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CONTRACT FOR SALE OF BUSINESS AND ASSETS

Asset Purchase Agreement

CONTRACT FOR SALE OF BUSINESS AND ASSETS | Document Parties: GATEWAY DISTRIBUTORS LTD | EMS  Business  Development,  Inc | Marshall Distributing,  L.L.C You are currently viewing:
This Asset Purchase Agreement involves

GATEWAY DISTRIBUTORS LTD | EMS Business Development, Inc | Marshall Distributing, L.L.C

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Title: CONTRACT FOR SALE OF BUSINESS AND ASSETS
Governing Law: California     Date: 9/14/2006

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                    CONTRACT FOR SALE OF BUSINESS AND ASSETS
                    ----------------------------------------

     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).


                                         1
<PAGE>
          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,
            ---------------
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
                                                     =============

     3.      Payment   of   Purchase   Price.   The   Purchase   Price shall be paid as
            ----------------------------
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


                                        2
<PAGE>
          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
            ------------------------------------------------------
induce   Buyer   to   enter   into   this   Agreement, Seller represents, warrants and
covenants   to   Buyer   that:


                                        3
<PAGE>
          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
            ------------------------------------------------------
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.


                                        4
<PAGE>
          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


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