UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

  

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): February 9, 2015 (February 4, 2015)

 

TWINLAB CONSOLIDATED HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

 

Nevada   000-55181   46-3951742
(State or other jurisdiction of incorporation)           (Commission File Number)   (IRS Employer Identification No.)

 

632 Broadway, Suite 201, New York, NY   10012
(Address of principal executive offices)   (Zip Code)

  

Registrant’s telephone number, including area code                      (212) 651-8500                    

 

 
(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 
 

 

Item 1.01 Entry into a Material Definitive Agreement.

  

Midcap Funding X Trust

 

As previously reported in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on January 28, 2015, Twinlab Consolidated Holdings, Inc. (the “Company”) and its direct and indirect wholly owned subsidiaries, Twinlab Consolidation Corporation (“TCC”), Twinlab Holdings, Inc. (“THI”), Twinlab Corporation (“Twinlab”), ISI Brands Inc. (“ISI”), TCC CM Subco I, Inc. (“Subco I”) and TCC CM Subco II, Inc. (“Subco II” and with the Company, TCC, THI, Twinlab and ISI collectively, the “Twinlab Companies”), entered into a Credit and Security Agreement (the “Credit Agreement”), dated January 22, 2015, with MidCap Financial Trust (“MidCap Trust”). MidCap Trust thereafter assigned all of its rights and interest under the Credit Agreement and related agreements to MidCap Funding X Trust (“MidCap Funding”), an affiliate of MidCap Trust.

 

On February 4, 2015, the Twinlab Companies and MidCap Funding entered into an Amendment No. 1 to Credit and Security Agreement and Limited Consent (the “MidCap Amendment”). Pursuant to the MidCap Amendment, (i) MidCap Funding consented to a change of corporate names of each of Subco I and Subco II to NutraScience Labs, Inc. and NutraScience Labs IP Corporation, respectively (collectively, the “Name Changes”), and (ii) the Credit Agreement was amended to include the First Promissory Note and Second Promissory Note (as defined below in this Item 1.01) as Permitted Debt (as defined in the Credit Agreement).

 

The foregoing description of the MidCap Amendment is qualified in its entirety by reference to the full text of such document, which document is an exhibit to this Report.

 

JL-BBNC Mezz Utah, LLC

 

As previously reported in the Company’s Current Report filed with the SEC on January 28, 2015, the Twinlab Companies entered into a Note and Warrant Purchase Agreement (the “JL Purchase Agreement”), dated January 22, 2015, with JL-BBNC Mezz Utah, LLC (“JL”).

 

On February 4, 2015, the Twinlab Companies and JL entered into a First Amendment to Note and Warrant Purchase Agreement and Consent (the “JL Amendment”). Pursuant to the JL Amendment, (i) JL consented to the Name Changes and (ii) the JL Purchase Agreement was amended to include the First Promissory Note and Second Promissory Note as (i) permitted Indebtedness (as defined in the JL Purchase Agreement) and (ii) within the coverage of the JL Purchase Agreement’s covenant against amending certain agreements and documents.

 

Pursuant to the JL Amendment, JL was issued a warrant exercisable for an aggregate of 434,809 shares of Common Stock, at a per share purchase price of $1.00, at any time prior to February 13, 2020 (the “JL Amendment Warrant”).

 

The number of shares issuable upon exercise of the JL Amendment Warrant is subject to adjustment on terms and conditions customary for a transaction of this nature in the event of (i) reorganization, recapitalization, stock split-up, combination of shares, mergers, consolidations and (ii) sale of all or substantially all of the Company’s assets or property.

  

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The foregoing descriptions of the (i) JL Amendment; and (ii) JL Amendment Warrant are qualified in their entirety by reference to the full text of such documents, which documents are exhibits to this Report.

 

Penta Mezzanine SBIC Fund I, L.P.

 

As previously reported in the Company’s (i) Current Report on Form 8-K filed with the SEC on November 18, 2014 and (ii) Current Report on Form 8-K filed with the Securities and Exchange Commission on November 18, 2014, the Twinlab Companies entered into a Note and Warrant Purchase Agreement, dated as of November 13, 2014, as amended by the First Amendment to Note and Warrant Purchase Agreement, Consent and Joinder dated as of January 22, 2015 (as so amended, the “Penta NWPA”), with Penta Mezzanine SBIC Fund I, L.P. (“Penta”).

 

On February 4, 2015, the Twinlab Companies and Penta entered into a Second Amendment to Note and Warrant Purchase Agreement and Consent (the “Second Penta Amendment”). Pursuant to the Second Penta Amendment, (i) Penta consented to the Name Changes and (ii) the Penta NWPA was amended to include the First Promissory Note and Second Promissory Note as (a) permitted Indebtedness (as defined in the Penta NWPA) and (b) within the coverage of the Penta NWPA’s covenant against amending certain agreements and documents.

 

On February 6, 2015 and in order to provide some of the funding to consummate the Nutricap Purchase Agreement (as defined below in this Item 1.01), Penta purchased the (i) Deferred Draw Note and (ii) Deferred Warrant (each as defined in the Company’s Current Report on Form 8-K filed with the SEC on November 18, 2014) in exchange for $2,000,000. The Deferred Warrant allows Penta to purchase 4,960,740 shares of Common Stock at an aggregate purchase price of $0.01. The Initial Warrant (as defined in the Company’s Current Report on Form 8-K filed with the SEC on November 18, 2014) was canceled and replaced in its entirety by the Deferred Warrant. Penta surrendered the Initial Warrant to the Company upon the issuance of the Deferred Warrant. Except for the number of shares issuable, the terms of the Deferred Warrant are the same as the Initial Warrant.

 

The foregoing description of the Second Penta Amendment is qualified in its entirety by reference to the full text of such document, which document is an exhibit to this Report, and the foregoing descriptions of the (i) Deferred Draw Note; (ii) Deferred Warrant; and (iii) Initial Warrant are qualified in their entirety by reference to the full text of such documents, which documents were filed as exhibits to the Company’s Current Report on Form 8-K filed with the SEC on November 18, 2014 and hereby incorporated by reference herein.

  

Item 2.01 Completion of Acquisition or Disposition of Assets.

  

As previously reported in the Company’s Current Report on Form 8-K filed with the SEC on September 22, 2014, TCC entered into an option agreement in September 2014 (the “Option Agreement”) that gave TCC an exclusive option to purchase certain assets of a manufacturer of nutritional products. Pursuant to the Option Agreement, as amended and restated and further amended, an Asset Purchase Agreement (the “Nutricap Purchase Agreement ”), dated and effective as of February 4, 2015 by and among Nutricap Labs, LLC, a New York limited liability company (“Nutricap”), Vitacap Labs, LLC, a New York limited liability company (“Vitacap” and with Nutricap, each a “Seller” and together, the “Sellers”), Canyon Marketing V, LLC, a Delaware limited liability company (“Canyon V”), Canyon Marketing II, Inc., a New York corporation (“Canyon II”), Canyon Marketing III, LLC, a Delaware limited liability company (“Canyon III”), and Subco I (“Buyer”) was executed. The transactions contemplated by the Nutricap Purchase Agreement were consummated on February 6, 2015. 

 

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Nutricap provides dietary supplement contract manufacturing services to the customers of its Business (as defined in the Nutricap Purchase Agreement), and pursuant to the Nutricap Purchase Agreement, Buyer acquired Nutricap’s customer relationships with such customers. Buyer assumed certain of the liabilities of the Business (the “Assumed Liabilities”), including, without limitation, liabilities for (i) certain taxes; and (ii) Buyer’s agreement to give credit for any Customer Deposit (as defined in the Nutricap Purchase Agreement) related to an existing purchase order with respect to which a customer agrees to novate such purchase order with Buyer pursuant to a Novation Contract (as defined in the Nutricap Purchase Agreement).

 

The aggregate consideration under the Nutricap Purchase Agreement for the purchased assets (collectively, the “ Purchase Price ”) was: (i) $8,000,000.00, in cash, reduced dollar for dollar by the amount of Customer Deposits (as so adjusted, the “Cash Consideration”); plus (ii) the assumption of the Assumed Liabilities; plus (iii) the sum of $2,500,000.00 paid by delivery of the First Promissory Note; plus (iv) the sum of $1,478,000 paid by delivery of the Second Promissory Note.

 

Except as otherwise provided in the Nutricap Purchase Agreement, for a period of three (3) years from the closing under the Nutricap Purchase Agreement, Sellers, Canyon V, Canyon II, Canyon III and their Affiliates (as defined in the Nutricap Purchase Agreement) have agreed not to (i) engage in or assist others to engage in the business in North America of providing contract manufacturing services for health and wellness companies engaged in selling vitamins, minerals and dietary supplements products, including custom formulas and private label products, and related label design, packaging and order fulfillment services for customers of such contract manufacturing services and (ii) cause, induce or encourage any customer, supplier or licensor to terminate or modify any relationship with Buyer.

 

Buyer delivered, in partial payment of the Purchase Price, that certain Unsecured Promissory Note, dated February 6, 2015, in the amount of $2,500,000 payable to Nutricap (the “First Promissory Note”). The First Promissory Note matures on the earlier to occur of (x) the sixty (60) day anniversary of the issuance of the First Promissory Note and (y) one (1) business day following the funding of Additional Financing (as defined in the Nutricap Purchase Agreement) (such earlier date, the “Maturity Date”). Interest on the principal amount of the First Promissory Note accrues at the rate of six (6%) percent per year. A late payment fee of $250,000 is payable by Buyer if the First Promissory Note is not paid on or before the Maturity Date. Concurrently with payment of the amounts due under the First Promissory Note in accordance with its terms, Buyer will deduct from such amounts due $900,000 and deliver the $900,000 so deducted to the Escrow Agent (as defined in the Nutricap Purchase Agreement) to be held pursuant to the Escrow Agreement (as defined in the Nutricap Purchase Agreement).

 

Buyer delivered, in partial payment of the Purchase Price, that certain Unsecured Promissory Note, dated February 6, 2015, in the amount of $1,478,000 payable to Nutricap (the “Second Promissory Note”). The Second Promissory Note matures on the twelve (12) month anniversary of the issuance of the Second Promissory Note. Interest on the principal amount of the Second Promissory Note accrues at the rate of three (3%) percent per year. Principal and accrued interest on the Second Promissory Note is payable in twelve (12) equal monthly installments on the last business day of each month commencing February 27, 2015. Buyer may prepay amounts due under the Second Promissory Note, in whole or in part, at any time and from time to time, without any prepayment penalty. In the event of an Event of Default (as defined in the Second Promissory Note), the interest rate increases to fifteen (15%) percent per year from the date of such Event of Default.

 

Buyer and Sellers entered into a Transition Services Agreement, dated February 6, 2015, pursuant to which Nutricap will provide Buyer with certain transitional services to assist Buyer to transfer to Buyer the customer relationships acquired by Buyer pursuant to the Nutricap Purchase Agreement (the “TSA”). The TSA provides that Nutricap will provide Buyer with, among other services, (i) the services of certain Nutricap personnel; (ii) the right to use Nutricap’s premises; (iii) access to Nutricap’s information services; and (iv) accounting services.

  

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The TSA is in effect until August 6, 2015 subject to Buyer’s right to extend the term of the TSA for up to an additional six (6) months. Notwithstanding the foregoing, Buyer has the right to discontinue provision of services under the TSA prior to the end of the term but will still be responsible for paying the costs of using Nutricap’s premises through the end of the term.

 

Buyer will pay Nutricap the following fees pursuant to the TSA: (i) a monthly fee of $300,000; (ii) $258,749.88 in twelve (12) equal monthly installments for use of Nutricap’s premises; and (iii) (x) one hundred and five (105%) percent of the monthly salary, benefits expenses and other compensation-related expenses and (y) applicable retention bonuses for certain individuals employed by Sellers prior to the closing under the Nutricap Purchase Agreement who perform transition services under the TSA.

 

The Company has granted 2014 Huntington Holdings, LLC (“HH”), an affiliate of Sellers, certain registration rights for the shares of Common Stock of the Company owned by HH (the “HH Registration Rights Agreement”).

 

The foregoing descriptions of the (i) Nutricap Purchase Agreement; (ii) First Promissory Note; (iii) Second Promissory Note; (iv) TSA; and (v) HH Registration Rights Agreement are qualified in their entirety by reference to the full text of such documents, which documents are exhibits to this Report.

  

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

  (a) The information set forth in Item 1.01 above is hereby incorporated by reference in answer to Item 2.03(a).

   

Item 9.01 Financial Statements and Exhibits.

 

  (a) Financial Statements of Business Acquired.
     
    Any required financial statements for the acquisition reported in Item 2.01 above will be filed by amendment as soon as practicable, but not later than 71 days from the date that this Current Report on Form 8-K is required to be filed.
     
  (b) Pro-forma Financial Information.
     
    Any required pro forma financial information for the acquisition reported in Item 2.01 above will be filed by amendment as soon as practicable, but not later than 71 days from the date that this Current Report on Form 8-K is required to be filed.
     
  (d) Exhibits.

 

  Exhibit 10.45 Amendment No. 1 to Credit and Security Agreement and Limited Consent, dated as of February 4, 2015, by and among Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc. and TCC CM Subco II, Inc. and MidCap Funding X Trust.
     
  Exhibit 10.46 First Amendment to Note and Warrant Purchase Agreement and Consent, dated as of February 4, 2015, by and between Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc., TCC CM Subco II, Inc. and JL-BBNC Mezz Utah, LLC.

  

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  Exhibit 10.47 Warrant, dated February 4, 2015, issued by Twinlab Consolidated Holdings, Inc. to JL-BBNC Mezz Utah, LLC.
     
  Exhibit 10.48 Second Amendment to Note and Warrant Purchase Agreement and Consent, dated as of February 4, 2015, by and between Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc., TCC CM Subco II, Inc. and Penta Mezzanine SBIC Fund I, L.P.
     
  Exhibit 10.49 Asset Purchase Agreement, dated as of February 4, 2015, by and among Nutricap Labs, LLC, Vitacap Labs, LLC, Canyon Marketing V, LLC, Canyon Marketing II, Inc., Canyon Marketing III, LLC and TCC CM Subco I, Inc.
     
  Exhibit 10.50 Unsecured Promissory Note, dated February 6, 2015, in the amount of $2,500,000 made by TCC CM Subco I, Inc. payable to Nutricap Labs, LLC.
     
  Exhibit 10.51 Unsecured Promissory Note, dated February 6, 2015, in the amount of $1,478,000 made by TCC CM Subco I, Inc. payable to Nutricap Labs, LLC.
     
  Exhibit 10.52 Transition Services Agreement, dated February 6, 2015, by and between TCC CM Subco I, Inc., Nutricap Labs, LLC and Vitacap Labs, LLC.
     
  Exhibit 10.53 Registration Rights Agreement, dated as of February 6, 2015, by and between Twinlab Consolidated Holdings, Inc. and 2014 Huntington Holdings, LLC.

   

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

Date:  February 9, 2015 TWINLAB CONSOLIDATED HOLDINGS, INC.
     
  By: /s/ Thomas A. Tolworthy
    Thomas A. Tolworthy
    President and Chief Executive Officer

 

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EXHIBIT INDEX 

 

 

Exhibit No. Description
   
Exhibit 10.45 Amendment No. 1 to Credit and Security Agreement and Limited Consent, dated as of February 4, 2015, by and among Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc. and TCC CM Subco II, Inc. and MidCap Funding X Trust.
   
Exhibit 10.46 First Amendment to Note and Warrant Purchase Agreement and Consent, dated as of February 4, 2015, by and between Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc., TCC CM Subco II, Inc. and JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.47 Warrant, dated February 4, 2015, issued by Twinlab Consolidated Holdings, Inc. to JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.48 Second Amendment to Note and Warrant Purchase Agreement and Consent, dated as of February 4, 2015, by and between Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc., TCC CM Subco II, Inc. and Penta Mezzanine SBIC Fund I, L.P.
   
Exhibit 10.49 Asset Purchase Agreement, dated as of February 4, 2015, by and among Nutricap Labs, LLC, Vitacap Labs, LLC, Canyon Marketing V, LLC, Canyon Marketing II, Inc., Canyon Marketing III, LLC and TCC CM Subco I, Inc.
   
Exhibit 10.50 Unsecured Promissory Note, dated February 6, 2015, in the amount of $2,500,000 made by TCC CM Subco I, Inc. payable to Nutricap Labs, LLC.
   
Exhibit 10.51 Unsecured Promissory Note, dated February 6, 2015, in the amount of $1,478,000 made by TCC CM Subco I, Inc. payable to Nutricap Labs, LLC.
   
Exhibit 10.52 Transition Services Agreement, dated February 6, 2015, by and between TCC CM Subco I, Inc., Nutricap Labs, LLC and Vitacap Labs, LLC.
   
Exhibit 10.53 Registration Rights Agreement, dated as of February 6, 2015, by and between Twinlab Consolidated Holdings, Inc. and 2014 Huntington Holdings, LLC.

  

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Exhibit 10.45

 

AMENDMENT NO. 1 TO CREDIT AND SECURITY AGREEMENT

AND LIMITED CONSENT

 

THIS AMENDMENT NO. 1 TO CREDIT AND SECURITY AGREEMENT AND LIMITED CONSENT (this “ Amendment ”) is made as of this 4 th day of February, 2015, by and among TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, TWINLAB CONSOLIDATION CORPORATION , a Delaware corporation, TWINLAB HOLDINGS, INC. , a Michigan corporation, ISI BRANDS INC. , a Michigan corporation, TWINLAB CORPORATION , a Delaware corporation, TCC CM SUBCO I, INC. , a Delaware corporation, and TCC CM SUBCO II, INC. , a Delaware corporation (each of the foregoing Persons being referred to herein individually as a “ Borrower ”, and collectively as “ Borrowers ”), and MIDCAP FUNDING X TRUST, a Delaware statutory trust, as successor-by-assignment from MidCap Financial Trust (as Agent for Lenders, “ Agent ”, and individually, as a Lender), and the other financial institutions or other entities from time to time parties to the Credit Agreement referenced below, each as a Lender.

 

RECITALS

 

A.            Pursuant to that certain Credit and Security Agreement dated as of January 22, 2015 by and among Borrowers, Agent and Lenders (as amended hereby and as it may be further amended, modified and restated from time to time, the “ Credit Agreement ”), Agent and Lenders agreed to make available to Borrowers a secured revolving credit facility in a principal amount of up to $15,000,000 from time to time (as amended, modified, supplemented, extended and restated from time to time, collectively, the “ Loans ”). Capitalized terms used but not otherwise defined in this Amendment shall have the meanings set forth in the Credit Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing, the terms and conditions set forth in this Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Agent, Lenders and Borrowers hereby agree as follows:

 

1.           Recitals. This Amendment shall constitute a Financing Document and the Recitals set forth above shall be construed as part of this Amendment as if set forth fully in the body of this Amendment.

 

2.           Limited Consent for Name Change of TCC CM Subco I, Inc. and TCC CM Subco II, Inc. At the request of and as an accommodation to Borrowers and subject to the strict compliance with the terms, conditions and requirements set forth herein (including, without limitation, satisfaction of each of the conditions set forth in Section 7 below), Agent and Lenders hereby consent to (i) the name change of TCC CM Subco I, Inc. to “NutraScience Labs, Inc.” and (ii) the name change of TCC CM Subco II, Inc. to “NutraScience Labs IP Corporation”, the documentation for which, including, but not limited to, the Articles of Amendment filed with the Delaware Secretary of State shall be delivered immediately to Agent upon filing. The limited consent set forth in this Section 2 is effective solely for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) except as expressly provided herein, be a consent to any amendment, waiver or modification of any term or condition of the Credit Agreement or of any other Financing Document; (b) prejudice any right that Agent or the Lenders have or may have in the future under or in connection with the Credit Agreement or any other Financing Document; (c) waive any Event of Default that exists as of the date hereof; or (d) establish a custom or course of dealing among any of the Credit Parties, on the one hand, or Agent or any Lender, on the other hand.

 

 
 

 

3.           Amendment to Credit Agreement.

 

(a)          Section 1.1 of the Credit Agreement is hereby amended to add the following defined terms in their alphabetical order:

 

Nutricap Seller First Note ” means the Unsecured Promissory Note in the principal amount of $2,500,000 to be issued by Subco I to Nutricap Labs, LLC, a New York limited liability company, in connection with the Target 2 Acquisition, the principal and interest repayment of which shall have a maturity of 60 days and bear interest at 6% per annum, a copy of which shall be provided to the Agent promptly, and in any case within one business day, of execution.

 

Nutricap Seller Second Note ” means the Unsecured Promissory Note in the principal amount of $1,478,000 to be issued by Subco I to Nutricap Labs, LLC, a New York limited liability company, in connection with the Target 2 Acquisition, the principal and interest repayment of which shall have a maturity of one year, payable in 12 equal monthly installments and bear interest at 3% per annum, a copy of which shall be provided to the Agent promptly, and in any case within one business day, of execution.

 

Nutricap Seller Notes ” shall mean, collectively, the Nutricap Seller First Note and Nutricap Seller Second Note.

 

(b)          The defined term “Permitted Debt” in Section 1.1 of the Credit Agreement is hereby amended and restated in its entirety as follows:

 

Permitted Debt ” means: (a) Borrowers’ and its Subsidiaries’ Debt to Agent and each Lender under this Agreement and the other Financing Documents; (b) Debt incurred as a result of endorsing negotiable instruments received in the Ordinary Course of Business; (c) purchase money Debt with respect to equipment, Debt listed on Schedule 5.1, and such other Debt (other than the Essex Lease) not to exceed $3,000,000 at any time (whether in the form of a loan or a Capital Lease) used solely to acquire equipment used in the Ordinary Course of Business and secured only by such equipment; (d) Debt existing on the date of this Agreement and described on Schedule 5.1 and any Refinancing Debt; (e) Debt in the form of insurance premiums financed through the applicable insurance company; (f) trade accounts payable arising and paid on a timely basis and in the Ordinary Course of Business; (g) Subordinated Debt, (h) the Essex Lease and (i) the Nutricap Seller Notes.

 

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4.           Confirmation of Representations and Warranties; Reaffirmation of Security Interest. Each Borrower hereby (a) confirms that all of the representations and warranties set forth in the Credit Agreement are true and correct with respect to such Borrower as of the date hereof, and (b) covenants to perform its respective obligations under the Credit Agreement. Each Borrower confirms and agrees that all security interests and Liens granted to Agent continue in full force and effect, and all Collateral remains free and clear of any Liens, other than those granted to Agent and Permitted Liens. Nothing herein is intended to impair or limit the validity, priority or extent of Agent’s security interests in and Liens on the Collateral.

 

5.           Enforceability. This Amendment constitutes the legal, valid and binding obligation of each Borrower, and is enforceable against each Borrowers in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.

 

6. Costs and Fees . Borrowers shall be responsible for the payment of all reasonable costs and fees of Agent’s counsel incurred in connection with the preparation of this Amendment and any related documents. If Agent or any Lender uses in-house counsel for any of these purposes, Borrowers further agree that the Obligations include reasonable charges for such work commensurate with the fees that would otherwise be charged by outside legal counsel selected by Agent or such Lender for the work performed. Borrowers hereby authorize Agent to deduct all of such fees set forth in this Section 6 from the proceeds of one or more Revolving Loans made under the Credit Agreement.

 

7. Conditions to Effectiveness. This Amendment shall become effective as of the date on which each of the following conditions has been satisfied (the “ Effective Date ”):

 

(a)          Borrowers shall have delivered to Agent this Amendment, duly executed by an authorized officer of each Borrower;

 

(b)          [Reserved.];

 

(c)          all representations and warranties of Borrowers contained herein shall be true and correct in all material respects as of the Effective Date (and such parties’ delivery of their respective signatures hereto shall be deemed to be its certification thereof);

 

(d)          [Reserved.];

 

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(e)          Agent shall have received from Borrowers of all of the fees owing pursuant to this Amendment and Agent’s reasonable out-of-pocket legal fees and expenses; and

 

(f)          Borrowers shall have delivered to Agent a fully executed copy of the Standstill Agreement attached hereto as Exhibit A, duly executed by an authorized officer of each of the parties thereto, including but not limited to NUTRICAP LABS, LLC, as junior lender.

 

8.           Release. Each Borrower, voluntarily, knowingly, unconditionally and irrevocably, with specific and express intent, for and on behalf of itself and all of its respective parents, subsidiaries, affiliates, members, managers, predecessors, successors, and assigns, and each of their respective current and former directors, officers, shareholders, agents, and employees (collectively, “ Releasing Parties ”), does hereby fully and completely release, acquit and forever discharge each Indemnitee of and from any and all actions, causes of action, suits, debts, disputes, damages, claims, obligations, liabilities, costs, expenses and demands of any kind whatsoever, at law or in equity, whether matured or unmatured, liquidated or unliquidated, vested or contingent, choate or inchoate, known or unknown that the Releasing Parties (or any of them) has against the Indemnitees (or any of them) that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event. “ Prior Related Event ” means any transaction, event, circumstance, action, failure to act, occurrence of any type or sort, whether known or unknown, which occurred, existed, was taken, was permitted or begun in accordance with, pursuant to or by virtue of (a) any of the terms of this Amendment or any other Financing Document, (b) any actions, transactions, matters or circumstances related hereto or thereto, (c) the conduct of the relationship between any Indemnitee and any Borrower, or (d) any other actions or inactions by any Indemnitee, all on or prior to the Effective Date. Each Borrower acknowledges that the foregoing release is a material inducement to Agent’s and Lender’s decision to enter into this Amendment and to agree to the modifications contemplated hereunder.

 

9.           No Waiver or Novation. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided in this Amendment, operate as a waiver of any right, power or remedy of Agent, nor constitute a waiver of any provision of the Credit Agreement, the Financing Documents or any other documents, instruments and agreements executed or delivered in connection with any of the foregoing. Nothing herein is intended or shall be construed as a waiver of any existing Defaults or Events of Default under the Credit Agreement or other Financing Documents or any of Agent’s rights and remedies in respect of such Defaults or Events of Default. This Amendment (together with any other document executed in connection herewith) is not intended to be, nor shall it be construed as, a novation of the Credit Agreement.

 

10. Affirmation. Except as specifically amended pursuant to the terms hereof, the Credit Agreement and all other Financing Documents (and all covenants, terms, conditions and agreements therein) shall remain in full force and effect, and are hereby ratified and confirmed in all respects by Borrowers. Each Borrower covenants and agrees to comply with all of the terms, covenants and conditions of the Credit Agreement (as amended hereby) and the Financing Documents, notwithstanding any prior course of conduct, waivers, releases or other actions or inactions on Agent’s or any Lender’s part which might otherwise constitute or be construed as a waiver of or amendment to such terms, covenants and conditions.

 

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11.          [Reserved.]

 

12.          Miscellaneous.

 

(a)           Reference to the Effect on the Credit Agreement. Upon the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,” or words of similar import shall mean and be a reference to the Credit Agreement, as amended by this Amendment. Except as specifically amended above, the Credit Agreement, and all other Financing Documents (and all covenants, terms, conditions and agreements therein), shall remain in full force and effect, and are hereby ratified and confirmed in all respects by Borrowers.

 

(b)           Incorporation of Credit Agreement Provisions. The provisions contained in Section 11.6 (Indemnification), Section 12.8 (Governing Law; Submission to Jurisdiction) and Section 12.9 (Waiver of Jury Trial) of the Credit Agreement are incorporated herein by reference to the same extent as if reproduced herein in their entirety.

 

(c)           Headings. Section headings in this Amendment are included for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

 

(d)           Counterparts. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Signatures by facsimile or by electronic mail delivery of an electronic version (e.g., .pdf or .tif file) of an executed signature page shall be treated as delivery of an original and shall bind the parties hereto. This Amendment constitutes the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.

 

[SIGNATURES APPEAR ON FOLLOWING PAGES]

 

5
 

 

( Signature Page to Amendment No. 1 to Credit and Security Agreement
and Limited Consent )

 

IN WITNESS WHEREOF , intending to be legally bound, and intending that this document constitute an agreement executed under seal, the undersigned have executed this Amendment under seal as of the day and year first hereinabove set forth.

 

AGENT: MIDCAP FUNDING X TRUST, a Delaware statutory trust, as successor-by-assignment from MidCap Financial Trust
   
  By: Apollo Capital Management, L.P.,
    its investment manager
   
  By: Apollo Capital Management GP, LLC,
 

its general partner

   
  By: /s/ Maurice Amsellem (SEAL)
  Name:  Maurice Amsellem
  Title:    Authorized Signatory

 

LENDER: MIDCAP FUNDING X TRUST, a Delaware statutory trust, as successor-by-assignment from MidCap Financial Trust
   
  By: Apollo Capital Management, L.P.,
    its investment manager
   
  By: Apollo Capital Management GP, LLC,
  its general partner
       
  By: /s/ Maurice Amsellem (SEAL)
  Name:  Maurice Amsellem
  Title:    Authorized Signatory

 

 
 

   

( Signature Page to Amendment No. 1 to Credit and Security Agreement

and Limited Consent )

 

BORROWERS:     TWINLAB CONSOLIDATION
      CORPORATION
       
      By: /s/ Thomas A. Tolworthy (Seal)
      Name: Thomas A. Tolworthy
      Title:   Chief Executive Officer and President

 

TWINLAB CONSOLIDATED HOLDINGS, INC.     TWINLAB HOLDINGS, INC.
     
By: /s/ Thomas A. Tolworthy (Seal)   By: /s/ Thomas A. Tolworthy (Seal)
Name:  Thomas A. Tolworthy   Name:  Thomas A. Tolworthy
Title:  Chief Executive Officer and President   Title:  Chief Executive Officer and President

 

TWINLAB CORPORATION   ISI BRANDS INC.
     
By: /s/ Thomas A. Tolworthy (Seal)   By: /s/ Thomas A. Tolworthy (Seal)
Name:  Thomas A. Tolworthy   Name:  Thomas A. Tolworthy
Title:  Chief Executive Officer and President   Title:  Chief Executive Officer and President

 

TCC CM SUBCO I, INC.   TCC CM SUBCO II, INC.
       
By: /s/ Thomas A. Tolworthy (Seal)   By: /s/ Thomas A. Tolworthy (Seal)
Name:  Thomas A. Tolworthy   Name:  Thomas A. Tolworthy
Title:  Chief Executive Officer and President   Title:  Chief Executive Officer and President
             

 

 

 

Exhibit 10.46

 

FIRST AMENDMENT TO NOTE AND WARRANT PURCHASE AGREEMENT

AND CONSENT

 

This FIRST AMENDMENT TO NOTE AND WARRANT AGREEMENT AND CONSENT (this “ Amendment ”), dated as of February 4, 2015, is made by and between TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation (“ Parent ”), TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation (“ TCC ”), TWINLAB HOLDINGS, INC., a Michigan corporation (“ Twinlab Holdings ”), ISI BRANDS INC., a Michigan corporation (“ ISI Brands ”), and TWINLAB CORPORATION, a Delaware corporation (“ Twinlab Corporation ”), TCC CM SUBCO I, INC., a Delaware corporation (“ Subco I ”), TCC CM SUBCO II, INC., a Delaware corporation (“ Subco II ”; and together with Parent, TCC, Twinlab Holdings, ISI Brands, Twinlab Corporation and Subco I, the “ Companies ” and each individually, a “ Company ”), and JL-BBNC MEZZ UTAH, LLC, an Alaska limited liability company (the “ Purchaser ”).

 

WHEREAS, the Companies and the Purchaser are parties to a Note and Warrant Purchase Agreement dated as of January 22, 2015 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Note Purchase Agreement ”); and

 

WHEREAS, (a) the Companies have requested that the Purchaser (i) consent to Subco I’s and Subco II’s name changes and (ii) amend certain provisions of the Note Purchase Agreement, and (b) the Purchaser has agreed to do so subject to the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the promises and the mutual agreements contained in this Amendment, and subject to the terms and conditions set forth herein, each party hereto hereby agrees as follows:

 

1.            Capitalized Terms . Capitalized terms used but not defined herein shall have the meanings set forth in the Note Purchase Agreement.

 

2.            Consent to Name Change . At the request of and as an accommodation to the Companies and subject to the strict compliance with the terms, conditions and requirements set forth herein (including, without limitation, satisfaction of each of the conditions set forth in Section 7 below), the Purchaser hereby consents to (i) the name change of Subco I to “NutraScience Labs, Inc.” and (ii) the name change of Subco II to “NutraScience Labs IP Corporation”, the documentation for which, including, but not limited to, the Articles of Amendment filed with the Delaware Secretary of State shall be delivered immediately to the Purchaser upon filing. The limited consent set forth in this Section 2 is effective solely for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) except as expressly provided herein, be a consent to any amendment, waiver or modification of any term or condition of the Note Purchase Agreement or of any other Transaction Document; (b) prejudice any right that the Purchaser have or may have in the future under or in connection with the Note Purchase Agreement or any other Transaction Document; (c) waive any Event of Default that exists as of the date hereof; or (d) establish a custom or course of dealing among any of the Companies, on the one hand, or the Purchaser on the other hand.

 

3.            Amendments to Note Purchase Agreement . Subject to the satisfaction of the conditions precedent set forth herein and in reliance on the representations, warranties and covenants of the Companies set forth herein and in the Note Purchase Agreement, each party hereto hereby agrees that the Note Purchase Agreement be, and it hereby is, amended as follows:

 

3.1.          Amendment and Restatement of Existing Defined Terms . Section 1 of the Note Purchase Agreement is hereby amended by amending and restating the following defined term as follows:

 

1
 

 

Warrant ” means the Warrant(s) to be issued by the Parent to the Purchaser at the Closing as set forth in Section 2.1(a)(ii) and the First Amendment Warrant.

 

3.2.          Addition of New Defined Terms . Section 1 of the Note Purchase Agreement is hereby amended by inserting the following new defined terms in the appropriate alphabetical order:

 

First Amendment ” means that certain First Amendment to Note and Warrant Purchase Agreement and Consent dated as of the First Amendment Date, between the Purchaser and the Companies.

 

First Amendment Date ” means February 4, 2015.

 

First Amendment Warrant ” has the meaning set forth in Section 4 of the First Amendment.

 

Nutricap Seller First Note ” means the Unsecured Promissory Note in the principal amount of $2,500,000 to be issued by Subco I to Nutricap Labs, LLC, a New York limited liability company, in connection with the Target 2 Acquisition, the principal and interest repayment of which shall have a maturity of 60 days and bear interest at 6% per annum, a copy of which shall be provided to the Purchaser promptly, and in any case within one business day, of execution.

 

Nutricap Seller Second Note ” means the Unsecured Promissory Note in the principal amount of $1,478,000 to be issued by Subco I to Nutricap Labs, LLC, a New York limited liability company, in connection with the Target 2 Acquisition, the principal and interest repayment of which shall have a maturity of one year, payable in 12 equal monthly installments and bear interest at 3% per annum, a copy of which shall be provided to the Purchaser promptly, and in any case within one business day, of execution.

 

Nutricap Seller Notes ” shall mean, collectively, the Nutricap Seller First Note and Nutricap Seller Second Note.

 

3.3.          Amendment to Section 6.7 . Section 6.7 of the Note Purchase Agreement is hereby amended by replacing Section 6.7 in its entirety with the following:

 

6.7            Indebtedness .

 

Create, incur, assume or suffer to exist any Indebtedness (exclusive of trade debt) except in respect of (a) the Indebtedness to Purchaser, (b) Permitted Senior Debt, (c) the Essex Debt, (d) the Little Harbor Debt, (e) Indebtedness, incurred at the time of, or within 20 days after, the acquisition of any fixed assets for the purpose of financing all or any part of the acquisition cost thereof, (f) the Utah Lease, (g) the Subordinated Debt; (h) Refinancing Indebtedness with respect to any of the foregoing; provided that any Refinancing Indebtedness that (i) is a renewal or extension of Permitted Senior Debt is renewed or extended in accordance with Section 15 of the Subordination Agreement, (ii) is a refinancing of Permitted Senior Debt is on terms reasonably satisfactory to the Purchaser, (iii) is a renewal or extension of the Subordinated Debt is renewed or extended in accordance with Section 15 of the JL-BBNC Subordination Agreement and (iv) is a refinancing of the Subordinated Debt is on terms reasonably satisfactory to the Purchaser; and (i) the Nutricap Seller Notes.”

 

3.4.          Amendment to Section 6.11 . Section 6.11 of the Note Purchase Agreement is hereby amended by replacing Section 6.11 in its entirety with the following:

 

2
 

 

6.11         Entering Into or Modification of Certain Agreements

 

The Companies and their Subsidiaries shall not amend, restate, supplement or otherwise modify (or permit or consent to any amendment, restatement, supplement or modification of) the terms of (i) its articles or certificate of incorporation, bylaws, any agreement between or among any of the holders of any Company’s or any of its Subsidiaries’ Equity Interests, any other organizational document, in each case which would be materially adverse to the Purchaser and (ii) any of the Transaction Documents, the documents and/or instruments evidencing the Permitted Senior Debt (unless permitted under the Subordination Agreement), the documents and/or instruments evidencing the Little Harbor Debt (unless permitted under the Little Harbor Subordination Agreement), or any of the leases for the Premises, in each case which would result in a Material Adverse Effect or (iii) the Nutricap Seller Notes.”

 

4.            First Amendment Warrant . A warrant in an amount equal to 434,809 shares of common stock of the Parent will be issued to the Purchaser in connection with the execution of the First Amendment (the “ First Amendment Warrant ”). The First Amendment Warrant shall be substantially in the form attached to the First Amendment as Exhibit A and shall be exercisable into the Equity Interest of the Parent as provided therein.

 

5.            Representations and Warranties; No Default . Each Company hereby represents and warrants that:

 

5.1.          The execution, delivery and performance by such Company of this Amendment (a) are within such Company’s corporate or similar powers and, at the time of execution hereof and have been duly authorized by all necessary corporate and similar action; (b) does not and will not result, in any breach or default under any other document, instrument or agreement to which a Company or any of its Subsidiaries is a party or to which a Company or any of its Subsidiaries, the Premises, the Collateral or any of the property of a Company or any of its Subsidiaries is subject or bound, except for such breaches or defaults which, individually or in the aggregate, have not had, and would not reasonably be expected to result in, a Material Adverse Effect and (c) will not violate any applicable law, statute, regulation, rule, ordinance, code, rule or order.

 

5.2.          This Amendment has been duly executed and delivered for the benefit of or on behalf of each Company and constitutes a legal, valid and binding obligation of each Company, enforceable against such Company in accordance with its terms except (a) as the same may be limited by bankruptcy, insolvency, reorganization moratorium or similar laws now or hereafter in effect relating to creditors rights generally and (b) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

 

5.3.          Both before and after giving effect to this Amendment on the date hereof (a) the representations and warranties of the Companies contained in Section 4.1 of the Note Purchase Agreement and the other Transaction Documents are true, correct and complete on and as of the date hereof as if made on such date (and to the extent any representations and warranties shall relate to the Effective Date or another earlier date, such representation and warranties shall be deemed to be amended to relate to the First Amendment Date), and (b) no Default or Event of Default has occurred and is continuing.

 

6.            Ratification and Confirmation . The Companies hereby ratify and confirm all of the terms and provisions of the Note Purchase Agreement and the other Transaction Documents and agree that all of such terms and provisions, as amended hereby, remain in full force and effect.

 

3
 

 

7.            Condition to Effectiveness . The effectiveness of this Amendment shall be subject to the satisfaction of the following conditions precedent:

 

7.1.          The Purchaser shall have received (i) a fully executed copy of this Amendment, (ii) a fully executed copy of the First Amendment Warrant, and (iii) fully executed amendments to the documents evidencing the Permitted Senior Debt, in each case in form and substance reasonably satisfactory to the Purchaser.

 

7.2.          All representations and warranties of the Companies contained herein shall be true and correct in all material respects as of the date hereof (and such parties’ delivery of their respective signatures hereto shall be deemed to be its certification thereof).

 

7.3.          The Purchaser shall have received all fees and other amounts due and payable to the Purchaser and its counsel in connection with this Amendment, and to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Companies under the Note Purchase Agreement.

 

7.4.          Borrowers shall have delivered to the Purchaser a fully executed copy of the Standstill Agreement attached hereto as Exhibit B, duly executed by an authorized officer of each of the parties thereto, including but not limited to Nutricap Labs, LLC, as junior lender.

 

8.            Miscellaneous .

 

8.1.          Except as otherwise expressly set forth herein, nothing herein shall be deemed to constitute an amendment, modification or waiver of any of the provisions of the Note Purchase Agreement, the Security Agreement or the other Transaction Documents, all of which remain in full force and effect as of the date hereof and are hereby ratified and confirmed. Each Company hereby acknowledges and agrees that nothing contained herein shall be deemed to entitle any Company to consent to, or a waiver, amendment or modification of, any of the terms, conditions, obligations, covenants or agreements contained in the Transaction Documents in similar or different circumstances. This Amendment (together with any other document executed in connection herewith) is not intended to be, nor shall it be construed as, a novation of the Note Purchase Agreement.

 

8.2.          This Amendment may be executed in any number of counterparts, each of which, when executed and delivered, shall be an original, but all counterparts shall together constitute one instrument. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or electronic mail shall be equally effective as delivery of a manually executed counterpart of this Amendment.

 

8.3.          This Amendment shall be governed by the laws of the State of New York without giving effect to any conflict of law principles and shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

 

8.4.           The Companies agree to pay all reasonable expenses, including legal fees and disbursements, incurred by Purchaser in connection with this Amendment and the transactions contemplated hereby.

 

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8.5.           Each Company, voluntarily, knowingly, unconditionally and irrevocably, with specific and express intent, for and on behalf of itself and all of its respective parents, subsidiaries, affiliates, members, managers, predecessors, successors, and assigns, and each of their respective current and former directors, officers, shareholders, agents, and employees (collectively, “ Releasing Parties ”), does hereby fully and completely release, acquit and forever discharge each Indemnified Party of and from any and all actions, causes of action, suits, debts, disputes, damages, claims, obligations, liabilities, costs, expenses and demands of any kind whatsoever, at law or in equity, whether matured or unmatured, liquidated or unliquidated, vested or contingent, choate or inchoate, known or unknown that the Releasing Parties (or any of them) has against the Indemnified Parties (or any of them) that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event. “ Prior Related Event ” means any transaction, event, circumstance, action, failure to act, occurrence of any type or sort, whether known or unknown, which occurred, existed, was taken, was permitted or begun in accordance with, pursuant to or by virtue of (a) any of the terms of this Amendment or any other Transaction Document, (b) any actions, transactions, matters or circumstances related hereto or thereto, (c) the conduct of the relationship between the Purchaser and any Company, or (d) any other actions or inactions by the Purchaser, all on or prior to the date hereof. Each Company acknowledges that the foregoing release is a material inducement to the Purchaser’s decision to enter into this Amendment and to agree to the modifications contemplated hereunder.

 

[Signature Pages Follow.]

 

5
 

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment which shall be deemed to be a sealed instrument as of the date first above written.

 

  COMPANIES
   
  TWINLAB CONSOLIDATED HOLDINGS, INC.
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  TWINLAB HOLDINGS, INC.
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  TWINLAB CONSOLIDATION CORPORATION
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  TWINLAB CORPORATION
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  ISI BRANDS, INC.
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

[Signature Page – First Amendment to JL-BBNC Note and Warrant Purchase Agreement and Consent]

 

 
 

 

  TCC CM SUBCO I, INC.
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  TCC CM SUBCO II, INC.
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

[Signature Page – First Amendment to JL-BBNC Note and Warrant Purchase Agreement and Consent]

 

 
 

 

  PURCHASER :
   
  JL-BBNC MEZZ UTAH, LLC, an Alaska limited liability company
     
  By: /s/ Jonathan B. Rubini
  Name: Jonathan B. Rubini
  Title: Managing Member

 

[Signature Page – First Amendment to JL-BBNC Note and Warrant Purchase Agreement and Consent]

 

 
 

 

 

EXHIBIT A

 

Form of First Amendment Warrant

 

[See attached]

 

 
 

 

 

EXHIBIT B

 

Standstill Agreement

 

[See attached]

 

 

 

Exhibit 10.47

 

THIS WARRANT AND THE EQUITY INTERESTS THAT MAY BE PURCHASED HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD OR TRANSFERRED, OR OFFERED FOR SALE OR TRANSFER, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION THEREUNDER OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF.

 

TWINLAB CONSOLIDATED HOLDINGS, INC.

 

No. 2015-4 February 4, 2015

 

Warrant

 

This Warrant (the " Warrant ") certifies that, for value received, JL-BBNC MEZZ UTAH, LLC, an Alaska limited liability company , and its permitted transferees, successors and assigns (the " Holder "), is entitled to purchase from TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation (the " Company "), 434,809 shares of common stock of the Company (subject to any adjustments pursuant to Section 3.3) issuable upon the full exercise of this Warrant at the purchase price of $1.00 per share (the " Exercise Price "), at any time prior to 5:00 P.M. on February 13, 2020 (the " Expiration Date ").

 

ARTICLE I

DEFINITIONS

 

SECTION 1.1 Definitions . As used in this Warrant, the following terms shall have the following meanings:

 

" Applicable Law " means all provisions of laws, statutes, ordinances, rules, regulations, permits, certificates or orders of any Governmental Authority applicable to the Person in question or any of its assets or property, and all judgments, injunctions, orders and decrees of all courts and arbitrators in proceedings or actions in which the Person in question is a party or by which any of its assets or properties are bound.

 

" Assignment Form " shall mean the assignment form attached as Annex 2 hereto.

 

" Affiliate " or " Affiliated " means, as applied to (i) any Person, directly or indirectly, in which such Person holds, beneficially or of record, ten percent (10%) or more of the equity of voting securities; (ii) any Person that holds, of record or beneficially, ten percent (10%) or more of the equity or voting securities of such Person; (iii) any director, officer, partner or individual holding a similar position in respect of such Person; (iv) as to any natural Person, any Person related by blood, marriage or adoption and any Person owned by such Persons, including any spouse, parent, grandparent, aunt, uncle, child, grandchild, sibling, cousin or in-law of such Person; or (v) any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise.

 

 
 

 

" Business Day " means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close.

 

" Company " shall have the meaning set forth in the Preamble.

 

" Current Holder’s Equity Interest " means 434,809 shares of common stock of the Company issuable upon the full exercise of this Warrant, minus any Equity Interest previously issued pursuant to the exercise of this Warrant.

 

" Delivery Date " shall have the meaning given to such term in Section 3.2 .

 

" Equity Interest " shall mean the interest of (i) a shareholder in a corporation, (ii) a partner (whether general or limited) in a partnership (whether general, limited or limited liability), (iii) a member in a limited liability company, or (iv) any other Person having any other form of equity security or ownership interest in any Person.

 

" Exchange Act " shall mean the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.

 

" Exchange Form " shall mean the exchange form attached as Annex 3 hereto.

 

" Executive Officer " shall mean, with respect to the Company, its Chief Executive Officer, President, Chief Financial Officer or Chief Operating Officer.

 

" Exercise Form " shall mean the exercise form attached as Annex 1 hereto.

 

" Exercise Price " shall have the meaning set forth in the Preamble.

 

" Expiration Date " shall have the meaning set forth in the Preamble.

 

" GAAP " shall mean generally accepted accounting principles in the United States as of the relevant date in question, consistently applied.

 

" Governmental Authority " means any arbitrator or any governmental authority, agency, department, commission, bureau, board, instrumentality, court or quasi-governmental authority having jurisdiction or supervisory or regulatory authority over the Company.

 

" Holder " shall have the meaning set forth in the Preamble.

 

" Holder's Equity Interest " shall have the meaning given to such term in Section 3.3 .

 

" Person " shall mean any individual, corporation, partnership, limited liability company, trust, unincorporated organization, or any other form of entity.

 

2
 

 

" Qualified Assignment " shall mean any of the following: (a) an assignment to a transferee acquiring at least 25% of the Equity Interests subject to the Warrant (subject to adjustment for stock splits, stock dividends, recapitalizations and similar events); or (b) an assignment to an Affiliate of the Holder.

 

" Rights Agreement " shall have the meaning given to such term in Section 4.1 .

 

" Securities Act " shall mean the Securities Act of 1933, as amended from time to time, and any successor statute.

 

" Subsidiary " shall mean a corporation or other entity any of whose Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the directors of such corporation, or other Persons performing similar functions for such entity, are owned, directly or indirectly, by such Person.

 

" Taxes " means all taxes, charges, fees, levies or other assessments, however denominated and whether imposed by a taxing authority within or without the United States, including all net income, gross income, gross receipts, sales, use, ad valorem, goods and services, capital, transfer, franchise, profits, license, withholding, payroll, employment, employer health, excise, estimated, severance, stamp, occupation, property or other taxes, custom duties, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any taxing authority whether arising before, on or after the date hereof.

 

" Warrant " or " Warrants " shall mean this Warrant.

 

" Warrant Register " shall have the meaning given to such term in Section 2.1.

 

SECTION 1.2 Interpretation . Unless the context of this Warrant clearly requires otherwise, the masculine, feminine or neuter gender and the singular or plural number shall be deemed to include the others whenever the context so requires. Accounting terms used but not otherwise defined herein have the meanings given to them under GAAP. The terms "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." The words "hereof," "herein," "hereunder," and similar terms in this Warrant refer to this Warrant as a whole and not to any particular provision of this Warrant. References to "Articles", "Sections," "Subsections," "Exhibits," "Preamble," "Annexes," and "Schedules" are to articles, sections, subsections, exhibits, preamble, annexes and schedules, respectively, of this Warrant, unless otherwise specifically provided. References to "days" and "months" refer to calendar days and calendar months unless otherwise expressly designated (i.e., business days or particular 30-day periods). The captions contained herein are for convenience only and shall not control or affect the meaning or construction of any provision of this Warrant. The term "dollars" or "$" means United States Dollars.

 

3
 

 

ARTICLE II

FORM; EXCHANGE FOR WARRANTS; TRANSFER; TAXES

 

SECTION 2.1 Warrant Register . Each Warrant issued, exchanged or transferred shall be registered in a warrant register (the " Warrant Register "). The Warrant Register shall set forth the number of each Warrant, the name and address of the holder thereof, and the Current Holder’s Equity Interest for which the Warrant is then exercisable. The Warrant Register will be maintained by the Company and will be available for inspection by the Holder at the principal office of the Company or such other location as the Company may designate to the Holder in the manner set forth in Section 5.1 hereof. The Company shall be entitled to treat the Holder as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other Person.

 

SECTION 2.2 Exchange of Warrants for Warrants .

 

(a)     The Holder may exchange this Warrant for another Warrant or Warrants of like kind and tenor representing in the aggregate the right to purchase the same Current Holder’s Equity Interest which could be purchased pursuant to the Warrant being so exchanged. In order to effect an exchange permitted by this Section 2.2 , the Holder shall deliver to the Company such Warrant accompanied by an Exchange Form in the form attached hereto as Annex 3 signed by the Holder thereof specifying the number and denominations of Warrants to be issued in such exchange and the names in which such Warrants are to be issued. Within ten (10) Business Days of receipt of such a request, the Company shall issue, register and deliver to the Holder thereof each Warrant to be issued in such exchange.

 

(b)     Upon receipt of evidence reasonably satisfactory to the Company (an affidavit of the Holder, including indemnification reasonably acceptable to the Company) of the ownership and the loss, theft, destruction or mutilation of any Warrant or, in the case of any such mutilation, upon surrender of such Warrant, the Company shall (at its expense) execute and deliver in lieu of such Warrant a new Warrant of like kind and tenor representing the same rights represented by and dated the date of such lost, stolen, destroyed or mutilated Warrant. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by any Person.

 

(c)     The Company shall pay all Taxes (other than any applicable income or similar Taxes payable by a Holder of a Warrant) attributable to an exchange of a Warrant pursuant to this Section 2.2 ; provided, however , that the Company shall not be required to pay any Tax which may be payable in respect of any transfer involved in the issuance of any Warrant in a name other than that of the Holder of the Warrant being exchanged.

 

4
 

 

SECTION 2.3 Transfer of Warrant .

 

(a)     Subject to Section 2.3(c) hereof, each Warrant and the rights thereunder may be transferred by the Holder thereof, in whole or in part, by delivering to the Company such Warrant accompanied by a properly completed Assignment Form in the form of Annex 2 . Within ten (10) Business Days of receipt of such Assignment Form the Company shall issue, register and deliver to the new Holder, subject to Section 2.3(c ) hereof a new Warrant or Warrants of like kind and tenor representing in the aggregate the right to purchase the same Current Holder’s Equity Interest which could be purchased pursuant to the Warrant being transferred. In all cases of transfer by an attorney, the original power of attorney, duly approved, or a copy thereof, duly certified, shall be deposited and remain with the Company. In case of a transfer by executors, administrators, guardians or other legal representatives, duly authenticated evidence of their authority shall be produced and may be required to be deposited and remain with the Company in its discretion.

 

(b)     Each Warrant issued in accordance with this Section 2.3 shall bear the restrictive legend set forth on the face of this Warrant, unless the Holder or transferee thereof supplies to the Company an opinion of counsel, reasonably satisfactory to the Company, that the restrictions described in such legend are no longer applicable to such Warrant.

 

(c)     The transfer of Warrants and any Equity Interest purchased thereunder shall be permitted, so long as such transfer is pursuant to a transaction that complies with, or is exempt from, the provisions of the Securities Act, and the Company may require an opinion of counsel in form and substance reasonably satisfactory to it to such effect prior to effecting any transfer of Warrants or any Equity Interest purchased thereunder.

 

ARTICLE III

EXERCISE OF WARRANT; EXCHANGE FOR EQUITY INTEREST

 

SECTION 3.1 Exercise of Warrants . On any Business Day before the Expiration Date, the Holder may exercise this Warrant, in whole or in part, by delivering to the Company this Warrant accompanied by a properly completed Exercise Form in the form of Annex 1 and a check in an aggregate amount equal to the applicable Exercise Price.

 

SECTION 3.2 Issuance of Equity Interest .

 

(a)     The Company represents and warrants that the authorized Equity Interest of the Company consists solely of (i) 5,000,000,000 shares of common stock, par value $0.001 per share, of which only 220,000,000 common shares have been issued as of the date hereof and (ii) 500,000,000 shares of preferred stock, of which no preferred shares have been issued as of the date hereof. The shares of common stock of the Company issued and outstanding as of the date hereof are duly authorized, validly issued, fully paid and non-assessable. The delivery to the Holder of certificates representing the Equity Interest that the Holder purchases pursuant to the exercise of this Warrant shall grant to the Holder good and valid title to the Equity Interest represented by such certificate, free and clear of any and all liens, pledges, security interests, charges or encumbrances of any kind or nature or any option, warrant or trust having the practical effect of any of the foregoing.

 

5
 

 

(b)     Immediately upon the exercise of this Warrant in accordance with Section 3.1 , the Company (the " Delivery Date ") shall issue the Equity Interest that the Holder has purchased pursuant to such exercise, deliver to the Holder the certificates representing such Equity Interest and reflect the issuance of such Equity Interest, which Equity Interest shall be duly authorized, validly issued, outstanding, fully paid and non-assessable, in the Company’s shareholder records (maintained by the Company or its duly appointed transfer agent), whereupon the Holder shall be deemed for all purposes, effective as of the Delivery Date, to be a holder of record and beneficial owner of the Equity Interest that it has purchased pursuant to such exercise.

 

(c)     If a Holder shall exercise this Warrant for less than all of the Equity Interest which could be purchased or received hereunder, the Company shall issue to the Holder, within five (5) Business Days of the Delivery Date, a new Warrant of like kind and tenor to this Warrant evidencing the right to purchase the remaining Equity Interest represented by the Warrant. This Warrant shall be cancelled upon surrender thereof pursuant to Section 3.1 .

 

(d)     The Company shall pay all Taxes (other than any applicable income or similar Taxes payable by a Holder of a Warrant) attributable to the initial issuance of any Equity Interest upon the exercise or exchange of this Warrant or any successor Warrant; provided , however , that the Company shall not be required to pay any Tax which may be payable in respect of any transfer involved in the issuance of a successor to this Warrant in a name other than that of the Holder of the Warrant being exercised or exchanged.

 

(e)     Except as set forth in any document that is un-redacted and publicly filed with the U.S. Securities and Exchange Commission, neither the Company nor its Subsidiaries has any liabilities or obligations of any nature (whether absolute, accrued, contingent or otherwise and whether due or to become due) which are not fully reflected or reserved against on the balance sheet as of June 30, 2014 in accordance with GAAP, except for liabilities and obligations incurred in the ordinary course of business and consistent with past practice since the date thereof.

 

SECTION 3.3 Adjustment of Holder’s Equity Interest . The Equity Interest issuable upon exercise of this Warrant (such Equity Interest is referred to herein as the " Holder's Equity Interest ") shall be subject to adjustment from time to time in accordance with this Section 3.3 .

 

SECTION 3.3.1  Issuance of Additional Equity Interest; Capital Reorganization or Capital Reclassifications . If, at any time after the date hereof, the Equity Interests of the Company shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation, whether through reorganization, recapitalization, stock split-up, combination of shares, merger or consolidation (including, without limitation, any subdivision or combination of Equity Interest), then in each case the Company shall cause effective provision to be made so that this Warrant shall, effective as of the effective date of such event retroactive to the record date, if any, of such event, be exercisable or exchangeable for the kind and number of equity securities, cash or other property to which a holder of the Equity Interest deliverable upon exercise or exchange of this Warrant would have been entitled upon such event and any such provision shall include adjustments in respect of such securities or other property that shall be equivalent to the adjustments provided for in this Warrant with respect to such Warrant.

 

6
 

 

SECTION 3.3.2  Consolidations and Mergers; Dissolution .

 

(a)     If, at any time after the date hereof, the Company shall consolidate with, merge with or into, or sell all or substantially all of its assets or property to, another Person, then the Company shall cause effective provision to be made so that each Warrant shall, effective as of the effective date of such event retroactive to the record date, if any, of such event, be exercisable or exchangeable for the kind and number of shares of stock, membership or other equity interests, other securities, cash or other property to which a holder of the Equity Interest deliverable upon exercise or exchange of such Warrant would have been entitled upon such event. The Company shall not consolidate or merge unless, prior to consummation, the successor corporation (if other than the Company) assumes the obligations of this paragraph by written instrument executed and mailed to the Holder at the Holder’s address set forth in Section 5.1. A sale or lease of all or substantially all the assets of the Company for a consideration (apart from the assumption of obligations) consisting primarily of securities is a consolidation or merger for the foregoing purposes.

 

(b)     In case a voluntary or involuntary dissolution, liquidation, or winding up of the Company (other than in connection with a consolidation or merger covered by subsection (a) above) is at any time proposed, the Company shall give at least 30 days’ prior written notice to the Holder. Such notice shall contain: (1) the date on which the transaction is to take place; (2) the record date (which shall be at least 30 days after the giving of the notice) as of which the Holder will be entitled to receive distributions as a result of the transaction; (3) a brief description of the transaction; (4) a brief description of the distributions to be made to the Holder as a result of the transaction and (5) an estimate of the fair value of the distributions. On the date of the transaction, if it actually occurs, this Warrant and all rights hereunder shall terminate.

 

SECTION 3.3.3  Notice; Calculations; Etc . Whenever the Equity Interest issuable hereunder shall be adjusted as provided in this Section 3.3 , the Company shall provide to the Holder a statement, signed by an Executive Officer, describing in detail the facts requiring such adjustment and setting forth a calculation of the Equity Interest applicable to each Warrant after giving effect to such adjustment. All calculations under this Section 3.3 shall be made to the nearest one hundredth of a cent or to the nearest one-tenth of a unit, as the case may be.

 

ARTICLE IV

CERTAIN OTHER RIGHTS

 

SECTION 4.1 Registration Rights.

 

(a)     At any time at which this Warrant or the Equity Interest underlying the same remains outstanding, upon the request of the Holder, the Company will enter into a registration rights agreement with Holder (the " Rights Agreement "). Such Rights Agreement shall provide that beginning October 1, 2015, if the Company is eligible for the use of a registration statement on Form S-3, then the Holder shall have the right to request an initial registration and thereafter on a quarterly basis after such initial registration shall have been declared effective by the U.S. Securities and Exchange Commission, registration of its Equity Interests on Form S-3 or any similar short-form registration (each, a " Demand Registration "). The Rights Agreement will provide that each request for a Demand Registration shall specify the approximate number of Equity Interests requested to be registered and that the Company shall cause a registration statement on Form S-3 (or any successor form) to be filed within twenty (20) days after the date on which the initial request is given and shall use its reasonable best efforts to cause such Registration Statement to be declared effective by the Commission as soon as practicable thereafter. The Rights Agreement will provide that the Company may postpone for up to ninety (90) days the filing or effectiveness of a registration statement for a Demand Registration if the Company determines in its reasonable good faith judgment that such Demand Registration would (i) materially interfere with a significant acquisition, corporate reorganization or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act. The Rights Agreement shall contain such other terms and conditions applicable to the Holder no less favorable to the Holder than registration rights made available to any other holder of any Equity Interest or other equity security of the Company.

 

7
 

 

(b)     The rights to cause the Company to register Equity Interests pursuant hereto may be assigned (but only with all related obligations) by the Holder in a Qualified Assignment; provided, that, (i) the Company is, upon or within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the securities with respect to which such registration rights are being assigned, (ii) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Warrant, (iii) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by transferee or assignee is restricted under the Securities Act, and (iv) such assignment shall be effective only if immediately following such transfer such Equity Interests continue to be Equity Interests of the Company.

 

ARTICLE V

MISCELLANEOUS

 

SECTION 5.1 Notices . Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and shall be made by electronic mail, personal service, facsimile or reputable courier service:

 

(a)          If to the Company, to:

 

TWINLAB CONSOLIDATED CORPORATION

600 East Quality Drive

American Fork, UT 84003

Attention: Mark Jaggi, Chief Financial Officer

Facsimile: (801) 763-0789

e-mail: MJaggi@twinlab.com

 

and

 

8
 

 

TWINLAB CONSOLIDATED CORPORATION

632 Broadway, Suite 201

New York, NY 10012

Attention: Richard Neuwirth, Chief Legal Officer

Facsimile: (212) 260-1853

e-mail: MJaggi@twinlab.com

with a copy to: RNeuwirth@twinlab.com

 

with a copy to:

 

VARNUM LLP

Bridgewater Place, P.O. Box 352

Grand Rapids, MI 49501

Attention: Mary Kay Shaver

Facsimile: (616) 336-7000

e-mail: mkshaver@varnumlaw.com

 

(b)          If to the Holder, to:

 

JL-BBNC MEZZ UTAH, LLC

P.O. Box 202845

Anchorage, AK 99520-2845

Attention: Jonathan B. Rubini

Facsimile: (907) 279-8066

e-mail: jrubini@jlproperties.com

 

with a copy to:

 

LANDYE BENNETT BLUMSTEIN LLP

701 West 8th Avenue, Suite 1200

Anchorage, Alaska 99501

Attention: Joshua D. Hodes, Esq.

e-mail: joshh@lbblawyers.com

 

Unless otherwise specifically provided herein, any notice or other communication shall be deemed to have been given when delivered in person or by courier service, upon receipt of electronic mail or upon receipt of facsimile.

 

SECTION 5.2 No Voting Rights: Limitations of Liability . This Warrant shall not entitle the holder thereof to any voting rights or, except as otherwise provided or referenced herein, other rights of an equity owner of the Company. No provision hereof, in the absence of affirmative action by the Holder to purchase its Equity Interest, and no enumeration herein of the rights or privileges of the Holder shall give rise to any liability of the Holder for the Exercise Price of the Equity Interest acquirable by exercise hereunder or as a stockholder of the Company.

 

SECTION 5.3 Amendments and Waivers . Any provision of this Warrant may be amended or waived, but only pursuant to a written agreement signed by the Company and the Holder.

 

9
 

 

SECTION 5.4 Severability . If any provision of this Warrant shall be held to be invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any way affect or render invalid or unenforceable any other provision of this Agreement, and such provision shall be deemed to be restated to reflect the parties' original intentions as nearly as possible in accordance with Applicable Law(s).

 

SECTION 5.5 Specific Performance . The Holder shall have the right to specific performance by the Company of the provisions of this Warrant, in addition to any other remedies it may have at law or in equity. The Company hereby irrevocably waives, to the extent that it may do so under Applicable Law, any defense based on the adequacy of a remedy at law which may be asserted as a bar to the remedy of specific performance in any action brought against the Company for specific performance of this Warrant by the Holder.

 

SECTION 5.6 Binding Effect . This Warrant shall be binding upon and inure to the benefit of the Company, the Holder and their respective successors and assigns.

 

SECTION 5.7 Counterparts . This Warrant may be executed in several counterparts, and/or by the execution of counterpart signature pages that may be attached to one or more counterparts of this Warrant, and all so executed shall constitute one agreement binding on all of the parties hereto, notwithstanding that all of the parties hereto are not signatory to the original or the same counterpart. In addition, any counterpart signature page may be executed by any party wherever such party is located, and may be delivered by telephone facsimile or by electronic mail in PDF format, and any such transmitted signature pages may be attached to one or more counterparts of this Warrant, and such faxed or sent by electronic mail signature(s) shall have the same force and effect, and be as binding, as if original signatures had been executed and delivered in person.

 

SECTION 5.8 Entire Agreement . This Warrant, together with the other documents and instruments entered into by the parties thereto in connection therewith, constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersedes any prior agreements, written or oral, with respect thereto.

 

SECTION 5.9 Governing law . THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS RULES AND PRINCIPLES. THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSE OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS WARRANT, AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS WARRANT.

 

10
 

 

SECTION 5.10 Expenses . The Company will promptly (and in any event within thirty (30) days of receiving any statement or invoice therefor) pay all reasonable fees, expenses and costs relating hereto, including, but not limited to, (i) the cost of reproducing this Warrant, (ii) the fees and disbursements of counsel to the Holder in preparing this Warrant, (iii) all transfer, stamp, documentary or other similar Taxes, assessments or charges levied by any governmental or revenue authority in respect hereof or any other document referred to herein, (iv) fees and expenses (including, without limitation, reasonable attorneys' fees) incurred in respect of the enforcement by the Holder of the rights granted to the Holder under this Warrant, and (v) the expenses relating to the consideration, negotiation, preparation or execution of any amendments, waivers or consents requested by the Company pursuant to the provisions hereof, whether or not any such amendments, waivers or consents are executed.

 

SECTION 5.11 Attorneys' Fees . In any action or proceeding brought by a party to enforce any provision of this Warrant, the prevailing party shall be entitled to recover the reasonable costs and expenses incurred by it or him in connection therewith (including reasonable attorneys’ and paralegals’ fees and costs incurred before and at any trial or arbitration and at all appellate levels), as well as all other relief granted or awarded in such action or other proceeding.

 

SECTION 5.12 Filings . The Company shall, at its own expense, promptly execute and deliver, or cause to be executed and delivered, to the Holder all applications, certificates, instruments and all other documents and papers that the Holder may reasonably request in connection with the obtaining of any consent, approval, qualification, or authorization of any Federal, provincial, state or local government (or any agency or commission thereof) necessary or appropriate in connection with, or for the effective exercise of, the Warrant (and/or any successor Warrant(s) hereto).

 

SECTION 5.13 Other Transactions . Nothing contained herein shall preclude the Holder from engaging in any transaction, in addition to those contemplated by this Warrant with the Company or any of its Affiliates in which the Company or such Affiliate is not restricted hereby from engaging with any other Person.

 

SECTION 5.14 Waiver of Jury Trial . THE HOLDER AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS WARRANT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE HOLDER OR THE COMPANY. THE COMPANY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE HOLDER ENTERING INTO THIS WARRANT.

 

11
 

 

SECTION 5.15 Headings . Section titles and captions contained in this Warrant are inserted only as a matter of convenience and for reference. The titles and captions in no way define, limit, extend or describe the scope of this Warrant or the intent of any provision hereof.

 

SECTION 5.16 No Third-Party Beneficiaries . This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

 

[Remainder of page intentionally left blank; signatures on following page]

 

12
 

 

IN WITNESS WHEREOF, the undersigned has caused this Warrant to be duly executed and delivered by an authorized officer, all as of the date and year first above written.

 

 

TWINLAB CONSOLIDATED HOLDINGS, INC.,

a Nevada corporation

 

  By:  /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title:   Chief Executive Officer and President

 

Signature Page To JL-BBNC Warrant 2015-4

 

13
 

 

ACKNOWLEDGED AND AGREED:

 

JL-BBNC MEZZ UTAH, LLC,

An Alaska limited liability company

 

By: /s/ Jonathan B. Rubini  
Name: Jonathan B. Rubini
Title: Managing Member

 

Signature Page To JL-BBNC Warrant 2015-4

 

14
 

 

ANNEX 1

 

ELECTION TO EXERCISE FORM

 

(To Be Executed By the Holder of This Warrant

 

In Order to Exercise This Warrant)

 

The undersigned hereby irrevocably elects to exercise the right covered by this Warrant to purchase ____________________ of the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, according to the conditions hereof and herewith makes payment in full of the Exercise Price with respect to such Equity Interest.

 

     
  Signature  
     
     
     
     
  Address  

 

Dated:    

 

 
 

 

ANNEX 2

 

ASSIGNMENT FORM

 

(To Be Executed By the Holder of This Warrant

 

In Order to Assign This Warrant)

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _____________________________ this Warrant and all rights evidenced thereby and does irrevocably constitute and appoint ___________________, attorney, to transfer the said Warrant on the books of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation.

 

     
  Signature  
     
     
     
     
  Address  

 

Dated:    

 

 
 

 

ANNEX 3

 

EXCHANGE FORM

 

(To Be Executed By the Holder of This Warrant

 

In Order to Exchange and Assign This Warrant)

 

The undersigned hereby irrevocably elects to exchange this Warrant to purchase ________________, of the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, for ___________ Warrants to purchase the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, set forth below to the Persons named and hereby sells, assigns and transfers unto such Persons that portion of this Warrant represented by such new Warrants and all rights evidenced thereby and does irrevocably constitute and appoint ____________________, attorney, to exchange and transfer this Warrant as aforesaid on the books of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation.

 

Equity Interest   Assignee
     
     
     
     
     
     
    Signature

 

   
   
  Address

 

FOR USE BY THE COMPANY ONLY:

 

This Warrant No. __ cancelled (or transferred or exchanged) this ________ day of _____________, ____________ of the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, issued therefor in the name of ____ ___________ Warrant No. ___ for ________, of the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, in the name of _________________________.

 

Dated:    

 

 

 

Exhibit 10.48

 

SECOND AMENDMENT TO NOTE AND WARRANT PURCHASE AGREEMENT AND CONSENT

 

This SECOND AMENDMENT TO NOTE AND WARRANT AGREEMENT AND CONSENT (this “ Amendment ”), dated as of February 4, 2015, is made by and between TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation (“ Parent ”), TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation (“ TCC ”), TWINLAB HOLDINGS, INC., a Michigan corporation (“ Twinlab Holdings ”), ISI BRANDS INC., a Michigan corporation (“ ISI Brands ”), and TWINLAB CORPORATION, a Delaware corporation (“ Twinlab Corporation ”), TCC CM SUBCO I, INC., a Delaware corporation (“ Subco I ”), TCC CM SUBCO II, INC., a Delaware corporation (“ Subco II ”; and together with Parent, TCC, Twinlab Holdings, ISI Brands, Twinlab Corporation and Subco I, the “ Companies ” and each individually, a “ Company ”), and PENTA MEZZANINE SBIC FUND I, L.P., a Delaware limited partnership (the “ Purchaser ”).

 

WHEREAS, the Companies and the Purchaser are parties to a Note and Warrant Purchase Agreement dated as of November 13, 2014, as amended by that certain First Amendment to Note and Warrant Purchase Agreement, Consent and Joinder dated as of January 22, 2015 (as the same may be further amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Note Purchase Agreement ”); and

 

WHEREAS, (a) the Companies have requested that the Purchaser (i) consent to Subco I’s and Subco II’s name changes and (ii) amend certain provisions of the Note Purchase Agreement, and (b) the Purchaser has agreed to do so subject to the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the promises and the mutual agreements contained in this Amendment, and subject to the terms and conditions set forth herein, each party hereto hereby agrees as follows:

 

1.            Capitalized Terms . Capitalized terms used but not defined herein shall have the meanings set forth in the Note Purchase Agreement.

 

2.            Consent to Name Change . At the request of and as an accommodation to the Companies and subject to the strict compliance with the terms, conditions and requirements set forth herein (including, without limitation, satisfaction of each of the conditions set forth in Section 7 below), the Purchaser hereby consents to (i) the name change of Subco I to “NutraScience Labs, Inc.” and (ii) the name change of Subco II to “NutraScience Labs IP Corporation”, the documentation for which, including, but not limited to, the Articles of Amendment filed with the Delaware Secretary of State shall be delivered immediately to the Purchaser upon filing. The limited consent set forth in this Section 2 is effective solely for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) except as expressly provided herein, be a consent to any amendment, waiver or modification of any term or condition of the Note Purchase Agreement or of any other Transaction Document; (b) prejudice any right that the Purchaser have or may have in the future under or in connection with the Note Purchase Agreement or any other Transaction Document; (c) waive any Event of Default that exists as of the date hereof; or (d) establish a custom or course of dealing among any of the Companies, on the one hand, or the Purchaser on the other hand.

 

3.            Amendments to Note Purchase Agreement . Subject to the satisfaction of the conditions precedent set forth herein and in reliance on the representations, warranties and covenants of the Companies set forth herein and in the Note Purchase Agreement, each party hereto hereby agrees that the Note Purchase Agreement be, and it hereby is, amended as follows:

 

1
 

 

3.1.          Addition of New Defined Terms . Section 1 of the Note Purchase Agreement is hereby amended by inserting the following new defined terms in the appropriate alphabetical order:

 

Nutricap Seller First Note ” means the Unsecured Promissory Note in the principal amount of $2,500,000 to be issued by Subco I to Nutricap Labs, LLC, a New York limited liability company, in connection with the Target 2 Acquisition, the principal and interest repayment of which shall have a maturity of 60 days and bear interest at 6% per annum, a copy of which shall be provided to the Purchaser promptly, and in any case within one business day, of execution.

 

Nutricap Seller Second Note ” means the Unsecured Promissory Note in the principal amount of $1,478,000 to be issued by Subco I to Nutricap Labs, LLC, a New York limited liability company, in connection with the Target 2 Acquisition, the principal and interest repayment of which shall have a maturity of one year, payable in 12 equal monthly installments and bear interest at 3% per annum, a copy of which shall be provided to the Purchaser promptly, and in any case within one business day, of execution.

 

Nutricap Seller Notes ” shall mean, collectively, the Nutricap Seller First Note and Nutricap Seller Second Note.

 

3.2.          Amendment to Section 6.7 . Section 6.7 of the Note Purchase Agreement is hereby amended by replacing Section 6.7 in its entirety with the following:

 

6.7            Indebtedness .

 

Create, incur, assume or suffer to exist any Indebtedness (exclusive of trade debt) except in respect of (a) the Indebtedness to Purchaser, (b) Permitted Senior Debt, (c) the Essex Debt, (d) the Little Harbor Debt, (e) Indebtedness, incurred at the time of, or within 20 days after, the acquisition of any fixed assets for the purpose of financing all or any part of the acquisition cost thereof, (f) the Utah Lease, (g) the Subordinated Debt; (h) Refinancing Indebtedness with respect to any of the foregoing; provided that any Refinancing Indebtedness that (i) is a renewal or extension of Permitted Senior Debt is renewed or extended in accordance with Section 15 of the Subordination Agreement, (ii) is a refinancing of Permitted Senior Debt is on terms reasonably satisfactory to the Purchaser, (iii) is a renewal or extension of the Subordinated Debt is renewed or extended in accordance with Section 15 of the JL-BBNC Subordination Agreement and (iv) is a refinancing of the Subordinated Debt is on terms reasonably satisfactory to the Purchaser; and (i) the Nutricap Seller Notes.”

 

3.3.          Amendment to Section 6.11 . Section 6.11 of the Note Purchase Agreement is hereby amended by replacing Section 6.11 in its entirety with the following:

 

6.11         Entering Into or Modification of Certain Agreements

 

The Companies and their Subsidiaries shall not amend, restate, supplement or otherwise modify (or permit or consent to any amendment, restatement, supplement or modification of) the terms of (i) its articles or certificate of incorporation, bylaws, any agreement between or among any of the holders of any Company’s or any of its Subsidiaries’ Equity Interests, any other organizational document, in each case which would be materially adverse to the Purchaser and (ii) any of the Transaction Documents, the documents and/or instruments evidencing the Permitted Senior Debt (unless permitted under the Subordination Agreement), the documents and/or instruments evidencing the Little Harbor Debt (unless permitted under the Little Harbor Subordination Agreement), the Subordinated Loan Documents (unless permitted under the JL-BBNC Subordination Agreement) or any of the leases for the Premises, in each case which would result in a Material Adverse Effect or (iii) the Nutricap Seller Notes.”

 

2
 

 

4.            Deferred Draw Note and Deferred Warrant . The Purchaser hereby agrees that upon the date Subco I exercises its purchase option in connection with the Target 2 Acquisition (the “ Option Exercise Date ”), the Purchaser agrees to purchase the Deferred Draw Note and the Deferred Warrant on the date the Target 2 Acquisition is consummated; provided that (i) the Target 2 Acquisition is consummated within five (5) Business Days of the Option Exercise Date and (ii) the Target 2 Acquisition is consummated in accordance with the terms thereof (without any amendment, modification or waiver of any of the terms thereof that would be materially adverse to the Purchaser without the consent of the Purchaser).

 

5.             Representations and Warranties; No Default . Each Company hereby represents and warrants that:

 

5.1.         The execution, delivery and performance by such Company of this Amendment (a) are within such Company’s corporate or similar powers and, at the time of execution hereof and have been duly authorized by all necessary corporate and similar action; (b) does not and will not result, in any breach or default under any other document, instrument or agreement to which a Company or any of its Subsidiaries is a party or to which a Company or any of its Subsidiaries, the Premises, the Collateral or any of the property of a Company or any of its Subsidiaries is subject or bound, except for such breaches or defaults which, individually or in the aggregate, have not had, and would not reasonably be expected to result in, a Material Adverse Effect and (c) will not violate any applicable law, statute, regulation, rule, ordinance, code, rule or order.

 

5.2.         This Amendment has been duly executed and delivered for the benefit of or on behalf of each Company and constitutes a legal, valid and binding obligation of each Company, enforceable against such Company in accordance with its terms except (a) as the same may be limited by bankruptcy, insolvency, reorganization moratorium or similar laws now or hereafter in effect relating to creditors rights generally and (b) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

 

5.3.         Both before and after giving effect to this Amendment on the date hereof (a) the representations and warranties of the Companies contained in Section 4.1 of the Note Purchase Agreement and the other Transaction Documents are true, correct and complete on and as of the date hereof as if made on such date (and to the extent any representations and warranties shall relate to the Effective Date or another earlier date, such representation and warranties shall be deemed to be amended to relate to the First Amendment Date), and (b) no Default or Event of Default has occurred and is continuing.

 

6.             Ratification and Confirmation . The Companies hereby ratify and confirm all of the terms and provisions of the Note Purchase Agreement and the other Transaction Documents and agree that all of such terms and provisions, as amended hereby, remain in full force and effect.

 

7.             Condition to Effectiveness . The effectiveness of this Amendment shall be subject to the satisfaction of the following conditions precedent:

 

7.1.          The Purchaser shall have received (i) a fully executed copy of this Amendment, (ii) a fully executed amendment to the documents evidencing the Permitted Senior Debt, (iii) a fully executed amendment to the Subordinated Loan Agreement and (iv) a fully executed standstill agreement between Nutricap Labs, LLC, Subco I and the Purchaser, in each case in form and substance reasonably satisfactory to the Purchaser.

 

3
 

 

7.2.         All representations and warranties of the Companies contained herein shall be true and correct in all material respects as of the date hereof (and such parties’ delivery of their respective signatures hereto shall be deemed to be its certification thereof).

 

7.3.          The Purchaser shall have received all fees and other amounts due and payable to the Purchaser and its counsel in connection with this Amendment, and to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Companies under the Note Purchase Agreement.

 

8.             Miscellaneous .

 

8.1.         Except as otherwise expressly set forth herein, nothing herein shall be deemed to constitute an amendment, modification or waiver of any of the provisions of the Note Purchase Agreement, the Security Agreement or the other Transaction Documents, all of which remain in full force and effect as of the date hereof and are hereby ratified and confirmed. Each Company hereby acknowledges and agrees that nothing contained herein shall be deemed to entitle any Company to consent to, or a waiver, amendment or modification of, any of the terms, conditions, obligations, covenants or agreements contained in the Transaction Documents in similar or different circumstances. This Amendment (together with any other document executed in connection herewith) is not intended to be, nor shall it be construed as, a novation of the Note Purchase Agreement.

 

8.2.         This Amendment may be executed in any number of counterparts, each of which, when executed and delivered, shall be an original, but all counterparts shall together constitute one instrument. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or electronic mail shall be equally effective as delivery of a manually executed counterpart of this Amendment.

 

8.3.         This Amendment shall be governed by the laws of the State of New York without giving effect to any conflict of law principles and shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

 

8.4.          The Companies agree to pay all reasonable expenses, including legal fees and disbursements, incurred by Purchaser in connection with this Amendment and the transactions contemplated hereby.

 

8.5.          Each Company, voluntarily, knowingly, unconditionally and irrevocably, with specific and express intent, for and on behalf of itself and all of its respective parents, subsidiaries, affiliates, members, managers, predecessors, successors, and assigns, and each of their respective current and former directors, officers, shareholders, agents, and employees (collectively, “ Releasing Parties ”), does hereby fully and completely release, acquit and forever discharge each Indemnified Party of and from any and all actions, causes of action, suits, debts, disputes, damages, claims, obligations, liabilities, costs, expenses and demands of any kind whatsoever, at law or in equity, whether matured or unmatured, liquidated or unliquidated, vested or contingent, choate or inchoate, known or unknown that the Releasing Parties (or any of them) has against the Indemnified Parties (or any of them) that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event. “ Prior Related Event ” means any transaction, event, circumstance, action, failure to act, occurrence of any type or sort, whether known or unknown, which occurred, existed, was taken, was permitted or begun in accordance with, pursuant to or by virtue of (a) any of the terms of this Amendment or any other Transaction Document, (b) any actions, transactions, matters or circumstances related hereto or thereto, (c) the conduct of the relationship between the Purchaser and any Company, or (d) any other actions or inactions by the Purchaser, all on or prior to the date hereof. Each Company acknowledges that the foregoing release is a material inducement to the Purchaser’s decision to enter into this Amendment and to agree to the modifications contemplated hereunder.

 

[Signature Pages Follow.]

 

4
 

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment which shall be deemed to be a sealed instrument as of the date first above written.

 

  COMPANIES
   
  TWINLAB CONSOLIDATED HOLDINGS, INC.
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  TWINLAB HOLDINGS, INC.
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  TWINLAB CONSOLIDATION CORPORATION
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  TWINLAB CORPORATION
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  ISI BRANDS, INC.
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

[Signature Page – Second Amendment to Note and Warrant Purchase Agreement and Consent]

 

 
 

 

  TCC CM SUBCO I, INC.
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  TCC CM SUBCO II, INC.
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

[Signature Page – Second Amendment to Note and Warrant Purchase Agreement and Consent]

 

 
 

 

  PURCHASER :
   
  PENTA MEZZANINE SBIC FUND I, L.P.
   
  By: Penta Mezzanine SBIC Fund I GP, LLC, its General Partner
     
  By: /s/ Richard E. Mount
  Name: Richard E. Mount
  Title: Authorized Member

 

[Signature Page – Second Amendment to Note and Warrant Purchase Agreement and Consent]

 

 

 

Exhibit 10.49

 

EXECUTION COPY

 

ASSET PURCHASE AGREEMENT

 

by and among

 

NUTRICAP LABS, LLC,

 

VITACAP LABS, LLC,

 

CANYON MARKETING V, LLC,

 

CANYON MARKETING II, INC.,

 

CANYON MARKETING III, LLC

 

and

 

TCC CM Subco I, Inc.

 

dated as of

 

February 4, 2015

 

 
 

 

TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS 1
   
ARTICLE II PURCHASE AND SALE 9
     
Section 2.01 Purchase and Sale of Assets 9
     
Section 2.02 Excluded Assets 10
     
Section 2.03 Assumed Liabilities 11
     
Section 2.04 Excluded Liabilities 11
     
Section 2.05 Purchase Price 13
     
Section 2.06 Customer Deposits 13
     
Section 2.07 Allocation of Purchase Price 14
     
Section 2.08 Third Party Consents 14
     
ARTICLE III CLOSING 14
     
Section 3.01 Closing 14
     
Section 3.02 Closing Deliverables 15
     
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS AND MEMBERS 16
     
Section 4.01 Organization and Qualification of Seller 16
     
Section 4.02 Authority 16
     
Section 4.03 No Conflicts; Consents 17
     
Section 4.04 Financial Statements 17
     
Section 4.05 Undisclosed Liabilities 18
     
Section 4.06 Absence of Certain Changes 18
     
Section 4.07 Material Contracts 19
     
Section 4.08 Title to Purchased Assets and Licensed Intellectual Property 21
     
Section 4.09 [Intentionally Omitted 22
     
Section 4.10 [Intentionally Omitted 22
     
Section 4.11 Intellectual Property 22
     
Section 4.12 Inventory 23
     
Section 4.13 [Intentionally Omitted 23
     
Section 4.14 Customers and Suppliers; Orders 23
     
Section 4.15 Insurance 24

 

i
 

 

Section 4.16 Legal Proceedings; Governmental Orders 24
     
Section 4.17 Compliance with Laws 24
     
Section 4.18 Environmental Matters 25
     
Section 4.19 Employee Benefit Matters 26
     
Section 4.20 Employment Matters 28
     
Section 4.21 Taxes 29
     
Section 4.22 Permits 30
     
Section 4.23 Brokers 30
     
Section 4.24 Product Warranty 30
     
Section 4.25 Products Liability 31
     
Section 4.26 Affiliate Interests 31
     
Section 4.27 No Other Representations or Warranties 31
     
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER 32
     
Section 5.01 Organization of Buyer 32
     
Section 5.02 Authority of Buyer 32
     
Section 5.03 No Conflicts; Consents 32
     
Section 5.04 Brokers 33
     
Section 5.05 Legal Proceedings 33
     
Section 5.06 Independent Review 33
     
ARTICLE VI COVENANTS 34
     
Section 6.01 Conduct of Business Prior to the Closing 34
     
Section 6.02 Access to Information 35
     
Section 6.03 No Solicitation of Other Bids 35
     
Section 6.04 Notice of Certain Events; Supplemental Disclosure 36
     
Section 6.05 Employees and Employee Benefits 37
     
Section 6.06 Confidentiality 39
     
Section 6.07 Non-competition; Non-solicitation 39
     
Section 6.08 Governmental Approvals and Consents 41
     
Section 6.09 Books and Records 42
     
Section 6.10 Public Announcements 42
     
Section 6.11 Bulk Sales Laws 43
     
Section 6.12 Receivables 43
     
Section 6.13 Transfer Taxes 44

 

ii
 

 

Section 6.14 Transition of Customers; Novation Contracts 44
     
Section 6.15 Change of Names 44
     
Section 6.16 Public Filings 45
     
Section 6.17 Deposit of Escrow Amount 45
     
Section 6.18 Financing Covenants 45
     
Section 6.19 Further Assurances 46
     
ARTICLE VII CONDITIONS TO CLOSING 46
     
Section 7.01 Conditions to Obligations of All Parties 46
     
Section 7.02 Conditions to Obligations of Buyer 47
     
Section 7.03 Conditions to Obligations of Sellers 48
     
ARTICLE VIII INDEMNIFICATION 49
     
Section 8.01 Survival 49
     
Section 8.02 Indemnification By Sellers and Members 50
     
Section 8.03 Indemnification By Buyer 50
     
Section 8.04 Certain Limitations 51
     
Section 8.05 Indemnification Procedures 53
     
Section 8.06 Payments 55
     
Section 8.07 Valuation of Buyer Stock 56
     
Section 8.08 Tax Treatment of Indemnification Payments 56
     
Section 8.09 Effect of Investigation 56
     
Section 8.10 Exclusive Remedies 56
     
ARTICLE IX TERMINATION 56
     
Section 9.01 Termination 56
     
Section 9.02 Effect of Termination 57
     
ARTICLE X MISCELLANEOUS 57
     
Section 10.01 Expenses 57
     
Section 10.02 Notices 58
     
Section 10.03 Interpretation 59
     
Section 10.04 Headings 59
     
Section 10.05 Severability 59
     
Section 10.06 Entire Agreement 59
     
Section 10.07 Successors and Assigns 59
     
Section 10.08 No Third-party Beneficiaries 60

 

iii
 

 

Section 10.09 Amendment and Modification; Waiver 60
     
Section 10.10 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial 60
     
Section 10.11 Specific Performance 61
     
Section 10.12 Counterparts 61
     
Section 10.13 Effectiveness 61

 

iv
 

 

ASSET PURCHASE AGREEMENT

 

This Asset Purchase Agreement (this “ Agreement ”), dated as of February 4, 2015 and effective as of the Option Exercise Date (as defined herein), is entered into by and among NUTRICAP LABS, LLC, a New York limited liability company (“ Nutricap ”), VITACAP LABS, LLC, a New York limited liability company (“ Vitacap ” and with Nutricap, each being a “ Seller ” and together, the “ Sellers ”), CANYON MARKETING V, LLC, a Delaware limited liability company (“ Canyon V ”), CANYON MARKETING II, INC., a New York corporation, (“ Canyon II ”), CANYON MARKETING III, LLC, a Delaware limited liability company (“ Canyon III ”, and together with Canyon II and Canyon V, the “ Members ”) and TCC CM SUBCO I, INC., a Delaware corporation (“ Buyer ”).

 

RECITALS

 

WHEREAS , Sellers are engaged in the business of providing contract manufacturing services for health and wellness companies engaged in selling vitamins, minerals, and dietary supplements products, including custom formulas and private label products, and related label design, packaging and order fulfillment services for Customers of such contract manufacturing services (collectively, the “ Business ”);

 

WHEREAS , (a) Canyon V is the sole member of Nutricap and (b) Canyon II and Canyon III are the sole members of Vitacap, and in each case, such Members will derive substantial benefits, financial and otherwise, from the transactions contemplated by this Agreement;

 

WHEREAS , Sellers, Members and Buyer have entered into an Amended and Restated Call Option Agreement, dated as of December 20, 2014 (as amended from time to time, the “ Call Option Agreement ”) pursuant to which Buyer has an option (the “ Call Option ”) to purchase the Purchased Assets (as defined herein) in accordance with the terms set forth in this Agreement and the Call Option Agreement; and

 

WHEREAS , subject to Buyer’s exercise of the Call Option, Sellers wish to sell and assign to Buyer, and Buyer wishes to purchase from Sellers, the Purchased Assets, free and clear of any liabilities of Sellers, subject to the terms and conditions set forth herein.

 

NOW, THEREFORE , in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

Definitions

 

The following terms have the meanings specified or referred to in this ARTICLE I :

 

 
 

 

Action ” means any claim, charge, action, hearing, cause of action, demand, lawsuit, arbitration, complaint, audit, notice of violation, proceeding, litigation, citation, summons, subpoena, or investigation, whether at law or in equity, or otherwise, in each case, by or before any Governmental Authority.

 

Affiliate ” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. For purposes of this Agreement, none of the Members, Sellers nor Jonathan Greenhut shall be deemed an Affiliate of New Vitality Transaction Holdings, Inc. (or any successor thereof).

 

Business Day ” means any day except Saturday, Sunday or any other day on which commercial banks located in New York are authorized or required by Law to be closed for business.

 

Buyer Stock ” means the common stock, par value $.0001 per share, of Buyer.

 

Buyer’s Accountants ” means Tanner LLP.

 

“CERCLA”  means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.

 

Code ” means the Internal Revenue Code of 1986, as amended.

 

Contracts ” means all contracts, leases, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures and other agreements and commitments, in each case to the extent constituting legally binding arrangements, whether written or oral.

 

“Customers” means any Person that (i) has purchased products from any of Sellers during the three year period preceding the Closing Date and (ii) seeks to purchase products from, or enter into any arrangement or agreement for the provision of dietary supplement contract manufacturing services by, any of the Sellers at any time during the Transition Period.

 

Disclosure Schedules ” means the Disclosure Schedules delivered by Sellers pursuant to this Agreement.

 

Dollars or $ ” means the lawful currency of the United States.

 

Encumbrance ” means any charge, claim, pledge, equitable interest, lien (statutory or other), option, security interest, mortgage, or other similar encumbrance.

 

2
 

 

Environmental Claim   means any Action, Governmental Order, lien, fine, penalty, or, as to each, any settlement or judgment arising therefrom, by or from any Person alleging liability of whatever kind or nature (including liability or responsibility for the costs of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from: (a) the presence, Release of, or exposure to, any Hazardous Materials; or (b) any non-compliance with any Environmental Law or term or condition of any Environmental Permit.

 

Environmental Law ” means any applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the protection of human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental Law” includes the following (including their implementing regulations and any state analogs): the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq.

 

Environmental Notice ” means any written directive, written notice of violation or infraction, or other written notice respecting any Environmental Claim relating to actual or alleged non-compliance with any Environmental Law or any term or condition of any Environmental Permit.

 

Environmental Permit ” means any Permit, letter, clearance, consent, waiver or exemption required or issued under or authorized by any Environmental Law.

 

ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

 

ERISA Affiliate ” means, with respect to any Person, any other Person that, together with such first Person, would be treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code.

 

“Escrow Agent ” means the entity designated to serve as escrow agent under the Escrow Agreement.

 

3
 

 

Escrow Agreement ” means the Escrow Agreement among Buyer, Sellers, Members, HH and the Escrow Agent, to be executed and delivered at the Closing in the form of Exhibit A hereto.

 

Escrow Amount ” means the sum of Nine Hundred Thousand Dollars ($900,000.00) to be deposited with the Escrow Agent and held in escrow pursuant to the Escrow Agreement.

 

GAAP ” means United States generally accepted accounting principles in effect from time to time.

 

Governmental Authority ” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.

 

Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

 

“Hazardous Materials”  means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation and polychlorinated biphenyls.

 

HH ” means 2014 Huntington Holdings, LLC, a Delaware limited liability company.

 

Initial Disclosure Date ” means September 13, 2014.

 

Intellectual Property Rights ” means all worldwide intellectual property rights, and the goodwill associated therewith, including, without limitation, patents, trademarks, service marks, logos, copyrights, and registrations and applications therefor, trade names, Internet domain names, telephone numbers, web addresses, websites (and the contents thereof), accounts with Twitter, Facebook and other social media companies and the content found thereunder and related thereto (in each case, excluding the social media accounts owned by Jonathan Greenhut), product specifications, formulas, formularies, know-how, trade secrets, computer software, and awards, in each case, which is owned or licensed by a Seller, and all rights to any Actions of any nature available to or being pursued by a Seller to the extent related to the foregoing whether accruing before, on or after the date hereof.

 

4
 

 

“Knowledge of Buyer” or “Buyer’s Knowledge” or any other similar knowledge qualification, means the actual knowledge of Richard H. Neuwirth, F. Peter Brechter, and Mark Jaggi.

 

Knowledge of Sellers” or “Sellers’ Knowledge ” or any other similar knowledge qualification, means the actual knowledge of Jonathan Greenhut, Michael Scagluso and Vincent Tricarico.

 

Law ” means any statute, law, ordinance, regulation, rule, code, order, constitution, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.

 

Liabilities ” means liabilities, obligations or commitments of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise.

 

License Agreement ” means the license agreement between Nutricap and TCC CM Subco II, Inc., to be executed and delivered at the Closing in the form of Exhibit F hereto.

 

Licensed Intellectual Property ” means the Sellers’ Intellectual Property Assets licensed to the Buyer pursuant to the License Agreement.

 

Losses ” means losses, damages, liabilities, deficiencies, judgments, interest, awards, penalties, fines, Taxes, fees, charges, assessments, costs or expenses of whatever kind, including (a)(i) reasonable attorneys’ fees and expenses (including expenses of investigation, court costs, and reasonable fees and expenses of accountants and other experts), and (ii) the cost of enforcing any right to indemnification hereunder, in each case, subject to Section 8.04(f) but excluding (b)(i) lost profits and other consequential damages, and (ii) special, indirect, exemplary and punitive damages.

 

Material Adverse Effect ” means any event, occurrence, fact, condition or change that is, or would reasonably be expected to become, individually or in the aggregate, materially adverse to (a) the business, results of operations, condition (financial or otherwise) or the ownership and use of the Purchased Assets, or (b) the ability of Sellers to consummate the transactions contemplated hereby on a timely basis; provided, however , that “Material Adverse Effect” shall not include the effect of any event, occurrence, fact, condition or change resulting from or relating to: (i) applicable economic or market conditions, including as related to the industry in which the Business operates, (ii) the announcement of the transactions contemplated by this Agreement, (iii) (A) the execution of, compliance with the terms of, or the taking of any action required by this Agreement or (B) the consummation of the transactions contemplated by this Agreement, (iv) any change in GAAP or any change in applicable Laws or the interpretation thereof, (v) changes in national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack, (vi) general financial or capital market conditions, including interest rates or market prices, or changes therein, or (vii) the failure of the Business to meet its internal projections for a period ending on or after the date of this Agreement (it being understood the underlying causes of such failure may be considered in determining whether a Material Adverse Effect has occurred).

 

5
 

 

Option Exercise Date ” means the Call Exercise Date (as defined in the Call Option Agreement).

 

Permits ” means all permits, licenses, franchises, approvals, authorizations, registrations, certificates, variances and similar rights obtained, or required to be obtained, from Governmental Authorities.

 

Person ” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

 

Post-Closing Tax Period ” means any taxable period beginning after the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period beginning after the Closing Date.

 

Pre-Closing Tax Period ” means any taxable period ending on or before the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period ending on and including the Closing Date.

 

Release   means any actual release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including ambient air (indoor or outdoor), surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).

 

Representative ” means, with respect to any Person, any and all managers, directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

 

Securities Purchase Agreement ” means the Securities Purchase Agreement dated as of August 1, 2014, by and between Buyer and HH.

 

Sellers’ Accountants ” means Shapiro, Goldstein Moses & Arturo, LLP.

 

Senior Debt ” means all indebtedness under that certain Loan and Security Agreement, dated as of October 23, 2012, between Nutricap and TD Bank, N.A.

 

Tax ” and “ Taxes ” means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, documentary, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.

 

6
 

 

Tax Return ” means any return, declaration, report, claim for refund, information return or statement or other document relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

Territory ” means North America.

 

Transaction Documents ” means this Agreement, the Call Option Agreement, the Transition Services Agreement, the Bill of Sale, the Assignment and Assumption Agreement, the License Agreement, the First Promissory Note, the Second Promissory Note and the other agreements, instruments and documents required to be delivered at the Closing.

 

VitaCap ” means VitaCap Labs, LLC, a New York limited liability company.

 

WARN Act ” means the federal Worker Adjustment and Retraining Notification Act of 1988, and similar state, local and foreign laws related to plant closings, relocations, mass layoffs and employment losses.

 

The following terms are defined in the following Sections of, or other locations in, this Agreement:

 

Term   Section/Location
Accounts Receivable   Section 2.02(a)
Acquisition Proposal   Section 6.03(a)
Additional Financing   Section 6.18(a)
Agreement   Preamble
Assigned Books & Records   Section 2.02(c)
Assigned Contracts   Section 2.02(b)
Assigned IP   Section 2.02(d)
Assignment and Assumption Agreement   Section 3.02(a)(iii)
Assumed Liabilities   Section 2.03
Audited Financial Statements   Section 4.04
Balance Sheet   Section 4.04
Balance Sheet Date   Section 4.04
Basket   Section 8.04(a)
Benefit Plan   Section 4.19
Bill of Sale   Section 3.02(a)
Business   Recitals
Buyer   Preamble
Buyer Closing Certificate   Section 7.03(g)
Buyer Indemnitees   Section 8.02

 

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Buyer’s Secretary Certificate   Section 7.03(i)
Call Option   Recitals
Call Option Agreement   Recitals
Cap   Section 8.04(c)
Cash Consideration   Section 2.05(a)
Closing   Section 3.01
Closing Date   Section 3.01
Complete Representation   Section 7.02(a)
Customer Labels   Section 2.01(c)
Direct Claim   Section 8.05(c)
Excluded Assets   Section 2.02
Excluded Books and Records   Section 2.02(j)
Excluded Contracts   Section 2.02(m)
Excluded Liabilities   Section 2.04
FIRPTA Certificate   Section 7.02(j)
First Promissory Note   Section 3.02(b)(vi)
Incomplete Representation   Section 7.02(a)
Indemnified Party   Section 8.05
Indemnifying Party   Section 8.05
Insurance Policies   Section 4.15
Interim Balance Sheet   Section 4.04
Interim Balance Sheet Date   Section 4.04
Interim Financial Statements   Section 6.04(d)
Inventory   Section 2.02(c)
Material Contracts   Section 4.07(a)
Material Customers   Section 4.14(a)
Material Suppliers   Section 4.14(b)
Members   Preamble
Multiemployer Plan   Section 4.19(c)
Non-Compete Period   Section 6.07
Non-Novation Event   Section 6.14(a)
Non-Solicitation Period   Section 6.07
Non-Transferable Deposit   Section 2.06
Novation Contract   Section 6.14(a)
Permitted Encumbrances   Section 4.08
Prohibited Names   Section 6.14
Purchase Price   Section 2.05(a)
Purchase Price Allocation   Section 2.07
Purchased Assets   Section 2.01
Qualified Benefit Plan   Section 4.19(c)
Second Promissory Note   Section 3.02(b)(vii)

 

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Seller   Preamble
Seller Benefit Plan   Section 4.19(a)
Sellers’ Closing Certificate   Section 6.20(a)
Seller Indemnitees   Section 8.03
Senior Debt Repayment   Section 2.05(b)
Tangible Personal Property   Section 2.02(e)
Transferred Employees   Section 6.05(a)
Transition Failure Event   Section 6.05(g)
Transition Services Agreement   Section 3.02(a)(i)
Third Party Claim   Section 8.05(b)
Union   Section 4.20(b)

 

ARTICLE II

Purchase and Sale

 

Section 2.01         Purchase and Sale of Assets. Subject to the exercise by Buyer of the Call Option, and subject to the terms and conditions set forth herein, at the Closing, Sellers shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase from Sellers, free and clear of any Encumbrances all of Sellers’ right, title and interest in, to and under all of Sellers’ assets, properties and rights specified below, whether real, personal or mixed, tangible or intangible, and whether owned, leased, licensed or otherwise held by Sellers, wherever located, and expressly excluding the Excluded Assets (collectively, the “ Purchased Assets ”):

 

(a)          all Customer relationships (including all goodwill related specifically to such Customer relationships);

 

(b)          (i) the right to enter into Novation Contracts (as defined in Section 6.14(a)) in accordance with Section 6.14(a) and (ii) all formulas or similar manufacturing specifications relating to products and services provided to Customers, to the extent Sellers own or have a right to acquire such formulas or specifications;

 

(c)          all labels for goods supplied to Customers that have not yet been affixed to finished goods and that do not reference any Seller on the label, whether directly or by UPC code (“ Customer Labels ”), but in all cases subject to the receipt of consent to the transfer of such Customer Labels pursuant hereto from Customers who own a right to such Customer Labels;

 

(d)          originals, or where not available, copies, of all books of account, ledgers, Customer lists, Customer purchasing histories, price lists, distribution lists, supplier lists, Customer sales material and records (including pricing history, total sales, terms and conditions of sale, sales and pricing policies and practices), as the same may be necessary to enable Buyer to perform contract manufacturing services for the acquired Customers after the Closing Date, including without limitation pursuant to any Novation Contract, and as have been identified as such by Buyer, but excluding in all events the Excluded Books and Records (“ Assigned Books and Records ”); and

 

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Section 2.02         Excluded Assets. Notwithstanding the foregoing, the Purchased Assets shall not include any asset of Sellers that is not specifically identified as a Purchased Asset under Section 2.01 , including, without limitation, the following assets (collectively, the “ Excluded Assets ”):

 

(a)          all accounts or notes receivable held by Sellers and the proceeds thereof, and any security, claim, remedy or other right related to any of the foregoing (“ Accounts Receivable ”);

 

(b)          all Contracts, including Contracts relating to Intellectual Property Rights (the “ Excluded Contracts ”);

 

(c)          all inventory (finished goods, raw materials, work in progress, packaging, supplies, parts and other inventories, including items held by Sellers on behalf of Customers, such as warehoused products, excluding Customer Labels) (“ Inventory ”);

 

(d)          subject to the terms of the License Agreement, all Intellectual Property Assets;

 

(e)          all furniture, fixtures, equipment, machinery, tools, vehicles, office equipment, supplies, computers, telephones and other tangible personal property (the “ Tangible Personal Property ”);

 

(f)          all Permits, including Environmental Permits (if any), which are held by Sellers and required for the conduct of the Business as currently conducted or for the ownership and use of the Purchased Assets, including those listed in Section 4.18(b) and Section 4.22 of the Disclosure Schedules;

 

(g)          all rights to any Actions of any nature available to or being pursued by Sellers whether arising by way of counterclaim or otherwise;

 

(h)          all prepaid expenses, credits, advance payments, claims, security, refunds, rights of recovery, rights of set-off, rights of recoupment, deposits, charges, sums and fees (including any such item relating to the payment of Taxes) (“ Prepaid Expenses ”);

 

(i)           all of Sellers’ rights under warranties, indemnities and all similar rights against third parties;

 

(j)           all books and records, including general, financial and accounting records, machinery and equipment maintenance files, production data, quality control records and procedures, research and development files, records and data (including all correspondence with any Governmental Authority), strategic plans, internal financial statements, marketing and promotional surveys, material and research, and files relating to the Intellectual Property Assets and the Contracts relating to Intellectual Property Rights, but excluding the Assigned Books and Records (the “ Excluded Books and Records ”);

 

(k)          all goodwill and the going concern value of the Business;

 

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(l)           Sellers’ cash, cash equivalents and bank accounts and Customer deposits;

 

(m)         any current assets not specified elsewhere;

 

(n)          the corporate seals, organizational documents, minute books, stock books, Tax Returns and other records having to do with the corporate organization of Sellers;

 

(o)          all Seller Benefit Plans and assets attributable thereto;

 

(p)          all accounting records (including records related to Taxes) and internal reports relating to the business activities of Sellers that are not Purchased Assets;

 

(q)          any interest in or right to any refund of Taxes that relate to Pre-Closing Tax Periods;

 

(r)          any insurance policies and rights, claims or causes of action thereunder;

 

(s)          and

 

(t)           the rights which accrue or will accrue to Sellers under the Transaction Documents.

 

Section 2.03         Assumed Liabilities. Subject to the exercise by Buyer of the Call Option, and subject the terms and conditions set forth herein, Buyer shall assume and agree to pay, perform and discharge only the following Liabilities of Sellers (collectively, the “ Assumed Liabilities ”), and no other Liabilities:

 

(a)          all Liabilities to the extent arising out of or relating to the ownership or use of the Purchased Assets by Buyer, including, without limitation, all Liabilities arising under Novation Contracts, in each case after the Closing Date, and including all Liabilities in respect of Customer deposits existing on the Closing Date (“ Customer Deposits ”), excluding such Liabilities that are Excluded Liabilities;

 

(b)          all Liabilities for Taxes related to the Purchased Assets for the Post-Closing Tax Period; and

 

(a)          all Liabilities for Buyer’s share of Taxes pursuant to Section 6.13 .

 

For the avoidance of doubt, disclosure by Seller of any particular Liabilities or any particular facts or circumstances in the Disclosure Schedules shall not mean that such Liabilities or facts or circumstances are Assumed Liabilities, it being expressly understood that Assumed Liabilities shall be limited to those items described in this Section 2.03 .

 

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Section 2.04         Excluded Liabilities. Notwithstanding the provisions of Section 2.03 or any other provision in this Agreement to the contrary, Buyer shall not assume and shall not be responsible to pay, perform or discharge any Liabilities of Sellers, or any Affiliates of Sellers, of any kind or nature whatsoever other than the Assumed Liabilities (the “ Excluded Liabilities ”). Sellers shall pay and satisfy concurrently with the Closing the Excluded Liabilities forth on Exhibit B hereto. Without limiting the generality of the foregoing, the Excluded Liabilities shall include, without limitation, the following Liabilities of Sellers:

 

(a)          any Liabilities arising or incurred in connection with the negotiation, preparation, investigation and performance of this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby, including fees and expenses of counsel, accountants, consultants, advisers and others, except as set forth in Section 10.01 ;

 

(b)          any Liability for Taxes with respect to the operations of Sellers during the Pre-Closing Tax Period or the Post-Closing Tax Period, except as set forth in Section 2.03(b) ;

 

(a)          any Liabilities relating to or arising out of the Excluded Assets;

 

(b)          any Liabilities relating to any accounts payable of Sellers, including any Liabilities associated with the Inventory or other current or long term liabilities of Sellers;

 

(c)          any Liabilities in respect of any Action, arising out of or relating to facts or circumstances existing on or prior to the Closing Date, regardless of when such Action arises, including (i) any product Liability or similar claim for injury to a Person; or (ii) any recall of any products manufactured for or sold by Sellers;

 

(d)          any Liabilities of Sellers arising under or in connection with Seller Benefit Plans;

 

(e)          any Environmental Claims, or Liabilities under Environmental Laws, arising out of or relating to facts or circumstances existing on or prior to the Closing Date;

 

(f)          any Liabilities of Sellers which are not Assumed Liabilities;

 

(g)          any Liabilities to indemnify, reimburse or advance amounts to any current or former member, officer, director, employee, agent or Affiliate of Sellers or Members with respect to the Pre-Closing period, except for indemnification of same pursuant to Section 8.03 as Seller Indemnitees;

 

(h)          any Liabilities under the Excluded Contracts or other Contracts which are not validly and effectively assigned to Buyer pursuant to this Agreement or the underlying Contracts of any Novation Contract;

 

(i)           any Liabilities of Sellers to any current or former Members, employees, officers, directors, retirees, independent contractors or consultants of Sellers or Members, including any Liabilities associated with any claims for wages or other benefits, bonuses, accrued vacation, workers’ compensation, severance, retention, termination or other payments;

 

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(j)           any Liabilities associated with debt, loans or credit facilities of Sellers owing to financial institutions; and

 

(k)          any Liabilities to the Persons disclosed in Section 4.23 of the Disclosure Schedules.

 

Section 2.05         Purchase Price.

 

(a)          The aggregate consideration for the Purchased Assets shall be (collectively, the “ Purchase Price ”): (i) Eight Million Dollars ($8,000,000.00), in cash, reduced dollar for dollar by the amount of Customer Deposits (as so adjusted, the “ Cash Consideration ”); plus (ii) the assumption of the Assumed Liabilities; plus (iii) the sum of Two Million Five Hundred Thousand Dollars ($2,500,000.00) to be paid by delivery of the First Promissory Note (as defined herein); plus (iv) the sum of One Million Four Hundred Seventy-Eight Thousand Dollars ($1,478,000) to be paid by delivery of the Second Promissory Note (as defined herein). Customer Deposits shall be addressed as provided in Section 2.06 below.

 

(b)          On the Closing Date, Buyer shall pay to Sellers an aggregate amount equal to the Cash Consideration less any Senior Debt, if any, required to be paid at Closing in accordance with the payoff letter delivered by the lender of such Senior Debt, in form and substance reasonably satisfactory to Buyer (the “ Senior Debt Repayment ”). Buyer shall (I) deliver the Cash Consideration, less the Senior Debt Repayment, if any, by wire transfer of immediately available funds to an account designated in writing by Sellers to Buyer and (II) deliver the Senior Debt Repayment, if any, by wire transfer of immediately available funds to the accounts designated in writing by the payee thereof.

 

Section 2.06         Customer Deposits From and after the Closing, Buyer will be responsible for all liabilities associated with Customer Deposits. Buyer shall promptly, and in no event later than thirty days following the Closing Date, contact each Customer for which there is a Customer Deposit that does not relate to a purchase order or supply order as of the Closing Date to request that such Customer enter into an agreement to acknowledge and consent to the assignment of all liabilities in respect of such Customer Deposit to Buyer. If such Customer does not deliver such an acknowledgement and consent to Buyer within a reasonable period of time following such request (the underlying Customer Deposit in such a situation, a “ Non-Transferable Deposit ”), Buyer shall provide written notice thereof to Seller. In the event that any Customer Deposit pertains to order for which there is a Non-Novation Event (as defined herein) or Non-Transferable Deposit, upon receipt of documentation evidencing the fulfillment by a Seller of the order applicable to such Non-Novation Event or the return of all or any portion of such Non-Transferable Deposit to the applicable Customer, Buyer shall promptly (i.e., no later than five (5) Business Days following receipt of such documentation) pay the appropriate Seller an amount equal to the Customer Deposit underlying the order fulfilled in respect of such Non-Novation Event or returned amount of such Non-Transferable Deposit, as applicable. In connection with the foregoing, Sellers shall deliver to Buyer on or before the Closing a schedule setting forth the amount of each Customer Deposit, identifying with particularity the customer and, where applicable, the specific order to which such Customer Deposit relates.

 

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Section 2.07         Allocation of Purchase Price. Sellers and Buyer shall jointly prepare an allocation of the Purchase Price (and all other capitalized costs) among the Purchased Assets (the “ Purchase Price Allocation ”) consistent with the principles contained in Section 2.07 of the Disclosure Schedules and in accordance with Section 1060 of the Code, which Purchase Price Allocation shall be binding upon Buyer and Sellers, and shall be prepared within thirty (30) days after Closing. Buyer and Sellers shall file Form 8594 (Asset Acquisition Statement Under Section 1060) on a timely basis reporting the Purchase Price Allocation and shall report, act and file all other Tax Returns in all respects and for all purposes consistent with the Purchase Price Allocation. Buyer and Sellers shall timely and properly prepare, execute, file and deliver all such documents, forms and other information as the other may reasonably request in preparing such allocation. Buyer and Sellers shall not take any position on their respective income tax returns that is inconsistent with such allocation.

 

Section 2.08         Third Party Consents. To the extent that Sellers’ rights under any Purchased Asset may not be assigned to Buyer without the consent of another Person which has not been obtained prior to the Closing, this Agreement shall not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof or be unlawful, and Sellers shall use commercially reasonable efforts to obtain any such required consent(s) as promptly as possible following the Closing, at Sellers’ cost and expense. If any such consent shall not be obtained or if any attempted assignment would be ineffective or would impair Buyer’s rights under the Purchased Asset in question so that Buyer would not in effect acquire the benefit of all such rights, then Sellers and Buyer shall cooperate in any lawful and commercially reasonable arrangement, as Sellers and Buyer shall agree, under which Buyer would, to the extent practicable, obtain the economic claims, rights and benefits under such asset and assume the economic burdens and obligations with respect thereto in accordance with this Agreement, including by subcontracting, sublicensing or subleasing to Buyer. Sellers shall promptly pay Buyer when received all monies received by Sellers under such Purchased Asset or any claim or right or any benefit arising thereunder. Notwithstanding any provision in this Section 2.08 to the contrary, Buyer shall not be deemed to have waived its rights under Section 7.02 hereof unless and until Buyer either provides written waivers thereof or elects to proceed to consummate the transactions contemplated by this Agreement at Closing.

 

ARTICLE III

Closing

 

Section 3.01         Closing. Subject to the terms and conditions of this Agreement, the Call Option Agreement and the satisfaction or waiver of all of the conditions to the Closing set forth in Article VII (other than conditions which, by their nature, are to be satisfied on the Closing Date, but subject to the satisfaction or waiver of such conditions), the consummation of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Goodwin Procter LLP, 620 Eighth Avenue, New York, New York 10018, at 12:00 pm, EST time, on the second Business Day after the Option Exercise Date, or at such other time, date or place as Sellers and Buyer may mutually agree upon. The date on which the Closing is to occur is herein referred to as the “ Closing Date ”.

 

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Section 3.02         Closing Deliverables.

 

(a)          At the Closing, Sellers shall deliver to Buyer (unless delivered previously) the following:

 

(i)          a transition services agreement in the form of Exhibit C hereto (the “ Transition Services Agreement ”) duly executed by Sellers;

 

(ii)         a bill of sale in the form of Exhibit D hereto (the “ Bill of Sale ”) duly executed by Sellers, transferring Sellers’ Purchased Assets to Buyer;

 

(iii)        an Assignment and Assumption Agreement in the form of Exhibit E hereto (the “ Assignment and Assumption Agreement ”) duly executed by Sellers effecting the assignment to and assumption by Buyer of the Purchased Assets and the Assumed Liabilities of Seller;

 

(iv)        the License Agreement, duly executed by Sellers;

 

(v)         the Escrow Agreement, duly executed by Sellers;

 

(vi)        the Sellers’ Closing Certificate;

 

(vii)       the Sellers’ Officer Certificate;

 

(viii)      a payoff letter in respect of the Senior Debt, in form and substance reasonably acceptable to the Buyer, and documentation regarding the release of all Encumbrances and security granted or entered in connection therewith;

 

(ix)         the FIRPTA Certificate (as defined herein); and

 

(x)          such other customary instruments of transfer, assumption, filings or documents, in form and substance reasonably satisfactory to Buyer, as may be required to give effect to this Agreement.

 

(b)          At the Closing, Buyer shall deliver to Sellers the following:

 

(i)          the Purchase Price (in accordance with Section 2.05 );

 

(ii)         the Transition Services Agreement duly executed by Buyer;

 

(iii)        the Assignment and Assumption Agreement duly executed by Buyer;

 

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(iv)        the License Agreement duly executed by Buyer;

 

(v)         the Escrow Agreement duly executed by Buyer and Escrow Agent;

 

(vi)        a promissory note, in the principal amount of $2,500,000.00, in the form of Exhibit G hereto (the “ First Promissory Note ”) duly executed by Buyer;

 

(vii)       a promissory note, in the principal amount of $1,478,000.00, in the form of Exhibit H hereto (the “ Second Promissory Note ”) duly executed by Buyer;

 

(viii)      the Buyer Closing Certificate; and

 

(ix)         the Buyer’s Secretary Certificate.

 

ARTICLE IV

Representations and warranties of SellerS AND MEMBERS

 

Sellers and Members jointly and severally make the following representations and warranties to Buyer, effective as of the Initial Disclosure Date. Exceptions to any representation or warranty may be made in the corresponding sections of the Disclosure Schedule:

 

Section 4.01         Organization and Qualification of Seller. Each Seller is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of New York and has full limited liability company power and authority to own, operate and lease the properties and assets now owned, operated and leased by it and to carry on the Business as currently conducted. Section 4.01 of the Disclosure Schedules sets forth each jurisdiction in which Sellers are licensed or qualified to do business, and Sellers are each duly licensed or qualified to do business and are each in good standing in each jurisdiction in which the ownership of the Purchased Assets or the operation of the Business as currently conducted makes such licensing or qualification necessary, except for those jurisdictions where a Seller’s failure to be licensed or qualified would not have a Material Adverse Effect.

 

Section 4.02         Authority.

 

(a)          Each Seller has full limited liability company power and authority to enter into this Agreement and the other Transaction Documents to which it is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each Seller of this Agreement and any other Transaction Document to which it is a party, the performance by such Seller of its obligations hereunder and thereunder and the consummation by each Seller of the transactions contemplated hereby and thereby have been duly authorized by all requisite limited liability company action on the part of such Seller. This Agreement has been duly executed and delivered by each Seller and Member, and constitutes a legal, valid and binding obligation of such Seller or Member enforceable against such Seller or Member in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditor’s rights and remedies generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at Law or in equity). When each other Transaction Document to which a Seller or Member is or will be a party has been duly executed and delivered by such Seller or Member, such Transaction Document will constitute a legal and binding obligation of such Seller or Member, enforceable against it or him in accordance with its terms, subject to (in each case), applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditor’s rights and remedies generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at Law or in equity).

 

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(b)          The Persons listed in Section 4.02(b)(i) of the Disclosure Schedules own all of the issued and outstanding equity interests of Sellers and/or Members, respectively, in the percentages shown thereon, and (ii) except as set forth in Section 4.02(b)(ii) of the Disclosure Schedules, no Person owns any options, warrants, subscriptions or other rights to purchase, or securities convertible into or exchangeable for, any equity interest in any Seller or Member.

 

Section 4.03         No Conflicts; Consents. Except as set forth in Section 4.03 of the Disclosure Schedules, the execution, delivery and performance by each Seller and Member of this Agreement and the other Transaction Documents to which a Seller or Member is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) conflict with or result in a violation or breach of, or default under, any provision of the organizational documents of either Seller; (b) conflict with or result in a violation or breach of any provision of any Law or Governmental Order applicable to any Seller, Member or the Purchased Assets; or (c) require notice to, or the consent, or other action by any Person under, conflict with, result in a violation or breach of, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any Person the right to accelerate, terminate, modify or cancel any Contract to which either Seller is a party or by which either Seller or to which any of the Purchased Assets are subject; or (d) result in the creation or imposition of any Encumbrance on the Purchased Assets, other than Permitted Encumbrances. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to either Seller in connection with the execution and delivery of this Agreement or any of the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby.

 

Section 4.04         Financial Statements. Complete copies of the consolidated audited financial statements of Sellers consisting of a balance sheet as at December 31, 2013 and the related statements of income and retained earnings, stockholders’ equity and cash flow for the year then ended (the “ Audited Financial Statements ”) have been made available to Buyer prior to the Initial Disclosure Date, and the consolidated unaudited financial statements of Sellers consisting of the balance sheet as of June 30, 2014 and related statements of income and retained earnings, members’ equity and cash flow for the period then ended (the “ Initial Interim Financial Statements ” and together with the Audited Financial Statements, the “ Financial Statements ”). The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject, in the case of the Initial Interim Financial Statements, to normal and recurring year-end adjustments (the effect of which will not be materially adverse in the aggregate) and the absence of notes (that, if presented, would not differ materially from those presented in the Audited Financial Statements). The Financial Statements are based on the Books and Records of Sellers and fairly present in all material respects the consolidated financial condition of Sellers as of their respective dates and the results of the operations of Sellers’ Business for the periods indicated. The balance sheet of Sellers included in the Audited Financial Statements is referred to herein as the “ Balance Sheet ” and the date thereof as the “ Balance Sheet Date ”, and the balance sheet of Sellers as of the date of the Initial Interim Financial Statements is referred to herein as the “ Initial Interim Balance Sheet ” and the date thereof as the “ Initial Interim Balance Sheet Date ”).

 

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Section 4.05         Undisclosed Liabilities. Except as set forth in Section 4.05 of the Disclosure Schedules, neither Seller has any monetary Liabilities except (a) those which are adequately reflected or reserved against on the Initial Interim Balance Sheet, (b) those which have been incurred in the ordinary course of business consistent with past practice since the Initial Interim Balance Sheet Date, (c) those liabilities arising under this Agreement and the other Transaction Documents, (d) those which are included in the computation of the Purchase Price, (e) those which are disclosed in the Disclosure Schedules, or (f) those Liabilities which do not or would not, individually or in the aggregate, exceed $50,000.

 

Section 4.06         Absence of Certain Changes. Except as set forth in Section 4.06 of the Disclosure Schedules, since the Initial Interim Balance Sheet Date (other than with respect to clause (a) below, which shall be since the Balance Sheet Date) there has not been any:

 

(a)          event, occurrence or development that has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

 

(b)          material change in any method of accounting or accounting practice of Sellers, except as required by GAAP or Law, or as disclosed in the notes to the Financial Statements;

 

(c)          material change in cash management practices and policies, practices and procedures with respect to collection of Accounts Receivable, establishment of reserves for uncollectible Accounts Receivable, accrual of Accounts Receivable, inventory control, prepayment of expenses, payment of trade accounts payable, accrual of other expenses, deferral of revenue and acceptance of Customer deposits;

 

(d)          transfer, assignment, sale or other disposition of material assets that individually or in the aggregate are material to the Business, except for the sale of Inventory in the ordinary course of business;

 

(e)          cancellation of any claims or amendment, termination or waiver of any material rights of either Seller;

 

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(f)           transfer, assignment or grant of any license or sublicense of any rights under or with respect to any Intellectual Property Assets;

 

(g)          material damage, destruction or loss, or any material interruption in use, of any Purchased Assets, whether or not covered by insurance;

 

(h)          acceleration, termination, or modification of any Material Contract or Permit;

 

(i)           imposition of any Encumbrance upon any Purchased Assets other than Permitted Encumbrances;

 

(j)           (i) grant of any bonuses, whether monetary or otherwise, or increase in any wages, salary, severance, pension or other compensation or benefits in respect of any employees, officers, directors, independent contractors or consultants, other than as provided for in any written agreements, required by applicable Law or in the ordinary course of business consistent with past practice, or (ii) action to accelerate the vesting or payment of any compensation or benefit for any employee, officer, director, consultant or independent contractor;

 

(k)          adoption, modification or termination of any: (i) employment, severance, retention or other Contract with any current or former member, manager, employee, officer, independent contractor or consultant, (ii) Seller Benefit Plan, or (iii) collective bargaining or other agreement with a Union;

 

(l)          any loan to (or forgiveness of any loan to) or entry into any other transaction with Member or any manager, officer, employee or Affiliate of either Seller or Member;

 

(m)          adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any similar Law;

 

(n)          purchase, lease or other acquisition of the right to own, use or lease any property or assets for an annual amount of $200,000 or more in the aggregate, except for purchases of Inventory or supplies in the ordinary course of business consistent with past practice (including purchases of Inventory or related product for Customers’ orders); or

 

(o)          any Contract to do any of the foregoing, or any action or omission that would result in any of the foregoing.

 

Section 4.07         Material Contracts.

 

(a)           Section 4.07(a) of the Disclosure Schedules lists each of the following Contracts (other than purchase orders (including commitments effected through e-mail)) (x) by which any of the Purchased Assets are bound or affected or (y) to which either Seller is a party or by which it is bound (such Contracts, together with all Contracts relating to Intellectual Property Rights set forth in Section 4.11(b) of the Disclosure Schedules, being “ Material Contracts ”), as of the Initial Disclosure Date:

 

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(i)          all Contracts involving any capital expenditures or series of related capital expenditures in excess of $50,000;

 

(ii)         all contracts that provide for the indemnification of any Person or the assumption of any Tax, environmental or other Liability of any Person;

 

(iii)        all Contracts that relate to the acquisition or disposition of any business, a material amount of equity or assets of any other Person (whether by merger, sale of stock, sale of assets or otherwise) pursuant to which either Seller has any continuing obligations, or any continuing indemnification, “earn-out” or other liabilities (fixed, contingent or otherwise);

 

(iv)         all broker, distributor, dealer, manufacturer’s representative, franchise, agency, sales promotion, market research, marketing consulting, and public relations and advertising Contracts that provide for payment or receipt by either Seller in connection with the Business in excess of $25,000 on an annual basis;

 

(v)          all Contracts with managers, officers, employees, independent contractors or consultants;

 

(vi)         all Contracts relating to indebtedness or the granting of security for indebtedness, and all guaranties;

 

(vii)        all Contracts with any Governmental Authority;

 

(viii)      all Contracts that limit or purport to limit the ability of either Seller, or any transferee of substantially all of either Seller’s assets, to compete or engage in any line of business or with any Person or in any geographic area or during any period of time;

 

(ix)         all joint venture, partnership or similar Contracts;

 

(x)          all Contracts for the sale of assets (excluding Inventory but including any master sale agreements related to the sale of Inventory) of either Seller involving the receipt by either Seller of more than $25,000 or for the grant to any Person of any option, right of first refusal or preferential or similar right to purchase any assets (including Inventory) of either Seller;

 

(xi)         all powers of attorney;

 

(xii)        all collective bargaining agreements or Contracts with any Union;

 

(xiii)      all Contracts for the purchase or lease of real estate;

 

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(xiv)      all Contracts for the acquisition of services, supplies, equipment, inventory, or other personal property involving more than $25,000 in the aggregate per annum;

 

(xv)       all Contracts with Member, or any Affiliate of either Seller or Member;

 

(xvi)      all Contracts with respect to the return of Inventory in the possession of Customers by reason of alleged overshipment, defective merchandise or otherwise; and

 

(xvii)     any Contract or series of related Contracts that involve payments of more than $25,000 in the aggregate per annum;

 

(xviii)    all Contracts that relate to the settlement of any Action within the three (3) years prior to the Initial Disclosure Date; and

 

(xix)       all Contracts that terminate more than one year from the date hereof.

 

(b)          Each Material Contract is valid and binding on the applicable Seller in accordance with its terms and is in full force and effect. Except as set forth in Section 4.07(b) of the Disclosure Schedules, neither Sellers nor, to Sellers’ Knowledge, any other party thereto is in breach of or default under (or is alleged to be in breach of or default under), or has provided or received any written notice of any intention to terminate, any Material Contract. Except as set forth in Section 4.07(b) of the Disclosure Schedules, to Sellers’ Knowledge, no event or circumstance has occurred that, with notice or lapse of time or both, would constitute a material default under any Material Contract or result in a termination thereof or would cause or permit the acceleration or other changes of any material right or obligation or the loss of any material benefit thereunder. Complete and correct copies of each Material Contract (including all modifications, and supplements thereto and waivers thereunder) have been made available to Buyer by Sellers. Except as set forth in Section 4.07(b) of the Disclosure Schedules, there are no material disputes pending, or to Sellers’ Knowledge, threatened, under any Material Contract.

 

Section 4.08         Title to Purchased Assets and Licensed Intellectual Property. Sellers have good and valid title to all of the Purchased Assets and the Licensed Intellectual Property. All such Purchased Assets and Licensed Intellectual Property are free and clear of Encumbrances except for the following (collectively referred to as “ Permitted Encumbrances ”):

 

(a)          those items set forth in Section 4.08 of the Disclosure Schedules;

 

(b)          those Encumbrances that will be discharged and released at the Closing by delivery of the Lien Release Payment; and

 

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(c)          mechanics’, carriers’, workmen’s, repairmen’s or other like liens arising or incurred in the ordinary course of business consistent with past practice for amounts that are not delinquent and which are not, individually or in the aggregate, material to the Business as presently conducted, the Purchased Assets or the Licensed Intellectual Property.

 

Section 4.09         [Intentionally Omitted.]

 

Section 4.10         [Intentionally Omitted.]

 

Section 4.11         Intellectual Property.

 

(a)          Sellers do not own any issued patents or pending applications for patents, applications or registrations for copyrights, or software. Section 4.11(a) of the Disclosure Schedules contains a complete list of all applications and registrations for trademarks and domain names owned by Sellers (the “ Intellectual Property Assets ”) and such registrations are in good standing.

 

(b)          Sellers do not license any Intellectual Property Rights to any Person. Section 4.11(b) of the Disclosure Schedules contains a complete list of all material licenses of Intellectual Property Rights to Sellers (but expressly excluding licenses of “off-the-shelf” and other commercially available software licensed pursuant to standard terms). All such licenses are valid and binding in accordance with their terms and in full force and effect. Neither Sellers nor, to Sellers’ Knowledge, any other party thereto is in breach of or in default under (or is alleged to be in breach of or in default under), or has provided or received any written notice of breach or default of or any intention to terminate any such license. To Sellers’ Knowledge, no event or circumstance has occurred that, with notice or lapse of time or both, would constitute an event of default under any such license or result in a termination thereof or would cause or permit the acceleration or other changes of any right or obligation or the loss of any benefit thereunder, except as disclosed in Section 4.11(b) of the Disclosure Schedules.

 

(c)          To Sellers’ Knowledge, Sellers own or are otherwise authorized or licensed to use all Intellectual Property Rights necessary for the conduct of its Business as presently conducted. The Intellectual Property Rights used in the Business as presently conducted are sufficient in all material respects for the conduct of such Business. The Intellectual Property Rights owned by Sellers are free and clear of any Encumbrances other than Permitted Encumbrances.

 

(d)          The execution, delivery and performance of this Agreement and the other Transaction Documents to which Sellers are a party, and the consummation of the transactions contemplated hereby and thereby, will not constitute a material breach of any license of material Intellectual Property Rights to Sellers, nor cause the forfeiture, termination or impairment of any material Intellectual Property Rights of Sellers, or result in payment of any additional amounts with respect to, such Intellectual Property Rights.

 

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(e)          To Sellers’ Knowledge, no Person is infringing upon, misappropriating, or otherwise violating the Intellectual Property Rights.

 

(f)          To Sellers’ Knowledge, the use of the Intellectual Property Rights in the Business as presently conducted does not infringe upon, misappropriate or otherwise violate any intellectual property rights of any Person.

 

(g)          Except as set forth in Section 4.11(g) of the Disclosure Schedule, there are no Actions (including any oppositions, interferences or re-examinations) settled, pending or to Sellers’ Knowledge, threatened (including in the form of offers to obtain a license); (i) alleging any infringement or other violation of the Intellectual Property Rights of any Person by Sellers, (ii) challenging the validity, enforceability, registrability or ownership of any Intellectual Property Rights of Sellers or Sellers’ rights with respect to any Intellectual Property Rights; or (iii) either by Sellers or any other Person alleging any infringement or other violation by any Person of any Intellectual Property Rights of Sellers. Sellers are not subject to any outstanding or prospective Governmental Order that does or would restrict or impair the use of any of its Intellectual Property Rights.

 

Section 4.12         Inventory. Section 4.12 of the Disclosure Schedules contains (a) a complete and correct list of Sellers’ Inventory as of the Initial Interim Balance Sheet Date and as of the Closing Date, (b) the identity of the Customers for whom such Inventory is held and (c) the value of such Inventory in accordance with GAAP applied on a consistent basis with the Financial Statements. All Inventory is owned by Sellers free and clear of all Encumbrances other than Permitted Encumbrances, and no Inventory is held on a consignment basis.

 

Section 4.13         [Intentionally Omitted.]

 

Section 4.14         Customers and Suppliers; Orders.

 

(a)           Section 4.14(a) of the Disclosure Schedules sets forth, for the twelve (12) months prior to the Initial Interim Balance Sheet Date, (i) the top ten (10) Customers (based on aggregate consideration paid to Sellers for goods or services rendered) (collectively, the “ Material Customers ”); and (ii) the approximate amount of consideration paid by each Material Customer during such 12-month period. Neither Seller has received any written notice that any of the Material Customers have ceased or intend to cease, after the Closing, to purchase goods or services from Sellers or to otherwise terminate or materially reduce its relationship with Sellers.

 

(b)           Section 4.14(b) of the Disclosure Schedules sets forth, for the twelve (12) months prior to the Initial Interim Balance Sheet Date, (i) the top ten (10) suppliers (based on aggregate consideration paid by Sellers for goods or services rendered) (collectively, the “ Material Suppliers ”); and (ii) the approximate amount of purchases from each Material Supplier during such 12-month period. Neither Seller has received any written notice that any of the Material Suppliers has ceased, or intends to cease, after the Closing, to supply goods or services to Sellers or to otherwise terminate or materially reduce its relationship with Sellers.

 

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(c)          Sellers’ backlog of orders is consistent with their past practice. Sellers’ orders on hand are bona fide orders at prices similar to recent past prices , and Sellers have no reason to believe any such orders will be subject to cancellation, deferred or renegotiation in any material respect (other than adjustments consistent with past practices).

 

Section 4.15         Insurance. Sellers have in place policies of fire, liability, product liability, umbrella liability, real and personal property, workers’ compensation, vehicular, fiduciary liability and other casualty and property insurance (collectively, the “ Insurance Policies ”), which policies are in full force and effect and enforceable in accordance with their terms, and are sufficient for compliance with all applicable Laws and Contracts to which either Seller is a party or by which it is bound. Section 4.15 of the Disclosure Schedules sets forth a list of all pending claims as of the Initial Disclosure Date, and the claims history for the three (3) years prior to the Initial Disclosure Date, under Sellers’ insurance policies.

 

Section 4.16         Legal Proceedings; Governmental Orders.

 

(a)          Except as set forth in Section 4.16(a) of the Disclosure Schedules, there are no Actions pending by either Seller, and there are no Actions pending, or, to Sellers’ Knowledge, threatened (in the form of a letter of counsel, or in a communication from a consumer stating that he or she has or is retaining counsel) against either Seller. There are no Actions pending or, to Sellers’ Knowledge, threatened, that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.

 

(b)          Except as set forth in Section 4.16(b) of the Disclosure Schedules, there are no outstanding Governmental Orders and no unsatisfied judgments, penalties or awards against, relating to or affecting either Seller. Sellers are in compliance in all material respects with the terms of each Governmental Order set forth in Section 4.16(b) of the Disclosure Schedules.

 

Section 4.17         Compliance with Laws. Except as set forth in Section 4.17 of the Disclosure Schedules, Sellers have complied within the two (2) years prior to the date hereof, and are now complying, in all material respects with all applicable Laws (including applicable occupational health and safety laws and regulations). Neither Seller has been charged in writing or threatened in writing with any charge by any Governmental Authority concerning any violation of any provision of any Law that would result in material Liability to the Purchased Assets or the Licensed Intellectual Property. Neither Seller is subject to any outstanding Governmental Order of any Governmental Authority. Without limiting the generality of the foregoing, except as set forth in Section 4.17 of the Disclosure Schedules, there have been no product recalls, withdrawals or seizures by any Governmental Authority with respect to any products developed, sold, licensed or delivered by Sellers.

 

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Section 4.18         Environmental Matters.

 

(a)          Except as set forth in Section 4.18(a) of the Disclosure Schedules, the operations of Sellers are currently and have been in compliance in all material respects with all Environmental Laws. Neither Seller has received from any Person any: (i) Environmental Notice or Environmental Claim; or (ii) written request for information pursuant to Environmental Law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements as of the Initial Disclosure Date.

 

(b)          Sellers have obtained and are in material compliance with all Environmental Permits (each of which is disclosed in Section 4.18(b) of the Disclosure Schedules) necessary for the conduct of the Business as currently conducted by Sellers or the ownership, operation or use of the Purchased Assets and all such Environmental Permits are in full force and effect, and Sellers have no Knowledge of any condition, event or circumstance that might prevent or impede, after the Closing Date or adversely affect the conduct of the Business as currently conducted by Sellers or the ownership, operation or use of the Purchased Assets. With respect to any such Environmental Permits, Sellers have undertaken, or will undertake prior to the Closing Date, all commercially reasonable measures necessary to facilitate transferability of the same and to Sellers’ Knowledge there is no condition, event or circumstance that might prevent or impede the transferability of the same, and neither Seller has received any Environmental Notice or written communication regarding any material adverse change in the status or terms and conditions of the same or which would affect the transferability of same.

 

(c)          To Sellers’ Knowledge, no real property currently or formerly leased or operated by either Seller is listed on, or, to Sellers’ Knowledge, has been proposed for listing on, the National Priorities List (or CERCLIS) under CERCLA, or any similar state list.

 

(d)          There has been no Release of Hazardous Materials in contravention of Environmental Law on any real property currently or formerly leased or operated by either Seller, and neither Seller has received an Environmental Notice that any real property currently or formerly leased or operated by either Seller has been contaminated with any Hazardous Material.

 

(e)           Section 4.18(e) of the Disclosure Schedules contains a complete and accurate list of all off-site Hazardous Materials treatment, storage, or disposal facilities or locations used by Seller and any predecessors as to which Sellers may retain liability, and none of these facilities or locations has been placed or proposed for placement on the National Priorities List (or CERCLIS) under CERCLA, or any similar state list, and neither Seller has received any Environmental Notice regarding potential liabilities with respect to such off-site Hazardous Materials treatment, storage, or disposal facilities or locations used by Sellers.

 

(f)          Sellers have not retained or assumed, by contract or operation of Law, any liabilities or obligations of any other Person that remain in effect, valid or enforceable with respect to any material liability under any Environmental Law.

 

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(g)          Sellers have provided or otherwise made available to Buyer and listed in Section 4.18(g) of the Disclosure Schedules all environmental reports and other similar documents, if any, with respect to any real property currently or formerly leased or operated by Sellers which are in its possession or under their reasonable control.

 

(h)          Sellers have no Knowledge of any facts or circumstance concerning the Release or regulation of Hazardous Materials that might, after the Closing Date, prevent, impede or materially increase the costs associated with the ownership and use of the Purchased Assets.

 

Section 4.19         Employee Benefit Matters.

 

(a)           Section 4.19(a) of the Disclosure Schedules contains, as of the Initial Disclosure Date, a true and complete list of each pension, benefit, retirement, compensation, profit-sharing, deferred compensation, incentive, performance award, phantom equity, stock or stock-based, change in control, retention, severance, vacation, paid time off, fringe-benefit and other similar agreement, plan, policy, program or arrangement (and any amendments thereto), in each case whether or not reduced to writing and whether funded or unfunded, including each “employee benefit plan” within the meaning of Section 3(3) of ERISA, whether or not tax-qualified and whether or not subject to ERISA (a “ Benefit Plan ”), which is or has within the four (4) years prior to the Initial Disclosure Date been, maintained, sponsored, contributed to, or required to be contributed to by either Seller for the benefit of any current or former member, manager, employee, officer, retiree, independent contractor or consultant of either Seller or any spouse or dependent of such individual, or under which either Seller has or may have any Liability, or with respect to which Buyer or any of its Affiliates would reasonably be expected to have any Liability, contingent or otherwise (as listed on Section 4.19(a) of the Disclosure Schedules, each, a “ Seller Benefit Plan ”).

 

(b)          With respect to Seller Benefit Plan, Sellers have made available to Buyer complete and correct copies of each of the following: (i) where the Seller Benefit Plan has been reduced to writing, the plan document together with all amendments; (ii) where the Seller Benefit Plan has not been reduced to writing, a written summary of all material plan terms; (iii) copies of any summary plan descriptions, summaries of material modifications, employee handbooks and any other written employee or workplace policies; (iv) in the case of Seller Benefit Plan that is intended to be qualified under Section 401(a) of the Code, a copy of the most recent determination, opinion or advisory letter from the Internal Revenue Service; (v) in the case of any Benefit Plan for which a Form 5500 is required to be filed, a copy of the most recently filed Form 5500, with schedules attached; (vi) reports related to any Benefit Plans with respect to the most recently completed plan years; and (vii) copies of material notices, letters or other correspondence from the Internal Revenue Service, Department of Labor or Pension Benefit Guaranty Corporation relating to the Benefit Plan.

 

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(c)          Except as set forth in Section 4.19(c) of the Disclosure Schedules , Sellers’ Benefit Plans (other than any multiemployer plan within the meaning of Section 3(37) of ERISA (each a “ Multiemployer Plan ”)) have been established, administered and maintained in all material respects in accordance with its terms and in material compliance with all applicable Laws (including ERISA and the Code). Seller Benefit Plan that is intended to be qualified under Section 401(a) of the Code (a “ Qualified Benefit Plan ”) is so qualified and has received a favorable and current determination letter from the Internal Revenue Service, or with respect to a prototype plan, can rely on an opinion letter from the Internal Revenue Service to the prototype plan sponsor, to the effect that such Qualified Benefit Plan is so qualified and that the plan and the trust related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, and Sellers have received no written notification indicating that the qualified status is being threatened or may be revoked. To the Knowledge of Sellers, nothing has occurred with respect to any Seller Benefit Plan that could reasonably be expected to subject Buyer or any of its Affiliates, to a penalty under Section 502 of ERISA or to tax or penalty under Section 4975 of the Code. Except as set forth in Section 4.19(c) of the Disclosure Schedules, all benefits, contributions and premiums relating to Seller Benefit Plan have been timely paid in accordance in all material respects with the terms of Seller Benefit Plan and all applicable Laws and accounting principles, and all benefits accrued under any unfunded Seller Benefit Plan have been paid, accrued or otherwise adequately reserved to the extent required by, and in accordance with GAAP.

 

(d)          Neither Seller nor any of Sellers’ ERISA Affiliates have (i) incurred or reasonably expect to incur, either directly or indirectly, any material Liability under Title I or Title IV of ERISA or related provisions of the Code relating to employee benefit plans; (ii) withdrawn from any Seller Benefit Plan; or (iii) engaged in any transaction which would give rise to liability under Section 4069 or Section 4212(c) of ERISA.

 

(e)          With respect to Seller Benefit Plan (i) no such plan is a Multiemployer Plan, (ii) no such plan is a “multiple employer plan” within the meaning of Section 413(c) of the Code or a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA); and (iii) no such plan is subject to the minimum funding standards of Section 302 of ERISA or Section 412 of the Code.

 

(f)          Except as set forth in Section 4.19(f) of the Disclosure Schedules and other than as required under Section 601 et. seq. of ERISA or other applicable Law, no Seller Benefit Plan or other arrangement provides post-termination or retiree welfare (including medical) benefits to any individual for any reason.

 

(g)          Except as set forth in Section 4.19(g) of the Disclosure Schedules, within the four (4) years prior to the Initial Disclosure Date there have not been, and there are not currently, any pending or, to Sellers’ Knowledge, threatened Actions relating to any Seller Benefit Plan (other than routine claims for benefits), and no Seller Benefit Plan has been the subject of an examination or audit by a Governmental Authority or the subject of an application or filing under, or is a participant in, an amnesty, voluntary compliance, self-correction or similar program sponsored by any Governmental Authority.

 

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(h)          There has been no amendment to, announcement by either Seller relating to, or change in employee participation or coverage under, any Seller Benefit Plan that would increase the annual expense of maintaining such plan above the level of the expense incurred for the most recently completed fiscal year. Sellers have no commitment or obligation or have made any representations, whether or not legally binding, to adopt, amend or modify any Seller Benefit Plan.

 

(i)          Each Seller Benefit Plan that is subject to Section 409A of the Code has been operated in compliance in all material respects with such Section and all applicable regulatory guidance (including, notices, rulings and proposed and final regulations).

 

(j)          Except as set forth in Section 4.19(j) of the Disclosure Schedules, neither the execution of this Agreement nor any of the transactions contemplated by this Agreement will (either alone or upon the occurrence of any additional or subsequent events): (i) entitle any current or former member, manager, officer, employee, independent contractor or consultant of either Seller to severance pay or any other payment; (ii) accelerate the time of payment, funding or vesting, or increase the amount of compensation due to any such individual; (iii) increase the amount payable under or result in any other material obligation pursuant to any Seller Benefit Plan; or (iv) result in “excess parachute payments” within the meaning of Section 280G(b) of the Code.

 

Section 4.20         Employment Matters.

 

(a)           Section 4.20(a) of the Disclosure Schedules contains a list of all persons who are employees, independent contractors or consultants of Sellers as of the Initial Disclosure Date, and sets forth for each such individual the following: (i) name; (ii) title or position (including whether full or part time); (iii) hire date; (iv) current annual base compensation rate; (v) commission, bonus or other incentive-based compensation; (vi) a description of the fringe benefits provided to each such individual as of the date hereof; and (vii) such individual’s accrued and unused paid time off. Except as set forth in Section 4.20(a) of the Disclosure Schedules, as of the Initial Disclosure Date, all compensation, including wages, commissions and bonuses payable to Sellers’ employees, independent contractors or consultants for services performed on or prior to the Initial Disclosure Date have been paid in full and there are no outstanding agreements, understandings or commitments of either Seller with respect to any compensation, commissions or bonuses.

 

(b)          Except as set forth in Section 4.20(b) of the Disclosure Schedules, neither Seller is, nor has it been, a party to, bound by, or negotiating any collective bargaining agreement or other Contract with a union, works council or labor organization (collectively, “ Union ”), and there is not, and has not been, any Union representing or purporting to represent any employee of either Seller, and, to Sellers’ Knowledge, no Union or group of employees is seeking or has sought to organize employees for the purpose of collective bargaining. Except as set forth in Section 4.20(b) of the Disclosure Schedules, there has not been in the prior two (2) years, nor has there been any written threat of, any strike, slowdown, work stoppage, lockout, concerted refusal to work overtime or other similar labor disruption or dispute affecting Sellers or any employees of Sellers. Neither Seller has a duty to bargain with any Union.

 

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(c)          Sellers are and have been in compliance in all material respects with the terms of all employment agreements to which Sellers are a party ( all of which are set forth in Section 4.20(c) of the Disclosure Schedules ) and all applicable Laws pertaining to employment and employment practices. All individuals characterized and treated by Sellers as consultants or independent contractors of Sellers are properly treated as independent contractors under all applicable Laws. All employees of Sellers classified as exempt under the Fair Labor Standards Act and state and local wage and hour laws are properly classified. Except as set forth in Section 4.20(c) of the Disclosure Schedules, there are no Actions against either Seller pending, or to Sellers’ Knowledge, threatened in writing to be brought or filed, by or with any Governmental Authority or arbitrator in connection with the employment of any current or former applicant, employee, consultant, volunteer, intern or independent contractor of Sellers, including any claim relating to unfair labor practices, employment discrimination, harassment, retaliation, equal pay, wages and hours or any other employment related matter arising under applicable Laws.

 

(d)          Neither Seller is subject to the WARN Act with respect to the transactions contemplated by this Agreement.

 

Section 4.21         Taxes. Except as set forth in Section 4.21 of the Disclosure Schedules:

 

(a)          All income Tax Returns and all material non-income Tax Returns required to have been filed by Seller for any Pre-Closing Tax Period have been, or will be, timely filed. Such Tax Returns are, or will be, complete and correct in all material respects. All Taxes due and required to have been paid by Sellers (whether or not shown on any Tax Return) have been, or will be, timely paid.

 

(b)          Sellers have withheld and paid each Tax required to have been withheld and paid in connection with amounts paid or owing to any Employee, independent contractor, creditor, Customer, shareholder or other party, and complied with all information reporting and backup withholding provisions of applicable Law.

 

(c)          No extensions or waivers of statutes of limitations have been given or requested with respect to any Taxes of Sellers.

 

(d)          All deficiencies asserted, or assessments made, against Sellers as a result of any examinations by any taxing authority have been fully paid, accrued on the Initial Interim Financial Statements, or finally settled.

 

(e)          Neither Seller is a party to any Action by any taxing authority. There are no Actions pending, or to Sellers’ Knowledge, threatened in writing, by any taxing authority against either Seller.

 

(f)          There are no Encumbrances for Taxes upon any of the Purchased Assets or the Licensed Intellectual Property nor, to Seller’s Knowledge, is any Taxing authority in the process of imposing any Encumbrances for Taxes on any of the Purchased Assets or the Licensed Intellectual Property (in each case, other than for current Taxes not yet due and payable).

 

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(g)          Neither Seller is a “foreign person” as that term is used in Treasury Regulations Section 1.1445-2.

 

(h)          Neither Seller is, nor has it been, a party to, or a promoter of, a “reportable transaction” within the meaning of Section 6707A(c)(1) of the Code and Treasury Regulations Section 1.6011 4(b).

 

(i)           None of the Purchased Assets or the Licensed Intellectual Property is property that Sellers are required to treat as being owned by any other person pursuant to the so-called “safe harbor lease” provisions of former Section 168(f)(8) of the Internal Revenue Code of 1954, as amended.

 

(j)           None of the Purchased Assets or the Licensed Intellectual Property is tax-exempt use property within the meaning of Section 168(h) of the Code.

 

Section 4.22         Permits. All Permits required for Sellers to carry on their operations as presently conducted have been obtained by Seller and are valid and in full force and effect, except, in each case, where the failure to have a particular Permit would not be material to Sellers’ Business or the ownership and use of the Purchased Assets or the Licensed Intellectual Property. All fees and charges due and payable with respect to such Permits as of the Initial Disclosure Date have been paid in full, except where the failure to have paid would not be material to Seller’s Business or the ownership and use of the Purchased Assets or the Licensed Intellectual Property. Section 4.22 of the Disclosure Schedules lists all current material Permits issued to Sellers, including the names of the Permits and their respective dates of issuance and expiration. To Sellers’ Knowledge, no event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of any Permit set forth in Section 4.22 of the Disclosure Schedules.

 

Section 4.23         Brokers. Except as set forth in Section 4.23 of the Disclosure Schedules, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Sellers.

 

Section 4.24         Product Warranty . Except as set forth in Section 4.24 of the Disclosure Schedules, (a) neither Seller has Liability for replacement of each product manufactured, sold, leased, or delivered by either Seller or other damages in connection therewith, and (b) each product manufactured, sold, leased, or delivered by Seller has been in conformity in all material respects with all applicable contractual commitments and all express and implied warranties (other than which the failure of such product to so conform as a result of actions of Sellers’ subcontractors) subject only to the reserve for product warranty claims set forth on the Initial Interim Balance Sheet as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of Sellers. Section 4.24 of the Disclosure Schedules includes copies of the standard terms and conditions of sale of Sellers (containing applicable guaranty, warranty, and indemnity provisions). No product manufactured, sold, leased, or delivered by Sellers is subject to any guaranty, warranty, or other indemnity beyond the applicable standard terms and conditions of sale set forth in Section 4.24 of the Disclosure Schedules.

 

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Section 4.25         Products Liability. To Sellers’ Knowledge, no event has occurred that is reasonably likely to result in a material (individually or in the aggregate) claim against either Seller for any injury to individuals or property as a result of the use of any product sold or delivered by either Seller.

 

Section 4.26         Affiliate Interests. Except as set forth in Section 4.26 of the Disclosure Schedules, neither Member nor any manager, or officer or Affiliate of either Seller or Member:

 

(a)          owns any interest in any Person which is a competitor, supplier or Customer of either Seller (not including any ownership of three percent (3%) or less of any class of securities of a company whose securities are registered under the Securities Act);

 

(b)          owns, in whole or in part, any property, asset or right used in connection with the Business;

 

(c)          has an interest in any Contract pertaining to either Seller;

 

(d)          has any contractual arrangements with either Seller; or

 

(e)          owes any money to, or is owed any money by, either Seller, other than for current wages, benefits, and compensation paid and provided in the ordinary course of business.

 

Section 4.27         No Other Representations or Warranties. Except for the representations and warranties contained in this ARTICLE IV (as modified by the Disclosure Schedules) or elsewhere herein, or in any Transaction Document, no Seller or Member makes, and no Seller or Member shall have any Liability for, any other express or implied representation or warranty with respect to the Purchased Assets, the Licensed Intellectual Property, the Business, Sellers or the Members, including with respect to any projections, estimates, budgets or forward-looking statement heretofore delivered to or made available to Buyer or any information regarding future revenues, expenses or results of operations of the Business or any other information or documents (financial or otherwise) made available to Buyer or its Representatives. Subject to the terms of this Agreement, the condition of the Purchased Assets and the Licensed Intellectual Property shall be “as is” and “where is”, and each Seller and Member disclaims (a) any other representations or warranties of any kind or nature, express or implied, including as to the condition, value or quality of the Purchased Assets or the Licensed Intellectual Property, (b) any representation or warranty of merchantability, usage, suitability or fitness for any particular purpose with respect to such Purchased Assets or Licensed Intellectual Property, any part thereof, the workmanship thereof, and the absence of any defects therein, whether latent or patent, and Buyer and its Representatives and Affiliates are relying on their own examination and investigation. Notwithstanding anything in this Section 4.27 to the contrary, nothing in this Agreement shall limit or restrict any Buyer Indemnitee’s right to enforce (in accordance with this Agreement) such Person’s rights or remedies in the event of fraud.

 

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ARTICLE V

Representations and warranties of buyer

 

Buyer represents and warrants to Sellers as of the Initial Disclosure Date, as follows:

 

Section 5.01         Organization of Buyer. Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the state of Delaware, and has the corporate power and authority to own, lease and operate its properties and assets and to carry on its business as now being conducted.

 

Section 5.02         Authority of Buyer. Buyer has full corporate power and authority to enter into this Agreement and the other Transaction Documents to which Buyer is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Buyer of this Agreement and any other Transaction Document to which Buyer is a party, the performance by Buyer of its obligations hereunder and thereunder and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer, and constitutes a legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditor’s rights and remedies generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at Law or in equity). When each other Transaction Document to which Buyer is or will be a party has been duly executed and delivered by Buyer, such Transaction Document will constitute a legal and binding obligation of Buyer enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditor’s rights and remedies generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at Law or in equity).

 

Section 5.03         No Conflicts; Consents. The execution, delivery and performance by Buyer of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) conflict with or result in a violation or breach of, or default under, any provision of the certificate of incorporation or by-laws of Buyer; (b) conflict with or result in a violation or breach of any provision of any Law or Governmental Order applicable to Buyer; or (c) require the consent, notice or other action by any Person under, violate conflict with or result in a default (or any event which, with notice or lapse of time or both, would constitute a default) under, or give rise to any right of termination, cancellation or acceleration under any Contract to which Buyer is a party or by which Buyer or any of its assets may be bound. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to Buyer in connection with the execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby.

 

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Section 5.04         Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Buyer.

 

Section 5.05         Legal Proceedings. There are no Actions pending or, to Buyer’s knowledge, threatened (a) against or by Buyer, or (b) that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement, and no event has occurred or circumstances exist that may give rise or serve as a basis for any such Action.

 

Section 5.06         Independent Review. Buyer has conducted its own independent review and analysis of the Purchased Assets or the Licensed Intellectual Property, and acknowledges that Buyer has been provided access to the properties, premises and records of the Business for this purpose. In entering into this Agreement, Buyer has relied upon its own investigation and analysis and the representations and warranties contained herein, and Buyer:

 

(a)          acknowledges that it has had the opportunity to visit with Sellers and meet with their officers and other representatives to discuss the Purchased Assets and the Licensed Intellectual Property;

 

(b)          acknowledges that it has undertaken such due diligence (including a review of the assets, liabilities, books, records and Contracts of Sellers, the Purchased Assets and the Licensed Intellectual Property) as Buyer deems adequate; and

 

(c)          except for the representations and warranties contained in ARTICLE IV or the other Transaction Documents, Sellers do not make any representations or warranties in connection with the transactions contemplated by this Agreement.

 

For the avoidance of doubt, nothing in this Section 5.06, nor Buyer’s investigation, analysis, due diligence review, nor any information received by Buyer, nor Buyer’s not having conducted any greater investigation, analysis or due diligence than it conducted, shall (w) operate as a waiver or otherwise diminish any of Sellers’ representations and warranties and agreements given or made by Sellers or Member in this Agreement, (x) be deemed to amend or supplement the Disclosure Schedules; (y) be deemed to be an acknowledgment or agreement on the part of Buyer that Sellers’ and the Member’s representations and warranties, or the Disclosure Schedules, are complete and correct; or (z) mean that Buyer’s Knowledge includes any facts or circumstances not expressly set forth in Sellers’ and the Member’s representations and warranties or in the Disclosure Schedules.

 

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ARTICLE VI

Covenants

 

Section 6.01         Conduct of Business Prior to the Closing. From the Option Exercise Date until the Closing Date, except as otherwise provided in this Agreement or consented to in writing by Buyer, Sellers shall (x) conduct the Business in the ordinary course of business consistent with past practice; and (y) use commercially reasonable efforts to maintain and preserve intact its current business organization, operations and franchise and to preserve the rights, goodwill and relationships of its employees Customers, lenders, suppliers and regulators with Seller. Without limiting the foregoing, from the Option Exercise Date through the Closing Date, Sellers shall:

 

(a)          preserve and maintain all Permits required for the conduct of the Business as currently conducted by Sellers and the ownership and use of the Purchased Assets and the Licensed Intellectual Property;

 

(b)          pay their debts, Taxes and other obligations when due, unless diligently contested in good faith by appropriate proceedings;

 

(c)          continue to collect Accounts Receivable in the ordinary course of business consistent with past practice;

 

(d)          maintain the physical properties and assets included in the Purchased Assets and the Licensed Intellectual Property, in each case, in a state of repair and condition that is consistent with the requirements and normal use of the Purchased Assets and the Licensed Intellectual Property, in each case, in the ordinary course of business consistent with past practice;

 

(e)          continue in full force and effect without modification all Insurance Policies, except as requested by applicable Law or for such modifications made in the ordinary course of business;

 

(f)           maintain the Books and Records in accordance with past practice;

 

(g)          comply in all material respects with all applicable Laws;

 

(h)          not acquire by merger or consolidation with, or by purchase of a substantial portion of the assets, stock or other equity of, or by any other manner, any business or any Person or any division thereof, individually or in the aggregate, for a consideration in excess of $50,000 (provided, that the liabilities assumed by Sellers in connection with such transaction shall not exceed $50,000, individually or in the aggregate); and

 

(i)          not take or permit any action that would cause any of the changes, events or conditions described in clauses (b) through (o) of Section 4.06 to occur.

 

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Section 6.02         Access to Information. Subject to the restrictions of any applicable Law or contractual undertaking disclosed in Section 4.07 of the Disclosure Schedules, from the Option Exercise Date until the Closing, Sellers shall (a) upon reasonable advance notice received from Buyer, afford Buyer and its Representatives reasonable access to and the right to inspect all of the Real Property, properties, assets, premises, Books and Records, Contracts and other documents and data related solely to the Purchased Assets, the Licensed Intellectual Property or the Assumed Liabilities; (b) furnish Buyer and its Representatives with such financial, operating and other data and information related to solely to the Purchased Assets, the Licensed Intellectual Property or the Assumed Liabilities as Buyer or any of its Representatives may reasonably request; and (c) instruct the Representatives of Sellers to cooperate with Buyer in its reasonable investigation of the Business. Any investigation pursuant to this Section 6.02 shall be conducted from time to time ( i.e. , not on a regular basis) during normal business hours under the supervision of Sellers’ personnel and in such manner as to maintain the confidentiality of this Agreement and the transactions contemplated hereby and not to interfere unreasonably with Sellers’ conduct of the Business. In the event Sellers require the engagement of additional personnel or resources to satisfy its obligations under this Section 6.02 , such engagement shall be made at Buyer’s sole cost and expense.

 

Section 6.03         No Solicitation of Other Bids.

 

(a)          From the Option Exercise Date until the Closing Date, Sellers and the Members shall not, and shall not authorize or permit any of their respective Affiliates or Representatives to, directly or indirectly, (i) encourage, solicit, initiate, facilitate or continue inquiries regarding an Acquisition Proposal; (ii) enter into discussions or negotiations with, or provide any information to, any Person concerning a possible Acquisition Proposal; or (iii) enter into any agreements or other instruments (whether or not binding) regarding an Acquisition Proposal. Sellers and the Members shall immediately cease and cause to be terminated, and shall cause their respective Affiliates and Representatives to immediately cease and cause to be terminated, all existing discussions or negotiations with any Persons conducted heretofore with respect to, or that could lead to, an Acquisition Proposal. For purposes hereof, “ Acquisition Proposal ” means any inquiry, proposal or offer from any Person (other than Buyer or any of its Affiliates) relating to the direct or indirect disposition, whether by sale, merger or otherwise, of all or any portion of Sellers’ Business, the Purchased Assets or the Licensed Intellectual Property. For the avoidance of doubt, nothing in Section 6.01 or this Section 6.03(a) or shall prohibit Sellers, the Members or their respective Affiliates or Representatives from exploring, analyzing or examining the possibility of an acquisition of or joint venture with a manufacturer of nutritional products.

 

(b)          In addition to the other obligations under this Section 6.03 , Sellers and the Members shall promptly (and in any event within two (2) Business Days after receipt thereof by either Seller or its Representatives) advise Buyer orally and in writing of the existence of (i) any Acquisition Proposal, (ii) any request for information with respect to any Acquisition Proposal, or (iii) any inquiry with respect to or which could reasonably be expected to result in an Acquisition Proposal.

 

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(c)          The provisions of Section 6.06 shall be applicable during the periods set forth in Sections 6.03(a) and 6.03(b) .

 

Section 6.04         Notice of Certain Events; Supplemental Disclosure.

 

(a)          From the Option Exercise Date until the Closing, Sellers shall promptly notify Buyer in writing of:

 

(i)          any fact or circumstances, the existence of which (A) has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or (B) has resulted in any covenant or agreement made by any Seller or Member hereunder or under any other Transaction Document to be in breach;

 

(ii)         any written notice or other written communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;

 

(iii)        any written notice or other written communication from any Governmental Authority relating to the transactions contemplated by this Agreement; and

 

(iv)         any Actions commenced or, to Sellers’ Knowledge, threatened in writing against, relating to or involving or otherwise affecting the Business, the Purchased Assets, the Licensed Intellectual Property or the Assumed Liabilities that, if pending on the Option Exercise Date, would have been required to have been disclosed pursuant to Section 4.16, or that relates to the consummation of the transactions contemplated by this Agreement.

 

(b)          Sellers shall, prior to Closing, by notice in accordance with the terms of this Agreement and the Call Option Agreement (pursuant to a Schedule Update (as defined in the Call Option Agreement)), supplement or amend the Disclosure Schedules with respect to any matter arising after the Initial Disclosure Date, which, if existing, occurring or known on the Initial Disclosure Date, would have been required to be set forth or described in the Disclosure Schedules or which existed as of the Initial Disclosure Date but were not included in the Disclosure Schedules as of the Initial Disclosure Date. Any disclosure in any such supplement or amendment for purposes of the indemnification and termination rights contained in this Agreement shall not be deemed to have cured any inaccuracy in or breach of any representation or warranty contained in this Agreement with regard to facts or circumstances existing as of the Initial Disclosure Date, except as set forth in Section 7.02(a) , or for determining whether or not the conditions set forth in Section 7.01 and Section 7.02 have been satisfied.

 

(c)          Sellers shall, prior to Closing, deliver consolidated unaudited financial statements of Sellers consisting of a balance sheet as at November 30, 2014 and the related statements of income and retained earnings, members’ equity and cash flow for the period then ended (the “ Interim Financial Statements ”). The Interim Financial Statements shall be prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject to normal and recurring year-end adjustments (the effect of which will not be materially adverse in the aggregate) and the absence of notes (that, if presented, would not differ materially from those presented in the Audited Financial Statements).

 

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(d)          Except as expressly provided in Section 6.04(b) , Buyer’s receipt of information pursuant to this Section 6.04 shall not operate as a waiver or otherwise diminish any representation, warranty, covenant or agreement given or made by Sellers or the Members in this Agreement or any of the other Transaction Documents.

 

Section 6.05         Employees and Employee Benefits.

 

(a)          Not later than ten (10) Business Days prior to the Closing, Buyer shall deliver to Sellers a list of (i) each employee of a Seller that Buyer will offer employment to, effective as of the Closing Date (a “ Non-Continuing Employees ”) and (ii) each employee of a Seller who Buyer will not offer employment to as of the Closing (the “ Continuing Employee ”). Commencing on the Closing Date, Sellers shall terminate all employees who are identified by Buyer as Non-Continuing Employees. No later than the Closing Date, Buyer shall offer employment to each Non-Continuing Employee (which employment may be offered on an “at will” basis) . Sellers shall bear any and all obligations and liability under the WARN Act resulting from employment losses pursuant to this Section 6.05 . Each Non-Continuing Employee who accepts an offer of employment with Buyer effective as of the Closing Date shall be referred to herein as a “ Transferred Employee .” No less than ten (10) days prior to the Closing, Sellers shall provide Buyer with a list of employee layoffs, by date and location, implemented by Sellers in the 90-day period preceding the Closing.

 

(b)          The Transferred Employees shall receive credit for all periods of employment and/or service with Sellers and their Affiliates prior to the Closing Date for purposes of eligibility and vesting under Buyer’s relevant plans and policies.

 

(c)          Effective as of the Closing Date, Buyer shall offer the Transferred Employees and their eligible dependents participation in the Benefit Plans of Buyer, including such medical, dental, life insurance, and short- and long-term disability as Buyer may offer to its other similarly situated employees, in accordance with the terms and conditions of those plans as soon as practicable after the Closing Date, but in no event more than thirty (30) days after the Closing Date. To the degree allowed under the applicable Buyer Benefit Plan: (i) all waiting periods and pre-existing condition clauses shall be waived under Buyer’s Benefit Plans for the Transferred Employees and their eligible dependents who were participating in similar Seller Benefit Plans before the Closing Date, and (ii) Buyer shall cause its Benefit Plans to recognize any out-of-pocket medical and dental expenses incurred by each of the Transferred Employees and their eligible dependents prior to the Closing Date and during the calendar year in which the Closing Date occurs for purposes of determining deductibles and out-of-pocket maximums under Buyer’s Benefit Plans (and Sellers shall provide such information to Buyer in connection with the Closing).

 

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(d)          From and after the Closing Date, Buyer shall recognize, and permit each Transferred Employee to use his or her accrued (in the ordinary course) and unused vacation days since January 1, 2014 (and Sellers shall provide such information to Buyer in connection with the Closing). Buyer shall recognize service by each Transferred Employee with Sellers and its Affiliates for purposes of determining entitlement to vacation under the applicable vacation policy of Buyer.

 

(e)          Sellers shall be solely responsible, and Buyer shall have no obligations whatsoever for, any compensation or other amounts payable to any current or former employee, officer, independent contractor or consultant of Sellers, including hourly pay, commission, bonus, salary, accrued vacation, fringe, pension or profit sharing benefits or severance pay for any period relating to the service with Sellers at any time on or prior to the Closing Date, and Sellers shall pay all such amounts to all entitled Persons in accordance with Sellers’ normal payroll practices.

 

(f)          Sellers shall keep its 401-k plan in place for up to ninety (90) days if so requested by Buyer (and at Buyer’s cost), to allow for an orderly transition for Transferred Employees to Buyer’s 401-k plan.

 

(g)          Sellers shall remain solely responsible for the satisfaction of all claims for medical, dental, life insurance, health, accident or disability benefits brought by or in respect of current or former employees, officers, independent contractors or consultants, or the spouses, dependents or beneficiaries thereof, which claims relate to events occurring on or prior to the Closing Date. Sellers also shall remain solely responsible for all worker’s compensation claims of any current or former employees, officers, independent contractors or consultants of Sellers which relate to events occurring on or prior to the Closing Date. Sellers shall pay, or cause to be paid, all such amounts to the appropriate Persons as and when due.

 

(h)          The Parties acknowledge that Jonathan Greenhut is expected to perform certain transitional services to Buyer on behalf of Nutricap pursuant to the terms set forth in the Transition Services Agreement. If Mr. Greenhut terminates his employment with Nutricap prior to the expiration of the Transition Period (a “ Transition Failure Event ”), Sellers shall, no later than five (5) Business Days after Buyer’s written demand, pay to Buyer the sum of Two Hundred Fifty Thousand Dollars ($250,000) as liquidated damages. The Parties acknowledge and agree that the harm to Buyer caused by a Transition Failure Event would be impossible or extremely difficult to calculate, establish or estimate. The parties further acknowledge and agree, after negotiation between Sellers and Buyer, that the liquidated damages set forth herein are a reasonable estimate of the anticipated or actual harm that might arise from a Transition Failure Event, and therefore constitute reasonable compensation to Buyer, and not a penalty, in the event of a Transition Failure Event.

 

(i)          Nothing herein express or implied by this Agreement shall confer upon any employee of Sellers, or legal representative thereof, any rights or remedies, including any right to employment or benefits for any specified period, of any nature or kind whatsoever, under or by reason of this Agreement.

 

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Section 6.06         Confidentiality. From and after the Closing until the third (3rd) anniversary of the Closing Date, Sellers and Member shall, and shall cause their Affiliates to, hold, and shall use commercially reasonable efforts to cause its respective Representatives to hold, in confidence any and all information, whether written or oral, concerning the Business, the Purchased Assets or the Licensed Intellectual Property, except to the extent that Seller or Member can show that such information is generally available to and known by the public through no fault of Sellers or Member or any of their Affiliates or Representatives; or is required to be disclosed by Law or judicial or legal process. If Sellers or Member or any of their Affiliates or Representatives are compelled to disclose any information by judicial or administrative process or by other requirements of Law, Sellers or Member shall promptly notify Buyer in writing prior to making such disclosure so that Buyer may seek an appropriate protective order and shall disclose only that portion of such information which Sellers or Member is advised by its counsel in writing is legally required to be disclosed, provided that Sellers and Member shall use commercially reasonable efforts to ensure that confidential treatment will be accorded such information. From and after the Closing, neither Sellers, Member nor any Affiliate of Sellers or Member shall directly or indirectly use, or directly or indirectly assist any other Person in using, whether or not for compensation, any Confidential Information.

 

Section 6.07         Non-competition; Non-solicitation.

 

(a)          Except as set forth in Section 3 of the Transaction Services Agreement and except for the fulfillment of orders underlying Non-Novation Events as contemplated by Section 2.06 and Section 6.14 , for a period of three (3) years commencing on the Closing Date (the “ Non-Compete Period ”), Sellers and Member shall not, and shall not permit any of their Affiliates to, directly or indirectly, and whether or not for compensation, (i) engage in or assist others in engaging in the Business in the Territory; or (ii) have an interest in any Person that engages directly or indirectly in the Business in the Territory in a capacity as a partner, shareholder, member, officer, director, employee, principal, agent, trustee or consultant; and for a period of three (3) years commencing on the Closing Date (the “ Non-Solicitation Period ”), Sellers and Member shall not, and shall not permit any of their Affiliates to, directly or indirectly, and whether or not for compensation, cause, induce or encourage any Customer, supplier or licensor of the Business to terminate or modify any relationship with Buyer. Notwithstanding the foregoing, Sellers and Member may own, directly or indirectly, solely as an investment, securities of any Person traded on any national securities exchange if such Seller or Member is not a controlling Person of, or a member of a group which controls, such Person and does not, directly or indirectly, own three percent (3%) or more of any class of securities of such Person. For the avoidance of doubt, the term “ Business ” as used in this Agreement, shall not include the business of direct-to-consumer or the related retail distribution of vitamins, minerals or dietary supplements.

 

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(b)          During the Non-Solicitation Period, Sellers and Member shall not, and shall not permit any of their Affiliates to, directly or indirectly, hire or solicit any Transferred Employee or any other person who is employed by Buyer during the Non-Solicitation Period, or encourage any such employee to leave such employment; provided, however , that Sellers, Member and their respective Affiliates shall be permitted to (i) hire any Transferred Employee or any other person who is employed by Buyer during the Non-Solicitation Period who is terminated by Buyer other than as a result of a breach by a Seller or Member of this Section 6.07(b) and (ii) hire any Transferred Employee or any other person who is employed by Buyer during the Non-Solicitation Period after the 180 day period following such employee’s voluntary termination of employment with Buyer; provided , however , that Ryan Mayer shall be permitted to provide services to Stain Away LLC, an Affiliate of Sellers, so long as the performance of such services do not interfere in any material respect with his performance of services to Buyer.

 

(c)          Sellers and Member acknowledge that a breach or threatened breach of this Section 6.07 would give rise to irreparable harm to Buyer, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by a Seller or Member of any such obligations, Buyer shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to seek equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond or other security).

 

(d)          Sellers and Member acknowledge that the restrictions contained in this Section 6.07 are reasonable and necessary to protect the legitimate interests of Buyer and constitute a material inducement to Buyer to enter into this Agreement and consummate the transactions contemplated by this Agreement. In the event that any covenant contained in this Section 6.07 should ever be adjudicated to exceed the time, geographic, product or service or other limitations permitted by applicable Law in any jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service or other limitations permitted by applicable Law. The covenants contained in this Section 6.07 and each provision hereof are severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written shall not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenant or provision in any other jurisdiction.

 

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Section 6.08         Governmental Approvals and Consents.

 

(a)          Sellers and Buyer shall, as promptly as possible, (i) make, or cause or be made, all filings and submissions required under any Law applicable to such party or any of its Affiliates; and (ii) use reasonable best efforts to obtain, or cause to be obtained, all consents, authorizations, orders and approvals from all Governmental Authorities that, in each case, are necessary for its execution and delivery of this Agreement and the other Transaction Documents and the performance of its obligations pursuant to this Agreement and the other Transaction Documents. Each party shall cooperate fully with the other parties and its Affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals. The parties hereto shall not willfully take any action that will have the effect of delaying, impairing or impeding the receipt of any required consents, authorizations, orders and approvals.

 

(b)          Sellers and Buyer shall use commercially reasonable efforts to give all notices to, and obtain all consents from, all third parties to which notice is required to be given or from which consent is required to be obtained that are described in Section 4.03 of the Disclosure Schedules.

 

(c)          Without limiting the generality of the parties’ undertakings pursuant to subsections (a) and (b) above, each of the parties hereto shall use all reasonable best efforts to:

 

(i)          respond to any inquiries by any Governmental Authority regarding antitrust or other matters with respect to the transactions contemplated by this Agreement or any other Transaction Document;

 

(ii)         avoid the imposition of any order or the taking of any action that would restrain, alter or enjoin the transactions contemplated by this Agreement or any other Transaction Document; and

 

(iii)        in the event any Governmental Order adversely affecting the ability of the parties to consummate the transactions contemplated by this Agreement or any other Transaction Document has been issued, to have such Governmental Order vacated or lifted.

 

(d)          All analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals made by or on behalf of a party before any Governmental Authority, in connection with the transactions contemplated hereunder (but, for the avoidance of doubt, not including any interactions between a Seller with Governmental Authorities in the ordinary course of business, any disclosure which is not permitted by Law and any disclosure required on the part of Buyer or any Affiliates of Buyer for purposes of federal or state securities laws) shall be disclosed to the other parties hereunder in advance of any filing, submission or attendance, it being the intent that the parties will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any such analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals. Buyer and Sellers shall give notice to the other with respect to any meeting, discussion, appearance or contact with any Governmental Authority or the staff or regulators of any Governmental Authority (other than federal or state securities regulatory agencies).

 

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(e)          Notwithstanding the foregoing, nothing in this Section 6.08 shall require, or be construed to require, Buyer or Sellers to agree to (i) sell, hold, divest, discontinue or limit, before or after the Closing Date, any assets, businesses or interests of Buyer or any of its Affiliates; (ii) any conditions relating to, or changes or restrictions in, the operations of any such assets, businesses or interests which, in either case, could reasonably be expected to result in a Material Adverse Effect or materially and adversely impact the economic or business benefits to Buyer or Sellers, as applicable, of the transactions contemplated by this Agreement and the other Transaction Documents; or (iii) any material modification or waiver of the terms and conditions of this Agreement.

 

Section 6.09         Books and Records.

 

(a)          For a period of three (3) years after the Closing, Buyer shall:

 

(i)          to the extent it received any Books and Records from Sellers, retain such Books and Records (including personnel files) relating to periods prior to the Closing; and

 

(ii)         upon reasonable notice, afford Sellers reasonable access (including the right to make, at Sellers’ expense, photocopies), during normal business hours, to such Books and Records.

 

(b)          In order to facilitate the resolution of any claims made by or against or incurred by Buyer after the Closing, or for any other reasonable purpose, for a period of three (3) years following the Closing, Sellers shall:

 

(i)          retain the books and records (including personnel files) of Sellers which relate to the Business and its operations for periods prior to the Closing; and

 

(ii)         upon reasonable notice, afford Buyer’s Representatives reasonable access (including the right to make, at Buyer’s expense, photocopies), during normal business hours, to such books and records.

 

(c)          Neither Buyer nor Sellers shall be obligated to provide the other party with access to any books or records (including personnel files) pursuant to this Section 6.09 where such access would violate any Law or cause the waiver of Buyer’s or Sellers’ attorney-client privilege.

 

Section 6.10         Public Announcements. Unless otherwise required by applicable Law (based upon the reasonable advice of counsel), no party to this Agreement shall make any public announcements or other disclosure or otherwise communicate with any news media in respect of this Agreement, the Call Option Agreement or the transactions contemplated hereby or thereby without the prior written consent of the other parties (which, in the case of Sellers and the Members, may be given by either Seller), which consent shall not be unreasonably withheld or delayed, and the parties shall cooperate as to the timing and contents of any such announcement. Notwithstanding the foregoing, Sellers and Member acknowledge and agree that any filings or public announcements that Buyer or any Affiliate of Buyer is required to make for federal or state securities laws purposes shall not be subject to this Section 6.11 ; provided, however , Sellers and Member shall be entitled to consult on any proposed language in any filing or public announcement relating to the transactions contemplated by the Transaction Documents.

 

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Section 6.11         Bulk Sales Laws. The parties hereby waive compliance with the provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Purchased Assets to Buyer.

 

Section 6.12         Receivables.

 

(a)          From and after the Closing, if either Seller or any of its Affiliates receives or collects any funds relating to any Accounts Receivable that pertains to a Post-Closing sale to a Customer by Buyer, such Seller or its Affiliate shall remit such funds to Buyer within five (5) Business Days after its receipt thereof. From and after the Closing, if Buyer or its Affiliates receives or collects any funds relating to any Excluded Asset, Buyer or its Affiliate shall remit any such funds to the appropriate Seller within five (5) Business Days after its receipt thereof. For the avoidance of doubt, Sellers shall be entitled to the collection and receipt of all Accounts Receivable arising from (a) the conduct of the Business prior to the close of business on the Closing Date, (b) the sale of Inventory during the Selloff Period (as defined in the Transition Services Agreement) in accordance with Section 3 of the Transition Services Agreement and (c) orders in respect of Non-Novation Events, and Buyer shall be entitled to the collection and receipt of all accounts receivable arising from sales by it to Customers after the Closing Date. In the event that a Customer seeks to take a deduction, offset or credit from or against an invoice of Buyer or Sellers, as applicable, with respect to Accounts Receivable owed to the other party(ies), no such deduction, offset or credit shall be granted without the consent of the party who holds the applicable Accounts Receivable.

 

(b)          The parties acknowledge that subsequent to the Closing each will have outstanding Accounts Receivable that could be owing from the same Customer. As between them, the parties agree that any amount collected in respect of any such receivable shall be allocated to the underlying invoice to the extent such payment can be clearly identified to a specific invoice. If a party receives any payment which cannot be reconciled to a specific invoice, such party shall notify the other parties hereto and the parties hereto shall cooperate in good faith to determine how the payment from such Customer should be reconciled; provided, however, in the event that the party receiving such payment has knowledge that such payment is in respect of the sale of products or provision of services to such Customer by the another party hereto, the receiving party shall promptly (within 3 Business Days) turn such payment over to such other party in the same form as received with any necessary endorsements and, in the case of any funds received in electronic form, remit the proceeds to the designated bank account of such other party, as appropriate.

 

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Section 6.13         Transfer Taxes. All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement and the other Transaction Documents (including any real property transfer Tax and any other similar Tax) shall be borne and paid by Buyer when due. Sellers shall, at Buyer’s expense, timely file any Tax Return or other document with respect to such Taxes or fees (and Buyer shall cooperate with respect thereto as necessary).

 

Section 6.14         Transition of Customers; Novation Contracts .

 

(a)          Commencing on the Closing Date and during the Transition Period (as defined in the Transition Services Agreement), the Sellers shall, at the Buyer’s cost and request, notify (or cause to be notified) the Customers that the Sellers are winding down their respective Business and shall recommend that Customers place future orders with Buyer for fulfillment. Notwithstanding anything to the contrary contained herein, Buyer shall have the right, exercisable in its sole discretion, to provide notice to Sellers at or prior to the Closing that Buyer is electing to cause any or all purchase orders and/or supply orders entered into by Sellers in respect of the Business for which the Inventory in respect thereof has not been received by Sellers as of the Closing Date to be terminated, following discussions with the counterparties to such orders (which discussions shall be facilitated, at Buyer’s request, by Sellers in accordance with terms of the Transition Services Agreement), and replaced by new purchaser orders or supply orders pursuant to which such Customer or supplier is contracting directly with Buyer (each, a “ Novation Contract ”); provided, however, that with respect to each such order for which there is a Customer Deposit, Buyer shall contact each applicable Customer no later than thirty (30) days following the Closing Date to request a Novation Contract. The Parties acknowledge that in the event that (i) a Customer or supplier is unwilling or unable to enter into a Novation Contract within ten (10) days following request thereof (or such other amount of time as reasonably agreed to by Sellers and Buyer) or (ii) a Customer or supplier is not contacted to request a Novation Contract within a reasonable period of time following the Closing Date, and the failure to have a Novation Contract entered into by such time would make it difficult for Sellers to timely fulfill the applicable order on its terms (the events described in the foregoing clauses (i) and (ii), each a “ Non-Novation Event ”), Sellers shall be permitted to fulfill the orders with respect to such Non-Novation Event and Buyer shall pay the amounts due pursuant to Section 2.06 . The failure of any counterparty to a Customer purchase order or supplier order to enter into a Novation Contract shall in no event be a condition to the consummation of the Closing or give rise to a claim for indemnification by Sellers and Members pursuant to Section 8.02 hereof, absent a breach of a representation or warranty contained herein.

 

(b)          The entrance by Buyer into any Novation Contract shall not be deemed a transfer to Buyer pursuant to this Agreement of the underlying order or agreement so novated.

 

Section 6.15         Change of Names. Promptly following the termination of the Selloff Period (as defined in the Transition Services Agreement), each Seller shall file an amendment to its Articles of Organization to change the name of such Seller to a name that does not use any part of the current name of such Seller (other than “LLC”), or any name that is similar to the current name of such Seller, or the name of any predecessor of such Seller, or any trade name of such Seller (all such names being “ Prohibited Names ”), and thereafter Sellers and Member shall not use any Prohibited Name as the name of either Seller or Member.

 

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Section 6.16         Public Filings. Prior to the Closing, before filing with the Securities and Exchange Commission (the “ SEC ”) any document containing disclosures directly relating to any Seller (a “ Seller Disclosure Document ”), Buyer shall furnish (or cause to be furnished) to such Seller copies of the portions of such proposed documents containing disclosures relating to such Seller. Upon written request from any Seller, Buyer shall make itself available to discuss any Seller Disclosure Document with such Seller. Buyer shall notify the Sellers after Buyer receives notice of the time when any such Seller Disclosure Document has been filed. Buyer shall notify the Sellers of any request by the SEC for additional information regarding any Seller or to amend or supplement any Seller Disclosure Document (an “ SEC Disclosure Request ”) directly related to this Agreement, any Transaction Document, Members or Sellers. Notwithstanding the foregoing or anything else contained herein, nothing set forth in this Agreement shall (x) in any way prohibit or limit Buyer from making, or require Buyer to include any language requested by Sellers in, any disclosure required by the SEC, (y) require Buyer to include any Seller in any negotiation, conversation, or other interaction between Buyer and the SEC or (z) require Buyers to (i) take any action to comply with this Section 6.16 , if Buyer is advised by counsel that such action is prohibited by law or otherwise or (ii) make any effort that is greater than a “commercially reasonable” effort to satisfy Buyer’s obligations set forth in this Section 6.16 . Notwithstanding anything to the contrary contained herein, neither Buyer nor any Affiliate of Buyer shall file any Seller Disclosure Document or issue any press release or public statement regarding the existence of the Transaction Documents or the transactions contemplated thereby until the first to occur of (x) the Closing and (y) the fourth (4th) Business Day following the Option Exercise Date.

 

Section 6.17         Deposit of Escrow Amount. On or prior to the Maturity Date (as defined in the First Promissory Note) of the First Promissory Note, Buyer shall pay to Nutricap an aggregate amount equal to the Amount Due (as defined in the First Promissory Note) under the First Promissory Note less the Escrow Amount. Buyer shall (I) deliver the Amount Due under the First Promissory Note, less the Escrow Amount, by wire transfer of immediately available funds to an account designated in writing by Nutricap to Buyer, and (II) deposit the Escrow Amount by wire transfer of immediately available funds into an account designated by the Escrow Agent, to be held and distributed in accordance with the terms of the Escrow Agreement.

 

Section 6.18         Financing Covenants.

 

(a)          Buyer shall use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to, as soon as reasonably practical, (i) obtain and consummate equity or debt financing (the “ Additional Financing ”) in an amount necessary to permit Buyer to pay the Amount Due under the First Promissory Note as promptly as reasonably practical following the Closing, but in no event later than sixty (60) days thereafter and (ii) cause its financing documents to permit the payment of the Amount Due on the terms set forth in the First Promissory Note.  Buyer acknowledges and agrees that the obtaining of the financing contemplated by this  Section 6.18(a)  is not a condition to the Closing. Buyer acknowledges and agrees that it shall use the proceeds of such Additional Financing, net of any and all legal fees, brokerage or placement fees and other fees and/or expenses customarily paid from the proceeds of equity or debt financing, to pay the Amount Due under the First Promissory Note in accordance with its terms prior to the use of such proceeds for any other purpose, except for uses of amounts that are not, in the aggregate, material and which would not cause Buyer to be unable to timely pay the Amount Due.

 

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(b)          Following the Closing and until the Maturity Date (as defined in the First Promissory Note) of the First Promissory Note, (i) F. Peter Brechter, on behalf of the Buyer, shall conduct weekly calls with Jonathan Greenhut, as representative of the Sellers, to reasonably inform Sellers of all material activity concerning such financing activities and (ii) Buyer shall give Sellers prompt notice of any adverse change with respect thereto; provided, however , the failure to conduct a weekly call under this Section 6.18(b) shall not constitute a breach of this Agreement if the parties promptly conduct a call the following week.

 

Section 6.19         Further Assurances. Following the Closing, each of the parties hereto shall, and shall cause their respective Affiliates to, use commercially reasonable efforts to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement and the other Transaction Documents.

 

ARTICLE VII

Conditions to closing

 

Section 7.01         Conditions to Obligations of All Parties. The obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment (or written waiver by such party), at or prior to the Closing, of each of the following conditions:

 

(a)          No Governmental Authority shall have issued any Governmental Order which is in effect and has the effect of making the transactions contemplated by this Agreement illegal, otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof.

 

(b)          No Action shall have been commenced against Buyer, or either Seller, or any Member seeking to prevent the Closing.

 

(c)          All approvals, consents and waivers that are listed in Section 7.02(c) of the Disclosure Schedules shall have been received, and executed counterparts thereof shall have been delivered to Buyer and Sellers at or prior to the Closing.

 

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Section 7.02         Conditions to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Buyer’s waiver, at or prior to the Closing, of each of the following conditions:

 

(a)          The representations and warranties of Sellers contained in this Agreement, the other Transaction Documents and any certificate or other writing delivered pursuant hereto shall be complete and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect), at and as if made on the Initial Disclosure Date; provided, that , (i) if such representations and warranties were not so complete and correct in accordance with the foregoing as of the Initial Disclosure Date (an “ Incomplete Representation ”), (ii) prior to the Closing Date, such Incomplete Representation becomes so complete and correct (a “ Complete Representation ”) (including as a result of actions taken by Sellers), and (iii) if such Incomplete Representation became a Complete Representation in a manner that does not materially increase Buyer’s obligations or liabilities, or reasonably foreseeable obligations or liabilities, after the Closing Date, or materially and adversely impact Buyer’s ability to own and operate the Purchased Assets or the Licensed Intellectual Property after the Closing Date in substantially the same manner as the Purchased Assets and the Licensed Intellectual Property were owned and operated by Sellers on the Initial Disclosure Date, then such representations and warranties shall be deemed to have been so complete and correct as of the Initial Disclosure Date. For the avoidance of doubt, Sellers’ delivery of a Schedule Update shall not in-and-of itself make an Incomplete Representation a Complete Representation for purposes of this Section 7.02.

 

(b)          Sellers and Member shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the other Transaction Documents to be performed or complied with by it prior to or on the Closing Date.

 

(c)          All approvals, consents and waivers that are listed in Section 7.02(c) of the Disclosure Schedules shall have been received and executed counterparts thereof shall have been delivered to Buyer at or prior to the Closing.

 

(d)          From the date of this Agreement, there shall not have occurred a Material Adverse Effect, which for purposes of this Section 7.02(d) only, shall also include a material breach of the representations and warranties set forth in Section 4.01 , Section 4.02 , and the first sentence of Section 4.08 .

 

(e)          Sellers and Member (as applicable) shall have delivered to Buyer duly executed counterparts to the Transaction Documents and such other documents and deliveries set forth in Section 3.02(a) .

 

(f)          All Encumbrances relating to the Purchased Assets and the Licensed Intellectual Property shall have been released in full, other than Permitted Encumbrances, and Sellers shall have delivered to Buyer written evidence, in form and substance reasonably satisfactory to Buyer, of the release of such Encumbrances.

 

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(g)          All Senior Debt, if any, to the extent not satisfied by the Senior Debt Repayment, shall have been paid in full, and Buyer shall have received written evidence thereof in form and substance reasonably satisfactory to Buyer.

 

(h)          Buyer shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of each Seller, that each of the conditions set forth in Section 7.02(a) and Section 7.02(b) have been satisfied (the “ Sellers’ Closing Certificate ”).

 

(i)          Buyer shall have received a certificate in form and substance reasonably acceptable to Buyer (“ Sellers’ Officer Certificate ”) executed by an executive officer of each Seller attaching and certifying true and correct copies of (i) Sellers’ Articles of Organization, (ii) Sellers’ Operating Agreements, and (iii) the resolutions of Sellers’ Member approving this Agreement and the transactions contemplated hereby.

 

(j)          Buyer shall have received a certificate pursuant to Treasury Regulations Section 1.1445-2(b) (the “ FIRPTA Certificate ”) that neither Seller is a foreign person within the meaning of Section 1445 of the Code duly executed by Sellers.

 

(k)          Buyer shall have received from Sellers a schedule setting forth a complete and correct list of all Customer Labels as of the Closing Date, including identification of the Customers for which such Customer Labels are held.

 

(l)          Buyer shall have received from Sellers a schedule setting forth a complete and correct list of all Customer Deposits as of the Closing Date, including the amount of each such Customer Deposit, the identity with particularity of the applicable Customer and, where applicable, the specific order to which such Customer Deposit relates.

 

Section 7.03         Conditions to Obligations of Sellers. The obligations of Sellers to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Sellers’ waiver, at or prior to the Closing, of each of the following conditions:

 

(a)          No Governmental Authority shall have issued any Governmental Order which is in effect and has the effect of making the transactions contemplated by this Agreement illegal, otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof.

 

(b)          No Action shall have been commenced against Buyer or Sellers seeking to prevent the Closing.

 

(c)          All approvals, consents and waivers that are listed in Section 7.02(c) of the Disclosure Schedules shall have been received, and executed counterparts thereof shall have been delivered to Buyer at or prior to the Closing.

 

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(d)          The representations and warranties of Buyer contained in this Agreement, the other Transaction Documents and any certificate or other writing delivered pursuant hereto shall be complete and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect), at and as if made on the Closing Date.

 

(e)          Buyer shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the other Transaction Documents to be performed or complied with by it prior to or on the Closing Date, including payment of the Purchase Price on the terms and conditions provided herein.

 

(f)          Buyer shall have delivered to Sellers duly executed counterparts to the Transaction Documents and such other documents and deliveries set forth in Section 3.02(b) .

 

(g)          Buyer shall have delivered the Senior Debt Repayment pursuant to Section 2.05(b) .

 

(h)          Sellers shall have received a certificate, in form and substance reasonably satisfactory to Sellers, dated the Closing Date and signed by a duly authorized officer of Buyer, that each of the conditions set forth in Section 7.03(a) and Section 7.03(e) have been satisfied (the “ Buyer Closing Certificate ”).

 

(i)          Sellers shall have received a certificate in form and substance reasonably acceptable to Sellers (“ Buyer’s Secretary Certificate ”) executed by the secretary of Buyer attaching and certifying true and correct copies of (i) Buyer’s Certificate of Incorporation, (ii) Buyer’s Bylaws, (iii) the resolutions of Buyer’s Board of Directors approving this Agreement and the transactions contemplated hereby, and (iv) the resolutions of Buyer’s shareholders approving this Agreement and the transactions contemplated hereby.

 

ARTICLE VIII

Indemnification

 

Section 8.01         Survival. Subject to the limitations and other provisions of this Agreement, the representations and warranties contained herein shall survive the Closing and shall remain in full force and effect until the date that is eighteen (18) months from the Closing Date (the “ Expiration Date ”); provided , that the representations and warranties in Section 4.01 , Section 4.02 , the first sentence of Section 4.08 , Section 5.01 , Section 5.02 and Section 5.04 shall survive indefinitely, the representations and warranties in Section 4.18 (but only as to which Buyer’s Losses exceed $100,000) shall survive for four (4) years following the Closing, and the representations and warranties in Section 4.21 shall survive for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof) that would apply to Third Party Claims regarding the subject matter of such representations and warranties plus sixty (60) days. All covenants and agreements of the parties contained herein shall survive the Closing for the period explicitly specified therein. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved; provided , that no claim may be asserted against any party for a breach of a representation and warranty unless written notice of such claim is received by such party, describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim, on or prior to the date on which the representation or warranty on which such claim is based ceases to survive as set forth.

 

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Section 8.02         Indemnification By Sellers and Members. Subject to the other terms and conditions of this ARTICLE VIII , Sellers and Members shall jointly and severally indemnify and defend Buyer and its Affiliates and their respective Representatives (collectively, the “ Buyer Indemnitees ”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, the Buyer Indemnitees based upon, arising out of, with respect to or by reason of (but without duplication):

 

(a)          any inaccuracy in or breach of any of the representations or warranties of Sellers, as of the Initial Disclosure Date and as of the Closing Date, contained in this Agreement, the Bill of Sale, the Assignment and Assumption Agreement, the License Agreement, the Call Option Agreement or in any certificate or instrument delivered by or on behalf of Sellers pursuant to this Agreement;

 

(b)          any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Sellers pursuant to this Agreement, the Bill of Sale, the Assignment and Assumption Agreement, the License Agreement, the Call Option Agreement or any certificate or instrument delivered by or on behalf of Sellers pursuant to this Agreement; or

 

(c)          any Excluded Asset or any Excluded Liability, provided that any claims for indemnification with regard to the Excluded Liabilities set forth in Section 2.04(g) shall be subject to the same indemnification limitations applicable to inaccuracies or breaches of the representations and warranties set forth in Section 4.18 .

 

Section 8.03         Indemnification By Buyer. Subject to the other terms and conditions of this ARTICLE VIII , Buyer shall indemnify and defend Sellers and their respective Affiliates and Representatives (collectively, the “ Seller Indemnitees ”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, the Seller Indemnitees based upon, arising out of, with respect to or by reason of (but without duplication):

 

(a)          any inaccuracy in or breach of any of the representations or warranties of Buyer, as of the Initial Disclosure Date and as of the Closing Date contained in this Agreement, or in any certificate or instrument delivered by or on behalf of Buyer pursuant to this Agreement, the Bill of Sale, the Assignment and Assumption Agreement or the License Agreement;

 

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(b)          any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Buyer pursuant to this Agreement, the Bill of Sale, the Assignment and Assumption Agreement, the License Agreement or the Call Option Agreement; or

 

(c)          any Assumed Liability or Purchased Asset.

 

Section 8.04         Certain Limitations. The indemnification provided for in Section 8.02 and Section 8.03 shall be subject to the following limitations:

 

(a)          Sellers and Members shall not be liable to the Buyer Indemnitees for indemnification under Section 8.02(a) until the aggregate amount of all Losses in respect of indemnification under Section 8.02(a) exceeds $157,500 (the “ Basket ”), in which event Sellers and Members shall only be liable for any such Losses in excess of the Basket. Representations and warranties in Article IV that are qualified by the terms “material” or “Material Adverse Effect”, or other terms of similar impact or effect, shall be read without regard to such terms (i.e., as if such words were deleted from such representation or warranty), and if the Losses in respect of any breach of any such representation and warranty (as so modified) do not exceed $15,750, such Losses will not count toward the Basket or otherwise be indemnified; provided that if the aggregate amount of all such Losses exceeds $50,000, then all such Losses (including the first $50,000 of such Losses) shall count toward the Basket, but Sellers and Members shall be liable solely for the extent of Losses in excess of the Basket.

 

(b)          Buyer shall not be liable to the Seller Indemnitees for indemnification under Section 8.03(a) until the aggregate amount of all Losses in respect of indemnification under Section 8.03(a) exceeds the Basket, in which event Buyer shall be liable for any such Losses in excess of the Basket.

 

(c)          In no event shall the aggregate amount of indemnity required to be paid by Sellers and Members pursuant to Section 8.02(a) or by Buyer pursuant to Section 8.03(a) exceed $1,570,000 (the “ Cap ”); provided, that the Cap shall not apply with respect to a breach of any representation or warranty in Section 4.01 , Section 4.02 , the first sentence of Section 4.08 , Section 4.19 , Section 4.21 , Section 4.23 , Section 5.01 or Section 5.02. Without limiting the applicability of the previous sentence, the aggregate liability of Seller for Losses arising out of, resulting from, or relating to (i) Section 8.02(a) or (ii) fraud, shall be limited to the Purchase Price.

 

(d)          Notwithstanding the foregoing, the limitations set forth in Section 8.04(a) and Section 8.04(b) shall not apply to Losses based upon, arising out of, with respect to or by reason of any inaccuracy in or breach of any representation or warranty in Section 4.01 , Section 4.02 , the first sentence of Section 4.08, Section 4.18, Section 4.19 , Section 4.21, Section 4.23, Section 5.01 or Section 5.02.

 

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(e)          For the avoidance of doubt, the limitations set forth in Section 8.04(a) , Section 8.04(b) , and Section 8.04(c) shall not apply to Losses based upon, arising out of, with respect to or by reason of Sections 8.02(b) or (c) .

 

(f)          The parties shall cooperate with each other to resolve any claim, Liability or Loss with respect to which one party is obligated to indemnify the other party hereunder, including making commercially reasonable efforts to resolve such claim, Liability or Loss. For any indemnifiable claim hereunder, (i) the recovery by the Indemnified Party shall be limited to the amount of actual out-of-pocket indemnifiable Losses sustained by such Indemnified Party and (ii) the Indemnified Party shall seek indemnification from any then-available third party insurance coverage. For all purposes of this ARTICLE VIII , “ Losses ” shall be net of any third party insurance proceeds or any indemnity, contributions or other similar payment actually paid to the Indemnified Party or its Affiliates in connection with the facts giving right to the right of indemnification (provided that Buyer shall be under no obligation to initiate any legal proceedings to obtain such payments).

 

(g)          In any case where a Buyer Indemnitee recovers from third Persons any amount in respect of a matter with respect to which Seller have made an indemnification payment to such Buyer Indemnitee pursuant to this Agreement, such Buyer Indemnitee shall promptly pay over to Sellers the amount so recovered (after deducting therefrom the full amount of the expenses incurred by the Buyer Indemnitee in procuring such recovery), and any amount expended by Sellers in pursuing or defending any claim arising out of such matter, but not in excess of the amount of the indemnification payment previously paid by Sellers to or on behalf of such Buyer Indemnitee in respect of such matter.

 

(h)          Notwithstanding anything contained in the Transaction Documents to the contrary, no Buyer Indemnitee may recover duplicative Losses in respect of a single set of facts or circumstances under more than one representation or warranty in this Agreement regardless of whether such facts or circumstances would give rise to a breach of more than one representation or warranty in this Agreement.

 

(i)          Notwithstanding the foregoing or anything else contained herein, subject to the proviso in Section 8.09 , if the Closing occurs, Buyer Indemnitees shall be indemnified for any Losses incurred by them as a result of any breaches in any representations and warranties herein, in the Bill of Sale, the Assignment and Assumption Agreement, the License Agreement, the Call Option Agreement or in any certificate or instrument delivered by or on behalf of Sellers pursuant to this Agreement, or any changes in facts or circumstances covered by Sellers’ representations and warranties set forth in any representations and warranties herein, the Bill of Sale, the Assignment and Assumption Agreement, the License Agreement, the Call Option Agreement or in any certificate or instrument delivered by or on behalf of Sellers pursuant to this Agreement, that occur between the Initial Disclosure Date and the Closing Date, except for changes that occur in the ordinary course of business in (i) the list of Sellers’ Inventory set forth in Section 4.12 of the Disclosure Schedule, (ii) the list of Sellers’ Material Customers set forth in Section 4.14(a) of the Disclosure Schedule and (iii) the list of Sellers’ Material Suppliers set forth in Section 4.14(b) of the Disclosure Schedule. For the avoidance of doubt, the indemnification set forth in this Section 8.04(i) shall apply even if Seller’s representations and warranties set forth in Article IV, as supplemented by Schedule Updates, are complete and correct as of the Closing Date.

 

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Section 8.05         Indemnification Procedures. The party making a claim under this ARTICLE VIII is referred to as the “ Indemnified Party ”, and the party against whom such claims are asserted under this ARTICLE VIII is referred to as the “ Indemnifying Party ”.

 

(a)           Third Party Claims. If any Indemnified Party receives written notice of the threat, assertion or commencement of any Action made or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement or a Representative of the foregoing (a “ Third Party Claim ”) against such Indemnified Party with respect to which an Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnified Party shall give the Indemnifying Party prompt written notice thereof (and in any event, prior to the Expiration Date), provided , that the delay or failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party is actually prejudiced thereby. Such notice by the Indemnified Party shall describe the Third Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have the right to participate in, or by giving written notice to the Indemnified Party within thirty (30) days following the Indemnifying Party’s receipt of notice of a Third Party Claim, to assume the defense of any Third Party Claim at the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and the Indemnified Party shall cooperate in good faith in such defense; provided , that if the Indemnifying Party is a Seller, such Indemnifying Party shall not have the right to defend or direct the defense of any such Third Party Claim that involves any criminal or quasi-criminal legal proceeding to which the Indemnified Party is a party. In the event that the Indemnifying Party assumes the defense of any Third Party Claim, subject to Section 8.05(b) , it shall have the right to take such action as it deems necessary to dispute, defend, appeal or make counterclaims pertaining to any such Third Party Claim in the name and on behalf of the Indemnified Party. The Indemnified Party shall have the right to participate in the defense of any Third Party Claim with counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. The fees and disbursements of such counsel shall be at the expense of the Indemnified Party, provided, that if in the reasonable opinion of counsel to the Indemnified Party, (A) there are legal defenses available to an Indemnified Party that are different from or additional to those available to the Indemnifying Party; or (B) there exists a conflict of interest between the Indemnifying Party and the Indemnified Party that cannot be waived, the Indemnifying Party shall be liable for the reasonable fees and expenses of counsel to the Indemnified Party, provided , however , that the Indemnifying Party will not be required to pay the fees and expenses of more than one counsel for all Indemnified Parties in any jurisdiction in any single Third Party Claim. If the Indemnifying Party elects not to compromise or defend such Third Party Claim, fails to notify the Indemnified Party in writing within the 30-day period noted above of its election to defend as provided in this Agreement, or fails to diligently prosecute the defense of such Third Party Claim, the Indemnified Party may, subject to Section 8.05(b) , pay, compromise, defend such Third Party Claim and seek indemnification for any and all Losses based upon, arising from or relating to such Third Party Claim. In any Third Party Claim with respect to which indemnification is being sought hereunder, the Indemnified Party or the Indemnifying Party, whichever is not assuming the defense of such Third Party Claim, shall have the right to participate in such matter and to retain its own counsel at such party’s own expense. The Indemnified Party and the Indemnifying Part shall cooperate with each other in all reasonable respects in connection with the defense of any Third Party Claim, including making available (subject to the provisions of Section 6.06 ) records relating to such Third Party Claim and furnishing, without expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third Party Claim and shall at all times use reasonable best efforts to keep the other party reasonably apprised of the status of any matter the defense of which they are maintaining.

 

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(b)           Settlement of Third Party Claims. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not enter into settlement of any Third Party Claim without the prior written consent of the Indemnified Party, except as provided in this Section 8.05(b) . If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of a financial or other obligation or restriction on the part of the Indemnified Party and provides, in customary form, for the unconditional release of each Indemnified Party from all liabilities and obligations in connection with such Third Party Claim and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to that effect to the Indemnified Party. If the Indemnified Party fails to consent to such firm offer within ten (10) days after its receipt of such notice, the Indemnified Party may continue to contest or defend such Third Party Claim and in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim shall not exceed the amount of such settlement offer. If the Indemnified Party fails to respond to such firm offer within ten (10) days after its receipt of notice and also fails to assume defense of such Third Party Claim, the Indemnifying Party may settle the Third Party Claim upon the terms set forth in such firm offer to settle such Third Party Claim. If the Indemnified Party has assumed the defense pursuant to Section 8.05(a) , it shall not agree to any settlement without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed).

 

(c)           Direct Claims. Any Action by an Indemnified Party on account of a Loss which does not result from a Third Party Claim (a “ Direct Claim ”) shall be asserted by the Indemnified Party giving the Indemnifying Party reasonably prompt written notice thereof (in any event, prior to the Expiration Date, if applicable), provided that the failure to give such prompt written notice shall not relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party is actually prejudiced thereby. Such notice by the Indemnified Party shall describe the Direct Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have thirty (30) days after its receipt of such notice to respond in writing to such Direct Claim. If the Indemnifying Party does not so respond within such thirty (30) day period, the Indemnifying Party shall be deemed to have accepted such claim. If the Indemnifying Party rejects such claim, the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement.

 

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Section 8.06         Payments. Once a Loss is agreed to by the Indemnifying Party or finally adjudicated to be payable pursuant to this ARTICLE VIII :

 

(a)          If the Indemnifying Party is Buyer, Buyer shall satisfy its obligations within fifteen (15) Business Days of such agreement or final, non-appealable adjudication by wire transfer of immediately available funds. The parties hereto agree that should Buyer not make full payment of any such obligations within such fifteen (15) Business Day period, any amount payable shall accrue interest from and including the date of agreement of Buyer or a final, non-appealable adjudication to and including the date such payment has been made at a rate per annum equal to ten percent (10%). Such interest shall be calculated daily on the basis of a 365 day year and the actual number of days elapsed, without compounding.

 

(b)          If the Indemnifying Party is a Seller or Member, such indemnification obligations shall be satisfied (i) first, from the Escrow Amount that is being held in escrow pursuant to the Escrow Agreement, (ii) second, if the indemnifiable Losses exceed such portion of the Escrow Amount (or if no portion of the Escrow Amount is then being held in escrow) the remaining indemnifiable Losses shall be paid by delivery to Buyer from escrow of all or a portion of the Buyer Stock purchased by HH pursuant to the Securities Purchase Agreement, valued as set forth in Section 8.07 and (iii) lastly, if the indemnifiable Losses exceed such portion of the Escrow Amount and the value of the Buyer Stock at the time any payment pursuant to this Section 8.06 is being made, the remaining indemnifiable Losses shall be paid jointly and severally by Sellers and the Members.

 

(c)          On the date that is six (6) months following the Closing Date, Buyer and Sellers shall jointly instruct the Escrow Agent, in accordance with the Escrow Agreement, to release one-half (1/2) of the then remaining Escrow Amount from such escrow, except the Escrow Agent shall retain an amount equal to the aggregate amount of all unsatisfied or disputed claims for Losses specified in the written notices for Third Party Claims and/or Direct Claims delivered to Sellers as an Indemnifying Party pursuant to Section 8.05 . On the Expiration Date, Buyer and Sellers shall jointly instruct the Escrow Agent, in accordance with the Escrow Agreement, to release the remaining funds held in such escrow, except the Escrow Agent shall retain an amount equal to the aggregate amount of all unsatisfied or disputed claims for Losses specified in the written notices for Third Party Claims and/or Direct Claims delivered to Sellers as an Indemnifying Party pursuant to Section 8.05 . Any portion of such escrow fund retained for unresolved claims shall be released by the Escrow Agent upon their resolution in accordance with this ARTICLE VIII and the terms of the Escrow Agreement.

 

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Section 8.07         Valuation of Buyer Stock. Any claim for indemnification of Losses suffered by Buyer or a Buyer Indemnitee that is to be satisfied by delivery of shares of the Buyer Stock, shall be satisfied by the delivery to Buyer of such number of shares of Buyer’s Stock that, multiplied by $2.29, equals the amount of the Losses.

 

Section 8.08         Tax Treatment of Indemnification Payments. All indemnification payments made under this Agreement shall be treated by the parties as an adjustment to the Purchase Price for Tax purposes, unless otherwise required by Law.

 

Section 8.09         Effect of Investigation. The representations, warranties and covenants of the Indemnifying Party and the Indemnified Party’s right to indemnification with respect to breaches thereof, shall not be affected or deemed waived by (a) reason of any investigation made by or on behalf of the Indemnified Party (including by any of its Representatives) or (b) by reason of the fact that the Indemnified Party or any of its Representatives knew or should have known that any such representation or warranty is, was or might be inaccurate, regardless of whether the Indemnifying Party cured any defects in any such representations and warranties by providing any Schedule Updates (as defined in the Call Option Agreement) or (c) by reason of the Indemnified Party’s waiver of any condition set forth in Section 7.02 or Section 7.03 , as the case may be; provided , that Sellers shall have no post-Closing liability for any breach of any representation or warranty in Article IV if (i) Buyer had knowledge of such breach prior to the Option Exercise Date and Buyer exercised the Call Option, or (ii) Buyer had knowledge of a Material Adverse Effect and waived the closing condition provided in Section 7.02(d) .

 

Section 8.10         Exclusive Remedies. Subject to Section 6.07 and Section 10.11 , the parties acknowledge and agree that their sole and exclusive remedy with respect to any and all claims (other than claims arising from fraud), for any breach of any representation, warranty, covenant, agreement or obligation set forth herein shall be pursuant to the indemnification provisions set forth in this ARTICLE VIII . Nothing in this Section 8.10 shall limit any Person’s right to seek and obtain any equitable relief which any Person shall be entitled or to seek any remedy on account of any party’s fraud.

 

ARTICLE IX

Termination

 

Section 9.01         Termination. Subject to the terms of the Call Option Agreement and this Agreement may be terminated at any time prior to the Closing:

 

(a)          by the mutual written consent of Sellers and Buyer;

 

(b)          by Buyer by written notice to Sellers, if: (i) if all of the conditions (except for such conditions which have been waived by Sellers or may only be satisfied by Buyer on the Closing Date) set forth in Section 7.01 and Section 7.03 have been satisfied, and Buyer is not then in material breach of any provision of this Agreement, and (ii) there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Sellers or Members pursuant to this Agreement that would give rise to a failure of any of the conditions specified in Section 7.02 , and such breach, inaccuracy or failure has not been cured by Sellers or Members within forty (40) days of Sellers’ receipt of written notice of such breach from Buyer;

 

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(c)          by Sellers by written notice to Buyer if: (i) if all of the conditions (except for such conditions which have been waived by Buyer or may only be satisfied by Sellers or Members on the Closing Date) set forth in Section 7.01 and Section 7.02 have been satisfied, and no Seller or Member is then in material breach of any provision of this Agreement, and (ii) there has been a breach, inaccuracy in or failure to perform any representation, warranty or agreement made by Buyer pursuant to this Agreement that would give rise to a failure of any of the conditions specified in Section 7.03 , and such breach, inaccuracy or failure has not been cured by Buyer within forty (40) days of Buyer’s receipt of written notice of such breach from Sellers;

 

(d)          by Buyer, or Sellers, in the event that (i) there shall be any Law that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited or (ii) any Governmental Authority shall have issued a Governmental Order restraining or enjoining the transactions contemplated by this Agreement, and such Governmental Order shall have become final and non-appealable;

 

(e)          by Buyer, if all of the conditions (except for such conditions which have been waived by Buyer or may only be satisfied by Sellers or Members on the Closing Date) set forth in Section 7.01 and Section 7.02 have not been satisfied by no later than forty-five (45) days from the date hereof; or

 

(f)          by Sellers, if all of the conditions (except for such conditions which have been waived by Seller or may only be satisfied by Buyer on the Closing Date) set forth in Section 7.01 and Section 7.03 have not been satisfied by no later than forty-five (45) days from the date hereof.

 

Section 9.02         Effect of Termination. In the event of the termination of this Agreement in accordance with this Article, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto except:

 

(a)          as set forth in this ARTICLE IX , Section 6.06 , Section 6.11 and ARTICLE X hereof; and

 

(b)          that nothing herein shall relieve any party hereto from liability for any willful breach of any provision hereof or fraud.

 

ARTICLE X

Miscellaneous

 

Section 10.01         Expenses. Except as otherwise expressly provided herein, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred, except as set forth in the letter, dated July 7, 2014, from “Nutricap LLC” to Buyer.

 

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Section 10.02         Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of receipt by recipient) or (d) when received, if sent by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10.02 ):

 

If to any Seller or Member:   Nutricap Labs, LLC
    70 Carolyn Blvd.
    Farmingdale, NY 11735
    Facsimile: (800) 658-3043
    E-mail:  Jon@nutricaplabs.com
    Attention: Jonathan Greenhut
       
with a copy to (which copy shall   Kramer Levin Naftalis & Frankel LLP
not constitute notice):   1177 Avenue of the Americas
    New York, New York 10036
    Facsimile: (212) 715-8453
    E-mail: jmoriarty@kramerlevin.com
    Attention: James J. Moriarty
       
If to Buyer:   Twinlab Consolidation Corporation
    632 Broadway, Suite 201
    New York, New York 10012
    Facsimile: (212) 505-5413
    E-mail: rneuwirth@twinlab.com
    Attention: General Counsel
       
with a copy to (which copy shall   Goodwin Procter LLP
not constitute notice):   The New York Times Building
    620 Eighth Avenue
    New York, NY 10018-1405
    Facsimile: (212) 355-3333
    E-mail: tmeriam@goodwinprocter.com
    Attention: Thomas C. Meriam

 

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Section 10.03         Interpretation. For purposes of this Agreement, (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to Articles, Sections, Disclosure Schedules and Exhibits mean the Articles and Sections of, and Disclosure Schedules and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Disclosure Schedules and Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.

 

Section 10.04         Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

 

Section 10.05         Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Except as provided in Section 6.07(d) , upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

 

Section 10.06         Entire Agreement. This Agreement and the other Transaction Documents constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement and those in the other Transaction Documents, the Exhibits and Disclosure Schedules (other than an exception expressly set forth as such in the Disclosure Schedules), the statements in the body of this Agreement will control. For the avoidance of doubt, this Agreement supersedes and replaces in its entirety that certain Asset Purchase Agreement, dated as of December 20, 2014, by and between the parties hereto.

 

Section 10.07         Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. None of the parties may assign its rights or obligations hereunder without the prior written consent of the other parties; provided, however , that prior to the Closing Date, Buyer may, without the prior written consent of Sellers or the Members, assign all or any portion of its rights under this Agreement to one or more of its direct or indirect wholly-owned subsidiaries. No assignment shall relieve the assigning party of any of its obligations hereunder.

 

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Section 10.08         No Third-party Beneficiaries. Except as provided in ARTICLE VIII , this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 10.09         Amendment and Modification; Waiver. This Agreement may only be amended or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

Section 10.10         Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

 

(a)          This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction).

 

(b)          ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE STATE OF NEW YORK IN EACH CASE LOCATED IN THE CITY OF NEW YORK AND COUNTY OF NEW YORK, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

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(c)          EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.10(c).

 

Section 10.11         Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.

 

Section 10.12         Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

Section 10.13         Effectiveness . This Agreement shall not be considered effective until the Option Exercise Date and no party will have any obligation under this Agreement until the Option Exercise Date; provided, however, that upon the Option Exercise Date, this Agreement, together with the Disclosure Schedules attached hereto, dated as of the Initial Disclosure Date, shall be automatically effective without any further action by any of the parties to this Agreement.

 

[ SIGNATURE PAGE FOLLOWS ]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

 

  SELLERS :
   
  NUTRICAP LABS, LLC
     
  By: /s/ Jonathan Greenhut
  Name: Jonathan Greenhut
  Title: Manager
     
  VITACAP LABS, LLC
     
  By: /s/ Jonathan Greenhut
  Name: Jonathan Greenhut
  Title: Manager
   
  MEMBERS:
   
  CANYON MARKETING V, LLC
     
  By: /s/ Jonathan Greenhut
  Name: Jonathan Greenhut
  Title: Manager
   
  CANYON MARKETING III, LLC
     
  By: /s/ Jonathan Greenhut
  Name: Jonathan Greenhut
  Title: Manager
   
  CANYON MARKETING II, INC.
     
  By: /s/ Jonathan Greenhut
  Name: Jonathan Greenhut
  Title: President

 

[ Signature Page to Asset Purchase Agreement ]

 

 
 

 

  BUYER:
   
  TCC CM SUBCO I, INC.
     
  By: /s/ Richard H. Neuwirth
  Name: Richard H. Neuwirth
  Title: Executive Vice President, Chief Legal Officer and Secretary

 

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and with the understanding that Buyer is relying hereon in entering into the above Asset Purchase Agreement, the undersigned, being a direct or indirect owner of the Members, hereby agrees to be personally bound by those same restrictions Sellers and Members are bound by in Section 6.03, Section 6.07 and Section 6.06 . For the avoidance of doubt neither the undersigned nor any trusts or other entities established by the undersigned, for estate planning purposes, shall have any personal Liability other than (i) as set forth in the preceding sentence and (ii) fraud.

 

  /s/ Jonathan Greenhut
  Jonathan Greenhut

 

[ Signature Page to Asset Purchase Agreement ]

 

 
 

 

EXHIBIT A

 

Form of Escrow Agreement

 

(attached)

 

 
 

 

EXHIBIT B

 

Excluded Liabilities to be Satisfied at Closing

 

The Senior Debt.

 

 
 

 

EXHIBIT C

 

Form of Transition Services Agreement

 

(attached)

 

 
 

 

EXHIBIT D

 

Form of Bill of Sale

 

(attached)

 

 
 

 

EXHIBIT E

 

Form of Assignment and Assumption Agreement

 

(attached)

 

 
 

 

EXHIBIT F

 

Form of License Agreement

 

(attached)

 

 
 

 

EXHIBIT G

 

Form of First Promissory Note

 

(attached)

 

 
 

 

EXHIBIT H

 

Form of Second Promissory Note

 

(attached)

 

 

 

Exhibit 10.50

 

EXECUTION VERSION

 

THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A STANDSTILL AGREEMENT DATED AS OF FEBRUARY 4, 2015 AMONG HOLDER, MAKER AND MIDCAP FUNDING X TRUST, A DELAWARE STATUTORY TRUST, ADMINISTRATIVE AGENT, WHICH STANDSTILL AGREEMENT (AS AMENDED IN ACCORDANCE WITH ITS TERMS) IS INCORPORATED HEREIN BY REFERENCE.

 

THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A STANDSTILL AGREEMENT DATED AS OF FEBRUARY 4, 2015 AMONG HOLDER, MAKER AND PENTA MEZZANINE SBIC FUND I, L.P., A DELAWARE LIMITED PARTNERSHIP, WHICH STANDSTILL AGREEMENT (AS AMENDED IN ACCORDANCE WITH ITS TERMS) IS INCORPORATED HEREIN BY REFERENCE.

 

THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A STANDSTILL AGREEMENT DATED AS OF FEBRUARY 4, 2015 AMONG HOLDER, MAKER AND JL-BBNC MEZZ UTAH, LLC, AN ALASKA LIMITED LIABILITY COMPANY, WHICH STANDSTILL AGREEMENT (AS AMENDED IN ACCORDANCE WITH ITS TERMS) IS INCORPORATED HEREIN BY REFERENCE.

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, MORTGAGED, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN EXEMPTION THEREFROM.

 

UNSECURED PROMISSORY NOTE

 

$2,500,000.00 February 6, 2015

 

FOR VALUE RECEIVED, the undersigned, TCC CM SUBCO I, INC., a Delaware corporation (“ Maker ”), promises to pay to NUTRICAP LABS, LLC, a New York limited liability company (“ Holder ”), the principal sum of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00), together with interest on the unpaid principal balance of this Unsecured Promissory Note (this “ Note ”) from time to time outstanding until paid in full, in lawful money of the United States of America. This Note shall mature and be due and payable by Maker on the earlier to occur of (x) the sixty (60) day anniversary of the date hereof and (y) one (1) Business Day following the funding of Additional Financing (as defined in the Purchase Agreement) (such earlier date, the “ Maturity Date ”) or, if such day is not a Business Day, then the next succeeding Business Day.

 

This Note is the “First Promissory Note” referenced in that certain Asset Purchase Agreement (as amended, restated, modified or supplemented from time to time, the “ Purchase Agreement ”), dated February 4, 2015 and effective as of the Option Exercise Date (as defined in the Purchase Agreement), among Maker, Holder, Vitacap Labs, LLC, a New York limited liability company, Canyon Marketing V, LLC, a Delaware limited liability company, Canyon Marketing II, INC., a New York corporation, and Canyon Marketing III, LLC, a Delaware limited liability company. Holder is receiving this Note pursuant to the Purchase Agreement and as part of the consideration for the sale and transfer of assets of Holder to Maker.

 

 
 

 

ARTICLE I

TERMS AND CONDITIONS

 

1.01         Payment of Principal and Accrued Interest .

 

a.           Interest shall accrue on the outstanding principal amount of this Note at six percent (6%) per annum (the “ Interest Rate ”). Interest shall be computed hereunder based on a 360-day year. Interest shall be payable, in arrears, from time to time, as provided below.

 

b.           The principal amount of this Note and accrued interest hereunder (the sum of such principal and accrued interest being hereinafter referred to as the “ Amount Due ”) shall be payable on the Maturity Date in accordance with Section 6.17 of the Purchase Agreement. Upon the occurrence of any Event of Default (as defined below), the Amount Due shall be payable in a single payment on demand.

 

1.02         Prepayment .

 

a.           The principal indebtedness evidenced by this Note may be prepaid, in whole or in part, at any time and from time to time, together with accrued and unpaid interest to the date of such prepayment on the amount so prepaid, without premium or penalty. Any partial prepayment of principal made after the Maturity Date shall be applied as follows: first, to the payment of accrued interest; and second, to the payment of principal.

 

b.           Upon any partial prepayment, at the request of either Maker or Holder, this Note shall be surrendered to Maker in exchange for a substitute note, which shall set forth the revised principal amount. In the event that this Note is prepaid in its entirety, this Note shall be surrendered to Maker for cancellation as a condition to any such prepayment.

 

1.03          Payments Only on Business Days . Payments hereunder shall be made only on a Business Day. Any payment hereunder which, but for this Section 1.03 , would be payable on a day which is not a Business Day, shall instead be due and payable on the next succeeding Business Day.

 

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ARTICLE II

DEFAULTS

 

2.01          Events of Default . The following shall constitute “ Events of Default ” under this Note:

 

a.           failure by Maker to make any interest payment required under this Note when the same shall become due and payable (whether at maturity, by acceleration or otherwise) and the continuation of such failure for a period of five (5) Business Days following notice thereof; or

 

b.           failure by Maker to make any payments of principal required under this Note when the same shall become due and payable (whether at maturity, by acceleration or otherwise) and the continuation of such failure for a period of five (5) Business Days following notice thereof; or

 

c.           Maker, pursuant to or within the meaning of any Bankruptcy Law (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against it in an involuntary case or proceeding; (iii) consents to the appointment of a custodian of it or for all or any substantial portion of its property or assets; or (iv) makes a general assignment for the benefit of its creditors; or

 

d.           an involuntary case or proceeding is commenced against Maker under any Bankruptcy Law and is not dismissed, bonded or discharged within sixty (60) days thereafter, or a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against Maker in an involuntary case or proceeding; (ii) appoints a custodian of Maker or for all or substantially all of its properties; or (iii) orders the liquidation of Maker; and in each case the order or decree remains unstayed and in effect for sixty (60) days.

 

If an Event of Default occurs, the Interest Rate shall equal fifteen percent (15%) per annum from and after the date of such Event of Default until the date upon which this Note is repaid in full. If an Event of Default occurs, Holder may, at its option, declare, by notice in writing to Maker (the “ Acceleration Notice ”), the entire principal amount of this Note (and any accrued and unpaid interest thereon) to be immediately due and payable and upon any such declaration such principal and interest shall become and be forthwith due and payable without any further notice, presentment, protest, or demand of any kind, all of which are hereby expressly waived by Maker. If an Event of Default specified in Sections 2.01(c) or 2.01(d) hereof occurs, the principal amount of this Note (and any accrued and unpaid interest thereon) shall become due and payable immediately without any declaration or other act on the part of Holder. If any Event of Default shall have occurred, Holder may proceed to protect and enforce its rights either by suit in equity or by action at law, or both, whether for specific performance of any provision of this Note or in aid of the exercise of any power granted to Holder under this Note.

 

2.02          Late Payment Fee . If the Amount Due is not paid in full on or before the Maturity Date, Maker agrees to immediately pay to Holder a late payment fee of TWO HUNDRED AND FIFTY THOUSAND DOLLARS ($250,000.00).

 

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ARTICLE III

MISCELLANEOUS

 

3.01          No Waiver: Amendment . Maker hereby waives presentment, demand for payment, notice of dishonor, notice of protest and all other notices or demands in connection with the delivery, acceptance, performance or default of this Note. No delay by Holder in exercising any power or right hereunder shall operate as a waiver of any power or right, nor shall any single or partial exercise of any power or right preclude other or further exercise thereof, or the exercise of any other power or right hereunder or otherwise; and no waiver whatsoever or modification of the terms hereof, including but not limited to an extension of the time for the payment of this Note or any installment due hereunder, shall be valid unless set forth in writing by Holder. This Note may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. No modifications or amendments made by agreement with any person now or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the liability of Maker under this Note, either in whole or in part unless Holder agrees otherwise in writing.

 

3.02          Limit of Validity . The provisions of this Note are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of demand or acceleration of the maturity of this Note or otherwise, shall the amount paid, or agreed to be paid to Holder for the use, forbearance or retention of money under this Note (“ Interest ”) exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, performance or fulfillment of any provision hereof or of any agreement between Maker and Holder shall, at the time performance or fulfillment of such provision shall be due, exceed the limit for Interest prescribed by law or otherwise transcend the limit of validity prescribed by applicable law, then ipso facto the obligation to be performed or fulfilled shall be reduced to such limit and if, from any circumstance whatsoever, Holder shall ever receive anything of value deemed Interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive Interest shall be applied to the reduction of the principal amount owing under this Note (whether or not then due) or at the option of Holder be paid over to Maker, and not to the payment of Interest. All Interest (including any amounts or payments deemed to be Interest) paid or agreed to be paid to Holder shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal amount of this Note so that the Interest thereof for such full period will not exceed the maximum amount permitted by applicable law.

 

3.03          Arms Length Agreement . This Agreement has been negotiated and prepared at the mutual request, direction and construction of Holder and Maker, at arms length, with the advice and participation of counsel, and will be interpreted in accordance with its terms without favor to any party.

 

3.04          Governing Law . This Note shall be interpreted, construed and enforced according to the substantive laws of the State of New York, without giving effect to principles of conflicts of law.

 

3.05          Judicial Proceedings . All judicial proceedings brought against Maker arising out of or relating to this Note may be brought in the Federal courts of the United States of America or the courts of the State of New York, in each case, located in the City of New York and County of New York, and by execution and delivery of this Note, Maker accepts for itself and in connection with its properties, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts and waives any defense of forum non conveniens and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Note. Maker hereby agrees that service of all process in any such proceeding in any such court may be made by registered or certified mail, return receipt requested, to Maker at its address set forth in Section 3.06 , such service being hereby acknowledged by Maker to be sufficient for personal jurisdiction in any action against Maker in any such court and to be otherwise effective and binding service in every respect. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of Holder to bring proceedings against Maker in the courts of any other jurisdiction.

 

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3.06          Notices . Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, electronic mail or registered or certified mail, postage prepaid, return receipt requested, in accordance with the Purchase Agreement.

 

3.07          Assignment and Transfer; Covenant . Neither this Note nor any interest herein shall be assigned, transferred, pledged or otherwise disposed of, through liquidation or otherwise (any of the foregoing, a “ Transfer ”), in whole or in part, by Holder. Neither this Note nor any interest herein or obligation hereunder shall be Transferred, in whole or in part, by Maker without the express prior written consent of Holder.

 

3.08          Replacement of Notes . Upon receipt by Maker of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note, and (in case of loss, theft or destruction) of an indemnity reasonably satisfactory to it, and upon surrender and cancellation of this Note, if mutilated, Maker will deliver a new Note, or like tenor in lieu of this Note, payable to Holder, in the same principal amount as the unpaid principal amount of this Note and bearing interest at the same Interest Rate as this Note. Any Note delivered in accordance with the provisions of this Section 3.08 shall be dated as of the date of this Note.

 

3.09          Successors and Assigns . The respective rights and obligations of Maker and Holder shall be binding upon and inure to the benefit of their respective heirs, executors, administrators, successors and permitted assigns.

 

3.10          Collection Costs . If any amount due under this Note is not paid at the earlier of (i) the due date hereunder or (ii) at acceleration of maturity as herein provided and is placed in the hands of an attorney for collection, or if it is collected through bankruptcy, probate or other court after maturity or the acceleration thereof, Maker shall pay all reasonable attorneys’ fees and collection costs of Holder incurred with respect to the collection of amounts due under this Note promptly on the demand of Holder.

 

3.11          Definitions . The following terms have the following meanings:

 

Acceleration Notice ” shall have the meaning set forth in Section 2.01 .

 

Bankruptcy Law ” means Title 11, United States Code, or any similar federal, state or foreign law for the relief of debtors or any arrangement, reorganization, assignment for the benefit of creditors or any other marshalling of the assets and liabilities of Maker.

 

Business Day ” means each day other than Saturdays, Sundays and days when commercial banks are authorized or required by law to be closed for business in New York, New York.

 

Events of Default ” shall have the meaning set forth in Section 2.01 .

 

Holder ” shall have the meaning set forth in the Preamble .

 

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Interest ” shall have the meaning set forth in Section 3.02 .

 

Interest Rate ” shall have the meaning set forth in Section 1.01(a) .

 

Maker ” shall have the meaning set forth in the Preamble .

 

Maturity Date ” shall have the meaning set forth in the Preamble .

 

Obligations ” means all principal, interest, premium, penalties, fees, indemnities, damages and other liabilities and obligations payable under the documentation governing, or with respect to, indebtedness for borrowed money (including all interest after the commencement of any bankruptcy, insolvency, receivership or similar proceeding at the rate provided in the governing documentation, whether or not such interest is an allowed claim in such proceeding).

 

Purchase Agreement ” shall have the meaning set forth in the Preamble .

 

Transfer ” has the meaning set forth in Section 3.07 .

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, Maker has executed this Note as of the date first above written.

 

  TCC CM SUBCO I, INC.
     
  By: /s/ Richard H. Neuwirth
    Name: Richard H. Neuwirth
    Title: Executive Vice President, Chief Legal Officer and Secretary

 

[ First Unsecured Promissory Note ]

 

 

 

Exhibit 10.51

 

EXECUTION VERSION

 

THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A STANDSTILL AGREEMENT DATED AS OF FEBRUARY 4, 2015 AMONG HOLDER, MAKER AND MIDCAP FUNDING X TRUST, A DELAWARE STATUTORY TRUST, ADMINISTRATIVE AGENT, WHICH STANDSTILL AGREEMENT (AS AMENDED IN ACCORDANCE WITH ITS TERMS) IS INCORPORATED HEREIN BY REFERENCE.

 

THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A STANDSTILL AGREEMENT DATED AS OF FEBRUARY 4, 2015 AMONG HOLDER, MAKER AND PENTA MEZZANINE SBIC FUND I, L.P., A DELAWARE LIMITED PARTNERSHIP, WHICH STANDSTILL AGREEMENT (AS AMENDED IN ACCORDANCE WITH ITS TERMS) IS INCORPORATED HEREIN BY REFERENCE.

 

THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A STANDSTILL AGREEMENT DATED AS OF FEBRUARY 4, 2015 AMONG HOLDER, MAKER AND JL-BBNC MEZZ UTAH, LLC, AN ALASKA LIMITED LIABILITY COMPANY, WHICH STANDSTILL AGREEMENT (AS AMENDED IN ACCORDANCE WITH ITS TERMS) IS INCORPORATED HEREIN BY REFERENCE.

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, MORTGAGED, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN EXEMPTION THEREFROM.

 

UNSECURED PROMISSORY NOTE

 

$1,478,000.00 February 6, 2015

 

FOR VALUE RECEIVED, the undersigned, TCC CM SUBCO I, INC., a Delaware corporation (“ Maker ”), promises to pay to NUTRICAP LABS, LLC, a New York limited liability company (“ Holder ”), the principal sum of ONE MILLION FOUR HUNDRED SEVENTY EIGHT THOUSAND DOLLARS ($1,478,000.00), together with interest on the unpaid principal balance of this Unsecured Promissory Note (this “ Note ”) from time to time outstanding until paid in full, in lawful money of the United States of America. This Note shall mature and be due and payable by Maker on the twelve (12) month anniversary of the date hereof (the “ Maturity Date ”) or, if such day is not a Business Day, then the next succeeding Business Day.

 

This Note is the “Second Promissory Note” referenced in that certain Asset Purchase Agreement (as amended, restated, modified or supplemented from time to time, the “ Purchase Agreement ”), dated February 4, 2015 and effective as of the Option Exercise Date (as defined in the Purchase Agreement), among Maker, Holder, Vitacap Labs, LLC, a New York limited liability company, Canyon Marketing V, LLC, a Delaware limited liability company, Canyon Marketing II, INC., a New York corporation, and Canyon Marketing III, LLC, a Delaware limited liability company. Holder is receiving this Note pursuant to the Purchase Agreement and as part of the consideration for the sale and transfer of assets of Holder to Maker.

 

 
 

 

ARTICLE I

TERMS AND CONDITIONS

 

1.01         Payment of Principal and Accrued Interest .

 

a.           Interest shall accrue on the outstanding principal amount of this Note at three percent (3%) per annum (the “ Interest Rate ”). Interest shall be computed hereunder based on a 360-day year. Interest shall be payable, in arrears, from time to time, as provided below.

 

b.           The principal amount of this Note and accrued interest hereunder (the sum of such principal and accrued interest being hereinafter referred to as the “ Amount Due ”) shall be payable in twelve (12) equal monthly installments on the last Business Day of each month (each, a “ Payment Date ”) following the date of this Note. Upon the occurrence of any Event of Default (as defined below), any remaining Amount Due shall be payable in a single payment on demand.

 

1.02         Prepayment .

 

a.           The principal indebtedness evidenced by this Note may be prepaid, in whole or in part, at any time and from time to time, together with accrued and unpaid interest to the date of such prepayment on the amount so prepaid, without premium or penalty. Any partial prepayment of principal made after the Maturity Date shall be applied as follows: first, to the payment of accrued interest; and second, to the payment of principal.

 

b.           Upon any partial prepayment, at the request of either Maker or Holder, this Note shall be surrendered to Maker in exchange for a substitute note, which shall set forth the revised principal amount. In the event that this Note is prepaid in its entirety, this Note shall be surrendered to Maker for cancellation as a condition to any such prepayment.

 

1.03         Payments Only on Business Days . Payments hereunder shall be made only on a Business Day. Any payment hereunder which, but for this Section 1.03 , would be payable on a day which is not a Business Day, shall instead be due and payable on the next succeeding Business Day.

 

1.04         Manner of Payment. Principal and interest shall be paid to Holder at the following address: 70 Carolyn Blvd., Farmingdale, NY 11735, or at such other place as the holder of this Note may designate in writing to Maker.

 

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ARTICLE II

DEFAULTS

 

2.01         Events of Default . The following shall constitute “ Events of Default ” under this Note:

 

a.           failure by Maker to make any interest payment required under this Note when the same shall become due and payable (whether at maturity, by acceleration or otherwise) and the continuation of such failure for a period of five (5) Business Days following notice thereof; or

 

b.           failure by Maker to make any payments of principal required under this Note when the same shall become due and payable (whether at maturity, by acceleration or otherwise) and the continuation of such failure for a period of five (5) Business Days following notice thereof; or

 

c.           Maker, pursuant to or within the meaning of any Bankruptcy Law (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against it in an involuntary case or proceeding; (iii) consents to the appointment of a custodian of it or for all or any substantial portion of its property or assets; or (iv) makes a general assignment for the benefit of its creditors; or

 

d.           an involuntary case or proceeding is commenced against Maker under any Bankruptcy Law and is not dismissed, bonded or discharged within sixty (60) days thereafter, or a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against Maker in an involuntary case or proceeding; (ii) appoints a custodian of Maker or for all or substantially all of its properties; or (iii) orders the liquidation of Maker; and in each case the order or decree remains unstayed and in effect for sixty (60) days.

 

If an Event of Default occurs, the Interest Rate shall equal fifteen percent (15%) per annum from and after the date of such Event of Default until the date upon which this Note is repaid in full. If an Event of Default occurs, Holder may, at its option, declare, by notice in writing to Maker (the “ Acceleration Notice ”), the entire principal amount of this Note (and any accrued and unpaid interest thereon) to be immediately due and payable and upon any such declaration such principal and interest shall become and be forthwith due and payable without any further notice, presentment, protest, or demand of any kind, all of which are hereby expressly waived by Maker. If an Event of Default specified in Sections 2.01(c) or 2.01(d) hereof occurs, the principal amount of this Note (and any accrued and unpaid interest thereon) shall become due and payable immediately without any declaration or other act on the part of Holder. If any Event of Default shall have occurred, Holder may proceed to protect and enforce its rights either by suit in equity or by action at law, or both, whether for specific performance of any provision of this Note or in aid of the exercise of any power granted to Holder under this Note.

 

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ARTICLE III

MISCELLANEOUS

 

3.01         No Waiver: Amendment . Maker hereby waives presentment, demand for payment, notice of dishonor, notice of protest and all other notices or demands in connection with the delivery, acceptance, performance or default of this Note. No delay by Holder in exercising any power or right hereunder shall operate as a waiver of any power or right, nor shall any single or partial exercise of any power or right preclude other or further exercise thereof, or the exercise of any other power or right hereunder or otherwise; and no waiver whatsoever or modification of the terms hereof, including but not limited to an extension of the time for the payment of this Note or any installment due hereunder, shall be valid unless set forth in writing by Holder. This Note may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. No modifications or amendments made by agreement with any person now or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the liability of Maker under this Note, either in whole or in part unless Holder agrees otherwise in writing.

 

3.02         Limit of Validity . The provisions of this Note are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of demand or acceleration of the maturity of this Note or otherwise, shall the amount paid, or agreed to be paid to Holder for the use, forbearance or retention of money under this Note (“ Interest ”) exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, performance or fulfillment of any provision hereof or of any agreement between Maker and Holder shall, at the time performance or fulfillment of such provision shall be due, exceed the limit for Interest prescribed by law or otherwise transcend the limit of validity prescribed by applicable law, then ipso facto the obligation to be performed or fulfilled shall be reduced to such limit and if, from any circumstance whatsoever, Holder shall ever receive anything of value deemed Interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive Interest shall be applied to the reduction of the principal amount owing under this Note (whether or not then due) or at the option of Holder be paid over to Maker, and not to the payment of Interest. All Interest (including any amounts or payments deemed to be Interest) paid or agreed to be paid to Holder shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal amount of this Note so that the Interest thereof for such full period will not exceed the maximum amount permitted by applicable law.

 

3.03         Arms Length Agreement . This Agreement has been negotiated and prepared at the mutual request, direction and construction of Holder and Maker, at arms length, with the advice and participation of counsel, and will be interpreted in accordance with its terms without favor to any party.

 

3.04         Governing Law . This Note shall be interpreted, construed and enforced according to the substantive laws of the State of New York, without giving effect to principles of conflicts of law.

 

3.05         Judicial Proceedings . All judicial proceedings brought against Maker arising out of or relating to this Note may be brought in the Federal courts of the United States of America or the courts of the State of New York, in each case, located in the City of New York and County of New York, and by execution and delivery of this Note, Maker accepts for itself and in connection with its properties, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts and waives any defense of forum non conveniens and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Note. Maker hereby agrees that service of all process in any such proceeding in any such court may be made by registered or certified mail, return receipt requested, to Maker at its address set forth in Section 3.06 , such service being hereby acknowledged by Maker to be sufficient for personal jurisdiction in any action against Maker in any such court and to be otherwise effective and binding service in every respect. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of Holder to bring proceedings against Maker in the courts of any other jurisdiction.

 

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3.06         Notices . Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, electronic mail or registered or certified mail, postage prepaid, return receipt requested, in accordance with the Purchase Agreement.

 

3.07         Assignment and Transfer; Covenant . Neither this Note nor any interest herein shall be assigned, transferred, pledged or otherwise disposed of, through liquidation or otherwise (any of the foregoing, a “ Transfer ”), in whole or in part, by Holder. Neither this Note nor any interest herein or obligation hereunder shall be Transferred, in whole or in part, by Maker without the express prior written consent of Holder.

 

3.08          Replacement of Notes . Upon receipt by Maker of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note, and (in case of loss, theft or destruction) of an indemnity reasonably satisfactory to it, and upon surrender and cancellation of this Note, if mutilated, Maker will deliver a new Note, or like tenor in lieu of this Note, payable to Holder, in the same principal amount as the unpaid principal amount of this Note and bearing interest at the same Interest Rate as this Note. Any Note delivered in accordance with the provisions of this Section 3.08 shall be dated as of the date of this Note.

 

3.09         Successors and Assigns . The respective rights and obligations of Maker and Holder shall be binding upon and inure to the benefit of their respective heirs, executors, administrators, successors and permitted assigns.

 

3.10         Collection Costs . If any amount due under this Note is not paid at the earlier of (i) the due date hereunder or (ii) at acceleration of maturity as herein provided and is placed in the hands of an attorney for collection, or if it is collected through bankruptcy, probate or other court after maturity or the acceleration thereof, Maker shall pay all reasonable attorneys’ fees and collection costs of Holder incurred with respect to the collection of amounts due under this Note promptly on the demand of Holder.

 

3.11         Definitions . The following terms have the following meanings:

 

Acceleration Notice ” shall have the meaning set forth in Section 2.01 .

 

Bankruptcy Law ” means Title 11, United States Code, or any similar federal, state or foreign law for the relief of debtors or any arrangement, reorganization, assignment for the benefit of creditors or any other marshalling of the assets and liabilities of Maker.

 

Business Day ” means each day other than Saturdays, Sundays and days when commercial banks are authorized or required by law to be closed for business in New York, New York.

 

Events of Default ” shall have the meaning set forth in Section 2.01 .

 

Holder ” shall have the meaning set forth in the Preamble .

 

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Interest ” shall have the meaning set forth in Section 3.02 .

 

Interest Rate ” shall have the meaning set forth in Section 1.01(a) .

 

Maker ” shall have the meaning set forth in the Preamble .

 

Maturity Date ” shall have the meaning set forth in the Preamble .

 

Obligations ” means all principal, interest, premium, penalties, fees, indemnities, damages and other liabilities and obligations payable under the documentation governing, or with respect to, indebtedness for borrowed money (including all interest after the commencement of any bankruptcy, insolvency, receivership or similar proceeding at the rate provided in the governing documentation, whether or not such interest is an allowed claim in such proceeding).

 

Payment Date ” shall have the meaning set forth in Section 1.01(b) .

 

Purchase Agreement ” shall have the meaning set forth in the Preamble .

 

Transfer ” has the meaning set forth in Section 3.07 .

 

[ Signature Page Follows ]

 

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IN WITNESS WHEREOF, Maker has executed this Note as of the date first above written.

 

  TCC CM SUBCO I, INC.
   
  By: /s/ Richard H. Neuwirth
    Name: Richard H. Neuwirth
    Title: Executive Vice President, Chief Legal Officer and Secretary

 

[Unsecured Promissory Note]

 

 

Exhibit 10.52

 

 

 

 

TRANSITION SERVICES AGREEMENT

 

between

 

TCC CM Subco I, Inc.,

 

NUTRICAP LABS, LLC

 

and

 

VITACAP LABS, LLC

 

 

February 6, 2015

 

 

 

 

 
 

 

TRANSITION SERVICES AGREEMENT

 

This Transition Services Agreement (this “ Agreement ”) is made and entered into as of February 6, 2015, by and between TCC CM Subco I, Inc. , a Delaware corporation (“ Buyer ”), Nutricap Labs, LLC , a New York limited liability company (“ NC ”), and Vitacap Labs, LLC, a New York limited liability company (“ Vita ”).

 

BACKGROUND

 

NC, Vita and Buyer are parties to that certain Asset Purchase Agreement (the “ Purchase Agreement ”), dated February 4, 2015 and effective as of the Option Exercise Date (as defined in the Purchase Agreement), pursuant to which NC and Vita have agreed to sell, and Buyer has agreed to purchase, NC and Vita’s Customer (as defined in the Purchase Agreement) relationships, as well as certain additional assets as set forth therein. Capitalized terms used but not defined in this Agreement shall have the meanings given to them in the Purchase Agreement. “ Commencement Date ” shall mean the “Closing Date” as such term is defined in the Purchase Agreement.

 

Because Buyer is acquiring Customer relationships and not an ongoing business, and Buyer does not, and will not, have the ability to transition all aspects of the Customer relationships into its own business immediately upon the Closing Date, Buyer has requested that NC provide certain transitional services after the Closing Date to assist Buyer to transfer the acquired Customer relationships in a commercially reasonable manner. In order to induce Buyer to enter into the Purchase Agreement, NC has agreed to provide to Buyer after the Closing access to the premises described in Exhibit A (the “ Premises ”) and certain services relating to the servicing of Customers by Buyer after the Closing on the terms and conditions contained in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing premises and the consummation of the transactions contemplated by the Purchase Agreement, the mutual covenants contained herein, and intending to be legally bound, the parties hereby agree as follows:

 

1. Engagement of NC Personnel .

 

(a) On and after the Commencement Date, NC will provide the services (the “ Transition Services ”) typically performed in the ordinary course of business for or on behalf of NC and Vita in respect of the Business as of immediately prior to the Commencement Date by the personnel set forth on Exhibit B (the “ Personnel ”) in support of Buyer’s servicing and transition of Customers until August 6, 2015 (as the same may be extended pursuant to this Agreement, the “ Transition Period ”). For the avoidance of doubt, in the event that any Personnel voluntarily terminate their employment with NC prior to the expiration of the Transition Period, NC may, but shall not be obligated to, hire replacement persons to perform the Transition Services for which such terminated Personnel were responsible (and any such hired replacements shall be deemed Personnel hereunder); provided , however, the performance of Transition Services shall not be excused as a result of any such terminated Personnel. Unless otherwise agreed to in writing by Buyer, NC agrees that it shall only utilize the Personnel in the provision of Transition Services hereunder at the Premises and at any adjacent warehouse facility utilized by Buyer during the Transition Period.

 

 
 

 

(b) Except for any additional fees specifically set forth herein or otherwise agreed to in writing from time to time by the Parties, the consideration to be paid by Buyer to NC for the Transition Services shall be as set forth on Exhibit C . In the event NC determines that the aggregate amount payable to NC for the Transition Services in any month (other than amounts in respect of the right to use the Premises) is reasonably likely to exceed in any material respect the historical amount of monthly expenses incurred by NC in the operation of its Business during the year preceding the Commencement Date, NC shall provide notice of such determination to Buyer and enter into good faith negotiations with Buyer to reduce such expenses to a historical level.

 

(c) At all times during the Transition Period, to the extent such Personnel remain employed by NC, such Personnel shall be deemed employees of NC or one or more of its Affiliates (and not of Buyer).

 

(d) During the Transition Period, NC shall cause the Personnel to devote such time as is reasonably sufficient to perform the Transition Services.

 

2. Transition Services . The Transition Services shall include the following, and any other services that the parties agree shall be covered by this Agreement:

 

(a) Right to use the Premises . From and after the Commencement Date until the end of the Transition Period, NC hereby grants to Buyer the right to occupy the Premises and to use all of the furniture, fixtures, equipment and services (including parking) currently existing at the Premises as may be necessary in order that the employees of Buyer, including the Transferred Employees (collectively, the “ Buyer Employees ”) may execute their designated responsibilities; provided that Buyer shall cause the use and occupation of the Premises by Buyer Employees to be conducted in compliance with that certain Agreement of Lease, dated as of May 11, 2010, by and between NC and Carolyn Holdings, LLC (the “ Lease ”). Buyer will give NC a list of Buyer Employees who will be situated at the Premises and such Buyer Employees shall be granted such space as is consistent with the historical usage by them or similarly-situated employees of Sellers, as well as such additional space within the Premises as is reasonably necessary to accommodate any additional Buyer Employees assigned to work at the Premises during the Transition Period. Buyer shall pay to NC a monthly charge for the use of the Premises and other property of NC as set forth on Exhibit C . Other than the occupancy and use of the Premises by one (1) employee of an Affiliate of Jonathan Greenhut (the “ Greenhut Employee ”) subject to Section 11, neither NC nor Vita nor any of their Affiliates shall be entitled to occupy or use the Premises during the Transition Period, except in connection with (i) their performance of the Transition Services, (ii) the sale of Inventory to Customers during the Selloff Period pursuant to Section 3 of this Agreement, (iii) the fulfillment of orders underlying Non-Novation Events as contemplated by Sections 2.06 and 6.14 of the Purchase Agreement, and (iii) actions reasonably necessary to wind down the Business; provided, in the case of the foregoing clause (iv), that such actions do not interfere in any material respect with Buyer’s use of the Premises as contemplated hereby.

 

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(b) Information Services .

 

(i) General . NC hereby grants, and Buyer hereby accepts, the right to use and obtain the Information Services in connection with Buyer’s servicing of Customers during the Transition Period. For purposes of this Agreement, “ Information Services ” means all of the information services, systems and maintenance currently being provided by NC to the Business, as such Information Services were provided to the Business and supported immediately prior to the Commencement Date, in each case only to the extent related to and necessary to provide service to the Customer relationships acquired by Buyer. During the Transition Period, NC shall not change, in any material respect, the manner in which the Information Services are made available to Buyer. During the Transition Period, NC shall provide the services of its Information Technology personnel to support Buyer in servicing the Customer relationship in substantially the same manner that such Information Technology personnel provided support to the Business prior to the Commencement Date.

 

(ii) Scope of Services . Buyer may only access and use the Information Services (A) in a manner consistent with the use of such Information Services by the Business prior to the Commencement Date and (B) for the internal information processing needs of Buyer in connection with Buyer’s sales to Customers during the Transition Period.

 

(iii) Data Integrity Measures . In connection with the Information Services made available to Buyer under this Agreement, NC and Buyer shall cooperate and implement reasonable firewalls (including as contemplated by Section 11), including, but not limited to, utilizing appropriate hardware and software necessary to maintain and ensure the integrity of Buyer’s data (including any Affiliate of Buyer) and NC’s or any of its contracting parties’ data (including any Affiliate of NC). NC acknowledges that it has provided Buyer with true, correct and complete copies of its systems security policies as of the date hereof. Buyer acknowledges that it has read and shall comply with such systems security policies.

 

(c) Customer and Supplier Transition Assistance Services . During the Transition Period, the Personnel shall, pursuant to a process agreed upon by the parties from time to time, (i) inform Customers, as well as any other Persons that contact NC or Vita regarding the purchase of vitamins, minerals or dietary supplement products, that all futures sales and purchases shall be made through Buyer, (ii) provide such Customers or other Persons with such telephone number(s) or other adddress(es) as Buyer may from time to time provide to NC and Vita in writing for such purpose and (iii) assist Buyer in securing an agreement with any third party that provided goods or services to NC or Vita prior to the Closing Date, upon the request of Buyer. Without limiting the foregoing, during the Transition Period, Personnel, including Jonathan Greenhut in particular, shall, upon reasonable request and during regular business hours, join Buyer in contacting Customers or suppliers, whether by telephone, video conference or in person, to assist with the transition of such Customer relationships or supplier relationships to Buyer on terms that are acceptable to Buyer. Any travel expenses incurred by Personnel, including but not limited to Mr. Greenhut, to attend any such meetings shall be borne by Buyer, subject to Buyer’s standard travel policy (a copy of which will be made available to all Personnel promptly following the Commencement Date) or as otherwise pre-approved in writing by Buyer; provided, however, that notwithstanding the foregoing or anything contained in Buyer’s standard travel policy to the contrary, in no event shall Mr. Greenhut be required to travel by air in excess of three (3) hours unless Buyer pre-approves the reimbursement or payment of such travel expenses for business class airfare in respect of such flight.

 

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(d) Supplies . During the Transition Period, NC will use commercially reasonable efforts to assist Buyer in meeting its needs for generic office supplies at the Premises, as such needs are conveyed to NC from time to time.

 

(e) Accounting Services . During the Transition Period, NC hereby agrees to provide accounting support services to Buyer in connection with its servicing of Customers, including but not limited to, the preparation of monthly center-level financial statements, assistance with journal entries, accounts payable processing, preparation and filing of sales and use tax returns, and other bookkeeping support services consistent with operation of the Business prior to the Commencement Date.

 

(f) Existing Services . NC represents and warrants that the Personnel, for so long as such Personnel remain employed by NC, will be available to perform services hereunder that are substantially similar to the services performed by such Personnel to the Business during the six (6) month period prior to the Closing Date.

 

(g) Access to Information . In addition to performing the Transition Services and its other obligations hereunder, NC and Vita shall provide Buyer and its Affiliates and third-party suppliers, as reasonably requested, with reasonable access, upon reasonable notice, to employees of NC and its Affiliates having knowledge of the Business as conducted prior to the Commencement Date, to respond to questions or provide data and general knowledge about the servicing of the Customer relationships prior to the Closing Date.

 

(h) Additional Services. Any additional services requested by Buyer that are not included in the Transition Services shall be negotiated in good faith (including the service fees with respect thereto), and, if mutually agreed upon by the parties hereto, shall be included in this Agreement through amendments to the Exhibits hereto.

 

(i) Termination of Services. Notwithstanding anything to the contrary contained herein, Buyer may discontinue any of the Transition Services (other than the right to use the Premises), in whole or in part, at any time and from time to time, in which case the modified fee arrangements, if any, described on Exhibit C will apply.

 

3. Liquidation of Existing Inventory . For a period of six (6) months following the Commencement Date (the “ Selloff Period ”), NC and Vita shall, notwithstanding anything herein or in the Purchase Agreement to the Contrary, be permitted to sell the Inventory as set forth on Section 4.12 of the Disclosure Schedules (as such disclosure is updated as of Closing). Within a reasonable period not to exceed ten (10) Business Days after the termination of the Selloff Period, NC shall deliver to Buyer certificates from an executive officer of each of NC and Vita, as applicable, (i) certifying that NC and Vita, as applicable, have ceased all sales of Inventory upon the termination of the Selloff Period, (ii) providing a reasonable description of all Inventory remaining in the possession of NC or Vita as of the Business Day immediately following the termination of the Selloff Period, if any (the “ Remaining Inventory ”), and (iii) certifying that the Remaining Inventory, if any, has been destroyed (which destruction shall be at the sole cost and expense of NC and Vita and shall occur no later than within five (5) Business Days following the termination of the Selloff Period).

 

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4. Service Managers; Governance .

 

(a) Each party will designate a services manager (that party’s “ Services Manager ”) who will be directly responsible for coordinating and managing the delivery or receipt of the Transition Services and have the authority to act on such party’s behalf with respect to matters relating to this Agreement. Each party’s designated Services Manager shall possess sufficient knowledge, experience and expertise to qualify him or her to manage the delivery or receipt of the Transition Services. The Services Managers will work with each other to address issues and to manage the parties’ relationship under this Agreement.

 

(b) NC hereby designates Michael Scagluso as its Services Manager, and Buyer hereby designates Steve Rolfes as its Services Manager (to the extent such Person is an employee of NC or Buyer or any of their respective Affiliates, as applicable). Each party shall have the right, upon prior written notice to the other party, to replace its respective Services Manager from time to time with a substitute manager with comparable job scope, knowledge, expertise and decision-making authority.

 

5. Standards of Performance . NC shall perform the Transition Services in (i) a professional, workmanlike and timely manner and otherwise in a manner and with substantially the same degree of care, skill and prudence customarily exercised in its own operations, and (ii) compliance in all material respects with all applicable Laws. NC DISCLAIMS ALL OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE TRANSITION SERVICES.

 

6. Invoice and Payment Procedures .

 

(a) Buyer shall pay NC for the Transition Services provided hereunder by means of direct funds transfer from Buyer’s account to NC’s designated account. Each month during the Term, NC shall submit to Buyer for payment an invoice, accompanied by a monthly income statement with respect thereto, reasonably detailing the amounts due under this Agreement with respect to the Transition Services for the immediately preceding month, as such amounts are set forth in more detail in Exhibit C . NC shall, in determining the invoiced amounts and preparing the accompanying income statement, account for the provision of the Transition Services using methods, policies and procedures consistent with those used historically by NC in the preparation of its financial statements. Such invoice shall be payable by Buyer within thirty (30) days from the date of receipt of such invoice (the “ Payment Period ”) unless Buyer delivers a Notice of Dispute (as defined below) during the Payment Period, in which case Buyer shall pay during the Payment Period all amounts not identified as disputed in such Notice of Dispute. The parties agree and acknowledge that the failure to pay any amount disputed in good faith in accordance with this Agreement shall not be considered a breach of this Agreement unless and until such dispute is resolved and any amounts owed have not been promptly paid, and NC shall continue to perform its obligations under this Agreement to provide Transition Services notwithstanding the existence of such dispute. During the Payment Period, as soon as reasonably practicable after receipt of any reasonable written request by Buyer, NC shall provide Buyer with data and documentation supporting the calculation of a particular fee for the purpose of verifying the accuracy of such calculation.

 

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(b) If Buyer disputes, in good faith, any amounts owed by Buyer to NC set forth in any invoice delivered pursuant to Section 6(a): (x) Buyer shall pay to NC the undisputed portion of such amounts within the Payment Period; (y) Buyer shall provide a written explanation to NC of what amounts are in dispute, and why such amounts are in dispute (the “ Notice of Dispute ”), together with reasonable supporting documentation in respect thereof; and (z) Buyer and NC shall thereafter use commercially reasonable good faith efforts to resolve the disputed amounts within ten (10) Business Days. If Buyer and NC are unable to resolve all matters specified in a Notice of Dispute within ten (10) Business Days following the delivery of such Notice of Dispute, such dispute Buyer and NC shall cause direct negotiations between Jonathan Greenhut, on behalf of NC, and Steve Rolfes, on behalf of Buyer (to the extent such Person is an employee of NC or Buyer or any of their respective Affiliates, as applicable) to occur with respect thereto.

 

(c) If any matter set forth in a Notice of Dispute is still unresolved after thirty (30) days following delivery thereof (the “ Consultation Period ”), the parties shall submit all matters that remain in dispute with respect to the Notice of Dispute to (i) an independent certified public accounting firm in the United States of national recognition mutually acceptable to Buyer and NC (the “ Independent Accounting Firm ”) or (ii) if Buyer and NC are unable to agree upon such a firm within ten (10) Business Days after the end of the Consultation Period, then within an additional ten (10) Business Days, Buyer and NC shall each select one such firm and those two firms shall select a third such firm, in which event “Independent Accounting Firm” shall mean such third firm. Buyer and NC shall use commercially reasonable best efforts to cause the Independent Accounting Firm to reach a determination of the amount due in respect of the portion of the applicable invoice identified in the Notice of Dispute, not more than thirty (30) day after such referral. Such determination shall be made by the Independent Accounting Firm based solely on the terms contained in this Agreement and presentations made by each of the parties hereto. Nothing herein shall be construed to authorize or permit the Independent Accounting Firm to resolve or otherwise review any items which are not specifically disputed in the Notice of Dispute. With respect to each disputed matter, such determination, if not in accordance with the position of either Buyer or NC, shall not be in excess of the amount, as included in the invoice by NC, nor less than the amount, as advocated by Buyer in the Notice of Dispute with respect to such disputed matter, respectively. The action of the Independent Accounting Firm pursuant to this Section 6(c) with respect to each items which is specifically disputed in the Notice of Dispute shall be final and binding on the parties, absent manifest error.

  

(d) The cost of the Independent Accounting Firm’s review and determination shall be shared equally by Buyer and NC. During the review by the Independent Accounting Firm, the Buyer and NC and their respective accountants will each make available to the Independent Accounting Firm interviews with such individuals, and such information, books and records and work papers, as may be reasonably requested by the Independent Accounting Firm to fulfill its obligations under Section 6(c). In acting under this Agreement, the Independent Accounting Firm will be entitled to the privileges and immunities of an arbitrator.

  

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7. Term; Termination . NC’s obligations hereunder with respect to any Transition Service will expire on the earliest of (i) the date Buyer terminates such Transition Service as contemplated below, (ii) the expiration of the Transition Period; provided, however, that in the event that Buyer determines, in its sole discretion, that it requires NC to continue to provide any of the Transition Services after the expiration of the Transition Period (a “ Further Term ”), it shall notify NC in writing, which notice shall be delivered no less than thirty days prior to the expiration of the Transition Period, indicating is electing to make an extension to the Transition Period, which extension shall not extend beyond twelve (12) months from the Commencement Date (the “ Final Termination Date ”). For the avoidance of doubt, unless otherwise agreed to the parties in writing, the terms and conditions of this Agreement applicable to the Transition Services shall continue to apply for the Further Term. If Buyer elects to have a Further Term in accordance with the foregoing, then any reference to the Transition Period referred to in this Agreement shall automatically be extended until the expiration of the Further Term in accordance with foregoing, notwithstanding any finite period referred to elsewhere in this Agreement. Buyer may terminate the provision of Transition Services hereunder by any specified Personnel or NC as a whole, prior to the Final Termination Date, at any time upon at least thirty (30) days’ prior written notice to NC. Buyer shall, as of expiration or earlier termination of the Transition Period or, if applicable, Further Term, and no termination of this Agreement prior to the Final Termination Date shall relieve Buyer of its obligation to, pay to NC all sums owed to NC for the provision of such terminated Transition Service(s) through the date of termination thereof, including without limitation, the amount of retention bonuses paid by NC to Personnel that maintained their employment through the date of such expiration or termination, in amounts not to exceed the retention bonus amount in respect of such Personnel as set forth in Exhibit D . In addition, notwithstanding the earlier termination of this Agreement in accordance herewith, Buyer shall pay the amounts described in Item 1 of Exhibit C hereto with respect to use of the Premises through the Final Termination Date. NC shall have the right, at its option, to terminate this Agreement upon thirty (30) days advance written notice in the event that Buyer defaults in the performance of any covenant, agreement, term or provision of this Agreement to be performed by Buyer and such default is not remedied during such 30-day period, provided that the notice and cure period applicable to Buyer’s failure to pay when due any NC invoice in respect of Transition Services shall be five (5) Business Days. Buyer shall use commercially reasonable efforts to transition the Transition Services provided under this Agreement to its own operations as promptly as practical and prior to the Final Termination Date. No provision of this Agreement shall affect, be construed as, or operate as a waiver of the right of the party aggrieved by any breach of this Agreement to be compensated for any injury or damage resulting therefrom which is incurred either before or after termination of this Agreement.

 

8. Proprietary Material . All books, records, data, work product and other documents relating to the businesses of each party and their respective Affiliates (the “ Owner ”) including, without limitation, all employee records, medical records, data, information, software, and manuals (collectively, the “ Proprietary Material ”), whether or not prepared by such party or otherwise coming into the possession or control of such party or of the other party as a result of or in connection with the performance of the Transition Services, shall be and remain the exclusive property of the Owner, and the other party shall not at any time, directly or indirectly, assert any interest or property rights therein. Such Proprietary Material shall not be used for any purpose other than in connection with the provision of Transition Services. Determination of ownership of Proprietary Material shall take into account the transfer of the Purchased Assets pursuant to the Purchase Agreement. Each party shall establish and maintain reasonable precautions against the destruction or loss of any such Proprietary Materials. Upon the expiration or termination of this Agreement, and without any further action, each party shall cause all such materials and all copies of the Proprietary Materials to be destroyed or, upon the request of the Owner thereof, returned to the Owner thereof in such format, electronic or otherwise, as the Owner may reasonably request as soon as reasonably possible following the effective date of the expiration or termination.

 

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9. Assignment . This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their heirs, successors and permitted assigns, and shall not confer upon any other person any rights or remedies hereunder. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of the other party, except that Buyer may assign all or any portion of its rights and obligations hereunder to any Affiliate of Buyer and Buyer may, without such consent, assign all such rights to any Person providing financing to Buyer as collateral security for such financing; provided that no such assignment shall relieve Buyer of any of its obligations hereunder.

 

10. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial .

 

(a) This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction).

 

(b) ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE STATE OF NEW YORK IN EACH CASE LOCATED IN THE CITY OF NEW YORK AND COUNTY OF NEW YORK, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH IN THE PURCHASE AGREEMENT SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

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(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10(C).

 

(d) Notwithstanding anything to contrary herein, the Parties agree to generally use their commercially reasonable, good faith efforts to resolve any disagreement with respect to the operation of this Agreement or the provision of the Transition Services prior to seeking a claim or other relief under this Section 10 or Section 16.

 

11. Confidentiality .

 

(a) Each party acknowledges that, in the course of this business relationship, it may become aware of or come into possession of certain confidential or proprietary information of the other party including but not limited to the Proprietary Material (as defined in Section 8). Each party agrees to maintain the confidentiality of such confidential and proprietary information (including the Proprietary Material) and agrees not to disclose such confidential and proprietary information to third parties, make copies, or use the information for any purpose other than as necessary in connection with the performance of the Transition Services, without the prior written permission of the Owner of the information. Each party agrees to either return all copies of any such information when all services to be performed under this Agreement have been performed or shall destroy such copies and an authorized officer shall certify to such destruction. Each party agrees that it will comply with applicable state and federal privacy law with respect to the handling of information pursuant to this Agreement. This Section 11 shall survive any termination or expiration of this Agreement.

 

(b) NC and Vita agree to (i) inform the Greenhut Employee of the restrictions contained in Section 11(a) and the Greenhut Employee shall agree to be bound by the Section 11(a) to the same extent as if he or she was a party to this Agreement and (ii) be responsible for any breaches of any of the provisions of this Section 11 by the Greenhut Employee (it being understood that such responsibility shall be in addition to and not by way of limitation of any right or remedy the Buyer may have against the Greenhut Employee with respect to such breach).

 

12. Indemnification .

 

(a) Indemnification By NC . NC agrees to hold harmless and indemnify Buyer and its Affiliates, directors, managers, officers, employees, agents, Representatives and permitted assignees (hereinafter collectively referred to as “ Buyer Indemnitees ”) from and against any and all liabilities, losses and expenses (including, but not limited to, reasonable attorneys’ fees) incurred by any such Buyer Indemnitee in connection with claims, demands, lawsuits, judgments, penalties or actions, arising from, related to or based upon (i) a material breach of this Agreement by, or the gross negligence or willful misconduct under this Agreement of, NC, its Representatives or permitted subcontractors, and (ii) any infringement, violation or misappropriation of the Intellectual Property Rights of any third party with respect to any of the Transition Services.

 

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(b) Indemnification By Buyer . Buyer agrees to hold harmless and indemnify NC and its Affiliates, directors, managers, officers, employees, agents, Representatives and permitted assigns (hereinafter collectively referred to as “ NC Indemnitees ”) from and against any and all liabilities, losses and expenses (including, but not limited to, reasonable attorneys’ fees) incurred by any such NC Indemnitee in connection with claims, demands, lawsuits, judgments, penalties or actions, arising from, related to or based upon (i) the performance of the Transition Services hereunder, except to the extent resulting from a material breach by, or gross negligence or willful misconduct of, NC or the Personnel, (ii) a material breach of this Agreement by Buyer, its Representatives or its permitted assigns, (iii) the gross negligence or willful misconduct under this Agreement of Buyer, its Representatives or its permitted assigns and (iv) the occupation of the Premises by Buyer Employees.

 

(c) Procedure for Indemnity .

 

(i) Notice of Claims . If a claim (a “ Claim ”) is to be made by a party entitled to indemnification hereunder against the indemnifying party, the party claiming such indemnification shall, give written notice (a “ Claim Notice ”) to the indemnifying party as soon as practicable after the party entitled to indemnification becomes aware of any fact, condition or event which may give rise to damages for which indemnification may be sought under this Section 12; provided however , that the failure of any indemnified party to give timely notice hereunder shall not affect rights to indemnification hereunder, except to the extent that the indemnifying party demonstrates that the defense of such claim is prejudiced by the indemnified party’s delay or failure to give such notice.

 

(ii) Defense of Third-Party Claims . If any lawsuit or enforcement action is filed by a third party against any party entitled to the benefit of indemnity hereunder with respect thereto, a Claim Notice thereof shall be given to the indemnifying party as promptly as practicable (and, in any event, within thirty (30) days after the service of the citation or summons). The failure of any indemnified party to give timely notice hereunder shall not affect rights to indemnification hereunder, except to the extent that the indemnifying party demonstrates that the defense of such claim is prejudiced by the indemnified party’s delay or failure to give such notice. After such notice, if the indemnifying party shall acknowledge, in writing, to the indemnified party that the indemnifying party is obligated under the terms of its indemnity hereunder in connection with such lawsuit or action, then the indemnifying party shall be entitled, if it elects to do so, at its own cost, risk and expense, (i) to take control of the defense and investigation of such lawsuit or action, (ii) to employ and engage legal counsel of its own choice, but, in any event, reasonably acceptable to the indemnified party, to handle and defend the same unless the named parties to such action or proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and the indemnified party has been advised by counsel that there may be one or more legal defenses available to such indemnified party that are different from or additional to those available to the indemnifying party, in which event, the indemnified party shall be entitled, at the indemnifying party’s cost, risk and expense, to separate counsel of its own choosing. The indemnifying party shall not, without the written consent of the indemnified party, which shall not be unreasonably withheld, conditioned or delayed, (i) settle or compromise any Claim or consent to the entry of any judgment which does not include an unconditional written release, by the claimant or plaintiff, of the indemnified party, from all liability in respect of such Claim or (ii) settle or compromise any Claim if the settlement imposes equitable remedies or material obligations on the indemnified party other than financial obligations for which such indemnified party will be indemnified hereunder. No Claim which is being defended in good faith by the indemnifying party in accordance with the terms of this Agreement shall be settled or compromised by the indemnified party without the written consent of the indemnifying party, which consent shall not be unreasonably withheld or delayed.

 

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(iii) If the indemnifying party fails to respond with respect to such lawsuit or action within thirty (30) days after receipt of the Claim Notice, the indemnified party against which such lawsuit or action has been asserted will (upon delivering notice to such effect to the indemnifying party) have the right to undertake, at the indemnifying party’s cost and expense, the defense, compromise or settlement of such lawsuit or action on behalf of and for the account and risk of the indemnifying party; provided, however , that such lawsuit or action shall not be compromised or settled without the written consent of the indemnifying party, which consent shall not be unreasonably withheld or delayed. If the indemnified party settles or compromises such lawsuit or action without the prior written consent of the indemnifying party, the indemnifying party will bear no liability hereunder for or with respect to such lawsuit or action, unless the indemnifying party unreasonably withheld consent. In the event either party assumes the defense of a particular lawsuit or action in the manner contemplated above, the party defense, compromise or settlement. The indemnifying party shall be liable for any settlement of any action effected pursuant to and in accordance with this Section 11 and for any final judgment (subject to any right of appeal), and the indemnifying party agrees to indemnify and hold harmless the indemnified party from and against any damages for which indemnification may be sought under this Section 12 by reason of such settlement or judgment.

 

(d) Limitation on Indemnity .

 

(i) To the extent that any claim, action, demand or lawsuit that is subject to indemnification under this Agreement is covered by insurance, the amount of any indemnity payment shall be net of the Net Proceeds of any insurance policy paid to the indemnified party with respect to such claim, action, demand or lawsuit. For purposes of this Section 12(d), “ Net Proceeds ” shall mean the insurance proceeds actually received, less any expenses of recovery, deductibles, and/or co-payments. If any amounts are reimbursed under insurance coverage, (i) concurrently with indemnification under this Section 12, the indemnified amount shall be offset by an amount equal to the Net Proceeds received under insurance coverage or (ii) subsequent to indemnification under this Section 12, the indemnified party shall reimburse the indemnifying party in an amount equal to the Net Proceeds subsequently received under insurance coverage.

 

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(ii) Amounts due to any indemnified party pursuant to this Section 12 shall be determined after taking into account any indemnity, contribution or other similar payment actually received by the indemnified party from any third party with respect thereto.

 

(iii) The indemnification provided in this Section 12 shall be the sole and exclusive remedy for any claims covered by Section 12(a) and Section 12(b) hereof. Notwithstanding the foregoing, nothing herein shall prevent any of the parties from bringing (i) an equitable action to enforce a covenant or obligation or (b) an action based upon allegations of fraud with respect to the other party in connection with this Agreement.

 

(e) Disclaimer of Certain Damages . Neither party shall be liable to the other under this Agreement for any indirect, special, or consequential damages or lost profits hereunder. In addition, in no event shall either party be liable for any punitive or exemplary damages of any kind. For purposes of clarity only, and without limiting the generality of the foregoing, the indemnifying party shall be responsible for direct damages, including without limitation, reasonable attorneys’ fees.

 

13. Independent Contractors . In its performance of this Agreement, NC will at all times act in its own capacity and right as an independent contractor, and nothing contained herein may be construed to make NC an agent, partner, or joint venturer of Buyer.

 

14. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

15. Notices . All notices, consents, requests, demands and other communications hereunder are to be in writing and given in the manner set forth in the Purchase Agreement.

 

16. Specific Performance . NC acknowledges and agrees that Buyer would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms and that any breach of this Agreement by NC could not be adequately compensated by monetary damages. Accordingly, NC agrees that, in addition to any other right or remedy to which Buyer, as applicable, may be entitled, at law or in equity, Buyer will be entitled to seek to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of the provisions of this Agreement, without posting any bond or other undertaking.

 

17. Force Majeure . NC shall not be considered in default in the performance of its obligations under this Agreement to the extent that its performance of such obligations is prevented or delayed by any cause beyond its control, including, but not limited to, civil disturbances, rebellion, invasion, epidemic, hostilities, war, acts of terrorism, embargo, natural disaster, acts of God, fire, sabotage, loss and destruction of property, other events or situations which NC was unable to prevent or overcome despite its exercise of reasonable due diligence.

 

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18. Amendment and Modification . This Agreement (including the exhibits hereto), the Purchase Agreement (including the exhibits and schedules thereto) and other Transaction Agreements may not be modified, amended, supplemented or waived except by a writing signed by each of NC, Vita and Buyer, and such writing must refer specifically to this Agreement.

 

19. Entire Agreement . This Agreement, embodies the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof.

 

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IN WITNESS WHEREOF , the parties hereto have duly executed this Agreement through their duly authorized representatives to be effective as of the date first written above.

  

NC:    

BUYER

 
       

NUTRICAP LABS, LLC 

  TCC CM SUBCO I, INC.  
       
By:   /s/ Jonathan Greenhut  

By: 

/s/ Richard H. Neuwirth
 

Name: 

Jonathan Greenhut     Name:   Richard H. Neuwirth
  Title:   Manager     Title:   Executive Vice President, Chief Legal Officer and Secretary
               

  

VITA: 

 
   

VITACAP LABS, LLC 

 
   
By:  

/s/ Jonathan Greenhut

 
  Name:  

Jonathan Greenhut 

 
  Title:   Manager  

 

 

[ Signature Page to Transition Services Agreement ]

 

 

 

 

Exhibit 10.53

 

EXECUTION COPY

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “ Agreement ”), is made and entered into as of February 6, 2015, by and between Twinlab Consolidated Holdings, Inc., a Nevada corporation (the “ Company ”), and 2014 Huntington Holdings, LLC (“ Investor ”).

 

WHEREAS, Twinlab Consolidation Corporation (“TCC”), a wholly-owned subsidiary of the Company, and the Investor are parties to a Securities Purchase Agreement, dated as of August 1, 2014 (the “ Purchase Agreement ”), pursuant to which the Investor purchased 1,528,384 shares of common stock, par value $0.0001 per share, of TCC (“TCC Common Stock”);

 

WHEREAS, the shares of TCC Common Stock were converted into shares of common stock, par value $0.0001 per share, of the Company pursuant to the Agreement and Plan of Merger, dated September 4, 2014, by and among Mirror Me, Inc. (now known as the Company), TCC MERGER CO. and TCC, as amended by that certain First Amendment to Agreement and Plan of Merger dated September 16, 2014;

 

WHEREAS, the Company has assumed the obligations of TCC under the Purchase Agreement with respect to registration of the shares of Common Stock (as defined below); and

 

WHEREAS, in connection with the consummation of the transactions contemplated by the Purchase Agreement, and pursuant to the terms of the Purchase Agreement, the parties desire to enter into this Agreement in order to grant certain registration rights to the Investor as set forth below.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual and dependent covenants hereinafter set forth, the parties agree as follows:

 

1.           Defined Terms . As used in this Agreement, the following terms shall have the following meanings:

 

Affiliate ” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

 
 

 

Agreement ” has the meaning set forth in the preamble.

 

Board ” means the board of directors of the Company (and any successor governing body of the Company or any successor of the Company).

 

Business Day ” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business.

 

Commission ” means the Securities and Exchange Commission or any other federal agency administering the Securities Act and the Exchange Act at the time.

 

Common Stock ” means the common stock, par value $0.001 per share, of the Company and any other common equity securities issued by the Company, and any other shares of stock issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation or other corporate reorganization).

 

Company ” has the meaning set forth in the preamble and includes the Company's successors by merger, acquisition, reorganization or otherwise.

 

Exchange Act ” means the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations thereunder, which shall be in effect from time to time.

 

Governmental Authority ” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of law), or any arbitrator, court or tribunal of competent jurisdiction.

 

Investor ” has the meaning set forth in the preamble.

 

Person ” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

 

Piggyback Registration ” has the meaning set forth in Section 2.(a).

 

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Prospectus ” means the prospectus or prospectuses included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus or prospectuses.

 

Purchase Agreement ” has the meaning set forth in the recitals.

 

Registrable Securities ” means (a) any shares of Common Stock held by the Investor or issuable upon conversion, exercise or exchange of any securities owned by the Investor at any time, and (b) any shares of Common Stock issued or issuable with respect to any shares described in subsection (a) above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization (it being understood that for purposes of this Agreement, a Person shall be deemed to be a holder of Registrable Securities whenever such Person has the right to then acquire or obtain from the Company any Registrable Securities, whether or not such acquisition has actually been effected). As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) a Registration Statement covering such securities has been declared effective by the Commission and such securities have been disposed of pursuant to such effective Registration Statement, (ii) such securities are sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met, (iii) such securities are otherwise transferred and such securities may be resold without subsequent registration under the Securities Act, or (iv) such securities shall have ceased to be outstanding.

 

Registration Statement ” means any registration statement of the Company which covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all materials incorporated by reference in such Registration Statement.

 

Rule 144 ” means Rule 144 promulgated under the Securities Act or any successor rule thereto or any complementary rule thereto (such as Rule 144A).

 

Securities Act ” means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations thereunder, which shall be in effect from time to time.

 

Selling Expenses ” means all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any holder of Registrable Securities, except for the reasonable fees and disbursements of counsel for the holders of Registrable Securities required to be paid by the Company pursuant to Section 5 .

 

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2.           Piggyback Registration .

 

(a)          Whenever the Company proposes to register any shares of its Common Stock under the Securities Act for its own account (other than a registration effected solely to implement an employee benefit plan or a transaction to which Rule 145 of the Securities Act is applicable, or a Registration Statement on Form S-4, S-8 or any successor form thereto or another form not available for registering the Registrable Securities for sale to the public), and the form of Registration Statement to be used may be used for any registration of Registrable Securities (a “ Piggyback Registration ”), the Company shall give prompt written notice (in any event no later than 45 days prior to the filing or initial submission of such Registration Statement) to the holders of Registrable Securities of its intention to effect such a registration and, subject to Section 2.(b) shall include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion from the holders of Registrable Securities within 30 days after the Company's notice has been given to each such holder. The Company may postpone or withdraw the filing or the effectiveness of a Piggyback Registration at any time in its sole discretion.

 

(b)          If the managing underwriter advises the Company and the holders of Registrable Securities (if any holders of Registrable Securities have elected to include Registrable Securities in such Piggyback Registration) in writing that in its opinion the number of shares of Common Stock proposed to be included in such registration, including all Registrable Securities and all other shares of Common Stock proposed to be included in such underwritten offering pursuant to registration rights granted by the Company to other holders of Common Stock, exceeds the number of shares of Common Stock which can be sold in such offering and/or that the number of shares of Common Stock proposed to be included in any such registration would adversely affect the price per share of the Common Stock to be sold in such offering, the Company shall include in such registration (i) first, the number of shares of Common Stock that the Company proposes to sell; and (ii) second, the number of shares of Common Stock requested to be included therein by holders of Registrable Securities and by such other holders of Common Stock, allocated pro rata among all such holders on the basis of the number of Registrable Securities and the number of shares of Common Stock (on a fully diluted, as converted basis), as applicable, owned by all such holders or in such manner as they may otherwise agree.

 

(c)           The Company shall select the investment banking firm or firms to act as the managing underwriter or underwriters in connection with such offering.

 

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3.           Lock-up Agreement . Each holder of Registrable Securities agrees that in connection with any public offering of the Company's Common Stock or other equity securities, and upon the request of the managing underwriter in such offering, such holder shall not, without the prior written consent of such managing underwriter, during the period commencing on the pricing of any offering pursuant to such registration and ending on the date specified by such managing underwriter (such period not to exceed 180 days in the case of an IPO or 90 days in the case of any registration other than an IPO), (a) offer, pledge, sell, contract to sell, grant any option or contract to purchase, purchase any option or contract to sell, hedge the beneficial ownership of or otherwise dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into, exercisable for or exchangeable for shares of Common Stock (whether such shares or any such securities are then owned by the Holder or are thereafter acquired), or (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (a) or (b) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing provisions of this Section 3 shall not apply to sales of Registrable Securities to be included in such offering pursuant to Section 2(a) and shall be applicable to the holders of Registrable Securities only if all officers and directors of the Company and all stockholders owning more than 10% of the Company's outstanding Common Stock are subject to the same restrictions. Notwithstanding anything to the contrary contained in the foregoing, a holder of Registrable Securities may during the period set forth above transfer any of the Registrable Securities (i) by gift or (ii) to family members; provided , however , that any recipient of Registrable Securities pursuant to clauses (i) and (ii) must agree in writing to be bound by the provisions of this Agreement as a condition of such gift or transfer to family members. Each holder of Registrable Securities agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the managing underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. Notwithstanding anything to the contrary contained in this Section 3 , each holder of Registrable Securities shall be released, pro rata, from any lock-up agreement entered into pursuant to this Section 3 in the event and to the extent that the managing underwriter or the Company permit any discretionary waiver or termination of the restrictions of any lock-up agreement pertaining to any officer, director or holder of greater than 10% of the outstanding Common Stock.

 

4.           Registration Procedures . If and whenever the holders of Registrable Securities request that any Registrable Securities be registered pursuant to the provisions of this Agreement, the Company shall use its reasonable best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof, and pursuant thereto the Company shall as soon as reasonably practicable:

 

(a)          prepare and file with the Commission a Registration Statement with respect to such Registrable Securities and use its reasonable best efforts to cause such Registration Statement to become effective;

 

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(b)          prepare and file with the Commission such amendments, post-effective amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for a period of not less than 180 days, or if earlier, until all of such Registrable Securities have been disposed of and to comply with the provisions of the Securities Act with respect to the disposition of such Registrable Securities in accordance with the intended methods of disposition set forth in such Registration Statement;

 

(c)          within a reasonable time before filing such Registration Statement, Prospectus or amendments or supplements thereto, furnish to one counsel selected by holders of a majority of such Registrable Securities copies of such documents proposed to be filed, which documents shall be subject to the review, comment and approval of such counsel;

 

(d)          notify each selling holder of Registrable Securities, promptly after the Company receives notice thereof, of the time when such Registration Statement has been declared effective or a supplement to any Prospectus forming a part of such Registration Statement has been filed;

 

(e)          furnish to each selling holder of Registrable Securities such number of copies of the Prospectus included in such Registration Statement (including each preliminary Prospectus) and any supplement thereto (in each case including all exhibits and documents incorporated by reference therein) and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller;

 

(f)          use its reasonable best efforts to register or qualify such Registrable Securities under such other securities or “blue sky” laws of such jurisdictions as any selling holder reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such holders to consummate the disposition in such jurisdictions of the Registrable Securities owned by such holders; provided , that the Company shall not be required to qualify generally to do business, subject itself to general taxation or consent to general service of process in any jurisdiction where it would not otherwise be required to do so but for this Section 4.(f);

 

(g)          notify each selling holder of such Registrable Securities, at any time when a Prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such holder, the Company shall prepare a supplement or amendment to such Prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such Prospectus shall not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading;

 

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(h)          make available for inspection by any selling holder of Registrable Securities, any underwriter participating in any disposition pursuant to such Registration Statement and any attorney, accountant or other agent retained by any such holder or underwriter (collectively, the “ Inspectors ”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “ Records ”), and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such Registration Statement;

 

(i)          provide a transfer agent and registrar (which may be the same entity) for all such Registrable Securities not later than the effective date of such registration;

 

(j)          use its reasonable best efforts to cause such Registrable Securities to be listed on each securities exchange on which the Common Stock is then listed;

 

(k)          in connection with an underwritten offering, enter into such customary agreements (including underwriting and lock-up agreements in customary form) and take all such other customary actions as the holders of such Registrable Securities or the managing underwriter of such offering reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (including, without limitation, making appropriate officers of the Company available to participate in “road show” and other customary marketing activities (including one-on-one meetings with prospective purchasers of the Registrable Securities);

 

(l)          otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission and make available to its stockholders an earnings statement (in a form that satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder) no later than 30 days after the end of the 12-month period beginning with the first day of the Company's first full fiscal quarter after the effective date of such Registration Statement, which earnings statement shall cover said 12-month period, and which requirement will be deemed to be satisfied if the Company timely files complete and accurate information on Forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise complies with Rule 158 under the Securities Act;

 

(m)          furnish to each selling holder of Registrable Securities and each underwriter, if any, with (i) a legal opinion of the Company's outside counsel, dated the effective date of such Registration Statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), in form and substance as is customarily given in opinions of the Company's counsel to underwriters in underwritten public offerings; and (ii) a “comfort” letter signed by the Company's independent certified public accountants in form and substance as is customarily given in accountants' letters to underwriters in underwritten public offerings;

 

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(n)          without limiting Section 4.(f) above, use its reasonable best efforts to cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the holders of such Registrable Securities to consummate the disposition of such Registrable Securities in accordance with their intended method of distribution thereof;

 

(o)          notify the holders of Registrable Securities promptly of any request by the Commission for the amending or supplementing of such Registration Statement or Prospectus or for additional information;

 

(p)          advise the holders of Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued; and

 

(q)          otherwise use its reasonable best efforts to take all other steps necessary to effect the registration of such Registrable Securities contemplated hereby.

 

5.           Expenses . All expenses (other than Selling Expenses) incurred by the Company in complying with its obligations pursuant to this Agreement and in connection with the registration and disposition of Registrable Securities, including, without limitation, all registration and filing fees, underwriting expenses (other than fees, commissions or discounts), expenses of any audits incident to or required by any such registration, fees and expenses of complying with securities and “blue sky” laws, printing expenses, fees and expenses of the Company's counsel and accountants and reasonable fees and expenses of one counsel for the holders of Registrable Securities participating in such registration as a group (selected by the holders of a majority of the Registrable Securities included in the registration), shall be paid by the Company. All Selling Expenses relating to Registrable Securities registered pursuant to this Agreement shall be borne and paid by the holders of such Registrable Securities, in proportion to the number of Registrable Securities registered for each such holder.

 

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6.           Indemnification .

 

(a)          The Company shall indemnify and hold harmless, to the fullest extent permitted by law, each holder of Registrable Securities, such holder's officers, directors, managers, members, partners, stockholders and Affiliates, each underwriter, broker or any other Person acting on behalf of such holder of Registrable Securities and each other Person, if any, who controls any of the foregoing Persons within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against all losses, claims, actions, damages, liabilities and expenses, joint or several, to which any of the foregoing Persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, actions, damages, liabilities or expenses arise out of or are based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus, preliminary Prospectus, free writing prospectus (as defined in Rule 405 promulgated under the Securities Act) or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation or alleged violation by the Company of the Securities Act or any other similar federal or state securities laws or any rule or regulation promulgated thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance; and shall reimburse such Persons for any legal or other expenses reasonably incurred by any of them in connection with investigating or defending any such loss, claim, action, damage or liability, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such holder expressly for use therein or by such holder's failure to deliver a copy of the Registration Statement, Prospectus, free-writing prospectus (as defined in Rule 405 promulgated under the Securities Act) or any amendments or supplements thereto (if the same was required by applicable law to be so delivered) after the Company has furnished such holder with a sufficient number of copies of the same prior to any written confirmation of the sale of Registrable Securities.

 

(b)          In connection with any registration in which a holder of Registrable Securities is participating, each such holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus and, to the extent permitted by law, shall indemnify and hold harmless, the Company, each director of the Company, each officer of the Company who shall sign such Registration Statement, each underwriter, broker or other Person acting on behalf of the holders of Registrable Securities and each Person who controls any of the foregoing Persons within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any losses, claims, actions, damages, liabilities or expenses resulting from any untrue or alleged untrue statement of material fact contained in the Registration Statement, Prospectus, preliminary Prospectus, free writing prospectus (as defined in Rule 405 promulgated under the Securities Act) or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder; provided , that the obligation to indemnify shall be several, not joint and several, for each holder and shall be limited to the net proceeds (after underwriting fees, commissions or discounts) actually received by such holder from the sale of Registrable Securities pursuant to such Registration Statement.

 

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(c)          Promptly after receipt by an indemnified party of notice of the commencement of any action involving a claim referred to in this Section 6 , such indemnified party shall, if a claim in respect thereof is made against an indemnifying party, give written notice to the latter of the commencement of such action. The failure of any indemnified party to notify an indemnifying party of any such action shall not (unless such failure shall have a material adverse effect on the indemnifying party) relieve the indemnifying party from any liability in respect of such action that it may have to such indemnified party hereunder. In case any such action is brought against an indemnified party, the indemnifying party shall be entitled to participate in and to assume the defense of the claims in any such action that are subject or potentially subject to indemnification hereunder, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after written notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof; provided , that if (i) any indemnified party shall have reasonably concluded that there may be one or more legal or equitable defenses available to such indemnified party which are additional to or conflict with those available to the indemnifying party, or that such claim or litigation involves or could have an effect upon matters beyond the scope of the indemnity provided hereunder, or (ii) such action seeks an injunction or equitable relief against any indemnified party or involves actual or alleged criminal activity, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party without such indemnified party's prior written consent (but, without such consent, shall have the right to participate therein with counsel of its choice) and such indemnifying party shall reimburse such indemnified party and any Person controlling such indemnified party for that portion of the fees and expenses of any counsel retained by the indemnified party which is reasonably related to the matters covered by the indemnity provided hereunder. If the indemnifying party is not entitled to, or elects not to, assume the defense of a claim, it shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. In such instance, the conflicting indemnified parties shall have a right to retain one separate counsel, chosen by the holders of a majority of the Registrable Securities included in the registration, at the expense of the indemnifying party.

 

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(d)          If the indemnification provided for hereunder is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or action referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amounts paid or payable by such indemnified party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which resulted in such loss, claim, damage, liability or action as well as any other relevant equitable considerations; provided , that the maximum amount of liability in respect of such contribution shall be limited, in the case of each holder of Registrable Securities, to an amount equal to the net proceeds (after underwriting fees, commissions or discounts) actually received by such seller from the sale of Registrable Securities effected pursuant to such registration. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties agree that it would not be just and equitable if contribution pursuant hereto were determined by pro rata allocation or by any other method or allocation which does not take account of the equitable considerations referred to herein. No Person guilty or liable of fraudulent misrepresentation shall be entitled to contribution from any Person.

 

7.           Participation in Underwritten Registrations . No Person may participate in any registration hereunder which is underwritten unless such Person (a) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements; provided , that no holder of Registrable Securities included in any underwritten registration shall be required to make any representations or warranties to the Company or the underwriters (other than representations and warranties regarding such holder, such holder's ownership of its shares of Common Stock to be sold in the offering and such holder's intended method of distribution) or to undertake any indemnification obligations to the Company or the underwriters with respect thereto, except as otherwise provided in Section 6 .

 

8.           Rule 144 Compliance . With a view to making available to the holders of Registrable Securities the benefits of Rule 144 under the Securities Act and any other rule or regulation of the Commission that may at any time permit a holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3 (or any successor form), the Company shall:

 

(a)          make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date of such Registration Statement;

 

(b)          use reasonable best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act, at any time after the Company has become subject to such reporting requirements; and

 

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(c)          furnish to any holder so long as the holder owns Registrable Securities, promptly upon request, a written statement by the Company as to its compliance with the reporting requirements of Rule 144 under the Securities Act and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed or furnished by the Company as such holder may reasonably request in connection with the sale of Registrable Securities without registration.

 

9.           Preservation of Rights . The Company shall not (a) grant any registration rights to third parties which are more favorable than or inconsistent with the rights granted hereunder, or (b) enter into any agreement, take any action, or permit any change to occur, with respect to its securities that violates or subordinates the rights expressly granted to the holders of Registrable Securities in this Agreement.

 

10.          Termination . This Agreement shall terminate and be of no further force or effect when there shall no longer be any Registrable Securities outstanding; provided , that the provisions of Section 5 and Section 6 shall survive any such termination.

 

11.          Notices . All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient or (d) on the fifth day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 11).

 

If to the Company: Twinlab Consolidated Holdings, Inc.
  632 Broadway, Suite 201
  New York, NY 10012
  Facsimile: (212) 505-5413
  E-mail:   rneuwirth@twinlab.com
  Attention: General Counsel
   
with a copy to: Wilk Auslander LLP
  1515 Broadway
  New York, NY 10036
  Facsimile No.: (212) 752-6380
  Attention: Joel I. Frank

  

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If to Investor: 2014 Huntington Holdings, LLC
  c/o Wild, Maney & Resnick, LLP
  20 Crossways Park North, Suite 412
  Woodbury, NY 11797
  Facsimile:  (516) 364-3717
   
with a copy to (which copy shall not constitute notice): Kramer Levin Naftalis & Frankel LLP
  1177 Avenue of the Americas
  New York, NY 10036
  Facsimile: (212) 715-8000
  E-mail: MBrooks@KRAMERLEVIN.com
  Attention: Michael T. Brooks

 

12.          Entire Agreement . This Agreement, together with the Purchase Agreement and any related exhibits and schedules thereto, constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. Notwithstanding the foregoing, in the event of any conflict between the terms and provisions of this Agreement and those of the Purchase Agreement, the terms and conditions of this Agreement shall control.

 

13.          Successor and Assigns . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. The Investor may assign its rights hereunder to any purchaser or transferee of Registrable Securities; provided , that such purchaser or transferee shall, as a condition to the effectiveness of such assignment, be required to execute a counterpart to this Agreement agreeing to be treated as the Investor whereupon such purchaser or transferee shall have the benefits of, and shall be subject to the restrictions contained in, this Agreement as if such purchaser or transferee was originally included in the definition of the Investor herein and had originally been a party hereto.

 

14.          No Third-Party Beneficiaries . This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Agreement.

 

15.          Headings . The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

 

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16.          Amendment, Modification and Waiver . The provisions of this Agreement may only be amended, modified, supplemented or waived with the prior written consent of the Company and the holders of a majority of the Registrable Securities. No waiver by any party or parties shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. Except as otherwise set forth in this Agreement, no failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

17.          Severability . If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

 

18.          Remedies . Each holder of Registrable Securities, in addition to being entitled to exercise all rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. The Company acknowledges that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and the Company hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

 

19.          Governing Law; Submission to Jurisdiction . This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction). Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in the federal courts of the United States or the courts of the State of New York in each case located in the city of New York, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by mail to such party's address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

 

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20.          Waiver of Jury Trial . Each party acknowledges and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Agreement or the transactions contemplated hereby. Each party to this Agreement certifies and acknowledges that (a) no representative of any other party has represented, expressly or otherwise, that such other party would not seek to enforce the foregoing waiver in the event of a legal action, (b) such party has considered the implications of this waiver, (c) such party makes this waiver voluntarily, and (d) such party has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 20.

 

21.          Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement on the date first written above.

 

  TWINLAB CONSOLIDATED HOLDINGS, INC.
   
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: President and Chief Executive Officer
     
  2014 HUNTINGTON HOLDINGS, LLC
     
  By: /s/ Jonathan Greenhut
  Name: Jonathan Greenhut
  Title: Authorized Signatory

 

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