Preview | Asset Purchase Agreement |

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this Agreement) is entered into as of April 28, 2004, by and among those parties listed on the signature page hereof and identified thereon as the Shareholders (the Shareholders), Anthony Mark Owens and Caroline S. Owens (together, the Owners), Natural Balance, Inc., a Colorado corporation (the Company, and collectively with the Owners and the Shareholders, the Sellers) and Natural Balance, Inc., a Delaware corporation (the Buyer).

WHEREAS, the Company is, among other things, in the business of manufacturing, marketing and distributing dietary supplements and other products (the Business) and owns certain tangible assets associated therewith; and

WHEREAS, the Owners are the owners of certain Proprietary Rights (as such term is defined in Section 1.1 hereof) licensed to the Company for use in its Business as well as certain real property used by the Company for its Business; and

WHEREAS, on the terms and subject to the conditions set forth in this Agreement, Buyer desires to acquire from the Sellers, and the Sellers desire to sell to Buyer, substantially all of the assets and properties related to the Business.

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

1.1 Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below:

(a) Affiliate shall mean, with respect to any Person, any Person which, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. As used in this definition, the term control (including the terms controlled by and under common control with) means the possession, directly or indirectly, of the power to direct the management policies of such Person, whether through the voting power of outstanding securities, by contract or otherwise.

(b) Affiliated Group means an affiliated group as defined in Section 1504 of the Code (or any similar combined, consolidated or unitary group defined under state, local or foreign income Tax law).

(c) Claims shall mean the written notice from the Buyer to either of the Sellers, describing in reasonable detail the nature of any claim made by the Buyer against any Indemnifying Party (as defined in Section 8.2(d) below) pursuant to this Agreement and the amount of the Loss (as defined in Section 8.2(a) below) with respect thereto, if then known.

(d) Code shall mean the Internal Revenue Code of 1986, as amended.

(e) Contracts shall mean any contracts, agreements and commitments, whether oral or written.

(f) Environmental, Health and Safety Requirements shall mean all federal, state and local statutes, regulations, ordinances and other provisions having the force or effect of law, all judicial and administrative orders and determinations, all contractual obligations and all common law concerning public health and safety, worker health and safety, and pollution or protection of the environment, including, without limitation, all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any hazardous materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation, each as amended and as now or hereafter in effect.

(g) ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended.

(h) GAAP shall mean United States generally accepted accounting principles as promulgated in effect from time to time, consistently applied.

(i) Indebtedness shall mean collectively all obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise, whether or not known, whether due or to become due and regardless of when asserted) arising out of transactions entered into at or prior to the Closing (as defined in Section 2.6), or any state of facts existing at or prior to the Closing, including (i) Taxes with respect to or based upon transactions or events occurring on or before the Closing and (ii) liabilities with respect to or based upon loans, indebtedness, promissory notes, debentures, deferred purchase price for property or services, capital lease obligations or similar obligations (or any guaranties of any of the foregoing).

(j) Knowledge, or any similar term or knowledge qualification contained herein, shall mean (i) with respect to any individual, the actual knowledge of such Person after the reasonable investigation of all key employees, officers and directors of the Company and (ii) in the case of any Person other than an individual, the actual knowledge of such Person after the reasonable investigation of all key employees, officers and directors of such Person.

(k) Lien shall mean any mortgage, pledge, conditional sale or other title retention agreement, encumbrance, lien, easement, option, debt, charge, claim, restriction, or other security interest of any kind.

(l) Manufacturing, Distribution and Accounting Facilities shall mean the land and buildings, consisting of approximately 4.5 acres of land and 6 buildings containing approximately 40,454 total square feet of warehouse, distribution, storage and office space, and all associated property rights, currently leased by the Company from the Owners for Companys manufacturing, distribution and accounting offices and facilities, and more particularly described on Exhibit A attached hereto, including all structures, improvements and fixtures located thereon, and all easements and other rights and interests appurtenant thereto.

(m) Non-Competition Period shall mean the period beginning on the Closing Date and ending on the fourth anniversary of the Closing Date.

(n) Person means an individual, a partnership, a corporation, a limited liability company, an association, a trust, a joint stock company, a joint venture, an unincorporated organization, any other business entity or a governmental entity (whether federal, state, county, city or otherwise and including, without limitation, any instrumentality, division, agency or department thereof).

(o) Proprietary Rights means all of the following owned by, issued to, used by or licensed to any of the Sellers and used in the Business (whether pursuant to a written license or not), along with all associated income, royalties, damages and payments due from or payable by any third party (including, without limitation, damages and payments for past, present, or future infringements or misappropriations thereof), all other associated rights (including, without limitation, the right to sue and recover for past, present, or future infringements or misappropriations thereof), and any and all corresponding rights that, now or hereafter, may be secured throughout the world: (i) trademarks, service marks, trade dress, logos, slogans, trade names and corporate names and all registrations and applications for registration thereof, together with all goodwill associated therewith; (ii) copyrights and works of authorship, and all registrations and applications for registration thereof; (iii) computer software (including, without limitation, data, data bases and related documentation); (iv) trade secrets, confidential information, and proprietary data and information (including, without limitation, compilations of data (whether or not copyrighted or copyrightable), ideas, know-how, marketing, information, financial and accounting data, business and marketing plans, and customer and supplier lists and related information); (v) internet sites and related code, graphics, assets and other properties related thereto as well as all rights associated therewith, including the Website located at www.naturalbalance.com; (vi) all items set forth in Schedule 5.13; (vii) all other intellectual property rights; and (viii) all copies and tangible embodiments of the foregoing (in whatever form or medium).

(p) Real Property shall mean all of the real property and improvements used or intended to be used in, or otherwise related to, the Business, including the Sales and Executive Offices and the Manufacturing, Distribution and Accounting Facilities.

(q) Sales and Executive Offices shall mean the land and buildings, consisting of approximately 1 acre of land and an approximate 7,200 square foot building, and all associated property rights, currently leased by the Company from the Owners for Companys administrative and sales offices, and more particularly described on Exhibit B attached hereto, including all structures, improvements and fixtures located thereon, and all easements and other rights and interests appurtenant thereto.

(r) Tangible Assets shall mean all assets of the Company or the Owners used in or related to the Business other than the Proprietary Rights.

(s) Tax or Taxes means any federal, state, local or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, excise, natural resources, severance, stamp, occupation, premium,

windfall profit, environmental, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll, license, employee or other withholding, or other Tax, of any kind whatsoever, including any interest, penalties or additions to Tax or additional amounts in respect of the foregoing.

(t) Tax Returns means returns, declarations, reports, claims for refund, information returns or other documents (including any related or supporting schedules, statements or information) filed or required to be filed in connection with the determination, assessment or collection of Taxes of any party or the administration of any laws, regulations or administrative requirements relating to any Taxes.

ARTICLE II

PURCHASE AND SALE OF ASSETS

2.1 Purchase and Sale of Assets.

(a) Purchased Assets. Subject to the terms and conditions of this Agreement, on the Closing Date (as defined in Section 2.6), the Buyer agrees to purchase from the Sellers, and the Sellers agree to sell, convey, assign, transfer and deliver to the Buyer by appropriate instruments reasonably satisfactory to the Buyer and its counsel, free and clear of all Liens, all of the assets, properties, rights, titles and interests of every kind and nature owned, licensed or leased by Company and the Owners and used in or related to the Business (including indirect and other forms of beneficial ownership) as of the Closing Date, whether tangible, intangible or personal and wherever located and by whomever possessed, including the Tangible Assets and the Proprietary Rights, including, without limitation, all of the following assets, but excluding all of the Excluded Assets (collectively, the Purchased Assets):

(i) all Company accounts, notes and other receivables, including any prepayments and prepaid expenses;

(ii) all inventory and related supplies of the Seller, (including product tags and product packaging components) and all inventory in transit that has been purchased, including but not limited to those items identified as Inventory in the NAV Schedule (collectively, Inventory);

(iii) all of the Tangible Assets, including but not limited to those certain Fixed Assets identified in the NAV Schedule, together with the Accumulated Depreciation associated therewith (as such terms are set forth in the NAV Schedule), and including those assets listed in Schedule 5.4;

(iv) all claims, deposits, prepayments, warranties, guarantees, refunds, causes of action, rights of recovery, rights of set-off and rights of recoupment of every kind and nature;

(v) all rights existing under those purchase orders to purchase goods or products relating to the Business as listed on the attached Schedule 2.1(a)(v) (collectively, the Assigned Purchase Orders);

(vi) all rights under any warranties and indemnification obligations (whether implied or express) received from suppliers to the extent they pertain to the Purchased Assets;

(vii) the right (but not the obligation) to hire any of the Companys employees, consultants and independent contractors;

(viii) all Proprietary Rights, including electronic and hard copies of any custom software programs, data, web pages and all related underlying software and documentation;

(ix) all permits, licenses, franchises, and other authorizations obtained from federal, state or local governments or governmental agencies or other similar rights, and all data and records pertaining thereto related to the Business (collectively, Government Licenses);

(x) all insurance, warranty, litigation, class action and condemnation proceeds received after the date hereof with respect to damage, non-conformance of or loss to the Purchased Assets, or which otherwise pertain to the Business or the activities conducted therefrom or in connection therewith, and all rights and proceeds under insurance policies to the extent related to or payable in connection with any of the Purchased Assets or the Assumed Liabilities, including those that arise under any certificates of insurance from suppliers or their insurers;

(xi) all rights to receive mail and other communications addressed to the Company, the Owners or any Shareholder related to the Business;

(xii) all telephone and facsimile numbers related to the Business;

(xiii) customer lists, price lists and vendor lists and similar items related to the Business;

(xiv) copies of books, financial and other corporate records to the extent related to the Business;

(xv) all historical records, images, commercials, advertisements, brochures and similar items;

(xvi) all goodwill of the Sellers associated with the Business, including the goodwill associated with existing customer relationships of the Business; and

(xvii) any Contract that, within a reasonable period of time after the disclosure of such Contract to the Buyer, the Buyer elects in writing to assume (the Assumed Contracts).

(b) Excluded Assets. The Sellers shall retain all of their right, title and interest in and to, and shall not transfer to the Buyer the following assets (collectively, the Excluded Assets):

(i) all cash and cash equivalents on hand, as identified on the NAV Schedule;

(ii) the Notes Receivable identified on the NAV Schedule;

(iii) the Building & Improvements identified on the NAV Schedule as being not purchased, together with the Accumulated Depreciation associated therewith;

(iv) the rights of Company, Owners and the Shareholders pursuant to this Agreement;

(v) the originals of books, financial and other corporate records related to the Business, including Tax Returns, stock and minute books, corporate seal and corporate records of Company; and

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