-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RQZF4CnUSXGwBmtI3FbXCJd0o+kGeoZqx+yqL493ZaP0E0maC8u7wcYL2lKB9Yj0 57FmYl9b9nnp57+zGztN6g== 0001108890-01-500093.txt : 20010627 0001108890-01-500093.hdr.sgml : 20010627 ACCESSION NUMBER: 0001108890-01-500093 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20010611 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010626 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPECTRUM ORGANIC PRODUCTS INC CENTRAL INDEX KEY: 0001034992 STANDARD INDUSTRIAL CLASSIFICATION: CANNED, FRUITS, VEG & PRESERVES, JAMS & JELLIES [2033] IRS NUMBER: 943076294 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-22231 FILM NUMBER: 1667058 BUSINESS ADDRESS: STREET 1: 133 COPELAND ST CITY: PETALUMA STATE: CA ZIP: 94952 BUSINESS PHONE: 7077788900 MAIL ADDRESS: STREET 1: 133 STREET 2: COPELAND STREET CITY: PETALUMA STATE: CA ZIP: 94952 FORMER COMPANY: FORMER CONFORMED NAME: ORGANIC FOOD PRODUCTS INC DATE OF NAME CHANGE: 19970304 8-K 1 spectrumform8-k061101.txt DATED 06-11-01 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 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) : June 11, 2001 Spectrum Organic Products, Inc. ---------------------------------------------------- (Exact name of registrant as specified in its charter) California 333-22997 94-3076294 -------------- ---------------------- ---------------- (State or other (Commission File Number) (IRS Employer jurisdiction of Identification No) incorporation) 133 Copeland Street Petaluma, CA 94952 -------------------------------------- (Address of Principal Executive Offices) (707) 778-8900 ----------------------------- (Registrant's telephone number) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On June 11, 2001, Spectrum Organic Products, Inc. (the "Company") entered into an Asset Purchase Agreement (the "Agreement") with Acirca, Inc. ("Acirca") pursuant to which the Company sold certain assets to Acirca related to the Company's tomato-based product lines (the "Disposition"). Acirca has been, and may continue to be, a customer of the Company, purchasing organic ingredients from the Company. The total consideration paid to the Company in connection with the Disposition was $3,046,015 in cash, which included $696,015 paid in consideration for saleable inventory sold to Acirca, subject to post-closing adjustments. The aggregate amount of consideration was determined following negotiations between the Company and Acirca and is set forth in the Agreement. Included in the total amount of consideration paid to the Company was $350,000 which was deposited in an escrow account to be applied towards indemnity claims of Acirca and, to the extent not utilized for any indemnity claims of Acirca, released to the Company in two equal installments at the six month and one year anniversaries of the Agreement. ITEM 5. OTHER EVENTS On June 12, 2001, Acirca and the Company issued a joint press release reporting the implementation of the Agreement. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (b) Pro Forma Financial Information On June 11, 2001, the Company sold its tomato-based product lines to Acirca, Inc., an unrelated third party, in a transaction approved by unanimous vote of the Company's Board of Directors. The assets disposed of included inventories, trademarks and goodwill associated with the Millina's Finest, Garden Valley Natural, Parrot and Frutti di Bosco brands of pasta sauces and salsas, as well as children's meals sold under the Grandma Millina's Kitchen Kids' Meals brand and certain private label pasta sauce and salsa products. Pro forma financial information is presented below which discloses the changes necessary to the balance sheet at March 31, 2001 as if the transaction was consummated on that date, and to the statements of operations for the three-month and twelve-month periods ended March 31, 2001 and December 31, 2000, respectively, as if the transaction had occurred at the beginning of each period presented. The pro forma results for the statements of operations for both periods presented exclude material non-recurring charges directly attributable to the transaction (see Note 11). 2
SPECTRUM ORGANIC PRODUCTS, INC. BALANCE SHEET March 31, 2001 ASSETS (Unaudited) (Unaudited) Disposition of (Unaudited) As Product Lines Pro Forma Reported Inc/(Dec) Results ------------ ------------ ------------ Current Assets: Cash $ 1,000 $ -- $ 1,000 Accounts receivable, net 3,719,200 -- 3,719,200 Inventories, net (Note 2) 7,694,800 (696,000) 6,998,800 Other current assets (Note 5) 101,500 350,000 451,500 ------------ ------------ ------------ Total Current Assets 11,516,500 (346,000) 11,170,500 Property and Equipment, net (Note 2) 3,175,700 (10,500) 3,165,200 Other Assets: Goodwill, net (Note 3) 9,495,600 (6,776,400) 2,719,200 Other assets, net 139,700 -- 139,700 ------------ ------------ ------------ Total Assets $ 24,327,500 $ (7,132,900) $ 17,194,600 ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Bank overdraft $ 856,600 -- $ 856,600 Line of credit (Note 5) 6,312,800 (2,696,000) 3,616,800 Accounts payable, trade (Note 4) 6,442,300 125,000 6,567,300 Accrued expenses 833,300 -- 833,300 Current maturities of notes payable, former stockholder 375,000 -- 375,000 Current maturities of notes payable and capitalized lease obligations 967,700 -- 967,700 Current maturities of notes payable, stockholders 140,000 -- 140,000 ------------ ------------ ------------ Total Current Liabilities 15,927,700 (2,571,000) 13,356,700 Notes payable, former stockholder, less current maturities 874,300 -- 874,300 Notes payable, stockholders, less current maturities 286,400 -- 286,400 Notes payable and capitalized lease obligations, less current maturities 387,000 -- 387,000 ------------ ------------ ------------ Total Liabilities 17,475,400 (2,571,000) 14,904,400 ------------ ------------ ------------ Commitments and Contingencies Stockholders' Equity: Preferred stock, 5,000,000 shares authorized, no shares issued or outstanding -- -- Common stock, no par value, 60,000,000 shares authorized, 45,140,354 issued and outstanding 8,745,200 -- 8,745,200 Additional paid-in capital 345,100 -- 345,100 Accumulated deficit (2,238,200) (4,561,900) (6,800,100) ------------ ------------ ------------ Total Stockholders' Equity 6,852,100 (4,561,900) 2,290,200 ------------ ------------ ------------ Total Liabilities and Stockholders' Equity $ 24,327,500 $ (7,132,900) $ 17,194,600 ============ ============ ============ The accompanying notes are an integral part of the financial statements. 3
SPECTRUM ORGANIC PRODUCTS, INC. STATEMENT OF OPERATIONS For the Three Months Ended March 31, 2001 (Unaudited) (Unaudited) Consolidated Disposed (Unaudited) Results Product Pro Forma As Reported Lines Results ------------ ------------ ------------ Gross Sales (Note 6) $ 11,002,600 $ 1,306,500 $ 9,696,100 Discounts and Allowances (Note 6) 790,600 119,000 671,600 ------------ ------------ ------------ Net Sales 10,212,000 1,187,500 9,024,500 Cost of Goods Sold (Note 6) 7,463,700 875,000 6,588,700 ------------ ------------ ------------ Gross Profit 2,748,300 312,500 2,435,800 ------------ ------------ ------------ Operating Expenses: Sales and Marketing (Note 7) 1,584,100 98,000 1,486,100 General and Administrative (Note 8) 843,700 4,000 839,700 Amortization of Goodwill (Note 9) 225,400 163,300 62,100 ------------ ------------ ------------ Total Operating Expenses 2,653,200 265,300 2,387,900 ------------ ------------ ------------ Income from Operations 95,100 47,200 47,900 ------------ ------------ ------------ Other Income (Expense): Other Income 20,800 0 20,800 Gains/(Losses) on Sale of Assets (2,500) 0 (2,500) Interest Expense (Note 10) (281,200) (19,100) (262,100) ------------ ------------ ------------ Total Other Expenses, Net (262,900) (19,100) (243,800) ------------ ------------ ------------ Income/(Loss) Before Income Taxes (167,800) 28,100 (195,900) Provision for Income Tax Expense -- -- -- ------------ ------------ ------------ Net Income/(Loss) $ (167,800) $ 28,100 $ (195,900) ============ ============ ============ Basic and Fully Diluted Loss Per Share $ 0.00 $ 0.00 ============ ============ Weighted Average Shares Outstanding 44,785,702 44,785,702 ============ ============ The accompanying notes are an integral part of the financial statements. 4
SPECTRUM ORGANIC PRODUCTS, INC. STATEMENT OF OPERATIONS For the Year Ended December 31, 2000 (Unaudited) Consolidated Disposed (Unaudited) Results Product Pro Forma As Reported Lines Results ------------ ------------ ------------ Gross Sales (Note 6) $ 45,582,400 $ 4,644,500 $ 40,937,900 Discounts and Allowances (Note 6) 2,490,800 366,200 2,124,600 ------------ ------------ ------------ Net Sales 43,091,600 4,278,300 38,813,300 Cost of Goods Sold (Note 6) 31,819,400 3,284,000 28,535,400 ------------ ------------ ------------ Gross Profit 11,272,200 994,300 10,277,900 ------------ ------------ ------------ Operating Expenses: Sales and Marketing (Note 7) 6,455,900 372,600 6,083,300 General and Administrative (Note 8) 4,157,900 20,600 4,137,300 Loss on Disposition of Property and Equipment 436,500 -- 436,500 Amortization of Goodwill (Note 9) 909,600 658,900 250,700 ------------ ------------ ------------ Total Operating Expenses 11,959,900 1,052,100 10,907,800 ------------ ------------ ------------ Loss from Operations (687,700) (57,800) (629,900) ------------ ------------ ------------ Other Income (Expense): Interest Expense (Note 10) (1,381,500) (79,000) (1,302,500) Gain on Disposal of Trademarks and Labels 50,000 -- 50,000 Other Income 20,800 -- 20,800 ------------ ------------ ------------ Total Other Expenses, Net (1,310,700) (79,000) (1,231,700) ------------ ------------ ------------ Loss Before Taxes (1,998,400) (136,800) (1,861,600) Provision for Income Tax Expense (3,900) -- (3,900) ------------ ------------ ------------ Net Loss $ (2,002,300) $ (136,800) $ (1,865,500) ============ ============ ============ Basic and Fully Diluted Loss Per Share $ (0.05) $ (0.04) ============ ============ Weighted Average Shares Outstanding 44,234,378 44,234,378 ============ ============ The accompanying notes are an integral part of the financial statements. 5
SPECTRUM ORGANIC PRODUCTS, INC. NOTES TO FINANCIAL STATEMENTS 1. Basis of Presentation These are unaudited pro forma financial statements and include all adjustments which, in the opinion of Management, are necessary in order to make the pro forma financial statements not misleading. The Company does not presently manage its operations by business segment, and does not prepare internal financial statements by business segment for use by Management. Accordingly, sales and marketing expenses, general and administrative expenses and certain unassigned cost of sales items have been allocated to the disposed product lines based on specific assumptions disclosed in the Notes to Financial Statements. Pro forma results for the three-month period ended March 31, 2001 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2001. These financial statements have been prepared in accordance with the instructions to Form 8-K and do not include certain disclosures required by generally accepted accounting principles. 2. Tangible Assets Sold The adjustments entered in the balance sheet column captioned "Disposition of Product Lines" reflect the sale of tangible assets associated with the transaction, principally inventories of finished case goods and packaging materials as well as the unamortized cost of label plates, dies, molds and artwork. Accounts receivable related to the disposed product lines were not sold, nor were any liabilities of the Company assumed by the buyer. 3. Intangible Assets Sold The adjustments entered in the balance sheet column captioned "Disposition of Product Lines" reflect the sale of intangible assets associated with the transaction, principally trademarks and goodwill. Since the product lines disposed of comprise all of the remaining assets of Organic Food Products, Inc. (the former registrant), the remaining unamortized goodwill associated with the reverse acquisition of OFPI in October 1999 has been written-off. 4. Transaction Costs The adjustment entered in the balance sheet column captioned "Disposition of Product Lines" reflects the estimated transaction costs incurred, principally investment banking, accounting and legal fees associated with executing the transaction. 5. Consideration Received The adjustments entered in the balance sheet column captioned "Disposition of Product Lines" reflect the net cash proceeds of $2,696,000 which were applied against the Company's line of credit and the funds deposited into escrow of $350,000. 6 6. Results of Operations The adjustments entered in the statement of operations column captioned "Disposed Product Lines" reflect the elimination of the reported sales, discounts and allowances and cost of goods sold directly associated with the disposed product lines for each period presented. Certain unassigned cost of goods sold items have been allocated to the disposed product lines based on ratios that are appropriate in the opinion of Management. 7. Sales and Marketing The adjustment entered in the statement of operations column captioned "Disposed Product Lines" reflects the elimination of sales and marketing expenses either directly attributable to the disposed product lines or appropriately allocated based on the percentage relationship between gross sales of the disposed product lines to total branded culinary products gross sales. No employee-related expenses have been allocated since the Company does not have personnel assigned solely to the disposed product lines, nor does it anticipate headcount reductions as a result of the disposition. 8. General and Administrative The adjustment entered in the statement of operations column captioned "Disposed Product Lines" reflects the elimination of discounts taken against accounts receivable, which was allocated based on the percentage relationship between gross sales of the disposed product lines to total Company gross sales. No employee-related expenses have been allocated since the Company does not have personnel assigned solely to the disposed product lines, nor does it anticipate headcount reductions as a result of the disposition. 9. Amortization of Goodwill The adjustment entered in the statement of operations column captioned "Disposed Product Lines" reflects the elimination of the goodwill amortization expense associated with the reverse acquisition of OFPI in October 1999, which resulted in goodwill of $7,866,000 which was being amortized to expense over a twelve year life. 10. Interest Expense The adjustment entered in the statement of operations column captioned "Disposed Product Lines" reflects the elimination of estimated interest expense associated with the additional borrowing base available under the Company's revolving line of credit before the sale of inventories and collection of trade accounts receivable associated with the disposed product lines. 11. Material Non-recurring Items The pro forma results on the statements of operations for both periods presented are intended to present the continuing operations of the Company, before non-recurring charges directly attributable to the Disposition. 7 Accordingly, the pro forma results exclude material non-recurring charges which result directly from the transaction and which will be included in the operating results of the Company for the three and six month periods ending June 30, 2001. These non-recurring items consist primarily of the non-cash loss on the sale of the product lines of approximately $4,425,000 and investment banking, accounting and legal fees associated with executing the transaction of approximately $125,000. These non-recurring items are reflected in the pro forma balance sheet as of March 31, 2001. (c) Exhibits 2.03 Asset Purchase Agreement dated June 11, 2001 by and between Spectrum Organic Products, Inc. and Acirca, Inc. 2.04 Escrow and Security Agreement dated June 11, 2001 by and among Spectrum Organic Products, Inc., Acirca, Inc. and Webster Trust Company, NA. 2.05 Transition Services Agreement dated June 11, 2001 by and between Spectrum Organic Products, Inc. and Acirca, Inc. 2.06 License Agreement dated June 11, 2001 by and between Spectrum Organic Products, Inc. and Acirca, Inc. 2.07 Noncompetition Agreement dated June 11, 2001 by and among Spectrum Organic Products, Inc., Acirca, Inc., Jethren Phillips, and John Battendieri. 2.08 Assignment and Assumption Agreement dated June 11, 2001 by and between Spectrum Organic Products, Inc. and Acirca, Inc. 99.01 Joint press release of Acirca and the Company dated June 12, 2001, titled "Acirca Acquires Millina's Finest Sauces". 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. Dated: June 25, 2001 Spectrum Organic Products, Inc. By: /s/ Robert B. Fowles ------------------------------- Robert B. Fowles Duly Authorized Officer & Chief Financial Officer EX-99.A4 2 spectrumexhibit2-03.txt ASSESTPURCHASEAGREEMENTDATED061101 ASSET PURCHASE AGREEMENT ------------------------ THIS ASSET PURCHASE AGREEMENT (this "Agreement"), made as of June 11, 2001, by and between Acirca, Inc., a Delaware corporation ("Buyer"), and (ii) Spectrum Organic Products, Inc., a California corporation, formerly known as Organic Food Products, Inc., Garden Valley Naturals, Inc. and S&D Foods, Inc. ("Seller"). (Seller and Buyer are collectively referred to herein as the "Parties") Certain capitalized terms used in this Agreement are defined in Section 6.1 below. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Seller is a wholesale manufacturer and distributor of pesticide- and preservative-free tomato-based products (including sauces, salsa and condiments) sold under the brand names Garden Valley Organic, Millina's Finest, Frutti de Bosco, Bella Toscana, and Parrot, as well as other related products and other private label brand names, all of which are more specifically identified on Exhibit A hereto (the "Business"); and WHEREAS, on the terms and subject to the conditions contained in this Agreement, Seller desires to sell, transfer and assign, or cause to be sold, transferred and assigned, to Buyer all of the Purchased Assets (as defined herein), and Buyer desires to purchase and acquire from Seller, all of the Purchased Assets. NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties, promises and covenants herein contained, and intending to be legally bound hereby, it is hereby agreed by the Parties as follows: ARTICLE I. PURCHASE AND SALE OF ASSETS 1.1 Purchase and Sale of Assets. Upon the terms and subject to the conditions of this Agreement, at the Closing, Buyer shall purchase and acquire from Seller, and Seller shall sell, assign and transfer, to Buyer, free and clear of all Liens, the Business and the assets of Seller (other than the Excluded Assets) owned and used by Seller in the conduct of the Business and identified below (collectively, the "Purchased Assets"): (a) Inventory and other Tangible Assets. The inventory of goods and supplies pertaining to the product lines identified in Exhibit A, including, but not limited to, finished goods and packaging materials owned by Seller that constitutes a part of the Business, as of the Closing (collectively, the "Inventory"), and all other tangible personal property owned by Seller and held solely for use in the Business as of the Closing, including without limitation the tangible assets listed on Schedule 1.1(a) hereto (collectively, the "Tangible Assets"). Notwithstanding anything to the contrary herein, upon Buyer's written request delivered to Seller not more than [five (5)] days after the Closing, Buyer shall acquire from Seller, and Seller shall transfer to Buyer, free of charge, free and clear of all Liens, all point of sale materials, merchandising materials, racks, displays, and molds requested by Buyer and owned by Seller and held solely for use in the Business as of the Closing, including without limitation the materials set forth on Schedule 1.1(a) hereto (collectively, the "Transferred Assets"); (b) Contracts. All contracts, leases, licenses and other agreements of Seller, or any portions thereof, relating to the Business, all of which are more specifically identified on Schedule 1.1(b) hereto (collectively, the "Assigned Contracts"); (c) Books and Records. All books and records, files and papers, including literature, graphic materials, mailing lists, pricing and information manuals, sales literature or other sales aids, computer data in the form it exists as of the Closing and customer lists, relating to the Business (collectively, the "Records") (originals of all Records that relate solely to the Business and true and complete copies of all other Records shall be conveyed to Buyer under this clause (c)); (d) Intellectual Property. All of the intellectual property worldwide that, as of the Closing, is owned or used by Seller solely in connection with, or planned for use solely in connection with, the Business (collectively, the "Intellectual Property"), including, but not limited to, the Intellectual Property listed in Schedule 1.1(d) hereto and all (i) trademarks, service marks, trade names, and trade dress, together with the goodwill of the Business; (ii) copyrights and all related and equivalent rights, including moral rights; (iii) rights in designs, and the like; (iv) trade secrets; (v) other intellectual property rights; (vi) technology, patents, patent applications, know-how, processes, computer software, designs, drawings, documentation, and other intellectual property, whether or not secret and whether or not reduced to writing; (vii) applications for, and applications to register, any of the foregoing; (viii) licenses to or under any of the foregoing; and (ix) rights or options to obtain any of the foregoing; (e) Advances and Prepaid Expenses. All rights of Seller to advances and all prepaid expenses relating solely to the Business or the Purchased Assets hereto; and (f) Security Deposits and Claims Against Third Parties. All security deposits with third parties and all claims against third parties relating to items included in the Purchased Assets or relating solely to the Business. 1.2 Excluded Assets. Notwithstanding anything to the contrary provided for in this Agreement, the Purchased Assets shall in no event include any assets or property of Seller other than the assets described in Section 1.1 (collectively, the "Excluded Assets"). -2- 1.3 Purchase of Assets. In consideration of the sale, transfer and assignment by Seller of the Purchased Assets and the agreements of the Seller contained herein and in the Related Agreements, Buyer shall pay the Purchase Price as set forth in Section 1.4 and be responsible for the Buyer Liabilities in accordance with Section 1.5. 1.4 Purchase Price. (a) Closing Purchase Price. At the Closing, Buyer shall pay in the manner provided in Section 1.8(a) an amount equal to $2,350,000 plus the Estimated Saleable Inventory Amount (the "Closing Purchase Price"). At least three Business Days prior to the Closing, Seller shall deliver to Buyer an estimated closing inventory schedule that contains its best estimate (determined in good faith in consultation with Seller's independent accountants) of the value (calculated at the lower of standard or actual cost and in accordance with GAAP) as of the Closing of the saleable finished goods and packaging materials of the Business with a shelf life of greater than twelve calendar months (the "Estimated Saleable Inventory Amount"). Upon delivery of the Estimated Saleable Inventory Amount, Seller shall permit Buyer (and its accountants), at Buyer's expense, to visit and inspect Seller's properties, and to examine its books of account and records, all at such reasonable times as may be requested by Buyer, for the purpose of estimating the value of the saleable finished goods and packaging materials of the Business. (b) Post-Closing Adjustment. Within 15 calendar days after the Closing Date, Buyer shall prepare and deliver to Seller a closing inventory schedule that contains the actual value (calculated at the lower of standard or actual cost and in accordance with GAAP) as of the Closing of the saleable finished goods, packaging materials and raw materials of the Business with a shelf life of greater than twelve calendar months (the "Final Saleable Inventory Amount"). Seller shall have a period of 10 days after its receipt of the Final Saleable Inventory Amount to dispute any amounts contained therein by delivering to Buyer a written notice of objection (an "Objection Notice") identifying the amounts in dispute and setting forth a reasonably detailed explanation of the basis of Seller's dispute. If no Objection Notice is delivered to Buyer within such 10-day period, the Final Saleable Inventory Amount delivered by Buyer to Seller shall be final and binding upon the Parties. If an Objection Notice is delivered to Buyer within such 10-day period, the Parties shall cooperate in good faith to resolve any amounts disputed by Seller. In the event that Buyer and Seller are unable to resolve such dispute within 10 days after the date an Objection Notice was delivered to Buyer, then Buyer and Seller shall refer the issues in dispute to a nationally recognized firm of independent public accountants not then engaged by either Buyer or Seller (the "Arbiter"). Buyer and Seller shall submit their positions on the dispute to the Arbiter within 10 days after appointment as such, and the Arbiter shall resolve the dispute within 20 days after such submission (the "Resolution Date"), and such resolution shall be final and binding upon the Parties. The fees and expenses of the Arbiter shall be paid one-half by Buyer and one-half by Seller. Upon finalization of the Final Saleable Inventory Amount, the purchase price shall be recalculated in the manner set forth in Section 1.4(a) above substituting such Final Saleable Inventory Amount for the Estimated Saleable Inventory Amount, which new purchase price shall be the final "Purchase Price" for all other purposes under this -3- Agreement. If the Purchase Price exceeds the Closing Purchase Price, Buyer shall pay the amount of such excess to Seller within five Business Days after the Resolution Date. If the Closing Purchase Price exceeds the Purchase Price, Seller shall pay the amount of such excess to Buyer within five Business Days after the Resolution Date. If the Closing Purchase Price equals the Purchase Price, no such payment shall be made. Any such payment shall be made by wire transfer of immediately available funds to an account of the recipient designated by the recipient in writing delivered by the recipient to the payor at least two Business Days prior to the date of such payment. 1.5 Assumption of Liabilities by Buyer. (a) Buyer shall be responsible for only liabilities that arise from or relate to Buyer's ownership of the Business or Buyer's ownership, possession or use of the Purchased Assets after the Closing pursuant to this Agreement (the "Buyer Liabilities"). Seller shall be responsible for liabilities that arise from or relate to Seller's (and, where it applicable, its Affiliates') ownership of the Business or Seller's (and, where it applicable, its Affiliates') ownership, possession or use of the Purchased Assets. (b) Buyer shall not assume and shall not be liable for any liabilities of the Seller or its Affiliates other than the Buyer Liabilities. Liabilities not assumed by the Buyer hereunder are referred to as the "Retained Liabilities" and include without limitation the following: (i) any liabilities or obligations (whether fixed, contingent, or otherwise) under or relating to any claim for severance or other benefits made by any employee of the Business; (ii) any and all amounts required to be paid in respect of sales, fees, expenses or taxes as a result of the transactions contemplated by this Agreement; (iii) any liabilities for Taxes incurred with respect to any Taxable Year ending on or before the Closing Date or that portion of any Split Period ending on the Closing Date; (iv) any liabilities under any tax sharing or allocation agreement between Seller or any of its Affiliates and any other Person; (v) any liabilities arising from any breach of any agreement or contract prior to the Closing; (v) any liabilities or obligations relating to accounts payable by the Seller arising on or prior to the Closing Date; (vi) any liabilities or obligations relating to any claims of infringement arising out of the use of the Intellectual Property on or prior to the Closing Date; -4- (vii) any liabilities or obligations relating to any product liability claims arising out of the operation of the Business on or prior the Closing Date, including without limitation claims arising out of or in connection with the use, possession or handling of the Inventory or the Tangible Assets on or prior to the Closing Date; (viii) any liabilities or obligations relating to any claims asserted by any Governmental Authority arising out of the operation of the Business on or prior to the Closing Date; (ix) any liabilities or obligations relating to any violation of Laws or the terms or provision of any judgment, decree, order, writ or injunction to which the Seller is or was subject; (x) any liabilities related to monies borrowed or guarantees entered into prior to the Closing Date; and (xi) any liabilities or obligations (whether fixed, contingent, or otherwise) under or relating to any of the Excluded Assets. Such excluded liabilities are collectively referred to herein as the "Retained Liabilities." Seller shall remain liable for all Retained Liabilities and shall pay or discharge, as and when the same become due and payable, the Retained Liabilities. 1.6 Conditions Precedent to the Obligations of Buyer. The obligations of Buyer to purchase the Purchased Assets at the Closing are subject to the satisfaction, or where legally permissible, waiver, on or before the Closing Date of each of the following conditions: (a) The representations and warranties of the Seller contained in this Agreement shall be true and correct in all material respects (except such representations and warranties as are qualified as to materiality by their terms, which shall be true and correct in all respects) as of the Closing Date, and the Seller shall have complied in all material respects with all its covenants contained in this Agreement (except such covenants as are qualified as to materiality by their terms, which shall be complied with in all respects) to be performed and complied with by it on or before the Closing Date; (b) No statute, rule or regulation or order or injunction of any court or administrative agency shall be in effect that prohibits Buyer from consummating the transactions contemplated hereby; (c) All Consents required in connection with the transactions contemplated hereby shall have been obtained on terms that are not reasonably likely to adversely affect the business, financial condition, results of operations, assets, liabilities or prospects of the Business after the Closing; -5- (d) There shall not be any material action, suit or proceeding pending or threatened that seeks to prohibit the consummation of the transactions contemplated hereby; (e) All actions, proceedings, instruments and documents required to carry out the transactions contemplated by this Agreement, including without limitation all of the Related Agreements, shall be reasonably satisfactory to Buyer; (f) From and after the date hereto to the Closing, there shall not have occurred any Material Adverse Change with respect to the Business; (g) Seller shall have delivered or otherwise make available to Buyer for inspection all materials reasonably requested by Buyer, and Buyer shall have completed to its satisfaction, its business, legal, accounting and tax due diligence review of Seller and the Business; and (h) Buyer shall have obtained on terms and conditions satisfactory to it all financing necessary to consummate the transactions contemplated by this Agreement and the Related Agreements (including without limitation paying the cash portion of the Closing Purchase Price). 1.7 Conditions Precedent to the Obligations of the Seller. The obligations of Seller to sell or cause the sale of the Purchased Assets at the Closing are subject to the satisfaction or, where legally permissible, waiver by Seller, on or before the Closing Date, of each of the following conditions: (a) The representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects (except such representations and warranties as are qualified as to materiality by their terms, which shall be true and correct in all respects) as of the Closing Date, and Buyer shall have complied in all material respects with all its covenants contained in this Agreement (except such covenants as are qualified as to materiality by their terms, which shall be complied with in all respects)to be performed and complied with by it on or before the Closing Date; (b) No statute, rule or regulation or order or injunction of any court or administrative agency shall be in effect that prohibits the Seller from consummating the transactions contemplated hereby; (c) All Consents (of third parties) required in connection with the transfer and assignment of the Assigned Contracts shall have been obtained; (d) There shall not be any material action, suit or proceeding pending or threatened that seeks to prohibit the consummation of the transactions contemplated hereby; and (e) All actions, proceedings, instruments and documents required to carry out the transactions contemplated by this Agreement shall be reasonably satisfactory to the Seller. -6- 1.8 The Closing. Consummation of the transactions contemplated by this Article I (the "Closing") shall occur at the offices of North Castle Partners, 15 Bank Street, Stamford, CT. 06901 (or such other location as Buyer and Seller may mutually determine), commencing at 11:00 a.m. local time on June 11, 2001, or at such other time and on such other date as Buyer and Seller may mutually determine (the "Closing Date"). At the Closing, (a) Buyer shall (i) escrow $350,000 of the Closing Purchase Price pursuant to the Escrow and Security Agreement, which shall constitute the Escrowed Amount (as defined in the Escrow and Security Agreement) and (ii) deliver the remainder of the Closing Purchase Price to Seller by wire transfer in immediately funds to an account designated by Seller in writing to Buyer at least two Business Days prior to Closing; (b) Seller shall deliver to Buyer an opinion, substantially in the form attached hereto as Exhibit B, from Cooley Godward LLP counsel to Seller, addressed to Buyer and dated as of the Closing Date; (c) Seller shall execute and deliver the Bill of Sale; (d) Buyer and Seller shall execute and deliver the Assignment and Assumption Agreement, the Transition Services Agreement, the Escrow and Security Agreement, the Most Favored Customer Agreement, the Noncompetition Agreement and all other Related Agreements to which they are a party; and (e) Seller shall deliver such other documents reasonably satisfactory to Buyer as Buyer may reasonably request for the purpose of (i) evidencing the accuracy of any representation or warranty made by Seller, (ii) evidencing the compliance by Seller with, or the performance by Seller of, any covenant or obligation set forth in this Agreement or any Related Agreement, (iii) evidencing the satisfaction of the conditions set forth in Section 1.6, or (iv) otherwise facilitating the consummation or performance of any of the transactions contemplated hereby. (f) Seller and Buyer shall execute and deliver a License Agreement substantially in the form attached hereto as Exhibit C. 1.9 Further Assurances. Seller shall from time to time, at the request of Buyer and without further cost or expense to Buyer, execute and deliver, such other instruments of conveyance and transfer and take such other actions as Buyer may reasonably request in order to further effectuate the consummation of the transactions contemplated hereby. Buyer shall from time to time, at the request of Seller and without further cost or expense to Buyer, execute and deliver such instruments and documents, and take such other actions as Seller may reasonably request in order to further effectuate the assumption of the Buyer Liabilities and the consummation of the other transactions contemplated hereby. 1.10 Allocation. The Purchase Price shall be allocated among the Purchased Assets as set forth in Schedule 1.10 hereto. Such allocation shall be conclusive and binding upon the Parties for all purposes, and neither Buyer nor Seller -7- shall file any Tax Return or other document with, or make any statement or declaration, to any Governmental Authority that is inconsistent with such allocation. ARTICLE II. REPRESENTATIONS AND WARRANTIES OF SELLER Except as set forth on the Schedule of Exceptions attached hereto, Seller represents and warrants to Buyer as follows: 2.1 Corporate Matters. (a) Seller (i) is a corporation, duly organized, validly existing, and in good standing under the laws of the state of California; and (ii) has full corporate power and authority to carry on the businesses in which it is engaged, including, without limitation, the Business, and to own and use the properties owned and used by it. Seller is duly qualified as a foreign corporation and is in good standing as a foreign corporation in all jurisdictions where the properties owned, leased or operated by it and relating to the Business are located or where the Business is conducted. Seller has no Affiliate that owns any of the Purchased Assets or conducts any portion of the Business. (b) Schedule 2.1(b) contains a true and complete list of the states and foreign countries in which Seller (and each of its Affiliates that conducts any portion of the Business) is qualified to do business as a foreign corporation. 2.2 Authorization. Seller has full corporate power and authority to execute and deliver this Agreement and each of the Related Agreements to which it is a party, to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. The execution, delivery and performance by Seller of this Agreement and each of the Related Agreements to which it is a party and the consummation by Seller of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate and stockholder action on its part. This Agreement constitutes, and each of the Related Agreements to which Seller is a party when it is executed and delivered by Seller will constitute, a valid and legally binding obligation of Seller enforceable against it in accordance with their respective terms and conditions. 2.3 Compliance With Laws; Noncontravention. (a) With regard to the Business, Seller is not (i) subject to the terms or provisions of any judgment, decree, order, writ or injunction, or (ii) in violation of any terms or provisions of any Laws, including, but not limited to Laws pertaining to anticompetitive practices, discrimination, employment and health and safety; -8- (b) Without limiting the generality of the foregoing clause (a), with regard to the Business, Seller has not violated, nor is in violation of, the applicable provisions of the federal Food, Drug and Cosmetics Act, as amended, the regulations and requirements adopted by the United States Food and Drug Administration (the "FDA") pursuant to such Act, the regulations and requirements adopted by the United States Department of Agriculture (the "USDA"), applicable state law and the requirements established by state and local authorities responsible for regulating food products and establishments, including, without limitation, the California Organic Foods Act of 1990 (collectively "state food authorities"), as well as with the terms and conditions imposed in any licenses granted to Seller by the FDA, USDA or state food authorities. In addition, Seller is not aware of any facts that would indicate that the FDA, USDA, or any state food authorities has or will prohibit or materially restrict the marketing, sale, license or use in the United States of any product currently produced, marketed, or under development, by Seller ("Products"), or the operation or use of any Products, and Seller is not aware of any product or process which the FDA or the USDA has prohibited from being marketed or used in the United States which in function and composition is substantially similar to any Products; (c) Seller possesses all licenses, franchises, permits, and other Governmental Authority authorizations (collectively, "Authorizations") which are necessary to the conduct of the Business in the manner in which, and in the jurisdictions and places where, the Business is conducted. All such Authorizations are in good standing, valid and effective in accordance with their respective terms. Seller is in material compliance with all limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules, and timetables contained in the Authorizations; (d) Seller has not (i) received any notice or charge from any Governmental Authority within the past three years asserting a violation of any Law with respect to the operations of the Business, or (ii) been the subject of any audit or investigation by any Governmental Authority within the past three years which may result in such an assertion; (e) Seller has filed in a timely manner all reports, documents, and other materials required to be filed (and the information contained therein was correct and complete in all respects) under all applicable Laws with respect to the Business (including rules and regulations thereunder); (f) Seller has possession of all records and documents required to be retained by it under all applicable Laws with respect to the Business, including without limitation a true and correct copy of the valid and effective QAI certification for each co-packer necessary for, used by Seller in connection with, or planned for use in connection with, the Business; and (g) Except as set forth in Schedule 2.3(g), neither the execution and delivery of this Agreement or any of the Related Agreements by Seller nor the consummation of the transactions contemplated hereby or thereby, will (i) violate any Law to which Seller is subject or any provision of its charter documents or by-laws, or (ii) conflict with, result in a breach of, constitute a -9- default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under, or the consent of any other party to, any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement for borrowed money, instrument of indebtedness, lien, or other arrangement to which Seller is a party or by which it is bound or to which any of its assets is subject. 2.4 Financial Statements. Set forth in Schedule 2.4 are (a) the audited financial statements of Seller and the unaudited pro forma financial information of the Business, each as of December 31, 2000, including balance sheets as of such date and related statements of income and cash flows for the year then ended, each prepared by Seller and derived from the audited financial statements of Seller as of such date and for such period; and (b) the unaudited financial statements of Seller and the unaudited pro forma financial information of the Business, each as of March 31, 2001, including balance sheets as of such date and related statements of income and cash flows for the interim period then ended, each prepared by Seller and derived from the unaudited financial statements of Seller as of such date and for such period (collectively, the "Financial Statements"). The Financial Statements present fairly the financial position, assets and liabilities, results of operations and cash flows of Seller and of the Business as of and for the dates and periods presented, and have been prepared in conformity with GAAP (except as noted therein and except that the interim and pro forma Financial Statements do not contain all notes required by GAAP and are subject to year-end adjustments, none of which will be material), and in all material respects are in accordance with the books and records of Seller and pertaining to the Business, it being understood that the Business is not operated or accounted for as a separate, stand alone operation. 2.5 Undisclosed Liabilities. With respect to the Business, there are no liabilities (contingent or otherwise), except for (a) liabilities and obligations set forth in the Financial Statements, (b) liabilities and obligations that have arisen after the date of the Financial Statements in the Ordinary Course of Business (none of which relates to any breach of contract, breach of warranty, infringement, or violation of law or arose out of any charge, complaint, action, suit, proceeding, hearing, investigation, claim, or demand), and (c) liabilities disclosed in the Schedules to this Agreement. To the best knowledge of Seller, no set of circumstances exists that is reasonably likely to give rise to any such liability. With respect to Seller's businesses or operations other than the Business, there are no liabilities (contingent or otherwise) which (x) have, or are reasonably likely to have, a Material Adverse Effect, or (y) have, or are reasonably like to have, an adverse impact on the transactions contemplated hereby including, without limitation, Seller's ability to transfer good title to the Purchased Assets to Buyer. 2.6 No Adverse Change. Since December 31, 2000, there has been no change in the business, financial condition, prospects, results of operations, assets or liabilities of the Business or in the value of the Purchased Assets taken as a whole, which would have a Material Adverse Effect, and no event has occurred since December 31, 2000 that is reasonably likely to have any such Material Adverse Effect. -10- 2.7 Conduct of Business. Since December 31, 2000, Seller has conducted its operations relating to the Business only in the Ordinary Course of Business; maintained the assets, relations with employees, suppliers, licenses and operations of the Business as an ongoing business in accordance with past custom and practice; and not engaged in any extraordinary transaction. Without limiting the generality of the foregoing, since that date, with respect to the Business and the Purchased Assets, Seller has not: (a) sold, leased, transferred, or assigned any of the tangible or intangible assets of the Business, other than for fair consideration and in the Ordinary Course of Business; (b) entered into or amended any single contract, lease, sublease, license, or sublicense, or series of related contracts, leases, subleases, licenses, and sublicenses either involving more than $10,000 or in anticipation of the transactions contemplated hereby; (c) had any party accelerate, terminate, modify, or cancel any single contract, lease, sublease, license, or sublicense or series of related contracts, leases, subleases, licenses, and sublicenses involving more than $10,000; (d) imposed any Lien upon any of the Purchased Assets, tangible or intangible; (e) made any capital expenditure (or series of related capital expenditures) either involving more than $25,000 or outside the Ordinary Course of Business; (f) made any capital investment in, any loan to, or any acquisition of the securities or a substantial portion of the assets of, any other Person; (g) created, incurred, assumed, or guaranteed any (i) indebtedness for money borrowed, or (ii) indebtedness representing the deferred purchase price of property or indebtedness constituting capitalized lease obligations involving more than $10,000 singly or $50,000 in the aggregate or outside the Ordinary Course of Business; (h) delayed or postponed (beyond its normal practice) the payment of accounts of the Business payable and other liabilities and obligations of the Business; (i) canceled, compromised, waived, or released any right or claim or series of related rights and claims involving more than $10,000 singly or $50,000 in the aggregate relating to the Purchased Assets or the Business or outside the Ordinary Course of Business; -11- (j) granted any license or sublicense of any of its rights under or with respect to any Intellectual Property other than in the Ordinary Course of Business; (k) suffered any material damage, destruction or other casualty loss affecting the Business or the Purchased Assets; and (l) committed the Business to any of the foregoing. 2.8 Litigation. Except as listed in Schedule 2.8, there are no judicial, administrative or arbitral claims, audit examinations, actions, suits, inquiries, litigations, proceedings or investigations pending or, to the best knowledge of Seller, threatened, as of the date hereof, (a) against or involving Seller relating to the Business or the Purchased Assets, or against Seller or any of its properties or rights, or (b) which seek to question, delay, or prevent the consummation of the transactions contemplated by this Agreement or any of the Related Agreements. Seller is not subject to any judgment, order or decree entered in any lawsuit or proceeding that might adversely affect Buyer's rights in the Purchased Assets or Buyer's ability to conduct the Business following the Closing Date. 2.9 Tax Matters. (a) All Tax Returns required to have been filed by the Seller with respect to the Business and the Purchased Assets (in whole or part) have been filed timely. All Tax Returns filed by Seller are true, accurate, correct and complete in all respects in so far as they relate to the Business and the Purchased Assets. No claim has ever been made by an authority in a jurisdiction where Seller does not file Tax Returns that it is or may be subject to taxation by that jurisdiction with respect to the Business or the Purchased Assets taken as a whole. (b) All Taxes due and payable (for Taxable Years ending on or before the Closing Date and for that portion of any Split Period ending on the Closing Date) by Seller have been or will be paid in full on a timely basis. Seller has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any shareholder, employee, creditor, independent contractor, or other third party. Seller has not received any written notice of deficiency or assessment from any federal, state, local or foreign taxing authority with respect to liability for Taxes relating to the Business or the Purchased Assets which have not been paid or settled. Other than Liens for Taxes not yet due and payable, there are no Liens on any of the Purchased Assets that arose in connection with any failure (or alleged failure) to pay any Tax. 2.10 Contracts. Except as listed on Schedule 2.10, Seller is not a party to any of the following relating to the Business or the Purchased Assets: (a) Any single lease or license of personal property from or to third parties providing for payments in excess of $5,000 per annum or entered into other than in the Ordinary Course of Business; (b) Any partnership or joint venture agreement; -12- (c) Any instrument or agreement (i) evidencing or constituting indebtedness for money borrowed, or (ii) evidencing or constituting indebtedness representing the deferred purchase price of property or indebtedness constituting capitalized lease obligations involving more than $5,000 singly or $50,000 in the aggregate or incurred other than in the Ordinary Course of Business, or (iii) under which there has been imposed (or may be imposed) a Lien (other than a Permitted Lien) on any of its assets, tangible or intangible; (d) Any instrument or agreement relating to the guaranty of any liability or obligation (including indebtedness) of any other Person; (e) Any material agreement pursuant to which Seller is required to maintain the confidentiality of third party information or by which Seller is limited, prohibited or otherwise restricted from competing in the market; (f) Any other agreement (other than Ordinary Course Contracts) under which the consequences of a default or termination could have a Material Adverse Effect; or (g) Any other agreement under which the amount paid or consideration received is greater than $50,000. Seller has made available to Buyer a correct and complete copy of each agreement listed in Schedule 1.1(b) hereto. With respect to each such agreement so listed: (i) the agreement is in full force and effect, subject to the receipt of the consents identified in Schedule 2.3(g), as applicable, and will remain in full force and effect immediately following the Closing; (ii) Seller is not in breach or default, and to the knowledge of the Seller, no other party is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default or permit termination, modification, or acceleration, under such agreement; and (iii) no party has repudiated any provision of such agreement. Seller is not a party to any verbal contract or contracts relating to the Business, involving the payment by Seller of greater than $5,000 singly or $25,000 in the aggregate, which, if reduced to writing, would be required to be listed in any such Schedule. 2.11 Powers of Attorney. Schedule 2.11 sets forth an accurate and complete list of the names of all Persons, if any, holding powers of attorney from Seller or any of its Affiliates with respect to the operations of the Business and a summary statement of the terms thereof. 2.12 Insurance. Schedule 2.12 sets forth aggregate loss experience data for the Business as of March 31, 2001, and for the three year period ended December 31, 2000, for property, casualty, and general liability claims, and the information set forth therein is true, correct and complete. No such policies of insurance shall be transferred to Buyer. To the extent possible, however, Seller will cooperate in Buyer's efforts to become a successor to Seller for purposes of experience ratings and similar tests for workers' compensation, unemployment and disability insurance. Such insurance policies (i) are valid, outstanding and -13- enforceable, (ii) taken together, provide in all material respects customary insurance for the assets and operations of the Business for all risks normally insured against by persons carrying on the same business or business, and (iii) are sufficient for compliance with all legal requirements and contracts to which Seller is a party or by which it is bound with respect to the Business. 2.13 Employees. (a) There are no labor controversies, disputes, strikes, lockouts, work slowdowns, or work stoppages pending or, to the best knowledge of Seller, threatened between Seller and any of their employees who work in the Business or have worked within the last five years in the Business. (b) Except as disclosed in Schedule 2.13, no labor union or other representative has been designated, selected or certified as the representative of the employees of Seller who work in the Business in accordance with the U.S. National Labor Relations Act or other applicable law, no collective bargaining agreement is in effect or is currently being negotiated with respect to the Business, and, to the best knowledge of Seller, no union organizing activities are currently taking place with respect to the Business. (c) Each employee of the Business who is not a United States citizen and who is providing services in the United States is doing so under a valid work permit and in full compliance with all laws and regulations pertaining to immigration or employment of persons who are not United States citizens. 2.14 Environmental Matters. (a) Seller has obtained, and now maintains as currently valid and effective, all permits required under the Environmental Laws (the "Environmental Permits") in connection with the operation of the Business. Seller is in compliance with all material terms and conditions of such Environmental Permits and all applicable Environmental Laws in connection with the operation of the Business. Seller is not aware of any circumstances that may prevent or interfere with such compliance in the future. (b) Seller has provided to Buyer all material information and communications (whether from a governmental authority, citizens' group, employer or other person) in the possession or control of Seller relating to the Business regarding alleged or suspected noncompliance with any Environmental Laws or Environmental Permits or alleged or suspected liability under any Environmental Laws. (c) There are no material environmental liens or other encumbrances on any of the properties owned or leased by Seller in connection with the operation of the Business prior to the Closing, and no government actions have been taken or are in process which are reasonably likely to subject any of such properties to such liens or other encumbrances, and Seller is not be required to place any notice or restriction relating to the presence of Materials of Environmental Concern at any property owned or leased by it in any deed to such property that is or was used in connection with the operation of the Business. -14- (d) There is no Environmental Claim arising from the operation of the Business prior to the Closing pending or, to the best knowledge of Seller, threatened against Seller or against any person whose liability for any Environmental Claim Seller has or may have retained or assumed either contractually or by operation of law. (e) To Seller's knowledge, there are no past or present actions, activities, circumstances, conditions, events or incidents relating to the Business prior to the Closing, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern, that are now or may later form the basis of any Environmental Claim against Seller, Buyer or against any person whose liability for any Environmental Claim Seller has or may have retained or assumed either contractually or by operation of law. (f) For purposes of this Section 2.14, the terms listed below shall have the following meanings: (i) "Claim" shall mean all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, liabilities and demands whatsoever, in law or equity. (ii) "Environmental Claim" means any Claim, investigation or notice (written or oral) by any person alleging potential liability (including, without limitation, potential liability for investigatory costs, response, remedial, or cleanup costs, governmental response or oversight costs, natural resources damages, property damages, personal injuries or fatalities, or penalties) arising out of, based on or resulting from (a) the presence, release or threatened release into the environment of, or human exposure to, any Material of Environmental Concern at any location, whether or not owned or operated by Seller or its Affiliates, or (b) activities or conditions forming the basis of any violation, or alleged violation of, or liability or alleged liability under, any Environmental Law. (iii) "Environmental Laws" shall mean all federal, state and local laws (including common law), statutes, rules, regulations, ordinances (including any amendments thereto), including but not limited to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C.ss. 9601 et seq., and the Resource Conservation and Recovery Act, 42 U.S.C.ss. 6901 et seq., the Federal Water Pollution Control Act, 33 U.S.C. ss. 1251 et seq., the Clean Air Act, 42 U.S.C.ss. 1857 et seq., and the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq., orders, decrees, plans, codes, judgments, injunctions, notice or demand letters, prohibitions, obligations, schedules, timetables, standards, conditions or requirements issued, entered, approved or promulgated thereunder, relating to pollution or protection of human health or the environment, including laws relating to emissions, discharges, releases or -15- threatened releases of Materials of Environmental Concern in, into, onto or upon the environment (including, without limitation, ambient air, surface water, ground water, or land), or otherwise relating to the manufacture, processing, distribution, use, treatment, collection, accumulation, storage, disposal, transport, or handling of Materials of Environmental Concern. (iv) "Materials of Environmental Concern" shall mean all chemicals, pollutants, contaminants, wastes, toxic substances, petroleum, petroleum products, hazardous materials and hazardous substances (as defined in Section 101(14) of CERCLA, 42 U.S.C. ss. 9601(14)), or solid or hazardous wastes as now or hereafter defined under any Environmental Laws. 2.15 Intellectual Property. (a) Schedule 1.1(d) accurately lists each item of intellectual property owned by Seller that has been duly registered with, filed in or issued by, as the case may be, the United States Patent and Trademark Office or such other government entities as are indicated on Schedule 1.1(d), and all other material items of intellectual property owned or used by Seller in connection with, or planned for use in connection with, the Business, including without limitation all (i) trademarks, service marks, trade names, and trade dress, together with the goodwill of the Business; (ii) copyrights and all related and equivalent rights, including moral rights; (iii) rights in designs, and the like; (iv) trade secrets; (v) other intellectual property rights; (vi) technology, patents, patent applications, know-how, processes, computer software, designs, drawings, documentation, and other intellectual property, whether or not secret and whether or not reduced to writing; (vii) applications for, and applications to register, any of the foregoing; (viii) licenses to or under any of the foregoing; and (ix) rights or options to obtain any of the foregoing. Seller has not granted to any Person the right to use any Intellectual Property. (b) Except as disclosed in Schedule 2.15(b), with regard to the Business, no claim or litigation has been asserted and Seller has not received notice of any threatened claims or litigation by any person contesting the right of Seller to use, or the validity or enforceability of the Intellectual Property or challenging or questioning the validity or effectiveness of any license or agreement pertaining thereto or asserting the misuse thereof and, to the best knowledge of Seller, use of such Intellectual Property by Seller does not infringe on the rights of any person or violate any license or other agreement applicable thereto. (c) Except as disclosed in Schedule 2.15(c), with regard to the Business, Seller has not asserted any claim or litigation concerning infringement of Intellectual Property by third parties, and Seller knows of no infringement of Intellectual Property by third parties. (d) Schedule 2.15(d) sets forth each material license or other agreement relating to the Intellectual Property. All of the licenses and other agreements referred to in Schedule 2.15(d) are in full force and effect; Seller is not in default thereunder, and to the best knowledge of Seller, no other -16- party thereto is in default thereunder, and no event has occurred which (whether with or without notice, lapse of time, or the happening or occurrence of any other event) would constitute a default thereunder. Except as disclosed in Schedule 2.15(d), continuation, and effectiveness of all such licenses and other agreements and the current terms thereof will in no way be affected by the transactions contemplated by this Agreement, except as provided herein or in the Related Agreements. 2.16 Title. (a) Seller has, and is conveying to Buyer, good title to all of the Purchased Assets, in each case free and clear of any Liens. (b) Except for assets used in connection with providing those services to be provided pursuant to the Transition Services Agreement, the Purchased Assets constitute all of the assets necessary for, used in or planned for use in, the operation of the Business as conducted by Seller. No third party has any rights to purchase any of the Purchased Assets, or any interest therein or any portion thereof, including rights of first offer or refusal. 2.17 Affiliated Transactions. Except for this Agreement and the agreements to be executed and delivered on the date hereof, there are no agreements, understanding or arrangements relating to the Business that will be binding on Buyer after the Closing that relate to any transaction, right or other matter in which Seller or any Affiliate has or will have an interest or as to which Seller or any such Affiliate is a party (other than agreements, understandings or arrangements as to which Seller's or Seller's Affiliates' rights and obligations will be assigned to or assumed by Buyer hereunder). 2.18 Brokers' Fees. Neither Seller nor any Affiliate has any liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement, except for such fees and commissions as to which Seller has full responsibility and Buyer has no liability. 2.19 Customers. Schedule 2.19 sets forth an accurate list of all significant customers of the Business, it being understood and agreed that for purposes of this Section 2.19 a "significant customer" means a customer representing 3% or more of the Business' estimated annual revenues as March 31, 2001. None of the significant customers of the Business has cancelled or substantially reduced or, to the best knowledge of Seller, is currently attempting or threatening to cancel, a contract or substantially reduce utilization of the services provided in connection with the Business. 2.20 Accounts Receivable. All accounts receivable of the Business are reflected properly in the Financial Statements and there has been no material change in the aggregate or net amounts of such accounts receivable since December 31, 2000. 2.21 No Insolvency. Seller is not involved in any proceeding by or against it in any bankruptcy court or any other insolvency or debtors' relief action or for the appointment of a trustee, receiver, liquidator, assignee, sequestrator or other similar official of it or of a substantial part of its property. Seller -17- is solvent and otherwise able to pay its debts currently as they become due, and as a result of the transactions contemplated hereby, Seller will not be rendered insolvent or otherwise unable to pay its debts currently as they become due. 2.22 Accuracy of Information. No representation or warranty by Seller in this Agreement or in any document delivered or to be delivered by Seller pursuant hereto, and, to Seller's best knowledge, no statement or material document furnished or to be furnished to Buyer pursuant hereto or in connection with the negotiation, execution or performance of this Agreement, contains or will contain any untrue statement of a material fact. Seller has not failed to disclose in this Agreement, the Exhibits and Schedules attached hereto or the Financial Statements any fact of material adverse significance to the assets, properties, businesses, operations, financial condition or earnings of the Business that is required to be disclosed pursuant hereto. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to Seller as follows: 3.1 Organizational Matters. Buyer is a corporation validly existing and in good standing under the laws of the State of Delaware with full power and authority to consummate the transactions contemplated hereby and by the Related Agreements to which it is a party. 3.2 Authorization of Transaction. Buyer has full power to execute and deliver this Agreement and each of the Related Agreements to which it is a party and to perform its obligations hereunder and thereunder. The execution, delivery and performance by Buyer of this Agreement and the Related Agreements to which it is a party has been duly authorized by all necessary action on its part. This Agreement constitutes, and each Related Agreements to which it is a party when it is executed and delivered by Buyer will constitute, a valid and legally binding obligation of Buyer enforceable against it in accordance with its terms and conditions. 3.3 Noncontravention. Neither the execution and delivery of this Agreement or any of the Related Agreements by Buyer nor the consummation of the transactions contemplated hereby or thereby, will (a) violate any Law to which Buyer is subject, or any provision of its certificate of incorporation or bylaws, or (b) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under, or the consent of any other party to, any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement for borrowed money, instrument of indebtedness, lien, or other arrangement to which Buyer is a party or by which it is bound or to which any of it assets is subject. Buyer does not need to obtain any Governmental Approval to consummate the transactions contemplated by this Agreement. -18- 3.4 Brokers' Fees. Buyer has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which Seller could become liable or obligated. ARTICLE IV. COVENANTS OF THE PARTIES 4.1 General. The Parties to this Agreement will use all reasonable efforts to take all action and to do all things necessary, proper, or advisable to consummate and make effective the transactions contemplated by this Agreement (including satisfying the closing conditions set forth in Sections 1.6 and 1.7 above). 4.2 Conduct of the Business. From the date hereof until the Closing, with respect to the Business, Seller will: (a) operate and carry on the Business only in the Ordinary Course of Business and not introduce any new method of management; (b) maintain the properties and facilities related to the Business, including those held under leases, in good working order and condition, ordinary wear and tear excepted; (c) perform their respective obligations under agreements relating to or affecting the assets, properties or rights of the Business; (d) keep in full force and effect insurance covering the Business and its assets, properties and rights comparable in amount and scope of coverage to that now maintained; (e) use its reasonable efforts to retain all employees related to the Business necessary to perform its obligations under the Transition Services Agreement so that such employees will remain available on and after the Closing and maintain the Business by maintaining existing relationships with suppliers, customers and others having business dealings with Seller (and their Affiliates) related to the Business and otherwise preserve the goodwill of the Business so that such relationships and goodwill be preserved on and after the Closing; (f) not amend its charters or by-laws; -19- (g) with respect to the Assigned Contracts, not enter into any other commitment that is material, not permit any amendment or termination of any material contract or commitment; (h) not waive any rights of value or rights that would otherwise accrue to Buyer after Closing; (i) use its best efforts to complete the transactions contemplated hereby and obtain the satisfaction of the conditions specified herein; (j) promptly notify Buyer of any default under any contract or with respect to any commitment, the threat or commencement of any litigation or other proceeding affecting the Business, or any development that occurs before the Closing that could in any way materially affect the Business; and (k) comply with all laws and regulations applicable to it and to the conduct of the Business. 4.3 Notices and Consents. Seller will use its reasonable efforts to secure approvals and consents of any third parties necessary to the consummation of the transactions contemplated by this Agreement and the Related Agreements; provided that nothing set forth in this Section 4.3 shall require Seller to make any payment not otherwise owed to any third party. 4.4 Access to Information. After the Closing: (a) Buyer Access. Seller will grant Buyer and its representatives reasonable access at all reasonable times, upon reasonable notice and in a manner reasonably intended to minimize disruption to the normal business operations of Seller, to (i) such financial, Tax, risk management, employee benefits and other records relating to the Business, the Purchased Assets and the Buyer Liabilities as may be necessary to enable Buyer to prepare Tax Returns or reports for or on behalf of the Business or to prepare for or respond to any Tax audit, to demonstrate the Business' loss experience with respect to property and casualty, general liability, workers' compensation and benefits claims for insurance purposes or to prepare or audit financial statements (or selected financial information) for the Business relating to or including periods prior to the Closing Date, including any such statement or information that is required to be included in any registration statement under the Securities Act (or amendment or supplement thereto) that Buyer may file with the Securities and Exchange Commission and (ii) the books and records relating to the Buyer Liabilities; and (b) Seller Access. Buyer will permit Seller and its representatives, at reasonable times, upon reasonable notice and in a manner so as to minimize any disruption to the normal business operations of the Business, reasonable access to books, records, contracts, Tax Records, and documents of or pertaining to the Business as may be necessary to enable Seller to prepare Tax Returns or reports for or on behalf of Seller or to prepare or respond to any Tax audit, to demonstrate its loss experience with respect to property and casualty, general liability, worker's compensation and benefits claims for insurance purposes, to prepare or audit financial statements. -20- 4.5 Tax Matters. (a) Pre-Closing Taxes. Seller will reimburse Buyer for any Taxes of or relating to the Business paid by Buyer after the Closing Date (i) with respect to any Taxable Year that ends on or before the Closing Date or (ii) to the extent that such Taxes are allocable to that portion of any Split Period that ends on the Closing Date. For purposes of this Agreement, in the case of any Taxes that are payable with respect to a Split Period, the portion of such Taxes allocable to the portion of such Split Period that ends on the Closing Date shall be determined on the basis of a deemed closing on the Closing Date of the books and records of Seller. (b) Transfer Taxes. Notwithstanding any other provision of this Agreement, Seller shall be responsible for all applicable transfer, documentary, sales, use, stamp, registration and other similar such Taxes and related costs ("Transfer Taxes") incurred in connection with the transactions contemplated by this Agreement. Each of the Parties hereby agrees to pay all such Taxes and other related costs and to file all necessary documentation as required under the applicable statutory provisions with respect to all such Taxes in a timely manner. Following any such payment and filing by Buyer or any of its Affiliates, Buyer shall seek payment from Seller in accordance with this Section 4.5. The Parties shall take all reasonable actions to minimize the amount of any such Transfer Taxes. 4.6 Confidentiality. (a) Pre-Closing Period. Prior to the Closing, except as permitted by this Section 4.6(a) and Section 4.6(c), (i) Buyer and its Affiliates will not disclose to any Person or use any Seller Confidential Information, except in connection with performing its obligations or enforcing its rights under this Agreement; and (ii) Seller and its Affiliates will not disclose to any Person or use any Buyer Confidential Information, except as required by Law or in connection with performing its obligations or enforcing its rights under this Agreement. (b) Post-Closing Period. After the Closing, Seller and its Affiliates will not disclose to any Person, or use, any Buyer Confidential Information, except as permitted by Section 4.6(c). In addition, after the Closing, Seller and its Affiliates shall not disclose or use any information included in the Intellectual Property that prior to the Closing Seller or its Affiliates has treated as confidential. After the Closing, Buyer and its Affiliates will not disclose to any Person, or use, any Seller Confidential Information, except for Confidential Information concerning the Purchased Assets or the Business. (c) Confidential Information. Information shall not be deemed (i) Seller Confidential Information, if Buyer, or (ii) Buyer Confidential Information, if Seller, can show that such information: -21- (i) Was known to it without obligation of confidence, or without breach of this Agreement before its receipt from the other party; (ii) Is publicly disclosed through no wrongful act of it; (iii) Is rightfully received from a third party without obligation of confidence and without breach of this Section 4.6; (iv) Is independently developed; or (v) Is required to be disclosed by it pursuant to an order of any court or like entity; provided that in such case, the party required to disclose such confidential information shall provide the other party with prompt notice of such request or order, including copies of subpoenas or orders requesting such confidential information, cooperate reasonably with the other party in resisting the disclosure of such confidential information via a protective order or other appropriate legal action, and shall not make disclosure pursuant thereto until the other party has had a reasonable opportunity to resist such disclosure, unless it is ordered otherwise. Nothing contained in this Section 4.6 shall prohibit Buyer or Seller, or their respective Affiliates, from making disclosures required in connection with any offering of securities or any of the Parties hereto from making disclosures required by applicable law. 4.7 Exclusivity. Seller acknowledges that Buyer has devoted and will devote substantial time and has incurred and will incur out-of-pocket expenses (including attorneys' fees and expenses) in connection with conducting business, financial, and legal due diligence investigations of the Business, drafting and negotiating this Agreement and the Related Agreements and consummating the transactions contemplated hereby and thereby. To induce Buyer to take the actions contemplated under this Agreement and to incur such expenses, Seller agrees that from and after the date of this Agreement until the earlier of Closing or termination of this Agreement neither Seller nor any of its Affiliates, officers, directors, agents, Jethren Phillips or John Battendieri shall: (a) enter into any written or oral agreement or understanding with any Person (other than Buyer and its Affiliates) regarding a sale (directly or indirectly including by way of merger or consolidation) of any or all of the Business or the Purchased Assets; (b) solicit or encourage the submission of any proposals from any person or entity (other than Buyer) regarding the possibility of any such sale; or (c) except as otherwise required by Law, provide any nonpublic financial or other confidential information regarding the Business or the Purchased Assets (including the letter of intent dated April 24, 2001 between Seller and Buyer, this Agreement, and any other materials reflecting Buyer Confidential Information) to any Person (other than Buyer and its Affiliates) whom Seller knows, or has reason to believe, would have any interest in acquiring all or any part of the Business or the Purchased Assets. -22- 4.8 Noncompetition Agreement. Seller acknowledge that pursuant to the terms of this Agreement and in reliance on the terms herein, Buyer will make a substantial investment in the Purchased Assets, that the restrictions contained in the Noncompetition Agreement, the form of which is attached hereto as Exhibit D, are reasonable and necessary for Buyer's protection and that acceptance of such restrictions is a substantial inducement to Buyer's purchase of the Business and Purchased Assets from Seller. 4.9 Seller Employees. Seller shall be responsible for all payments, claims and other matters related to Seller's employees of the Business arising both before and after the Closing and Buyer shall have no liability for any such payments, claims or other obligations, except for obligations arising after the Closing with respect to any of Seller's employees employed by Buyer pursuant to an employment agreement between such employee and Buyer. 4.10 Accounts Receivable. As soon as practicable after the Closing Date, Seller and Buyer shall jointly notify customers of the Business of the consummation of the transactions contemplated hereby. Such notice shall include notification that the payment of all accounts receivable due with respects to invoices dated on or before the Closing Date shall be payable to Seller and all accounts receivable with respect to invoices dated after the Closing Date shall be payable to Buyer. All funds received by Seller from any customer or other party in respect accounts receivable of the Business with invoices dated after the Closing Date shall be held by Seller in trust for the benefit of Buyer, and, immediately upon receipt thereof, Seller shall deliver such funds to Buyer without right of offset, and all funds received by Buyer from any customer or other party in respect accounts receivable of the Business due with invoices dated on or before the Closing Date shall be held by Buyer in trust for the benefit of Seller, and, immediately upon receipt thereof, Buyer shall deliver such funds to Seller without right of offset. ARTICLE V. REMEDIES 5.1 Survival. All representations, warranties and covenants of Buyer and Seller contained in this Agreement shall survive the Closing, regardless of any investigation made by or on behalf of any other Party or the knowledge of any of its Affiliates, officers, directors, employees, agents or representatives and shall continue thereafter in full force and effect. The representations and warranties set forth in this Agreement shall survive thereafter as follows: (a) the representations and warranties of the Seller set forth in Sections 2.2, 2.3 and 2.16 shall survive indefinitely; (b) the representations and warranties of the Seller set forth in Sections 2.9 and 2.14 shall survive until the expiration -23- of the applicable statute of limitations with respect to Seller's obligations for Taxes or other liabilities described therein; and (c) all other representations and warranties set forth in Article II of this Agreement shall survive through the first anniversary of the Closing Date. 5.2 Indemnification of Buyer Indemnitees. Seller agrees to indemnify Buyer, its Affiliates, and their respective stockholders, partners, officers, directors, employees, agents, representatives, successors and assigns (collectively, the "Buyer Indemnitees") against, and hold Buyer Indemnitees harmless from, any and all Damages paid, suffered or incurred by any of them, directly or indirectly, which result from, arise out of, or are caused by: (a) Any breach of any of the representations and warranties of the Seller made in this Agreement, or the failure of any representation or warranty made by the Seller in this Agreement to be true, complete and correct; (b) Any breach in any covenant or agreement made by Seller or its Affiliates in this Agreement; (c) Any liability for Taxes incurred with respect to any Taxable Year ending on or before the Closing Date and that portion of any Split Period ending on the Closing Date; (d) Any Retained Liabilities; or (e) Any matters set forth on Schedule 5.2(e); provided, however, that Seller will not be obligated to indemnify Buyer Indemnitees for Damages (other than Damages that arise under Sections 2.16, 5.2(c), or 5.2(d), as to which there shall be no limitations) (i) relating to any Claim for which Damages do not exceed $10,000 singly and $25,000 in the aggregate for any and all Claims, and (ii) in excess of the Escrowed Amount. The remedies provided in this Article 5 shall be the exclusive remedy with respect to this Agreement or the Purchased Assets, absent fraud or intentional breach or intentional inaccuracies in respect to Seller's representations and warranties. For purposes of indemnification under Section 5.2(a), any breach of any representation or warranty by Seller contained in this Agreement (or in any certificate delivered pursuant to the terms of this Agreement) shall be deemed to constitute a breach of such representation or warranty notwithstanding any limitation or qualification as to materiality, including but not limited to, anything relating to a Material Adverse Change, set forth in such representation or warranty, it being the intention of the Parties hereto that Buyer Indemnitees shall be indemnified and held harmless from and against any and all Damages arising out of or based upon or with respect to the failure of any such representation or warranty to be true, correct and complete in any respect subject to the limitations set forth in this Section 5.2. -24- 5.3 Indemnification of the Seller. Buyer agrees to indemnify Seller, its Affiliates and their respective stockholders, officers, directors, employees, agents, representatives, successors and assigns (collectively, the "Seller Indemnitees") against, and hold Seller Indemnitees harmless from, any and all Damages paid, suffered or incurred by any of Seller Indemnitees, directly or indirectly, which results from, arises out of, or is caused by: (a) Any breach of any of Buyer's representations and warranties made in Article III of this Agreement; (b) Any breach of any covenant made by Buyer in this Agreement; or (c) Any Buyer Liabilities. 5.4 Matters Involving Third Parties. If any third party shall notify any party (the "Indemnified Party") with respect to any matter which may give rise to a Claim for indemnification against any other party (the "Indemnifying Party") under this Article V, then the Indemnified Party shall notify each Indemnifying Party thereof promptly in writing; provided, however, that, except as provided in Section 5.6 hereof, no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any liability or obligation hereunder the Indemnifying Party is damaged thereby. In the event any Indemnifying Party notifies the Indemnified Party within fifteen days after the Indemnified Party has given notice of the matter that the Indemnifying Party is assuming the defense thereof, (a) the Indemnifying Party will defend the Indemnified Party against the matter with counsel of its choice satisfactory to the Indemnified Party, (b) the Indemnified Party will cooperate in the defense of such Claim and may retain separate co-counsel at its sole cost and expense (except that the Indemnifying Party will be responsible for the fees and expenses of the separate co-counsel to the extent the Indemnified Party reasonably concludes that the Indemnified Party and the Indemnifying Party have a conflict of interest), (c) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the matter without the prior written consent of the Indemnifying Party (not to be withheld unreasonably), and (d) the Indemnifying Party will not consent to the entry of any judgment with respect to the matter, or enter into any settlement which does not include a provision whereby the plaintiff or claimant in the matter releases the Indemnified Party from all liability with respect thereto, without the prior written consent of the Indemnified Party (not to be withheld unreasonably). In the event no Indemnifying Party notifies the Indemnified Party within fifteen days after the Indemnified Party has given notice of the matter that the Indemnifying Party is assuming the defense thereof, however, the Indemnified Party may defend against, or enter into any settlement with respect to, the matter in any manner it may deem appropriate. 5.5 Matters Involving the Parties. In the event that the Indemnified Party asserts a Claim under this Article V (excluding Claims covered by Section 5.4 hereof) against an Indemnifying Party, the Indemnified Party shall give written notice to the Indemnifying Party specifying, in reasonable detail, the basis for the assertion of the Claim and the amount of the Claim asserted. Such assertion -25- of liability shall be deemed accepted by such Indemnifying Party and the amount of such Claim shall be deemed a valid Claim, conclusive and binding on the Indemnifying Party, unless, within ten days after the Indemnified Party gives written notice to the Indemnifying Party of such Claim, the Indemnifying Party gives written notice to the Indemnified Party contesting the basis for, or the amount of, such Claim. 5.6 Written Notice of Indemnification Claims. Any Claim for indemnification under this Article V based on a breach of a representation or warranty must be asserted in a written notice delivered to Seller if made pursuant to Section 5.2, and to Buyer if made pursuant to Section 5.3, before the expiration of the survival date applicable to the representation and warranty relating to such Claim. ARTICLE VI. MISCELLANEOUS 6.1 Certain Defined Terms. (a) As used in this Agreement, the following terms shall have the following meanings: "Affiliate" means any Person that controls or is controlled by, is under the control of or is under direct or indirect common control with the Person in question. "Assignment and Assumption Agreement" means the Assignment Agreement substantially in the form attached hereto as Exhibit E. "Bill of Sale" means the Bill of Sale substantially in the form attached hereto as Exhibit F. "Business Day" means any day other than Saturday, Sunday or a day that constitutes a legal holiday in the State of New York, the Commonwealth of Virginia or the State of California. "Buyer Confidential Information" means information concerning the terms of the sale to Buyer of the Business, any materials reflecting Buyer's proposal and any other financial information, projections or proposals regarding the Business, including without limitation, the pricing and payment arrangements contemplated hereby, and all other information which has been designated as confidential by Buyer and of which Seller has been notified. -26- "Claim" means any threatened or actual demand, charge, complaint, hearing, investigation, claim, suit, action, order, decree, judgment, ruling or proceeding. "Code" means the Internal Revenue Code of 1986, as amended. "Consent" means any consent, approval, authorization, waiver, permit, grant, franchise, concession, agreement, license, certificate, exemption, order, registration, declaration, filing, report or notice of, with or to any Person or Governmental Authority. "Damages" means any and all losses, lost profits, liabilities, damages, fines, penalties, fees, amounts paid in settlement, assessments, Taxes, costs and expenses (including, without limitation, interest, reasonable attorneys' and witness fees, court costs and amounts paid, suffered or incurred in investigating, preparing, defending, acknowledging, satisfying or settling any Claim asserted against, resulting to, imposed upon, or incurred or suffered by such Person), excluding consequential damages other than lost profits. "Escrow and Security Agreement" means the Escrow and Security Agreement substantially in the form attached hereto as Exhibit G. "Escrowed Amount" means, initially, the sum of $350,000 to be withheld from the Closing Purchase Price and as further defined in Escrow and Security Agreement. "GAAP" means United States generally accepted accounting principles, as in effect from time to time. "Governmental Approval" means any Consent of, with or to any Governmental Authority. "Governmental Authority" means any nation or government, any state or other political subdivision thereof; any entity, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including, without limitation, any government authority, agency, department, board, commission or instrumentality of the United States, any State of the United States or any political subdivision thereof; any court, tribunal or arbitrator; and any self-regulatory organization acting under color of authority granted by Law. "Law" means all applicable provisions of all (a) constitutions, treaties, statutes, laws (including the common law), codes, rules, regulations, ordinances or orders of any Governmental Authority, (b) Governmental Approvals and (c) orders, decisions, injunctions, judgments, awards and decrees of or agreements with any Governmental Authority. -27- "License Agreement" means the License Agreement substantially in the form attached hereto as C. - "Lien" means any lien, mortgage, pledge, hypothecation, right of others, claim, security interest, encumbrance, burden, title retention agreement, lease, sublease, license, occupancy agreement, easement, covenant, encroachment, interest, option, right of first offer or refusal, including but not limited to such Liens as may arise under any contracts. "Litigation" means, with respect to any Person, any action, claim, demand, suit, proceeding, citation, summons, subpoena, inquiry or investigation of any nature, civil, criminal, regulatory or otherwise, in law or in equity, pending or threatened against, by or affecting such Person or any of its properties or assets, by or before any court, tribunal, arbitrator or other Governmental Authority. "Material Adverse Change" means, when used in connection with the Business, any state of facts, change, effect, condition or occurrence that is materially adverse to the business, financial condition, value, prospects, liabilities or results of operations of the Business; provided that, (a) any adverse change, event or effect that is demonstrated to be primarily caused by the announcement or pendency of the transactions contemplated hereby, or (b) facts, changes, effects, conditions or occurrences resulting from any change in law or GAAP, which affect generally entities operating a business such as the Business shall not taken alone be considered to be a Material Adverse Change. "Ordinary Course Contracts" means contracts entered into in the Ordinary Course of Business that are cancelable by Seller (or its successor) without penalty to it on not more than 90 days' notice. "Ordinary Course of Business" means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency). "Parties" means each of Seller and Buyer. "Person" shall be construed broadly, and shall include any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, unincorporated organization or governmental entity (or any agency or political subdivision thereof). "Related Agreements" means the Escrow and Security Agreement, the Transition Services Agreement, the Most Favored Customer Agreement, the Noncompetition Agreement, the Assignment and Assumption Agreement, the License Agreement and the Bill of Sale, and all other agreements and documents required to be delivered by any party hereto at the Closing pursuant to any of the foregoing. "Securities Act" means the United States Securities Act of 1933, as amended. -28- "Seller" has the meaning set forth in the Introductory Paragraph. In addition, for purposes of Article II (other than the introductory paragraph thereto), to the extent relevant, the term "Seller" includes each Affiliate of Seller that conducts any of the Business or owns any of the Purchased Assets, and for purposes of Article IV, to the extent relevant, the term "Seller" includes each subsidiary of Seller. "Seller Confidential Information" means information concerning the Business or Seller's other businesses that is acquired from Seller by Buyer and is explicitly designated by Seller as subject to the confidentiality requirements of Section 4.6 hereof. "Split Period: means a Taxable Year that begins on or before the Closing Date and ends after the Closing Date. "Tax" or "Taxes" shall mean all taxes, however denominated, including any interest, penalties or additions to tax or other additional amounts that may become payable in respect thereof, imposed by any federal, state, local or foreign government or any agency or political subdivision of any such government, which taxes shall include, without limiting the generality of the foregoing, all net or gross income taxes, payroll and employee taxes (including withholding, payroll and employment taxes required to be withheld with respect to income paid to employees), withholding taxes, unemployment insurance taxes, social security (or similar) taxes, disability taxes, registration taxes, sales and use taxes, excise taxes, franchise taxes, gross receipts taxes, occupation taxes, premium taxes, windfall profits taxes, environmental taxes (including taxes under Code Section 59A), real and personal property taxes, ad valorem taxes, stamp taxes, value added taxes, alternative or add-on minimum taxes, transfer taxes, profits taxes, licenses, estimated taxes, severance taxes, duties (custom and others), worker's compensation taxes, and other taxes, customs, duties, fees, assessments, charges or obligations of the same or of a similar nature, whether arising before, on or after the Closing Date. "Tax Returns" means all returns, declarations, reports, estimates, and information statements and returns required to be filed relating to Taxes, including but not limited to, original returns and filings, amended returns, claims for refunds, information returns, administrative or judicial filings, accounting method change requests, responses to revenue agents' reports (federal, state or local) and settlement documents, and any schedules or attachments to any of the foregoing. "Taxable Year" means any taxable year or any other taxable period with respect to which any Tax may be imposed under any applicable statute, rule or regulation. -29- (b) In addition, the following terms are defined in the following Sections of the Agreement: TERM SECTION ---- ------- Agreement Introductory Paragraph Assigned Contracts Section 1.1(b) Buyer Liabilities Section 1.5 Authorizations Section 2.3(b) Business Recitals Buyer Introductory Paragraph Buyer Indemnities Section 5.2 Closing Section 1.8 Closing Date Section 1.8 Closing Purchase Price Section 1.4(a) Environmental Claim Section 2.14(f) Environmental Laws Section 2.14 Environmental Permits Section 2.14 Estimated Saleable Inventory Amount Section 1.4(a) Excluded Assets Section 1.2 Final Saleable Inventory Amount Section 1.4(b) Financial Statements Section 2.4 Indemnified Party Section 5.4 Indemnifying Party Section 5.4 Intellectual Property Section 1.1(d) Materials of Environmental Concern Section 2.14(f) Purchased Assets Section 1.1 Purchase Price Section 1.4(b) Records Section 1.1(c) Retained Liabilities Section 1.5 Seller Indemnitees Section 5.3 Tangible Assets Section 1.1(a) Transfer Taxes Section 4.5(b) (c) The definitions given for terms in this Section 6.1 and elsewhere in this Agreement will apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun will include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" will be deemed to be followed by the phrase "without limitation." The words "hereby," "herein," "hereof," "hereunder" and words of similar import refer to this Agreement as a whole (including any exhibits thereto) and not merely to the specific section, paragraph or clause in which such word appears. All references herein to Sections, schedules and exhibits will be deemed references to Sections of and schedules and exhibits to this Agreement unless the context otherwise requires. All references to "$" will be deemed references to the lawful money of the United States of America. Accounting and financial terms not otherwise defined herein shall have the meanings ascribed to such terms under GAAP. -30- 6.2 Termination. (a) Anything contained herein to the contrary notwithstanding, this Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing Date: (i) By written consent of Buyer and Seller; (ii) By Seller, if any of the conditions set forth in Section 1.7 hereof shall have become incapable of fulfillment and shall not have been waived by Seller; (iii) By Buyer, if any of the conditions set forth in Section 1.6 hereof shall have become incapable of fulfillment, and shall not have been waived by Buyer; or (iv) By any Buyer, if the Closing does not occur on or prior to June 15, 2001. (b) In the event of termination by a Party pursuant to this Section 6.2, written notice thereof shall forthwith be given to the other Parties hereto and the transactions contemplated by this Agreement shall be terminated, without further action by any Party. (c) If this Agreement is terminated and the transactions contemplated hereby are abandoned as described in this Section 6.2, this Agreement shall become void and of no further force and effect except for obligations set forth in this Section 6.2. Nothing in Section 4.2 and this Section 6.2 shall be deemed to release a Party from any liability for any breach by such Party of the terms and provisions of this Agreement. 6.3 Press Releases and Announcements. No party shall issue any press release or announcement relating to, or otherwise disclose, the subject matter of this Agreement prior to the Closing without the prior written approval of Buyer and Seller; provided, however, that any party may make any public disclosure specifically contemplated in this Agreement or any public disclosure it believes in good faith is required by law or regulation (in which case the disclosing party will advise the other parties prior to making the disclosure). 6.4 No Third Party Beneficiaries. Except as otherwise provided in Article VI hereof with respect to Buyer Indemnities, this Agreement shall not confer any rights or remedies upon any person other than the Parties and their respective successors and permitted assigns. 6.5 Entire Agreement. This Agreement (together with the Related Agreements and other schedules and exhibits attached hereto) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, that may have related in any way to the subject matter hereof, including without limitation, the letter of intent dated April 24, 2001 by and between Seller and Buyer. The schedules and exhibits to this Agreement shall be construed with and as integral parts of this Agreement to the same extent as if they were set forth verbatim herein. -31- 6.6 Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of Buyer and Seller; provided, however, that Buyer may assign any or all of its rights and interests hereunder to one or more of its Affiliates, to any Person providing financing to Buyer or the Business and to any Person or Persons who acquire all or substantially all of the Purchased Assets or the Business. 6.7 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. This Agreement, the Related Agreements, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any Party or to any such agreement or instrument, each other Party shall re-execute original forms thereof and deliver them to all other parties. No Party shall raise the use of a facsimile machine to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine as a defense to the formation or enforceability of a contract and each such Party forever waives any such defense. 6.8 Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. 6.9 Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two Business Days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to Seller: Spectrum Organic Products, Inc. 1304 South Point Boulevard Suite 280 Petaluma, CA 94954 Attention: Fax No.: (707) 765-8736 -32- With a required copy to: Cooley Godward LLP One Maritime Plaza, 20th Floor San Francisco, CA 94111 Attention: Susan Cooper Philpot Fax No.: (415) 951-3699 If to Buyer: Acirca, Inc. 4350 North Fairfax Drive Suite 350 Arlington, VA 22203 Attention: Olivier Sonnois, VP-Strategy & Business Development Fax No.: (703) 312-4801 and Arnold & Porter 555 Twelfth Street, N.W. Washington, D.C. 20004 Attention: Neil Goodman Fax No.: 202-942-5999 Any party may give any notice, request, demand, claim, or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the party for whom it is intended. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other parties notice in the manner herein set forth. 6.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS RULES THEREOF TO THE EXTENT SUCH CONFLICTS RULES WOULD REQUIRE THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION. 6.11 Forum Selection and Consent to Jurisdiction. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF NEW YORK, NEW YORK OR ANY UNITED STATES FEDERAL COURT SITTING IN NEW YORK, NEW YORK, AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ANY OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HERETO -33- FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS FROM ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY HAND DELIVERY OR BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY, AS THE CASE MAY BE, AT THE ADDRESSES DESCRIBED IN SECTION 6 OF THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE UPON HAND DELIVERY OR TEN (10) DAYS AFTER SUCH MAILING. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY OBJECTION IT MAY HAVE TO VENUE AND THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTIONS OR PROCEEDINGS. 6.12 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 HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. 6.13 Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by Buyer and Seller. No waiver by any party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. 6.14 Specific Performance. Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter, in addition any other remedy to which they may be entitled, at law or in equity. 6.15 Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, -34- or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed. 6.16 Expenses. Buyer will pay all expenses Buyer incurs in connection with this Agreement and the transactions contemplated herein, and Seller will pay all expenses incurred by or on behalf of Seller in connection with this Agreement and the transactions contemplated herein. 6.17 Construction. The language used in this Agreement will be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party. -35- IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. ACIRCA, INC. By: /s/ William Urich -------------------------------- William Urich Chief Financial Officer and Secretary SPECTRUM ORGANIC PRODUCTS, INC. By: /s/ Jethren Phillips -------------------------------- Jethren Phillips CEO and Chairman of the Board -36- EX-99.A4 3 spectrumexhibit2-04.txt ESCROW/SECURITYAGREEMENTSDATED061101 ESCROW AND SECURITY AGREEMENT ----------------------------- THIS ESCROW AND SECURITY AGREEMENT (this "Agreement") made as of June 11, 2001, by and among Acirca, Inc., a Delaware corporation ("Buyer"), Spectrum Organic Products, Inc., a California corporation ("Seller"), and Webster Trust Company, N.A., as Escrow Agent (the "Escrow Agent"). W I T N E S S E T H: - - - - - - - - - - WHEREAS Buyer and Seller have entered into an Asset Purchase Agreement (the "Purchase Agreement") dated as of June 11, 2001, pursuant to which Buyer has acquired the Business and the Purchased Assets and paid the Closing Purchase Price, in each case as such term is defined therein; WHEREAS, pursuant to Article V of the Purchase Agreement, Seller has agreed to indemnify and hold harmless the Buyer Indemnitees with respect to certain liabilities; WHEREAS, pursuant to Section 1.8 of the Purchase Agreement, Buyer has paid $350,000 of the Closing Purchase Price (the "Escrowed Amount") to the Escrow Agent to be held in escrow pursuant to the terms of this Agreement; and WHEREAS, in order to induce Buyer to pay the Escrowed Amount to the Escrow Agent, and in consideration therefor, Seller has agreed to grant to Buyer a perfected lien on and security interest in the Escrowed Amount; NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and in the Purchase Agreement, the parties hereto hereby agree as follows: ARTICLE I Certain Definitions ------------------- Capitalized terms used but not defined herein have the meaning assigned to such terms in the Purchase Agreement. In addition, capitalized terms used herein have the meaning set forth in this Article I or elsewhere in this Agreement. The term "Escrowed Funds" means the Escrowed Amount plus all interest accrued thereon as provided in Section 2.02 hereof minus the sum of (i) any Indemnity Amounts paid to Buyer Indemnitees pursuant to Section 4.01 or 4.02(b) hereof, (ii) any Indemnity Stepdown Payments paid to Seller pursuant to Secton 4.02 (a) hereof, (iii) any amounts paid by Buyer to the Accounting Firm (as defined herein) to determine the Remaining Indemnity Amount pursuant to Section 4.02 or 4.03 hereof and (iv) any amounts distributed to Seller pursuant to Section 4.03 or 4.04 hereof. The term "Indemnity Stepdown Payment" means the amount of the Escrowed Funds paid by Buyer to Seller on each of the Indemnity Stepdown Payment Dates as provided in Section 4.02 hereof. The term "Indemnity Stepdown Payment Dates" means each of the six-month and one-year anniversaries of the Closing Date. The term "Remaining Indemnity Amount" means, as of any date, the aggregate amount of Damages that are reasonably likely to arise in connection with all Claims theretofore made by a Buyer Indemnitee for which indemnification is provided pursuant to Article V of the Purchase Agreement. The term "Termination Date" means the first anniversary of the Closing Date. ARTICLE II Creation of Escrow; ------------------- Investment of Escrowed Funds ---------------------------- SECTION 2.01. Creation of Escrow. The Escrow Agent hereby agrees to accept the Escrowed Amount and hold the Escrowed Funds in escrow in a collateral account entitled _________ at the Escrow Agent (the "Collateral Account") pursuant to the terms of this Agreement. Except as otherwise provided in Section 3.01 hereof, the Escrow Agent hereby agrees that the Collateral Account and all Escrowed Funds held hereunder shall be held for the account of Seller; provided that, subject to applicable bankruptcy law, the Seller and Buyer expressly agree that no portion of the Collateral Account or the Escrowed Funds shall be or become part of the bankruptcy estate of Seller in the event that Seller is or becomes the subject debtor of a bankruptcy proceeding. SECTION 2.02. Investment of Escrowed Funds, The Escrow Agent, at the written direction of Seller, shall, to the extent practicable, invest and reinvest the Escrowed Funds in any of the following as may be specified in writing by Seller: (i) readily marketable direct obligations of or obligations guaranteed by the United States of America maturing within one year from their respective dates of issuance, (ii) certificates of deposit maturing within 30 days from their respective dates of issuance and issued by state or national banking institutions each of which shall have a capital and undivided surplus (as reflected in its latest publicly available financial statements) aggregating at least $50 million, (iii) municipal bonds of issuers that have a class of short-term obligations rated in one of the three highest debt-rating categories for short-term debt by Standards & Poor's, Moody or Fitch, maturing within one year of their dates of issuance, and (iv) money market mutual funds meeting the requirements of Rule 2a-7 under the Investment Company Act of 1940, maturing within one year of their dates of issuance (the foregoing clauses (i) through (iv) being hereinafter referred to as "Investments"). -2- ARTICLE III Grant of Security Interest -------------------------- SECTION 3.01. Grant. Seller hereby grants to Buyer, to the extent and so long as any of the Escrowed Amount and all moneys from time to time held standing to the credit thereof are held by the Escrow Agent hereunder, as of and from the date such funds are received by the Escrow Agent, a perfected, first priority security interest in the Collateral Account, such funds and Seller's right to receive distributions thereof (collectively, the "Secured Funds"), to secure the payment of the amounts, if any, payable to the Buyer Indemnitees pursuant to Article V of the Purchase Agreement. In connection therewith, Seller expressly agrees (i) that the Escrow Agent is acting as Buyer's agent solely to the extent necessary to perfect Buyer's first priority security interest in the Secured Funds; and (ii) to execute and deliver such instruments as Buyer may from time to time reasonably request for the purpose of evidencing and perfecting such security interest. SECTION 3.02. Representations and Covenants of Seller. Seller hereby represents, warranties and covenants as follows: (a) As a result of the execution and delivery of this Agreement and the filing of any financing statements or other documents necessary to assure, preserve and perfect the security interest created hereby, Buyer shall have a valid, perfected, enforceable lien on, and a continuing security interest in, the Secured Funds, enforceable and superior as such as against creditors and purchasers and such lien shall be superior and prior to all other liens on the Secured Funds; (b) Seller shall promptly give written notice to Buyer of any levy or attachment, execution or other process against any of the Secured Funds; (c) Seller at its sole cost and expense shall take any and all actions reasonably necessary or desirable to defend the Secured Funds against the claims and demands of all persons other than Buyer Indemnitees and to defend the security interest of Buyer in the Secured Funds and the priority thereof against any adverse lien of any nature; and (d) Seller shall pay and discharge when due all taxes, levies and other charges on the Secured Funds, unless such tax, levy or other charge is being contested in good faith and with respect to which adequate reserves as determined in good faith by Seller have been established and are being maintained. -3- ARTICLE IV Distributions from Escrow ------------------------- SECTION 4.01. Distributions to Buyer Indemnitees. If at any time and from time to time Buyer advises the Escrow Agent in writing (with a copy delivered simultaneously to Seller) (such notice, a "Claim") (a) that a Buyer Indemnitee is entitled to indemnification pursuant to Article V of the Purchase Agreement and (b) of the amount of indemnification due (the "Indemnity Amount"), then the Escrow Agent shall, between sixteen and twenty Business Days after the date of receipt of the written notice from Buyer, deliver Escrowed Funds equal to the Indemnity Amount to Buyer (or any persons designated in writing by Buyer), unless the Escrow Agent shall have received, within fifteen Business Days after the date the Escrow Agent received such written notice from Buyer, a written objection from Seller to such delivery setting forth the amount in dispute, in which case the Escrow Agent shall deliver any undisputed amount to Buyer (or its designee) and shall continue to hold the disputed amount until either (A) receipt of a certificate signed by Buyer and Seller directing the Escrow Agent to deliver Escrowed Funds equal to the agreed Indemnity Amount set forth in such certificate to Buyer or (B) receipt of an order of a court of competent jurisdiction directing the Escrow Agent to deliver Escrowed Funds equal to the disputed Indemnity Amount specified therein to Buyer (or its designee). SECTION 4.02. Distributions to Seller on Indemnity Stepdown Payments. (a) No later than 45 calendar days prior to each Indemnity Stepdown Payment Date, Buyer and Seller shall attempt in good faith to agree in writing to an estimate of the Remaining Indemnity Amount as of such date. In the event that Buyer and Seller are unable to agree to the Remaining Indemnity Amount by the 30th calendar day prior to the Indemnity Stepdown Payment Date, then a nationally recognized independent accounting firm not then engaged by Buyer or Seller (the "Accounting Firm") shall determine such amount within 30 calendar days thereafter. The fees and expenses of the Accounting Firm shall be shared equally by Buyer and Seller. In determining such Remaining Indemnity Amount with respect to Claims relating to a matter then in litigation, the Accounting Firm will take steps similar to those that would be taken in establishing a reserve under FAS 5 (including consultation with the counsel litigating such matter). After the Remaining Indemnity Amount is determined, on each Indemnity Stepdown Payment Date, a copy of such determination, signed by both Buyer and Seller, shall be delivered to the Escrow Agent. As promptly as practicable following the determination of the Remaining Indemnity Amount, the Escrow Agent shall deliver to Seller the Indemnity Stepdown Payment for such Indemnity Stepdown Payment Date, the amount of which shall be, (i) on the first Indemnity Stepdown Payment Date, the lesser of (A) $175,000 and (B) the difference between (1) the Escrowed Funds (immediately prior to payment of any Indemnity Stepdown Payment on such date) minus (2) the Remaining Indemnity Amount as of such date, and (ii) on the second Indemnity Stepdown Payment Date, the amount equal to the amount, if any, by which the Escrowed Funds (immediately prior to payment of any Indemnity Stepdown Payment on such date) exceed the Remaining Indemnity Amount as of such date. (b) Notwithstanding anything in the foregoing Section 4.02(a): (i) The Escrow Agent shall not make any Indemnity Stepdown Payment if, on the applicable Indemnity Stepdown Payment Date, any Indemnity Amount (or portion thereof) then being disputed has not been accounted for in the Remaining Indemnity Amount as determined pursuant to Section 4.02 hereof; and -4- (ii) If the Escrow Agent is unable to deliver the full amount of any Indemnity Amount due to Buyer (or its designee) pursuant to Section 4.01 hereof, Seller shall pay to Buyer (or its designee) not more than five Business Days thereafter, by wire transfer or certified check made payable to Buyer (or its designee), such Indemnity Amount or portion thereof, to the extent that (A) such Indemnity Amount or portion thereof has not been paid otherwise hereunder and (B) the payment of such Indemnity Amount or portion thereof does not exceed the limitation set forth in Section 4.05. SECTION 4.03. Initial Distribution to Seller After the Termination Date. No later than 45 days prior to the 90th day after the Termination Date, Buyer and Seller shall attempt in good faith to agree in writing to an estimate of the Remaining Indemnity Amount as of such date, if any. Any disagreement as to the Remaining Indemnity Amount shall be resolved in the manner (including payment of the Accounting Firm's fees and expenses) and within the time periods provided in Section 4.02. After the Remaining Indemnity Amount is determined and a copy of such determination, signed by both Buyer and Seller, is sent to the Escrow Agent, there shall be retained in the Collateral Account Escrowed Funds equal to the Remaining Indemnity Amount. As promptly as practicable following the determination of the Remaining Indemnity Amount, the excess, if any, of the Escrowed Funds over the Remaining Indemnity Amount shall be distributed to Seller. If the Remaining Indemnity Amount is zero, this Agreement shall terminate and all remaining Escrowed Funds shall be paid to Seller. SECTION 4.04. Special Distributions to Seller. (a) If, following the Termination Date, any Claim is resolved (a "Resolved Claim") for an amount that is less than the Indemnity Amount specified in the notice with respect to such Resolved Claim (or, if less, the amount of Escrowed Funds then held in the Collateral Account with respect to such Resolved Claim pursuant to the most recent determination of the Remaining Indemnity Amount), the Escrow Agent shall distribute to Seller, upon written notice signed by Buyer and Seller, any Escrowed Funds being held in respect of such Resolved Claim in excess of the actual Indemnity Amount with respect to such Resolved Claim; provided that if any Buyer Indemnitee is entitled to indemnification with respect to such Resolved Claim, (i) Seller or a court of competent jurisdiction shall have directed the Escrow Agent to deliver Escrowed Funds to such Buyer Indemnitee with respect thereto pursuant to Section 4.01 and (ii) the amount of Escrowed Funds then being held in respect of all other Claims shall not be less than the Remaining Indemnity Amount (as most recently determined) adjusted to reflect the resolution of such Resolved Claim. (b) If, at any time after the Termination Date, Buyer has knowledge that, as to any Remaining Indemnity Amount being held in escrow, the Remaining Indemnity Amount exceeds the aggregate amount of Damages that are reasonably likely to arise in connection with all outstanding Claims, Buyer shall notify the Escrow Agent in writing (with a copy to Seller) and the Escrow Agent shall release all Escrowed Funds in excess of the amount of Damages that are reasonably likely to arise in relation to such Claims, if any. -5- SECTION 4.05. Limitation on Distributions to Buyer. In no event shall Buyer seek payment to it of any amount under this Agreement in excess of the Escrowed Amount. Notwithstanding any other provision of this Agreement, once the Escrowed Amount has been paid to Buyer by the Escrow Agent, this Agreement shall terminate and all remaining Escrowed Funds shall be paid to Seller. ARTICLE V The Escrow Agent ---------------- SECTION 5.01. General. The Escrow Agent shall not deal with the Escrowed Funds except in accordance with (a) this Agreement, (b) written instructions given in conformity with this Agreement or (c) instructions agreed to in writing by Buyer and Seller. The Escrow Agent shall not be bound in any way by the Purchase Agreement or by any agreement or contract between the Buyer and Seller other than this Agreement (whether or not the Escrow Agent has knowledge thereof), it being understood that the Escrow Agent's only duties and responsibilities shall be to invest, hold and distribute the Escrowed Funds in accordance with the terms of this Agreement. The Escrow Agent shall not be responsible for any loss resulting from investments of the Escrowed Funds in accordance with the terms of this Agreement. The Escrow Agent shall have no liability with respect to any action taken by it except for its own gross negligence or willful misconduct. The Escrow Agent makes no representations and has no responsibility as to the validity, genuineness or sufficiency of any of the documents or instruments included in the subject matter of the escrow. The Escrow Agent may rely and shall be protected in relying upon any resolution, certificate, opinion, request, communication, demand, receipt or other paper or document in good faith believed by it to be genuine and to have been signed or presented by the proper party or parties in accordance with the terms of this Agreement. The Escrow Agent may act in reliance upon the advice of counsel satisfactory to it in reference to any matter in connection with the escrow and shall not incur any liability for any action taken in good faith in accordance with such advice. SECTION 5.02. Fees. The Escrow Agent's fees and expenses (including the reasonable fees, expenses and disbursements of its counsel) in acting hereunder shall be paid by Seller. While the Escrow Agent holds the Escrowed Funds, any dividend or interest income earned by the Escrowed Funds shall be reinvested in the Escrowed Funds and shall be added to the amount of the Escrowed Funds then being held by Escrow Agent, net of any monthly fees, escrow fees or expenses due the Escrow Agent. A copy of the Escrow Agent's fee schedule is attached hereto as Schedule A. SECTION 5.03. Resignation. The Escrow Agent or any successor Escrow Agent hereunder may resign by giving 30 days, prior written notice of resignation to Buyer and Seller, and such resignation shall be effective from the date specified in such notice. In case the office of Escrow Agent shall become vacant for any reason, Buyer may appoint a bank or trust company having capital and undivided surplus (as reflected in its latest publicly available certified financial statements) of not less than $25 million and having an office in Virginia, as successor Escrow Agent hereunder by an instrument or instruments in writing delivered to such successor Escrow Agent, the retiring -6- Escrow Agent and Seller, whereupon such successor Escrow Agent shall succeed to all the rights and obligations of the retiring Escrow Agent as if this Agreement were originally executed by such successor Escrow Agent, and the retiring Escrow Agent shall duly transfer and deliver to such successor Escrow Agent the Escrowed Funds in the form held by it hereunder at such time. SECTION 5.04. Dispute Resolution; Reliance Upon Counsel or By Court. In the event of any dispute between or among the parties to this Agreement or of any dispute as to the Escrow Agent and its duties, the Escrow Agent shall be entitled to refuse to comply with any claim or demand and: (a) may act or refrain from acting in full reliance upon and with the advice of counsel selected by it and shall be fully protected in so acting or refraining from acting on the advice of counsel; or (b) may refrain from acting until required to do so by final adjudication by a court of competent jurisdiction; or (c) may deposit the Escrowed Funds held by it with the Superior Court of Connecticut, Judicial District of Hartford and commence an interpleader action to determine the proper disposition of the Escrowed Funds. The cost of such counsel and the costs of such action including reasonable attorneys' fees incurred by the Escrow Agent shall be paid as ordered by such court, but if there be no order, then by the parties (other than the Escrow Agent) equally. ARTICLE VI Miscellaneous ------------- SECTION 6.01. Registration. The Escrow Agent may register any Investments in its own name or in the name of a nominee or maintain them in bearer form and may deposit any such Investments in a depository or clearing corporation. SECTION 6.02. Expenses. Each of Buyer and Seller shall pay its own costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby. SECTION 6.03. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been given if delivered personally or sent by registered or certified mail (return receipt requested), postage prepaid, to the parties to this Agreement at the following addresses or at such other address for a party as shall be specified by like notice: to Buyer: Acirca, Inc. 4350 North Fairfax Drive Suite 350 Arlington, VA 22203 Attention: Olivier Sonnois, VP-Strategy & Business Development Fax No.: (703) 312-4801 -7- With a copy to: Arnold & Porter 555 Twelfth Street, N.W. Washington, D.C. 20004 Attention: Neil Goodman Fax No.: (202) 942-5999 to Seller: Spectrum Organic Products, Inc. 1304 South Point Boulevard Suite 280 Petaluma, CA 94954 Attention: Fax No. : (707) 765-8736 With a copy to: Cooley Godward LLP One Maritime Plaza, 20th Floor San Francisco, CA 94111 Attention: Susan Cooper Philpot Fax No. : (415) 951-3699 to the Escrow Agent: Webster Trust Company, N.A. 346 Main Street Kensington, CT 06037 Attention: Lee D. Watters Fax No. : With a copy to: Griffin & Griffin, P.C. 145 Bank Street P.O. Box 2184 Waterbury, CT 06722 Fax No. : (203) 596-7983 All such notices and communications shall be deemed to have been received on the date of delivery if personally delivered or on the third Business Day after the mailing thereof. -8- SECTION 6.04. Assignability. This Agreement shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors, but shall not be assignable by any party without the prior written consent of the other parties. SECTION 6.05. Purchase Price Adjustment; Taxes. The parties hereto agree that any amounts paid to any Buyer Indemnitee hereunder shall be treated as an adjustment to the Purchase Price paid by Buyer pursuant to the Purchase Agreement. The parties hereto agree that all Escrowed Funds (other than the Escrowed Amount) shall be treated as income of Seller for all Federal, state and local tax purposes. SECTION 6.06. Entire Agreement. This Agreement and the Asset Purchase Agreement and the other Related Agreements except as set forth therein constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements and undertakings, written and oral. SECTION 6.07. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CONNECTICUT, WITHOUT GIVING EFFECT TO THE CONFLICTS RULES THEREOF TO THE EXTENT SUCH CONFLICTS RULES WOULD REQUIRE THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION. SECTION 6.08. Forum Selection And Consent to Jurisdiction. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE UNITED STATES DISTRICT FOR THE DISTRICT OF CONNECTICUT OR THE SUPERIOR COURT OF CONNECTICUT, JUDICIAL DISTRICT OF HARTFORD, AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ANY OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HERETO FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS FROM ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY HAND DELIVERY OR BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY, AS THE CASE MAY BE, AT THE ADDRESSES DESCRIBED IN SECTION 6 OF THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE UPON HAND DELIVERY OR TEN (10) DAYS AFTER SUCH MAILING. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY OBJECTION IT MAY HAVE TO VENUE AND THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTIONS OR PROCEEDINGS. SECTION 6.09. Article and Section Headings. The article, section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. -9- SECTION 6.10. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be a single agreement. SECTION 6.11. Amendment; No Waivers. This Agreement may not be amended or modified except (a) by an instrument in writing signed by Buyer, Seller and the Escrow Agent or (b) by a waiver in accordance with the following sentence. Any party hereto may (i) extend the time for the performance of any obligation or other act of any other parties hereto or (ii) waive compliance with any agreement or condition contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition, of this Agreement. The failure of any party at any time to require performance of any provision hereof shall in no manner affect its right at a later time to enforce the same. No waiver by any party of any breach of any term contained in this Agreement shall be deemed to be or construed as a further or continuing waiver of any such breach in any subsequent instance or waiver of any breach of any other term contained in this Agreement. SECTION 6.12. Severability. If any term or provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nonetheless remain in full force and effect so long as the economic and legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, 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 by this Agreement be consummated as originally contemplated to the fullest extent possible. SECTION 6.13. Further Assurances. Each of Buyer and Seller agree to execute and deliver, upon the written request of any party hereto, any and all such further instruments and documents as such party may deem desirable for the purpose of obtaining the full benefits of this Agreement. [SIGNATURE PAGE FOLLOWS] -10- IN WITNESS WHEREOF, the parties to this Agreement have caused this Agreement to be duly executed as of the date first written above. ACIRCA, INC. By: /s/ William Urich -------------------------------- William Urich Chief Financial Officer and Secretary SPECTRUM ORGANIC PRODUCTS, INC. By: /s/ Jethren Phillips -------------------------------- Jethren Phillips CEO and Chairman of the Board Webster Trust Company, N.A. as Escrow Agent, By: /s/ -------------------------------- Name: Title: -11- Schedule A (attached hereto) -12- EX-99.A4 4 spectrumexhibit2-05.txt TRANSITIONSERVICESAGREEMENTDATED061101 TRANSITION SERVICES AGREEMENT ----------------------------- THIS TRANSITION SERVICES AGREEMENT, dated June 11, 2001 (the "Agreement"), is entered into by and between SPECTRUM ORGANIC PRODUCTS, INC., a California corporation ("SPECTRUM"), and ACIRCA, INC., a Delaware corporation ("ACIRCA"). WHEREAS, SPECTRUM and ACIRCA have entered into an Asset Purchase Agreement, dated as of the date hereof (the "Asset Purchase Agreement"), whereby SPECTRUM has agreed to sell and ACIRCA has agreed to purchase certain assets of SPECTRUM; WHEREAS, the Asset Purchase Agreement contemplates the transfer of certain activities from SPECTRUM to ACIRCA (the "Transfer") and such transfer requires the provision of certain services by SPECTRUM for a successful transition; and WHEREAS, as a condition to ACIRCA entering into the Asset Purchase Agreement, SPECTRUM has agreed to provide ACIRCA with certain services necessary to efficiently complete the Transfer with minimal disruption to customers of the Business (as defined in the Asset Purchase Agreement). NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Asset Purchase Agreement. 2. Performance of Services. Subject to the terms and conditions set forth herein, SPECTRUM shall, in providing the Services (as defined herein), provide to ACIRCA, not less than the same level of quality and performance consistent with past practices, which SPECTRUM has previously achieved in operating the Business during the prior year. SPECTRUM agrees to provide all Services which ACIRCA may reasonably request during the period beginning on the date the Asset Purchase Agreement is executed and ending as set forth in Section 7 hereof ("Transition Period"). ACIRCA agrees to use reasonable efforts to terminate its need for the Services as soon as reasonably possible and in any event (unless the parties otherwise agree) not later than the end of the Transition Period. 3. Communication. The parties agree that specified points of contact from both ACIRCA and SPECTRUM are critical to this transition. The contacts for each party is set forth on below: a) Primary Contacts. ---------------- ACIRCA: Bill Urich SPECTRUM: Bob Fowles b) Service Contacts. ---------------- i. Customer Service: ACIRCA: Richard Kline SPECTRUM: Bendada Powers / Helen Cervi ii. Management Information Systems: ACIRCA: Sam Levy SPECTRUM: Sue Sims iii. Accounting and Financial Reporting: ACIRCA: Jim Allwein SPECTRUM: Larry Lawton iv. Marketing and Sales: ACIRCA: Olivier Sonnois / Jeff Powers SPECTRUM: Neil Blomquist / Lynn MacDonald v. Warehousing and Order Fulfillment ACIRCA: Richard Kline SPECTRUM: Renada Powers / James Sharp vi. Manufacturing: ACIRCA: David Hull SPECTRUM: Pete Holcombe 4. Services. Subject to Sections 2 and 5, SPECTRUM shall provide ACIRCA with services (the "Services"), which shall include (without limitation) the following: (a) Customer Service. SPECTRUM shall provide order and billing transition services to ACIRCA as described on attached Exhibit A. (b) Management Information Systems. SPECTRUM shall provide management information systems transition services to ACIRCA as described on attached Exhibit B. (c) Accounting and Financial Reporting. SPECTRUM shall provide accounting and financial reporting transition services to ACIRCA as described on attached Exhibit C. (d) Marketing and Sales Transition Services. SPECTRUM shall provide to ACIRCA the marketing and sales transition services as described on attached Exhibit D. 2 (e) Manufacturing Transition Services. SPECTRUM shall provide manufacturing transition services to ACIRCA as described on attached Exhibit E. (f) Warehousing and Order Fulfillment Services. SPECTRUM shall provide warehousing and order fulfillment services to ACIRCA as described on attached Exhibit F. 5. Service Charges. (a) SPECTRUM shall invoice ACIRCA twice monthly for all reasonable out-of-pocket costs actually incurred by SPECTRUM in connection with the provision of the Services including without limitation freight costs, distribution costs, warehousing costs, off-invoice chargebacks, and travel, meals and lodging of SPECTRUM employees; provided, however, in no event shall include such costs include overhead costs incurred by SPECTRUM, including without limitation compensation of SPECTRUM employees, all of which costs shall be the sole responsibility of SPECTRUM. (b) SPECTRUM shall provide the Services in exchange for a monthly fee equal to 5% of the net sales of the Business (as defined in the Asset Purchase Agreement) as conducted by ACIRCA during the term of this Agreement as provided in Section 7 hereof. For purposes of this Agreement, "net sales" means gross sales, less off-invoice promotions and cash discounts. Upon ACIRCA's written notice delivered from time to time to SPECTRUM to terminate or reduce the scope of provision of any Service, SPECTRUM shall terminate the scope of, as applicable, the provision or performance of such Service as soon as is reasonably practicable, but in no event not later than thirty (30) days after such notice is given. If all Services are terminated in accordance with this Section 5 at any time other than the last day of a calendar month, all monthly fees shall be prorated to reflect such termination in service level, based on the actual number of days during which any Services were performed or provided divided by the number of days in the calendar month in which such Services are terminated or reduced. Not more than thirty (30) days after the end of each calendar month during the Transition Period, SPECTRUM shall invoice ACIRCA for the Services performed during the preceding calendar month. ACIRCA shall pay each invoice in full within fifteen (15) days after its receipt thereof. 6. Mail. The parties acknowledge that it may occur that, after the Closing Date, each of SPECTRUM and ACIRCA may inadvertently receive mail, telegrams, packages or other communications properly belonging to the other. Accordingly, each of SPECTRUM and ACIRCA recognizes and agrees that after the Closing Date the other may receive and open all mail, telegrams, packages and other communications so received in order to determine the appropriate recipient, and may retain the same to the extent that they relate to the business of the receiving party and, to the extent that they do not relate to the business of the receiving party, shall promptly send the same to the other party by personal delivery, mail, facsimile or nationally recognized overnight courier service, as appropriate, or contact the other party by telephone for delivery instructions for such mail, telegrams, packages or other communications (or, in case the same relate to both businesses, shall promptly forward copies thereof to the other party in accordance with the other party's delivery instructions). The provisions of this Section 6 are not intended to and shall not be deemed to constitute an authorization by either party to permit the other to accept service of process on its behalf, and neither party is or shall be deemed the agent of the other for service of process or for any other purpose. 3 7. Termination. The term of this Agreement shall commence on the date hereof and thereafter continue in full force and effect until August 31, 2001, except as otherwise expressly provided herein or unless terminated sooner as provided herein or extended by mutual agreement. 8. Notices. All notices, demands and other communications which may or are required to be given to or made by either party to the other in connection with this Agreement shall be in writing, and shall be deemed to have been duly given or made: (a) if sent by registered or certified mail, five days after the posting thereof with first class postage attached, and (b) if sent by hand or overnight delivery, upon the delivery thereof, in each case addressed to the respective parties as follows: If to the Seller: Spectrum Organic Products, Inc. 133 Copeland Street Petaluma, CA 94952 Attn: Robert Fowles Fax: (707) 765-8747 with a copy to: Cooley Godward LLP One Maritime Plaza, 20th Floor San Francisco, CA 94111 Attn: Susan Cooper Philpot Fax: (415) 951-3699 If to the Buyer: Acirca, Inc. 4350 North Fairfax Drive Suite 350 Arlington, VA 22203 Attn: Olivier Sonnois, VP - Strategy & Business Development Fax: (703) 312-4801 4 with a copy to: Arnold & Porter 555 Twelfth Street, N.W. Washington, D.C. 20004 Attn: Neil Goodman Fax: (202) 942-5999 or to such other address and to the attention of such other persons as either party hereto may specify from time to time by notice to the other party. 9. Entire Agreement. This Agreement and the Asset Purchase Agreement, and the documents and certificates referred to therein embody the entire agreement and understanding of the parties hereto with respect to the subject matter hereof, and supersede all prior and contemporaneous agreements and understandings, oral or written, relative to said subject matter. 10. Captions. The section headings of this Agreement are inserted for convenience only and shall not constitute a part of this Agreement in construing or interpreting any provision hereof. 11. Waiver; Consent. This Agreement may not be changed, amended, terminated, augmented, rescinded or discharged (other than by performance), in whole or in part, except by a writing executed by the parties hereto, and no waiver of any of the provisions or conditions of this Agreement or any of the rights of a party hereto shall be effective or binding unless such waiver shall be in writing and signed by the party claimed to have given or consented thereto. Except to the extent that a party hereto may have otherwise agreed in writing, no waiver by that party of any condition of this Agreement or breach by the other party of any of its obligations or representations hereunder shall be deemed to be a waiver of any other condition or subsequent or prior breach of the same or any other obligation or representation by the other party, nor shall any forbearance by the first party to seek a remedy for any noncompliance or breach by the other party be deemed to be a waiver by the first party of its rights and remedies with respect to such noncompliance or breach. 12. No Third Party Beneficiaries. Nothing herein, expressed or implied, is intended or shall be construed to confer upon or give to any Person including, without limitation, any employee of SPECTRUM, any legal or equitable right, remedy, claim or other benefit under or by reason of this Agreement. 13. Counterparts. This Agreement may be executed simultaneously in multiple counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. 14. Gender. Whenever the context requires, words used in the singular shall be construed to mean or include the plural and vice versa, and pronouns of any gender shall be deemed to include and designate the masculine, feminine or neuter gender. 5 15. Severability. All provisions of this Agreement, and all portions of such provisions, are intended to be, and shall be, independent and severable, and in the event that any provision or portion thereof is determined to be unlawful, invalid or unenforceable, such determination shall not affect the validity or enforceability of any other provision, or portion thereof, of this Agreement, and all other provisions and portions thereof shall continue to be valid and enforceable. [SIGNATURE PAGE FOLLOWS] 6 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. SPECTRUM ORGANIC PRODUCTS, INC. ACIRCA, INC. By: /s/ Jethren Phillips By: /s/ William Urich ---------------------------- -------------------------------- Jethren Phillips William Urich CEO and Chairman of the Board Chief Financial Officer and Secretary 7 EXHIBIT A --------- Order and Billing ----------------- SPECTRUM shall provide ACIRCA with order and billing services throughout the Transition Period as follows: o Accept all orders for products, input those orders into SPECTRUM data system and copy ACIRCA within 24 hours of receipt of such orders o Provide copies of bills of lading within 24 hours of receipt of same from Weber Distribution Center o Update and maintain lot numbers for all products o Bill customers on behalf of ACIRCA for all orders o Process all payments received according to instructions outlined in Exhibit C o Promptly after the date hereof, notify all existing customers, and all customers whose business is or was being pursued by SPECTRUM during the six (6) months prior to the date hereof, of the change in order/billing procedures, including notification that the payment of all amounts due with respect to receivables shall be payable according to instructions outlined in Exhibit C, which notification shall include a statement that all payment for orders made on or after the date hereof shall be remitted to ACIRCA o After the Transition Period, if orders are received at SPECTRUM, notify customer of the consummation of the transactions contemplated hereby and reroute the orders to ACIRCA 8 EXHIBIT B --------- Management Information Systems ------------------------------ Promptly after the date hereof, SPECTRUM shall provide ACIRCA with the following data for all the SKUs that ACIRCA is purchasing from SPECTRUM: o Bill of materials by SKU (item, status, component, cost, quantities, vendor (if not Spectrum Organic Products, Inc.), vendor setup) o Finished goods configuration (item, packaging, pallet configuration, case configuration, shelf life, size) o Historical sales (invoiced) data from gross sales (cases and $) and off-invoice sales ($), by SKU, by customer and by month, starting July of 1999 o 1 year of production historical data cases by SKU and plant o Customer master file (ship to and bill to addresses) including contacts and discounts o Vendor file (bill to addresses) o Broker file (ship to and bill to addresses) including discounts o 7 months (June, 2001 through December, 2001) of production forecasts in cases, by SKU, plant and month o 7 months (June, 2001 through December, 2001) of sales forecasts in cases, by SKU and month o Inventory by SKU and lot # as of June 11, 2001 and June 29, 2001 o Weekly sales transactions details commencing the week beginning June 11, 2001 through the week beginning June 25, 2001, including without limitation returns, orders, invoicing dates, customer, SKUs, off-invoice discounts, $ and quantities in cases SPECTRUM shall provide all data files in a format reasonably required by ACIRCA. SPECTRUM shall provide all data in Excel or Access format. SPECTRUM shall deliver to ACIRCA a hard copy of all data files after June 30, 2001, but in no event later than July 13, 2001, on CD-Rom. 9 EXHIBIT C --------- Accounting and Financial Reporting ---------------------------------- SPECTRUM shall provide ACIRCA with accounting, financial reporting and collection services through the Transition Period as follows: o Prior to Closing, deliver to ACIRCA wire transfer instructions (bank name, address, ABA#, account#) o As soon as practicable after Closing, deliver to ACIRCA beginning finished goods inventory report (based on audited, physical count), including inventories by lot# and lot date o No later than July 13, 2001, deliver to ACIRCA sales and gross profit report for the period beginning June 11, 2001 and ending June 30, 2001 (period extended if requested by ACIRCA), which report shall include gross sales, off-invoice discounts, cost of goods sold, distribution costs (if applicable), gross profit, and customer information o Deliver to ACIRCA, weekly inventory activity reports commencing the week beginning June 11, 2001, reflecting inventory movements (sales, transfers, receipts) by lot number as provided to Spectrum by Weber Distribution Center o Deliver to ACIRCA, weekly cash receipts reports commencing the week beginning June 11, 2001 o SPECTRUM shall collect on behalf of ACIRCA payments relating to products ordered on or after the Closing Date, and all such funds shall be held by SPECTRUM in trust for the benefit of ACIRCA and delivered to ACIRCA to the account set forth below o SPECTRUM shall promptly advise ACIRCA of any payments which are in excess of thirty (30) days past due o Immediately upon receipt of any remittance advice from lock box for payments relating to products ordered on or after the Closing Date, SPECTRUM shall deliver such funds ACIRCA by wire transfer to the account below: Bank of America 4201 Wilson Blvd Arlington, Va. 22203 Phone: 703-807-1040 Contact name: DJ Account No. 003929257672 ABA# 05200163 o If SPECTRUM receives any payment without a remittance advice identifying the invoices being paid, relating to products ordered both prior to, and on or after, the Closing, and such payment is insufficient to cover the full outstanding amount with respect to all such products, then SPECTRUM shall first apply the payment to the outstanding amount relating to the products ordered on or after Closing up to such outstanding amount. o ACIRCA acknowledges that customers will be deducting amounts for promotions, manufacture charge-backs, returned merchandise and other disputes which cannot be anticipated as of the date hereof. SPECTRUM shall use its best efforts to attribute such deductions appropriately to ACIRCA products or its own products, as the case may be. 10 EXHIBIT D --------- Marketing and Sales Transition Services --------------------------------------- SPECTRUM shall ACIRCA with marketing and sales transition services as follows: o Throughout the Transition Period, provide ACIRCA sales and marketing personnel with reasonable access to all SPECTRUM sales and marketing personnel who were responsible for selling and marketing the products, which shall include without limitation reviewing each customer status, based on the following criteria: a) All access to SPECTRUM sales and marketing personnel is done through President of Brands or Director of Sales and Marketing; b) Planning and scheduling of SPECTRUM sales and marketing personnel is done over the 90 day period immediately following the date hereof c) All reasonable, actually incurred, out-of-pocket expenses such as travel, meals and lodging related to the use of SPECTRUM sales and marketing personnel shall be reimbursed to SPECTRUM subject to evidence thereof as reasonably required by ACIRCA o Immediately after the Closing, deliver to ACIRCA a contact list of all SPECTRUM sales and marketing personnel who were responsible for selling and marketing the products o As soon as practicable after the Closing, introduce (in person) designated ACIRCA sales and marketing personnel to every sales brokerage firm and key contact therein representing the tomato-based business o As soon as practicable after the Closing, introduce (in person) designated ACIRCA sales and marketing personnel to every trade buyer and key contact therein related to the sauce, salsa and Kid's Meals Categories o As soon as practicable after the Closing, introduce (in person) designated ACIRCA sales and marketing personnel to every private label customer and key contact therein o As soon as practicable after the Closing, introduce ACIRCA sales and marketing personnel to every marketing vendor and key contact therein o Throughout the Transition Period, provide support and clarification on all then existing trade disputes o SPECTRUM shall use its best efforts to ensure all trade promotional activities have been booked with all key customers until and including October 2001 to ensure continuation of current volume growth momentum and within currently established promotional guidelines o Alert ACIRCA sales and marketing personnel to any incremental promotional opportunity that may exist but which may not have been booked as of the Closing Date o SPECTRUM shall use its best efforts to provide ACIRCA with material slotting allowances by customer ($) 11 EXHIBIT E --------- Manufacturing Transition Services --------------------------------- SPECTRUM shall provide to ACIRCA manufacturing services as follows: o Maintain a finished product fill rate of 98% of orders, both on a case basis and dollars. The fill rate performance based on a sales forecast provided by ACIRCA. Changes to the forecast must come at least 30 days prior to the revised period. o Assist ACIRCA in creating a forecast for the balance of this calendar year. o Maintain inventory necessary to support the fill rate provided herein, approximately a 5 weeks supply. o Schedule the necessary production with co-packers/processors. o Order the necessary packaging materials and ingredients to cover the production requirements provided herein. o Oversee the transfer of production to the appropriate distribution center(s) as directed by ACIRCA. o Provide ACIRCA with weekly production reports and transfer documents by lot number commencing on the week beginning June 11, 2001. Once the finished good inventories have been transferred to distribution center(s) as directed by ACIRCA, ACIRCA will provide the information necessary for Spectrum to comply with the production and distribution requirements provided herein at least 30 days in advance of the need. 12 EXHIBIT F --------- Warehousing and Order Fulfillment Services ------------------------------------------ SPECTRUM shall provide ACIRCA with warehousing and order fulfillment services as follows: o Upon receipt of order from customer, notify warehouse of expected pickup/delivery date and copy ACIRCA o Ensure that warehouse has adequate supply of product to fulfill orders o Prior to order pickup, ensure that warehouse provides notice of shortages or other issues that might affect the fulfillment of the order o Cause Weber Distribution to update and maintain lot numbers for all products o Bill customers for all orders that have been picked up o Process all billing and payments according to instructions outlined in Exhibit C Promptly after the Transition Period, SPECTRUM and ACIRCA shall compare records to ensure that all open orders are accounted for. 13 EX-99.A4 5 spectrumexhibit2-06.txt LICENSE AGREEMENTDATED061101 LICENSE AGREEMENT THIS LICENSE AGREEMENT (this "Agreement") is effective as of June 11, 2001 (the "Effective Date") by and between Acirca, Inc., a Delaware corporation ("Licensor") and Spectrum Organic Products, Inc., a California corporation ("Licensee"). WHEREAS, Licensor and Licensee have entered into an Asset Purchase Agreement, dated as of the date hereof (the "Asset Purchase Agreement"), whereby Licensee sold to Licensor and Licensor purchased certain assets of Licensee, including but not limited to the trademarks described in Exhibit A hereto (the "Trademarks"); WHEREAS, Licensor owns all right, title and interest in and to the Trademarks, and has the exclusive right to use and to license others to use the Trademarks; WHEREAS, Licensee desires to use the Trademarks in connection with the production and sale of Licensee's food products pursuant to existing distribution relationships (the "Distribution Agreements"), as they have been produced and sold by Licensee prior to the date of this Agreement, which products are more specifically identified on Exhibit B hereto (the "Products"); and WHEREAS, as an inducement for Licensee to enter into the Asset Purchase Agreement, Licensor has agreed to grant to a limited nontransferable, nonexclusive license, with no right to sublicense, to use the Trademarks according to the terms and conditions provided in this Agreement. NOW, THEREFORE, in consideration of the foregoing and of the mutual promises hereinafter set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows: 1. Grant of License. ----------------- 1.1. Licensor hereby grants Licensee a nontransferable, nonexclusive license during the term of this Agreement solely to use the Trademarks on the Products, and on labels affixed to the Products, other packaging for Products, and advertising and promotional literature for Products (collectively, the "Materials") solely for purposes of fulfilling its obligations under the Distribution Agreements. 1.2. Any use of the Trademarks by Licensee shall be in substantially the same form as Licensor's use of the Trademarks immediately prior to the date of this Agreement and in connection with such products as listed in Exhibit Bto this Agreement. 1.3. Licensee shall not use a Trademark in any way not specifically permitted pursuant to Sections 1.1 and 1.2. Prohibited uses include, without limitation, the use of a Trademark (i) in connection with the sale of any product other than the Products, (ii) for any purpose other than fulfilling its obligations under the Distribution Agreements, (iii) with respect to the "Bella Toscana" trademark specified in Exhibit A, in connection with the sale of any organic product, or (iv) for any purpose other than selling finished Products which exist as of the date hereof and include the Trademarks. 1.4. Licensee shall not distribute to any third party any Products, or Materials, with the Trademarks unless Licensee first submits two specimens thereof to Licensor and Licensor approves the form thereof in writing. Licensor shall not withhold its approval unreasonably. Licensee shall be solely liable for the contents of all Products and Materials. 1.5. This Agreement grants Licensee the right to use the Trademarks specified in Exhibit A. Other than the Trademarks, Licensee shall not use, or have any rights in, anytrademarks, or any other subject matter in which Licensor has any rights. 1.6. Nothing in this Agreement shall be deemed to limit or interfere with Licensor's unrestricted right to use or license the use of the Trademarks. 2. Validity of the Trademarks. --------------------------- Licensee acknowledges the validity of the Trademarks and Licensor's ownership of the Trademarks. Licensee shall not attack such validity or ownership, and Licensee shall do nothing inconsistent with such validity and ownership. Licensee shall not apply for registration of the Trademarks or any trademark which is confusingly similar to the any Trademark in any country, or oppose registration of the Trademarks by Licensor. Licensee shall not use any trademark which is confusingly similar to the Trademarks. All use of the Trademarks shall inure to the benefit of Licensor. 3. Quality Control. ---------------- 3.1. Licensee's use of the Trademarks shall be consistent with the high quality image of Licensor so as to enhance the Trademarks and the goodwill relating thereto. Licensee shall not make any use of the Trademarks that would cause embarrassment to Licensor or tend to discredit its image or reputation for quality and charitable work. All Products in connection with the sale of which Licensee uses the Trademarks shall be manufactured in accordance with prevailing industry standards for the production of quality goods and the quality control standards used by Licensee immediately prior to the date of this Agreement. Licensee agrees to comply with any and all applicable federal, state and local laws and regulations. 3.2. Upon Licensor's request, Licensee shall provide to Licensor a reasonable number of samples of Products in connection with the sale of which Licensee uses the Trademarks, as well as specimens of Materials bearing the Trademarks. 3.3. Upon reasonable notice, Licensor shall have the right to inspect Licensee's operations, including without limitation all facilities, manufacturing operations, and all books and records pertaining thereto, with respect to the use of the Trademarks. 4. Enforcement. ------------ If either Licensee or Licensor becomes aware of any infringement of the Trademarks by any third party, it promptly shall notify the other. In the event of such infringement, Licensor shall have the right (but not the obligation) to bring an action, at its sole expense, against the third party. Licensee shall cooperate in any action brought by the Licensor pursuant to this Article, and, to the extent possible, have its employees testify when requested and make available relevant records, papers, information, samples, and the like. Any damages finally received through an action commenced pursuant to this Article shall first be applied to the expenses of the parties in connection with the action, with the balance being retained by Licensor. 5. DISCLAIMER OF OTHER WARRANTIES. ------------------------------- THE TRADEMARKS ARE PROVIDED "AS IS". LICENSOR MAKES NO, AND HEREBY DISCLAIMS ANY, REPRESENTATIONS OR WARRANTIES UNDER THIS AGREEMENT, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY LIMITATION ANY IMPLIED WARRANTIES AND ANY WARRANTY AGAINST INFRINGEMENT. 6. LIMITATION OF LIABILITY. ------------------------ TO THE MAXIMUM EXTENT PERMITTED BY LAW, IN NO EVENT SHALL LICENSOR BE LIABLE UNDER THIS AGREEMENT FOR ANY DAMAGES WHATSOEVER, INCLUDING BUT NOT LIMITED TO ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES. 7. Indemnities. ------------ Licensee shall defend, indemnify and hold harmless Licensor and Licensor's directors, officers, agents and employees from and against all claims, liabilities, suits, losses, damages and expenses, including costs and reasonable attorneys' fees, ("Claims"), related to or resulting from (i) Licensee's use of Trademarks; (ii) the manufacture, distribution or sale of Products or (iii) the contents of any Materials, whether arising under a theory of fraud, contract, tort, warranty, product liability, infringement, strict liability, or otherwise, or arising from the breach by Licensee of any duty contained in this Agreement. Licensee shall have the right to control any litigation within the scope of the indemnity. The indemnified party (i) shall cooperate to the extent necessary in the defense of any Claim, and (ii) may retain counsel at its own expense to participate in the defense. 8. Term and Termination. --------------------- 8.1 This Agreement shall continue in force and effect for six (6) months from the Effective Date (the "Initial Term"), unless terminated earlier in accordance with Section 8.2. Every six (6) months after the Effective Date, this Agreement shall renew automatically and continue in force and effect for an additional six (6) months (together with the Initial Term, the "Term"), unless terminated earlier in accordance with Section 8.2. 8.2. Either party may terminate this Agreement at any time with cause by serving sixty (60) days written notice upon the other party. Licensor may terminate this Agreement immediately in the event of any material breach of this Agreement by Licensee which remains uncured after ten (10) days written notice thereof to Licensee. 8.3. Upon the expiration or termination of this Agreement, Licensee forthwith shall cease any use of the Trademarks, and shall immediately cease selling Products and distributing Materials which include the Trademarks. 9. Notices. -------- 9.1. All notices sent under this Agreement shall be in writing and (i) hand delivered; (ii) transmitted by telegram or by certified or registered mail, return receipt requested; or (iii) delivered by prepaid overnight courier. 9.2. Notices shall be sent to the parties at the following addresses or such other addresses as the parties subsequently may provide by notice in accordance with this Article: If to Licensor: Acirca, Inc. 4350 North Fairfax Drive Suite 350 Arlington, VA 22203 Attention: Olivier Sonnois, VP-Strategy & Business Development Fax No.: (703) 312-4801 If to Licensee: Spectrum Organic Products, Inc. 1304 South Point Boulevard Suite 280 Petaluma, CA 94954 Attention: Robert Fowles Fax No.: (707)765-8736 10. Miscellaneous. -------------- 10.1. Licensee understands and agrees that it may not claim or otherwise suggest that that Licensor has manufactured, sold or otherwise is the origin of the Products being sold by Licensee. 10.2. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS RULES THEREOF TO THE EXTENT SUCH CONFLICTS RULES WOULD REQUIRE THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION. 10.3. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF NEW YORK, NEW YORK OR ANY UNITED STATES FEDERAL COURT SITTING IN NEW YORK, NEW YORK, AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ANY OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HERETO FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS FROM ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY HAND DELIVERY OR BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY, AS THE CASE MAY BE, AT THE ADDRESSES DESCRIBED IN SECTION 10 OF THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE UPON HAND DELIVERY OR TEN (10) DAYS AFTER SUCH MAILING. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY OBJECTION IT MAY HAVE TO VENUE AND THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTIONS OR PROCEEDINGS. 10.4. The rights and obligations granted to Licensee under this Agreement are personal to the Licensee and may not be assigned, delegated, sublicensed, encumbered, or otherwise transferred by Licensee without the prior written consent of the Licensor, which shall not be withheld unreasonably. Any purported assignment, delegation, sublicense, encumbrance, or other transfer by Licensee in violation of this Section shall be of no force or effect. Licensor shall have the right to assign, delegate or otherwise transfer its rights and obligations under this Agreement. 10.5. This Agreement shall be binding upon and inure to the benefit of the parties, their successors, permitted assigns and legal representatives. 10.6. The provisions of this Agreement concerning disclaimers of warranties, limitations of liability, indemnities, use of the Trademarks after expiration or termination of this Agreement, and interpretation of this Agreement shall remain in effect after the termination or recision of this Agreement. 10.7. Except as specifically provided in this Agreement, the rights and remedies provided in this Agreement and all other rights and remedies available to either party at law or in equity are, to the extent permitted by law, cumulative and not exclusive of any other right or remedy now or hereafter available at law or in equity. Neither asserting a right nor employing a remedy shall preclude the concurrent assertion of any other right or employment of any other remedy, nor shall the failure to assert any right or remedy constitute a waiver of that right or remedy. 10.8. This Agreement may be modified or amended only by written agreement of the parties. 10.9. All headings in this Agreement are included solely for convenient reference, are not intended to be full and accurate descriptions of the contents of this Agreement, shall not be deemed a part of this Agreement, and shall not affect the meaning or interpretation of this Agreement. 10.10. Nothing in this Agreement shall be construed as creating a partnership, joint venture or agency relationship between the parties, or as authorizing either party to act as agent for the other. 10.11. This Agreement, including its exhibits, constitutes the entire agreement between the parties concerning the subject matter of this Agreement and supersedes all prior and contemporaneous agreements between the parties concerning the subject matter of this Agreement. 10.12. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. ACIRCA, INC. By: /s/ William Urich -------------------------------- William Urich Chief Financial Officer and Secretary SPECTRUM ORGANIC PRODUCTS, INC. By: /s/ Jethren Phillips -------------------------------- Jethren Phillips CEO and Chairman of the Board Exhibit A --------- U.S. FEDERAL APPLICATIONS/REGISTRATIONS - ------------------- --------------------- ----------------------------------- Trademark Serial/Reg. No. Filing Date/Reg. Date & Applicant/ Current Owner Name - ------------------- --------------------- ------------------------------------ MILLINA'S FINEST Reg. No. 2,147,800 Filed: May 6, 1997 Ser. No. 75/287,472 Registered: March 31, 1998 - ------------------- --------------------- ------------------------------------ BELLA TOSCANA Ser. No. 76/138,302 Filed: October 2, 2000 - ------------------- --------------------- ------------------------------------ STATE APPLICATIONS/REGISTRATIONS - --------------------- --------------------- ---------------------------------- Trademark State/Reg. No. Registration Date, Listed Owner - --------------------- --------------------- ---------------------------------- MILLINA'S FINEST California Registered: January 26, 1993 Reg. No. 97023 Owner: Organic Food Products, Inc. - --------------------- --------------------- ---------------------------------- COMMON LAW INTEREST MILLINA'S FINEST BELLA TOSCANA GARDEN VALLEY EX-99.A4 6 spectrumexhibit2-07.txt NONCOMPETITIONAGREEMENTDATED061101 NONCOMPETITION AGREEMENT ------------------------ THIS NONCOMPETITION AGREEMENT (this "Agreement") is made and entered into as of the 11th day of June, 2001 by and among Acirca, Inc., a Delaware corporation (the "Company"), Spectrum Organic Products, Inc., a California corporation (the "Seller"), Jethren Phillips, a resident of California ("Phillips"), and John Battendieri, a resident of California ("Battendieri", and together with Phillips, the "Shareholders"). WITNESSETH: ----------- WHEREAS, pursuant to the Asset Purchase Agreement, dated as of June, 2001, by and among the Company and the Seller (the "Asset Purchase Agreement"), the Seller will sell to the Company, and the Company will purchase from the Seller, substantially all of Seller's assets that are used in the conduct of the Business (as defined therein); WHEREAS, the Seller conducts the Business within the Area (as defined herein); WHEREAS, Phillips owns seventy percent (70%) of the issued and outstanding shares of capital stock of the Seller and will benefit materially and significantly from the transactions contemplated by the Asset Purchase Agreement (the "Transactions"); WHEREAS, Battendieri owns nine percent (9%) of the issued and outstanding shares of capital stock of the Seller and will benefit materially and significantly from the Transactions; WHEREAS, the Seller and each of the Shareholders possesses significant information and experience with regard to the Business, and the Company desires to protect its investment in the Business upon Closing (as defined herein); and WHEREAS, as a condition precedent to the Company's obligations to consummate the Transactions, the Company has required the execution and delivery of this Agreement by the Seller and each of the Shareholders. NOW THEREFORE, in consideration of the premises and mutual covenants hereinafter set forth, the parties hereto, intending to be legally bound hereby, agree as follows: 1. Definitions. (a) "Affiliate" has the meaning given to it in the Asset Purchase Agreement. 2 (b) "Area" means Petaluma, California, the adjacent cities and counties in California, the rest of the State of California, the states contiguous thereto, and each other state in the United States. (c) "Business" means the tomato-based, organic foods business of Seller as conducted on the date hereof and in the twelve prior months, including but not limited to the production, promotion, marketing and sale of the Products (as defined herein). (d) "Closing" has the meaning given to it in the Asset Purchase Agreement. (e) "Commencement Date" means the date of this Agreement. (f) "Investment", in any Person, means any direct or indirect advance, loan or other extension of credit, including by way of guaranty or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of capital stock, bonds, notes, debentures or other similar instruments issued by, such Person. (g) "Person" has the meaning given to it in the Asset Purchase Agreement. (h) "Products" means Seller's tomato-based pasta sauces, salsa, gravies and dipping sauces and the like sold under the brand names Millina's Finest, Garden Valley Organic, Frutti de Bosco, Bella Toscana, Kid's Meals and Parrot and other private label brand names, all as listed on Exhibit A to the Asset Purchase Agreement; provided, however, in no event shall Products include canned tomatoes, barbecue sauce, cocktail sauce or ketchup. (i) "Purchased Assets" has the meaning given to it in the Asset Purchase Agreement. (j) "Restriction Period" shall mean a period of three (3) years commencing on the date hereof. 2. Payment; Acknowledgement. Pursuant to the Asset Purchase Agreement, and in consideration for the Seller's and each Shareholder's covenant in Section 4 hereunder, the Seller will be paid the Purchase Price (as defined in the Asset Purchase Agreement) by the Company, subject to certain adjustments. Further, each of the Shareholders hereby represents that he or she (as applicable) is the beneficial owner of certain issued and outstanding shares of capital stock of the Seller. The Seller and each of the Shareholders acknowledge and agree that it, he or she (as applicable) will benefit materially and significantly from the Transactions. 3 3. Term; Termination. This Agreement shall become effective on the Commencement Date and shall remain in effect until the third (3rd) anniversary date hereof, unless modified by the parties hereto pursuant to Section 10 herein. 4. Covenant Not to Compete and Not to Solicit; Confidentiality. (a) Each of the Seller and the Shareholders covenants and agrees that it, he or she (as applicable) shall not, during the Restriction Period, except with the express prior written consent of the Company, directly or indirectly, whether through itself, individually or through an Affiliate thereof, whether in partnership, jointly or in conjunction with any person, firm, partnership, limited liability company, corporation, or unincorporated association of any kind, whether as employee, owner, partner, principal, agent, director, officer, consultant or shareholder (except as the holder of not more than five percent (5%) of the outstanding shares of a corporation whose stock is listed on any national or regional securities exchange or reported by the Nasdaq Stock Market or any successor thereto) (each, a "Prohibited Association"), do any of the following: (i) engage in or propose to engage in the Business within the Area; (ii) make or maintain any Investment in any Person that engages in the Business or portion thereof, or proposes to engage in the Business or portion thereof, within the Area; (iii) establish or maintain a Prohibited Association with any Person that engages in the Business or portion thereof, or proposes to engage in the Business or portion thereof, within the Area; (iv) act as sales agent for distribution for any Person that engages in the Business or portion thereof, or proposes to engage in the Business or portion thereof, within the Area; or (v) act as contractor for product development or research for any Person that engages in the Business or portion thereof, or proposes to engage in the Business or portion thereof, within the Area. (b) Without limiting the generality of the foregoing clause, each of the Seller and the Shareholders further covenants and agrees that it, he or she (as applicable) shall not, during the Restriction Period, in each case with respect to the Business as conducted by the Company or any of its Affiliates, directly or indirectly, disparage or otherwise make any adverse comment concerning the Company or any portion of the Business. (c) Each of the Shareholders agrees that he or she (as applicable) shall be bound by and subject to the terms, conditions and obligations of Section 4.6 of the Asset Purchase Agreement as if such Shareholder were the "Seller". (d) Each of the Seller and the Shareholders acknowledges that it, he or she (as applicable) has no right to use any of the Purchased Assets. 5. Acknowledgments; Injunctive Relief. Each of the Seller and the Shareholders acknowledges and agrees that, given the nature of the relationship of the parties and the highly competitive nature of the organic food business, (i) its, his or her (as applicable) violation of this Agreement would cause the Company and its Affiliates to suffer irreparable damage and (ii) the character, periods and geographical areas and the scope of restrictions on its, his or her 4 (as applicable) activities as set forth in this Agreement are fair and reasonably required for the protection of the Company and its Affiliates. Therefore, in addition to any other remedies which the Company and its affiliates may have under this Agreement or otherwise, the Company and each of its Affiliates shall be entitled to apply to any court of competent jurisdiction for an injunction restraining each of the Seller and the Shareholders (as applicable) from committing or continuing any violation of Section 4 of this Agreement, and each of the Seller and the Shareholders shall not object to such application except to litigate whether, in fact, it, he or she (as applicable) has violated Section 4 of this Agreement. 6. Notice. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed as follows: If to the Seller: Spectrum Organic Products, Inc. 1304 South Point Boulevard Suite 280 Petaluma, CA 94954 Attention: Fax: (707) 765-8736 with a copy to: Cooley Godward LLP One Maritime Plaza, 20th Floor San Francisco, CA 94111 Attn: Susan Cooper Philpot Fax: (415) 951-3699 If to Phillips: Jethren Phillips 1605 Washington Road Santa Rosa, CA 95404 Fax: (707) 585-0881 with a copy to: Spectrum Organic Products 133 Copeland Street Petaluma, CA 94952 Attn: Chief Financial Officer Fax: (707) 765-8747 5 If to Battendieri: John Battendieri 600 Olive Springs Road Sequel, CA 95073 Fax: (831) 476-5218 with a copy to: Spectrum Organic Products 133 Copeland Street Petaluma, CA 94952 Attn: Chief Financial Officer Fax: (707) 765-8747 If to the Company: Acirca, Inc. 4350 North Fairfax Drive Suite 350 Arlington, VA 22203 Attn: Olivier Sonnois, VP-Strategy & Business Development Fax: (703) 312-4801 with a copy to: Arnold & Porter 555 Twelfth Street, N.W. Washington, D.C. 20004 Attn: Neil Goodman Fax: (202) 942-5999 or to such other address as such party may have furnished to the other parties in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. Each of the parties shall promptly notify the Company in writing, in accordance herewith, of any change of address during the Restriction Period. 7. Invalid or Unenforceable Provisions. In the event that any part of this Agreement shall be held to be unenforceable or invalid, the remaining parts thereof shall nevertheless continue to be valid and enforceable as though the invalid portions were not a part hereof. In the event that any of the provisions of this Agreement relating to the character, period or geographic scope of restriction shall be deemed to exceed the character of restriction, period of time or geographic scope which a court of competent jurisdiction deem enforceable, the character of the restriction, period of time and geographic scope shall, for purposes of this Agreement, be deemed to be the character of the restriction and maximum time period and geographic scope which a court of 6 competent jurisdiction would deem valid and enforceable in any state in which such court of competent jurisdiction shall be convened. For the purposes of this Section 7, the parties hereto agree that the covenants contained in Section 4 shall each be construed as a series of separate covenants, one for each geographic subdivision which comprises the Area and, except for geographic coverage, each separate covenant shall be deemed identical. 8. Benefit and Burden. This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective legatees, distributees, estates, executors, administrators, personal representatives, heirs, successors and assigns, and other legal representatives. The Company and each of its Affiliates are intended beneficiaries of the covenants contained in Section 4 of this Agreement. 9. Indemnification. Each of the Seller and the Shareholders agrees to save and hold the Company and its affiliates harmless from and against any claim, loss or damage whatsoever (including reasonable attorneys' fees and other costs of enforcement of this Agreement) arising out of a final, nonappealable determination by a court of competent jurisdiction that the it, he or she (as applicable) has committed a breach of its, his or her obligations under this Agreement. The foregoing shall be in addition to, and not in limitation of, any rights the Company and its Affiliates may have against the other parties arising out of or in connection with this Agreement and the Asset Purchase Agreement. 10. Modifications. No change or modification of this Agreement shall be valid unless the same is in writing and signed by all the parties hereto. No waiver of any provision of this Agreement shall be valid unless in writing and signed by the party against whom it is sought to be enforced. The failure of a party at any time to insist upon strict performance of any condition, promise, agreement or understanding set forth herein shall not be construed as a waiver or relinquishment of the right to insist upon strict performance of the same or other conditions, promises, agreements or understandings at a future time. 11. Entire Agreement. This Agreement, together with the Asset Purchase Agreement and any other agreements entered into in connection therewith (collectively the "Acquisition Agreements"), contain all of the promises, agreements, conditions, understandings, warranties and representations between the parties hereto with respect to the subject matter hereof, and there are no promises, agreements, conditions, understandings, warranties or representations, oral or written, express or implied, between them with respect to such matters other than as set forth herein or therein. Any and all prior agreements between the parties hereto with respect to such matters are hereby revoked and are deemed null and void. The Acquisition Agreements are, and are intended by the parties to be, an integration of any, and all prior agreements or understandings, oral or written, with respect to the subject matter hereof. 12. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to the conflicts rules thereof to the extent such conflicts rules would require the application of the law of another jurisdiction. 7 13. Forum Selection And Consent to Jurisdiction. Any legal action or proceeding with respect to this Agreement may be brought in the courts of New York, New York or any United States Federal Court sitting in New York, New York, and, by the execution and delivery of this Agreement, each party hereto hereby irrevocably accepts for itself and in respect of any of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each party hereto further irrevocably consents to the service of process from any of the aforementioned courts in any such action or proceeding by hand delivery or by registered or certified mail, postage prepaid, to such party, as the case may be, at the addresses described in Section 6 of this Agreement, such service to become effective upon hand delivery or ten (10) days after such mailing. Each party hereto hereby irrevocably waives to the fullest extent it may effectively do so, any objection it may have to venue and the defense of an inconvenient forum to the maintenance of such actions or proceedings. 14. Headings. The headings and other captions in this Agreement are for convenience and reference only and shall not be used in interpreting, construing or enforcing any of the provisions of this Agreement. 15. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument. Any such counterpart may be executed by facsimile signature with only verbal confirmation, and when so executed and delivered shall be deemed an original and such counterparts together shall constitute only one original. [SIGNATURE PAGE FOLLOWS] 8 IN WITNESS WHEREOF, each of the Company and the Seller has caused this Agreement to be executed on their behalf and each of the Shareholders has hereunto set his or her hand the day and year first above written. /s/ JETHREN PHILLIPS ---------------------------------- JETHREN PHILLIPS /s/ JOHN BATTENDIERI ----------------------------------- JOHN BATTENDIERI SPECTRUM ORGANIC PRODUCTS, INC. By: /s/ Jethren Phillips -------------------------------- Jethren Phillips, CEO and Chairman of the Board ACIRCA, INC. By: /s/ William Urich -------------------------------- William Urich Chief Financial Officer and Secretary EX-99.A4 7 spectrumexhibit2-08.txt ASSIGNMENT/ASSUMPTIONAGREEMENTDATED061101 ASSIGNMENT AND ASSUMPTION AGREEMENT ----------------------------------- AGREEMENT dated as of June 11, 2001 by and between Spectrum Organic Products, Inc., a California corporation ("Seller") and Acirca, Inc., a Delaware corporation ("Buyer"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Buyer and Seller have entered into an Asset Purchase Agreement dated as of June 11, 2001 (the "Asset Purchase Agreement"); and WHEREAS, subject to the terms and conditions contained in the Asset Purchase Agreement, Seller desires to sell, transfer and assign to Buyer, and Buyer desires to acquire from Seller and accept the assignment from Seller of, the Purchased Assets (terms with initial capital letters used herein without definition have the meanings given in the Asset Purchase Agreement); NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, Seller and Buyer, intending to be legally bound, hereby agree as follows: 1. Bill of Sale. Effective as of the close of business on the date hereof, Seller does hereby assign, transfer and set over to Buyer, upon the terms and conditions set forth in the Asset Purchase Agreement, all of its right, title and interest in and to the Purchased Assets. 2. Assumption. The Buyer hereby assumes, subject to the terms and conditions of the Asset Purchase Agreement, all liabilities that arise from or relate to Buyer's ownership of the Business or Buyer's ownership, possession or use of the Purchased Assets, including obligations and liabilities arising under the Assigned Contracts, after the Closing pursuant to the Asset Purchase Agreement. Provided, however, that the Buyer does not assume and is not liable for any Retained Liabilities. 3. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to the conflicts rules thereof to the extent such conflicts rules would require the application of the law of another jurisdiction. 4. Further Assurances. Each of Buyer and Seller shall do and perform, or cause to be done and performed, all such further acts and things and shall execute and deliver any and all such further instruments and documents as the other party may reasonably request in order to carry out the intent and to accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 5. Amendments. This Agreement may not be amended, modified, altered, or supplemented other than by means of a written instrument duly executed and delivered on behalf of each of the Buyer and the Seller. 6. Counterparts. This Agreement may be executed in any number of counterparts, all of which together shall constitute one and the same document. [signatures appear on following page] IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed in their respective company names by their respective duly authorized officers, all as of the day and year first written above. SPECTRUM ORGANIC PRODUCTS, INC. By: /s/ Jethren Phillips -------------------------------- Jethren Phillips CEO and Chairman of the Board ACIRCA, INC. By: /s/ William Urich -------------------------------- William Urich Chief Financial Officer and Secretary EX-22 8 spectrumpressrelease.txt JOINTPRESSRELEASEDATED061201 ACIRCA ACQUIRES MILLINA'S FINEST SAUCES Second Largest Organic Pasta Sauce Joins Growing Portfolio Arlington, VA - June 12, 2001 - Acirca, Inc., today announced it acquired the nation's second largest brand of certified organic pasta sauce, Millina's Finest(R), and Fruitti Di Bosco(R)from Spectrum Organic Products, Inc. (Nasdaq: SPOP). The addition of Frutti Di Bosco and Millina's Finest certified organic gourmet pasta sauces gives Acirca the number two position in the U.S. organic pasta sauce category with a 22% market share. Commenting on the acquisition Acirca CEO Mark S. Rodriguez said, "The addition of these two fine brands to our recently launched lines of Walnut Acres(R) certified organic soup and salsa substantially improves Acirca's offering. A more diversified product line allows the company to provide knowledgeable, health conscious consumers with more high quality, great tasting certified organic food and beverage products. Additionally, the improved scale helps the company better serve our valuable distributors and retail customers and allows us to realize synergies in our supply chain, production, distribution and marketing." Spectrum CEO Jethren P. Phillips stated, "We are pleased with the sale of the Millina's business to Acirca. Acirca has the resources available to take the business to a higher level than Spectrum could have accomplished in the near term. Spectrum will continue to expand its strategic alliance with Acirca by continuing to supply organic raw materials through our Organic Ingredients division. More importantly, the transaction will provide Spectrum with new working capital to invest in our rapidly growing core businesses of EFA (essential fatty acid) food and supplement products under the brand names Spectrum Naturals(R) and Spectrum Essentials(R)." Terms of the transaction were not disclosed. Organic food - food produced without the use of chemical fertilizers or pesticides and processed without synthetic ingredients - is the fastest growing specialty foods category in the United States. With an average annual growth rate of 24% throughout the last decade, U.S. retail sales of organic food are estimated to grow from $8 billion in 2000 to nearly $20 billion in 2005. Within this market, sales of packaged organic food (as distinguished from organic fruits and vegetables), already at $3.5 billion, are expected to expand even faster, enjoying growth rates of 30% annually over the same period. Acirca is well positioned to foster this growth and benefit from it. About Acirca - ------------ Acirca, which produces and markets Walnut Acres certified organic soups and salsa, was formed on June 1, 2000, to develop premier certified organic brands. The name Acirca is inspired by the phrase "a circle of life" and reflects the company's commitment to the development of products that help consumers obtain better health and are good for the environment. Acirca is a privately held company owned collectively by company employees and independent investors. About Spectrum - -------------- Spectrum Organic Products, Inc. is a leading manufacturer and marketer of natural and organic foods, culinary oils, vinegar and condiments under the Spectrum Naturals(R) label and essential fatty acids nutritional supplements under the Spectrum Essentials(R) label. Spectrum is a publicly traded corporation on the NASDAQ under the symbol SPOP. "Safe Harbor" Statements under the Private Securities Act of 1995: The statements contained in this release, which are not historical facts, are "forward-looking" statements that are subject to risk and uncertainties that could cause actual results to differ materially from those set forth or implied by the forward-looking statements. These risks are described in Spectrum Organic Products, Inc. Securities and Exchange Commission filings. # # # Media Contacts: For Acirca, Inc. Michael Neuwirth (212) 246-6252, mjneuwirth@aol.com Beth Corwin (212) 229-0500, bcorwin@ptanaka.com -------------------- For Spectrum Organic Products, Inc. Tori Janaya, 707/778-8900 ext. 3316, torij@spectrumorganic.com ------------------------- -----END PRIVACY-ENHANCED MESSAGE-----