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-1" attached hereto. All other assets of
E.M.S.
Business Development,
Inc., are excluded
form 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
______________________________ and ______________ (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.
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 set forth in the Liabilities
Undertaking attached
hereto as Exhibit "C". The Purchase Price shall be
allocated as
follows:
Business Operations
$
-----------------------
Business Assets
$
-----------------------
Property
$
-----------------------
Total Purchase Price
$
=======================
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".
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 Janssen
Personal
Note #2, $750,000 Farmers & Merchants #2 to be drawn upon
through
transition)(hereafter
collectively the
"Janssen Debts"); and
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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. Seller
and
Property Owner
further covenant and
agree that the proceeds from the
Purchase Price
shall be applied as follows:
iii.
First to the unpaid
balance of the Janssen Debts to the
Janssens;
iv.
Second to pay the unpaid balance on the Property Note and
the Property
Deed of Trust; ($770,000) in favor of Terry
Nielsen;
v.
Third, One
Million Dollars to the Janssens;
vi.
Fourth, the
remainder of the Purchase Price will be
disbursed to
the Seller.
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. 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.
e.
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. Buyer will deposit into an escrow
account with
("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
the fourteenth (14th) month after the
Closing (the
"Holding Period"). Said instructions 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:
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.
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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.
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.
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,
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simultaneously with,
or subsequent to the execution of this
Agreement)
contains any
untrue statement of material fact, or omits to state a
material fact
in any way concerning the Buyer or the transaction
contemplated
hereby.
g.
Purchaser covenants
and agrees that during the period from the
Closing and
continuing
through the end of the Holding Period that:
i.
Buyer shall
continue to manage and operate the
Seller's
Business Operations
in accordance with Seller's current practices
and that Buyer shall make no change in Seller's
current management,
personnel, practices
or policies regarding the Business
Operations
unless it receives the Seller's prior written consent thereto.
ii.
Buyer shall
pay its employees all wages, salaries
and
benefits of
any kind, including without limitation, vacation
accruing to
such employees in a timely manner and the Seller
shall
have no duty or
