security
interest, encumbrance, claim, easement, restriction
or
charge of any kind or nature (whether or not of record).
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c.
The Property
which shall be free and clear of all liens,
encumbrances and other
matters of record except for items 1, 2, 3, 4 and 5
(the
"Permitted
Exceptions") shown on the preliminary title report ("PTR")
attached hereto
as Exhibit "B". Seller and Property
Owner shall mutually
terminate their
existing lease agreement pertaining to the
Property (the
"Lease") at
the Closing and Buyer shall incur no liability
therefor or
thereafter.
2.
Purchase Price.
The purchase price for the Business Operations,
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Business Assets
and the Property (the
"Purchase Price") shall be $6,000,000.00
plus Buyer's
assumption of the liabilities of $1,241,301.00 as set forth in
the
Liabilities
Undertaking attached
hereto as Exhibit "C". The Purchase Price
shall be allocated as follows:
Business Operations
and Assets
$6,471,301.00
Property (Equity)
$ 770,000.00
Assumption of
Liabilities
$1,241,301.00
Total Purchase
Price
$7,241,301.00
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3.
Payment of
Purchase Price. The Purchase Price shall be paid as
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follows:
a.
On or before the
Closing Date, Buyer shall execute and deliver
to
Seller Buyer's promissory note in the sum of Five
Million Two Hundred
Thirty Thousand
and No/100 Dollars ($5,230,000.00) (the "Operations &
Assets Note") in the
form attached as Exhibit "D". The Operations & Assets
Note
shall be secured as provided in the Security Agreement attached
hereto
as Exhibit "E" and the
Financing Statement UCC-1 attached hereto as Exhibit
"F".
b.
On or before the
Closing Date, Buyer shall execute and deposit
in
Escrow an all inclusive installment note
(the "Property Note") in the
principal sum
of Seven Hundred Seventy Thousand and No/100 Dollars
($770,000.00) payable
to the Property Owner in the form attached hereto as
Exhibit "G". The Property Note shall be secured by an all inclusive
deed of
trust on the Property
(the "Property Deed of Trust") which shall be in the
form
attached hereto as Exhibit "H". On or before the Closing Date,
Property Owner will deposit into Escrow, for delivery to Buyer at
Closing a
good
and sufficient deed transferring title to the Property to Buyer.
c.
On or before the
Closing Date, Buyer shall execute and deliver
to
Seller the Liabilities Undertaking and
shall assume the liabilities as
provided in
this Agreement.
d.
Seller and
Property Owner covenant and agree that:
i. a
portion of the Operations & Assets Note proceeds
(approximately
$3,786,062) will
be used to pay the
balance owing on
the following
obligations
which are currently owed by the Seller
and/or its
affiliates
to Kathleen Janssen and/or Dean
Janssen (the
"Janssens"):
($1,025,000 Bank
of Stockton #1, $437,450 Bank of
Stockton #2,
$748,612 Farmers & Merchants #1, $75,000 Wells
Fargo,
$225,000 Kathy
Janssen Personal Note #1, $525,000
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Janssen Personal Note
#2, $750,000 Farmers & Merchants #2 to be drawn
upon through
transition)(hereafter collectively the "Janssen Debts");
and
ii.
the proceeds
from the Property Note (approximately
$770,000) will
be paid to the Property Owner for the Property
as
provided in Paragraph 2 above and the Property Owner shall satisfy
and
discharge the
underlying
note and underlying deed of trust.
iii.
Seller and
Property Owner further covenant and agree
that the proceeds from the Purchase Price shall be applied as
follows:
First to the unpaid balance of the Janssen Debts to
the Janssens;
Second to pay the unpaid balance on the Property
Note
and the Property Deed of Trust ($770,000)
in favor of Terry Nielsen;
Third, One
Million Dollars to the Janssens; and
Fourth, the
remainder of the Purchase Price will be
disbursed to
the Seller.
e.
The parties
understand
and agree that Buyer has no
responsibility to
ensure that any proceeds of the sale due Seller or
Property Owner are
applied by them in the manner described in subparagraph
d
above and that the failure of Seller and Property
Owner to apply any
proceeds of
sale in said manner
shall not affect their obligations to the
Buyer created
in this Agreement.
f.
Notwithstanding the
pro visions of this
subparagraph 3 above,
it
is understood and agreed that the Janssens' Debt
will continue to be
serviced by
Buyer throughout the Holding Period (defined below). Any
accrued and unpaid
interest at the end of the Holding Period will be added
to
the Purchase Price and to the Operations & Assets Note.
g.
Payment of
the Purchase Price will be secured by the (a)
Business Operations;
and (b) the Business Assets and (c) 12,000,000
shares of Cal-Bay International, Inc., preferred B Stock (the "CBAY
Shares") owned by
Buyer's affiliate Gateway Venture Holdings, Inc. Gateway
Venture Holdings,
Inc. will deposit into an escrow
account with Turn-Key
Financial Services,
Inc. ("Escrow Holder")
the CBAY Shares which shall be
restricted for
one year and which shall be retained by
Escrow Holder as
part
of the security for the full and timely payment of the Purchase
Price.
At
the Closing Buyer shall provide the Escrow Holder with
irrevocable
instructions to
pay the Purchase Price in full on or
before September 1,
2007
(the "Holding Period"). Said instructions shall be approved by
Gateway
Venture Holdings,
Inc., and shall further provide that if the
Purchase
Price has not been
paid in full at the end of the Holding Period, the CBAY
Shares shall (to the extent necessary) be sold by the Escrow Holder
and the
proceeds shall
be used to pay the Purchase Price.
4.
Representations,
Warranties and
Covenants of Seller.
In order to
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induce Buyer
to enter into this Agreement, Seller represents,
warrants and
covenants to
Buyer that:
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a.
Marshall Distributing,
LLC is a limited liability company duly
organized, validly
existing and in good standing under the laws of
the
state of Utah, and is qualified and licensed to
do business as it is now
being conducted.
b.
EMS Business
Development,
Inc., is a California
corporation,
validly existing
and in good standing under the laws of the State of
California and is
qualified and licensed to do business as it is now being
conducted.
c.
The Seller has good and marketable title to the Business Assets
free
and clear of all mortgages, pledges, charges,
security interests,
encumbrances and
any other liens of any nature whatsoever except as
described herein
and/or shown on the Balance Sheet.
d.
The Property
Owner has and shall deliver good and
marketable
title to the Property
except or the Permitted Exceptions shown on the PTR.
e.
Upon execution of this
Agreement by all parties this Agreement
shall be a valid and binding Agreement of Seller except as
limited by
bankruptcy,
insolvency,
reorganization,
moratorium or
similar laws
affecting creditors'
rights.
f.
There are no suits or claims relating to the Seller, the
Property Owner,
the Business Operations, the Business Assets, or the
Property which are
currently pending against Seller, or the Property Owner
which have
been threatened or asserted against Seller or the Property
Owner.
g.
Except as disclosed pursuant to this Agreement, there
are no
liabilities (whether
absolute or contingent, liquidated or
unliquidated,
due
or to become due) relating to the
Seller or the Property, nor has any
condition existed
or event occurred
which could reasonably be expected to
give
rise to such liability.
h.
This Agreement
contains the entire agreement and understanding
of
the parties and there are no other representations, warranties
or
promises upon
which the parties rely, each of the parties
hereto having
performed his
or its own due diligence in
investigating the transactions
described herein. Buyer further acknowledges and agrees that (i)
except and
only
as expressly set forth in this Agreement, it has
not relied on any
representations warranties or covenants of either Seller, Property
Owner or
anyone acting for or
on behalf of Seller or Property Owner; and (ii) Buyer
shall purchase the
Business Operations, Business Assets and Property based
on
its own independent inspection and examination thereof.
5.
Representations,
Warranties and
Covenants of Buyer. In order to
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induce Seller and Property Owner to enter into this Agreement,
Buyer represents,
warrants and
covenants to Seller and Property Owner that:
a.
Buyer is a corporation
duly organized, validly existing and in
good
standing under the laws of the State of Nevada
and is qualified and
licensed to
do business as it is now being conducted.
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b.
The Buyer has full
corporate power and authority to enter into
this
Agreement and to carry out the transactions
contemplated herein. The
Boards of Directors of the Buyer have taken all action
required by law,
their respective
articles of incorporation and bylaws or otherwise to
authorize the execution, delivery and performance of this Agreement
and the
consummation of
the transactions contemplated herein.
c.
Upon execution of this
Agreement by all parties this Agreement
shall be a valid and binding legal obligation of the
Buyer enforceable
against it
in accordance with its terms.
d.
Buyer is the sole owner of the CBAY Shares,
free and clear of
any
liens or encumbrances save and except
the restrictions imposed on all
preferred B
shares issued by CBAY.
e.
Buyer and any entity
or person that owns or controls Buyer are
not
bankrupt or insolvent under any applicable Federal state standard,
have
not
filed for protection or relief under any applicable bankruptcy
or
creditor protection
statute and have not been threatened by creditors with
an
involuntary
application
of any applicable bankruptcy or creditor
protection
statute.
f.
Neither this Agreement, nor any of the Exhibits hereto, nor any
document, certificate,
or statement referred to herein or furnished to the
Seller by Buyer in connection with the transaction contemplated
herein
(whether delivered
prior to, simultaneously with, or subsequent to the
execution of
this Agreement) contains any untrue statement of
material
fact, or, to the best
of Buyer's knowledge, omits to state a material fact
in
any way concerning the Buyer or the transaction
contemplated hereby.
g.
This Agreement
contains the entire agreement and understanding
of
the parties and there are no other representations,
warranties, or
promises upon
which the parties rely, each of the parties
hereto having
performed his
or its own due diligence in
investigating the transactions
described herein.
Seller and Property
Owner further acknowledge and agree
that
(i) except and only as expressly set forth in
this A
