Exhibit 10(f)

 

EXECUTION VERSION

 

ASSET PURCHASE AGREEMENT

 

BY AND BETWEEN

 

UNIVERSAL FOOD & BEVERAGE COMPANY OF GEORGIA

 

AND

 

CALIFORNIA NATURAL PRODUCTS

 

DATED AS OF FEBRUARY 16, 2006

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ASSET PURCHASE AGREEMENT

 

This ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
February 16, 2006, by and among UNIVERSAL FOOD & BEVERAGE COMPANY OF GEORGIA a
Georgia corporation (“Purchaser”) and CALIFORNIA NATURAL PRODUCTS, a California
corporation (“Seller”).

 

WITNESSETH:

 

WHEREAS, Seller owns and operates a facility located at 11 Artley Road,
Savannah, Georgia (the “Savannah Facility”) and is engaged in the business of
manufacturing, packaging, distributing and selling aseptic packaged Grade A
dairy, soy milk, rice milk, meal replacement and juice products out of the
Savannah Facility (the “Savannah Business”); and

 

WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to purchase
from Seller, substantially all of Seller’s property and assets relating to the
Savannah Business, including without limitation the Savannah Facility and the
assets located thereon, upon the terms and subject to the conditions hereinafter
set forth; and

 

WHEREAS, Seller also owns and operates a facility located at 1250 Lathrop Road,
Lathrop, California (the “California Facility”) and is engaged in the business
of manufacturing, packaging, distributing and selling aseptic packaged Grade A
dairy, soy milk, rice milk, meal replacement and juice products out of the
California Facility (the “California Business”); and

 

WHEREAS, Seller and Purchaser contemplate that Seller will continue to own and
operate the California Facility and be engaged in the California Business after
the transaction hereunder closes, and such assets constituting the California
Facility and the California Business shall not be transferred to Purchaser as
part of the transaction hereunder.

 

NOW, THEREFORE, in consideration of the mutual promises herein contained, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

 

I. SALE AND PURCHASE OF PURCHASED ASSETS

 

1.1 Purchased Assets

 

On the terms and subject to the conditions hereinafter set forth, at the Closing
(as hereinafter defined), Seller shall sell, convey, transfer, assign and
deliver to Purchaser free and clear of any security interest, mortgage, lien,
charge, restriction, encumbrance, conditional sale agreement, claim, pledge or
right of any party (collectively, “Liens”) and Purchaser shall purchase from
Seller all of Seller’s right, title and interest in and to the Savannah Business
and all property and assets of Seller, other than the Excluded Assets (as
hereinafter defined) which are primarily used or usable in, or which arise out
of, the conduct

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of the Savannah Business as of the Closing Date (as hereinafter defined),
wherever located and whether or not all or any of said property and assets
appear on or are reflected upon Seller’s books, records or financial statements
(collectively, the “Purchased Assets”), including, but not necessarily limited
to, the following:

 

  (a) Real Estate

 

The land described on Schedule 1.1(a) and all structures and other improvements
now or hereafter constituting the Savannah Facility or erected thereon, and all
easements, tenements, hereditaments, privileges and appurtenances in any way
belonging thereto (collectively, the “Real Estate”).

 

  (b) Operating Assets, Equipment, Machinery

 

All operating assets, furniture, fixtures, equipment and machinery owned, leased
or used by Seller primarily in connection with the Savannah Business, whether
located at the Real Estate or elsewhere, including, without limitation, those
items listed on Schedule 1.1(b) attached hereto and made a part hereof;

 

  (c) Supplies

 

All office, marketing and other supplies located at the Savannah Facility and
related to the Savannah Business;

 

  (d) Contract Rights

 

All of Seller’s right, title and interest in, to and under all those contracts
and agreements and personal property leases relating to the Savannah Business
and the Purchased Assets listed on Schedule 1.1(d) attached hereto and made a
part hereof, except any contracts relating to the employment of any employees of
Seller or the retention of any independent contractors of Seller, unless the
employees or independent contractors are hired by Purchaser, as otherwise
provided in this Agreement, and including but not limited to contracts and
agreements with customers, vendors, brokers, suppliers, service providers,
licensees and licensors (individually, an “Assigned Contract” and, collectively,
the “Assigned Contracts”);

 

  (e) Intellectual Property

 

The use (along with Seller) of all intellectual property related primarily to
the Savannah Business, including without limitation, any and all licenses,
patents and patent applications, processes, formulas, receipts, contractual
rights, know-how, trade secrets, lists of past and present customers, potential
customers, lists of suppliers, lists of employees, operating manuals, quality
manuals, SOPs, procedure manuals, operating practices, recorded knowledge,
business plans, performance standards, catalogues, product and consumer research
data, analyses and computer software and programs, marketing and sales review
plans and data, scheduling and service methods, sales and service manuals and
all other proprietary, confidential and other similar information (in whatever
form or medium), as well

 

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as all good will and going concern value associated with the foregoing and all
rights to use the foregoing, and all other intangible property of Seller, owned,
licensed or used in connection with the manufacture, sale, distribution and
marketing of all products by Seller primarily in the Savannah Business but
excluding the trade name “California Natural Products,” and all variants thereof
(collectively, the “Intellectual Property”);

 

  (f) Records and Non-Operating Assets

 

All non-operating assets owned, leased or used by Seller primarily in connection
with the Savannah Business, including but not limited to books, records,
documents, files, and other information, whether current or in storage, and
whether located at the Real Estate or elsewhere; provided, however, that,
notwithstanding the foregoing, Seller shall retain its corporate records,
including but not limited to its articles of incorporation, bylaws, shareholder
agreements, employment agreements, stock register and other files related to its
organization and capitalization;

 

  (g) Licenses, Permits and Approvals

 

To the extent assignable or transferable, all permits, franchises, licenses,
approvals and authorizations by or of governmental authorities or third parties
required for the conduct of the Savannah Business or the ownership of the
Purchased Assets (also listed on Schedule 6.1(a));

 

  (h) Inventories

 

All raw materials, commodities, finished goods, work in process, inventory,
packaging and supplies of the Savannah Business in the possession of Seller; and

 

  (i) Other Assets

 

All other tangible or intangible personal property owned or leased by Seller
which are primarily used in, or are necessary for the continued conduct of, the
Savannah Business or Purchased Assets, whether or not of a type falling within
any of the categories of assets or properties described above, including,
without limitation, all spare parts inventories, addresses, telephone numbers,
fax numbers and P.O. Boxes; provided, however, that immediately after the
Closing, Purchaser shall not use the trade name “California Natural Products” in
any way in connection with the Savannah Business or Purchased Assets.

 

1.2 Excluded Assets

 

Notwithstanding the terms of Section 1.1, it is agreed that the assets and
properties of the California Business shall not be included in the Purchased
Assets (collectively the “Excluded Assets”). Furthermore, the following assets
of Seller that are part of the Savannah Business shall not be included as part
of the Purchased Assets and shall, therefore, also be deemed Excluded Assets for
purposes hereunder and be retained by Seller and not be sold or transferred to
Purchaser hereunder:

 

(a) All cash of the Savannah Business;

 

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(b) All accounts receivable of the Savannah Business existing prior to Closing;

 

(c) All right, title and interest to the trade name “California Natural
Products” and all variants thereof, including all related trade marks and
service marks, if any, whether or not registered;

 

(d) Inter-company advances and receivables and related accounts; and

 

(e) All rights that have accrued to the benefit of Seller relating to deferred
tax assets, tax refund claims, claims against third parties for contract
breaches, torts, or other matters arising out of the pre-Closing performance of
its Assigned Contracts.

 

II. NON-ASSUMPTION OF LIABILITIES

 

2.1 Non-Assumption of Liabilities

 

Purchaser shall not assume or agree to pay, perform or discharge, or in any
manner be responsible for, any accounts payable, debts, capitalized lease
obligations and any other obligations or liabilities of Seller (as well as those
of Seller’s affiliates, shareholders, officers and directors) of any kind or
nature whatsoever, whether disclosed or undisclosed, fixed, absolute, accrued,
ordinary, extraordinary, contingent or otherwise, direct or indirect, primary or
secondary, and whether known or unknown. Without in any way limiting the
generality of the foregoing, Purchaser shall not be liable for any workers’
compensation and employee liability claims resulting from accidents or
occurrences commencing on or before the Closing and shall not be liable for any
product liability claims resulting from products contained in the finished goods
inventory as of the Closing.

 

2.2 Transferee Liability

 

The parties hereto agree that Purchaser will not, by virtue of the transactions
contemplated by this Agreement, assume any liabilities or obligations of Seller
or incur any transferee liability whatsoever., Accordingly, Seller agrees to
indemnify, protect and hold harmless Purchaser from and against any and all
transferee liability arising out of the transactions contemplated herein that
may hereafter be claimed by the Internal Revenue Service, Georgia Department of
Revenue, any other state, county or local government authority or agency or any
creditor of Seller as of the Closing Date.

 

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III. PURCHASE PRICE

 

3.1 Purchase Price For Assets

 

The aggregate purchase price to be paid by Purchaser to Seller for the Savannah
Business and the Purchased Assets shall be Nine Million Dollars ($9,000,000)
plus the Closing Date Inventory Amount (the “Purchase Price”). The Closing Date
Inventory Amount shall be determined as provided in Section 3.1(b). The Purchase
Price shall be paid as follows:

 

  (a) Cash

 

$9,000,000, less the Earnest Money Deposit and any credits and prorations
pursuant to the terms of this Agreement, shall be paid by Purchaser to Seller at
Closing by the wire transfer of immediately available funds to a bank account
designated by Seller.

 

  (b) Determination of Closing Date Inventory Amount

 

On the business day immediately prior to the scheduled Closing Date, Seller
shall physically count and review, at the Savannah Facility, the existing
inventory to compute its value as of the Closing Date (the “Closing Date
Inventory Amount”). Purchaser may have representatives present to oversee the
inventory count and review. Equipment spare parts inventories shall not be
included in determining the Closing Date Inventory Amount. The Closing Date
Inventory Amount shall be determined on a lower of cost or market,
first-in/first-out basis in accordance with generally accepted accounting
principles consistently applied. No later than forty-five (45) days after the
Closing, Seller shall finalize the value of the Closing Date Inventory Amount,
and all other computations necessary to determine the Closing Date Inventory
Amount due to Seller, and shall submit such computations (the “Final Inventory
Computations”) to Purchaser for review and approval. Purchaser may dispute the
Closing Date Inventory Amount or any other part of the Final Inventory
Computations by sending a notice (the “Dispute Notice”) to Seller within seven
(7) days of receipt of the Final Inventory Computations. Purchaser and Seller
shall consult with one another to resolve all points of dispute concerning the
Final Inventory Computations within ten (10) days of the date of the Dispute
Notice; provided, however, if Purchaser and Seller are unable to resolve all
points of dispute within such time period, Purchaser and Seller shall within two
(2) days following the expiration of such period, jointly select a nationally
recognized independent accounting firm not presently engaged by Purchaser or
Seller to act as an arbitrator to resolve within fifteen (15) days after such
selection all points of dispute with regard to the Final Inventory Computations.
Purchaser and Seller shall cooperate with such firm. Any resolution of the
points of dispute pursuant to this Section 3.1(d) shall be binding upon
Purchaser and Seller solely for purposes of this Section 3.1(d). Each party
shall be responsible for the payment of its own expenses in resolving any such
disputes, and the costs of the jointly-selected accounting firm shall be borne
equally by Seller and Purchaser. Once such final computations have been made,
and the Closing Date Inventory Amount is either agreed upon or no longer subject
to dispute, Purchaser shall, no later than

 

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five (5) days after the submission of the Final Inventory Computations or the
final resolution of the dispute related thereto (as the case may be), remit to
Seller the Closing Date Inventory Amount.

 

3.2 Allocation of Purchase Price

 

The Purchase Price shall be allocated in accordance with Schedule 3.2. After the
Closing, the parties shall make consistent use of the allocation, fair market
value and useful lives specified in Schedule 3.2 for all tax purposes and in all
filings, declarations and reports with the Internal Revenue Service in respect
thereof, including the reports required to be filed under Section 1060 of the
Internal Revenue Code. In any tax proceeding, neither Purchaser nor Seller shall
contend or represent that such allocation is not a correct allocation.

 

3.3 Allocations and Prorations

 

The following expenses related to the transfer of the Real Estate and the other
Purchased Assets shall be allocated between Seller and Purchaser as follows:

 

(a) Seller shall pay: the cost of providing the Title Insurance Policy in favor
of Purchaser required by Section 3.4; one-half of the escrow and New York Style
closing fees and charges of the Escrow Agent; the cost of releasing the Liens
currently encumbering the Real Estate; and all transfer, excise, conveyance or
other similar taxes and charges incurred in conveying the Real Estate or the
other Purchased Assets to Purchaser.

 

(b) Purchaser shall pay: one half of the escrow and New York Style closing fees
and charges of the Escrow Agent; and the cost of recording the deed and filing
any and all other documents executed by Seller that Purchaser wishes to have
recorded and/or filed in order to perfect its interest in the Real Estate or the
other Purchased Assets.

 

(c) With respect to the Real Estate transferred to Purchaser, the following
expenses will be prorated as of the close of business on the day preceding the
Closing Date: (i) real property and personal property taxes; (ii) security
deposits (if any); and (iii) all electric, sewage, storm water and other utility
charges. To the extent such charges are handled based on estimates in order to
make the closing payments, if and to the extent that such amounts differ based
upon final readings and bills, appropriate adjustments will be made between the
parties, and the liable party will make payments promptly when requested.

 

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3.4 Real Estate Title, Survey and Searches

 

(a) As soon as is reasonably possible, and in no event later than fifteen
(15) business days after the date of this Agreement, Seller shall furnish to
Purchaser, at Seller’s sole and exclusive expense, for the Real Estate:

 

(i) from a title insurance company reasonably acceptable to Purchaser and Seller
(the “Title Insurer”):

 

(A) a title commitment issued by the Title Insurer to insure title to all land,
improvements and insurable appurtenances related to the Real Estate in the
amount of that portion of the Purchase Price allocated to the Real Estate, as
specified in Schedule 3.2, covering such Real Estate, naming Purchaser as the
proposed insured and having an effective date after the date of this Agreement
and providing for extended coverage and the following endorsements: and Zoning
3.1 with parking (the “Title Commitment”) wherein the Title Insurer shall agree
to issue an ALTA 1992 form owner’s policy of title insurance in accordance
therewith (the “Title Policy”); and

 

(B) complete and legible copies of all recorded documents listed as Schedule B
matters to be terminated or satisfied in order to issue the policy described in
the Title Commitment (the “Recorded Documents”); and

 

(ii) complete and current searches in the name of Seller and other appropriate
parties of all Uniform Commercial Code Financing Statements records maintained
by the Secretary of State of each of California and Georgia, each other
jurisdiction in which a filing would be required in order to perfect a security
interest in the Purchased Assets, and the clerk or recorder of deeds of each
county in which any of the Purchased Assets is located and wherever else Seller
or Purchaser, based upon its investigation, is aware that a Uniform Commercial
Code Financing Statement has been filed, together with such releases,
termination statements and other documents as may be necessary to provide
reasonable evidence that all the Purchased Assets to be sold under this
Agreement are free and clear of Encumbrances, other than as permitted under this
Agreement.

 

(b) The Title Commitment shall include the Title Insurer’s requirements for
issuing the Title Policy, which requirements shall be met by Seller on or before
the Closing Date (including those requirements that must be met by releasing or
satisfying monetary Liens, but excluding Liens that will remain after Closing
and those requirements that are to be met solely by Purchaser).

 

(c) If Purchaser desires, Purchaser may obtain, at Purchaser’s sole cost and
expense, an “ALTA/ACSM” survey on the Real Estate (“Survey”) from a licensed
surveyor, and Seller shall reasonably cooperate with any surveyor so engaged and
shall afford reasonable access to the Real Estate for such purposes.

 

(d) If any of the following shall occur (collectively, a “Title Objection”):

 

(i) any Title Commitment or other evidence of title or search of the appropriate
real estate records discloses that any party other than Seller has title to the
insured estate covered by the Title Commitment;

 

(ii) any title exception is disclosed in Schedule B to any Title Commitment that
is not one that Seller specifies when delivering the Title

 

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Commitment to Purchaser as one that Seller will cause to be deleted from the
Title Commitment concurrently with the Closing, including (A) any exceptions
that pertain to encumbrances securing any loans and (B) any exceptions that
Purchaser reasonably believes could materially and adversely affect Purchaser’s
use and enjoyment of the Real Estate described therein; or

 

(iii) any Survey discloses any matter that Purchaser reasonably believes could
materially and adversely affect Purchaser’s use and enjoyment of the Real Estate
described therein;

 

then Purchaser shall notify Seller in writing of such matters within thirty
(30) business days after receiving all of the Title Commitment, Survey and
copies of Recorded Documents for the Real Estate covered thereby.

 

(e) Seller shall have the option to (i) cure each Title Objection and take all
such steps required by the Title Insurer to eliminate each Title Objection as an
exception to the Title Commitment or (ii) within five (5) days of receiving
Purchaser’s notice of Title Objections, provide written notice to Purchaser of
those Title Objections it is willing to cure. Seller shall be deemed to have
decided not to cure all other exceptions (other than monetary exceptions).
Following any such notice from Seller that it is unwilling to cure any Title
Objections, Purchaser shall have the option to take the Real Estate subject to
such uncured Title Objections or terminate this Agreement at any time prior to
the Closing. Any Title Objection that the Title Company is willing to insure
over on terms acceptable to Seller and Purchaser is herein referred to as an
“Insured Exception.” The Insured Exceptions, together with any title exception
or matters disclosed by the Survey not objected to by Purchaser in the manner
aforesaid shall be deemed to be acceptable to Purchaser.

 

(f) Nothing herein waives Purchaser’s right to claim a breach of Section 6.1(g)
or to claim a right to indemnification as provided in Article VIII if Purchaser
suffers losses or damages as a result of a misrepresentation with respect to the
condition of title to the Real Property.

 

IV. CLOSING

 

4.1 Closing Date and Time

 

The closing of the transactions contemplated by this Agreement (the “Closing”)
will take place at 10:00 a.m., Chicago time, on February 16, 2006 at the offices
of Purchaser’s counsel, Holland & Knight LLP, One Mid America Plaza, Suite 1000,
Oakbrook Terrace, Illinois 60181, or at such other date or place, or in such
other manner, as may be mutually agreed upon by the parties hereto (the “Closing
Date”); provided, however, that each of Seller or Purchaser may, at its sole
discretion, extend the Closing Date until March 31, 2006 in order to permit
satisfaction of closing conditions. The effective time of the Closing shall be
deemed to occur at 12:01 a.m. on the Closing Date.

 

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4.2 Closing Deliveries By Seller

 

On the Closing Date, Seller shall deliver to Purchaser the following:

 

(a) A Warranty Bill of Sale and General Assignment executed by Seller, conveying
the Purchased Assets to Purchaser;

 

(b) A recordable Warranty Deed executed by Seller conveying the Real Estate to
Purchaser;

 

(c) Such other instruments of sale, transfer and assignment as shall be
necessary to effectuate the transfer, assignment and conveyance of the Purchased
Assets to Purchaser, and to vest in Purchaser title to the Purchased Assets,
free and clear of all Liens;

 

(d) Assignments and Assumptions of the Assigned Contracts (collectively, the
“Assignment and Assumption”), executed by Seller;

 

(e) A transition services agreement executed by Seller (the “Transition Services
Agreement”) under which Seller shall provide production, operations, accounting
and other specified services to Purchaser following the Closing for a period of
time up to, but no later than, April 1, 2006, on terms and conditions
satisfactory to Purchaser and Seller;

 

(f) A copy of resolutions duly adopted by the shareholders and Board of
Directors of Seller, authorizing the execution, delivery and performance of this
Agreement and all related agreements, documents and certificates, duly certified
as of the Closing Date by an authorized officer of Seller;

 

(g) A Certificate of Good Standing of Seller, certified as of a date not more
than fourteen (14) days prior to the Closing Date, from the Secretary of State
of the State of California;

 

(h) A Certificate of Qualification To Do Business in the State of Georgia,
certified as of a date not more than fourteen (14) days prior to the Closing
Date, from the Secretary of State of the State of Georgia;

 

(i) A certificate of an authorized officer of Seller, certifying: (1) a copy of
Seller’s By-laws; (2) a copy of the Articles of Incorporation of Seller; and
(3) as to the incumbency and signatures of Seller’s officers;

 

(j) A certificate, dated as of the Closing Date, of an authorized officer of
Seller, certifying that the conditions specified in Section 5.1 hereof have been
fully satisfied;

 

(k) An opinion of counsel for Seller in form and substance reasonably acceptable
to Purchaser’s counsel;

 

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(l) The Title Insurance Policy, insuring in favor of Purchaser a fee simple
interest in the Real Estate, subject only to those exceptions that are reflected
in the Title Insurance Commitment and which Purchaser is willing to take subject
to following the process set forth in Section 3.4 above; and

 

(m) Such other documents and certificates to be executed or delivered by Seller
at the Closing in accordance with the terms of this Agreement or in order to
complete the transactions contemplated by this Agreement or as reasonably
requested by Purchaser.

 

4.3 Closing Deliveries By Purchaser

 

On the Closing Date, Purchaser shall deliver to Seller the following:

 

(a) The payment of the cash portion of the Purchase Price as required by
Section 3.1(a);

 

(b) The Transition Services Agreement executed by Purchaser;

 

(c) A copy of resolutions duly adopted by the Board of Directors of Purchaser,
authorizing the execution, delivery and performance of this Agreement and all
related agreements, documents and certificates, duly certified as of the Closing
Date by an authorized officer of Purchaser;

 

(d) A certificate of an authorized officer of Purchaser, certifying: (1) a copy
of Purchaser’s By-laws; (2) a copy of the Articles of Incorporation of
Purchaser; and (3) as to the incumbency and signatures of Purchaser’s officers;

 

(e) A certificate, dated as of the Closing Date, of an authorized officer of
Purchaser, as applicable, certifying that the conditions specified in
Section 5.2 hereof have been fully satisfied;

 

(f) An opinion of counsel for Purchaser in form and substance reasonably
acceptable to Seller’s counsel;

 

(g) The Assignment and Assumption executed by Purchaser; and

 

(h) Such other documents and certificates required to be executed or delivered
by Purchaser at the Closing in accordance with the terms of this Agreement or in
order to complete the transactions contemplated by this Agreement.

 

4.4 Form of Closing Documents

 

As soon as is reasonably practicable after the execution of this Agreement, and
in any event no later than February 16, 2006, the parties shall cause their
respective counsel to prepare and exchange drafts of the closing documents
contemplated by Sections 4.2 and 4.3,

 

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and the form and substance of such documents will be subject to the reasonable
review and approval of the parties and their respective counsel.

 

V. CONDITIONS TO CLOSING

 

5.1 Conditions Precedent to Obligations of Purchaser

 

The obligations of Purchaser to consummate the transactions contemplated by this
Agreement are subject to and conditioned on the satisfaction of each of the
following conditions, any one or more of which may be waived in writing by
Purchaser and which shall all be deemed waived upon the Closing:

 

  (a) Representations, Warranties and Covenants

 

All of the representations and warranties of Seller contained herein shall be
true and correct in all material respects on and as of the date hereof and on
and as of the Closing Date, and Seller shall have complied with and performed in
all material respects all of the covenants and agreements to be complied with
and performed by Seller on or prior to the Closing Date.

 

  (b) No Adverse Proceedings

 

As of the Closing Date, no action, investigation, suit or proceeding by any
governmental or regulatory commission, agency or authority, and no action, suit
or proceeding by any other person or entity, shall be pending or threatened
which challenges or seeks to enjoin, prohibit or prevent this Agreement or any
transaction contemplated hereby, or which claims damages as a result of the
consummation of such transactions.

 

  (c) No Material Adverse Change

 

No material adverse change in the Purchased Assets, the Savannah Business, the
operations, financial condition or prospects of Seller, nor any material loss of
or damage to the Purchased Assets or the Savannah Business, whether or not
covered by insurance, shall have occurred from December 31, 2005, to the Closing
Date.

 

  (d) Consent of Customers to Assignment of Contracts

 

Purchaser shall have received consents from each respective customer to the
assignments to Purchaser of those Assigned Contracts, if any, listed on Schedule
5.1(d), with such consents on terms and conditions satisfactory to Purchaser in
its sole discretion.

 

  (e) Required Consents

 

All third party consents, waivers and releases under any agreements, leases,
mortgages, licenses, permits and other instruments to which Seller is a party or
by which any of the Purchased Assets may be bound, including, without
limitation, all consents, waivers

 

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and releases of Liens on the Purchased Assets, all consents required under the
Assigned Contracts, and all consents, approvals, orders and authorizations of,
and all registrations, qualifications, designations, declarations or filings
with, any federal, state, local or foreign government authority having
jurisdiction over Seller or any of its properties, required in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, shall have been obtained on or prior to, and
shall be in full force and effect as of, the Closing Date.

 

  (f) Due Diligence Review

 

Purchaser shall have completed to its satisfaction a business, financial,
accounting and legal due diligence review of Seller, the Savannah Business and
the Real Estate (including, without limitation, a review of the direct or
contingent liabilities of Seller, if any) conducted by Purchaser and its
attorneys and accountants.

 

  (g) Deliveries

 

Seller shall have delivered to Purchaser all documents required to be delivered
to Purchaser on the Closing Date pursuant to Section 4.2 hereof.

 

  (h) Financing

 

Purchaser shall have received an unconditional commitment to finance the
purchase transaction contemplated under this Agreement from a lenders and/or
sources of equity capital of Purchaser’s choosing and subject to terms and
conditions acceptable to Purchaser in its sole discretion.

 

5.2 Conditions Precedent to Obligations of Seller

 

The obligations of Seller to consummate the transactions contemplated by this
Agreement are subject to and conditioned on the satisfaction of each of the
following conditions, any one or more of which may be waived in writing by
Seller and which shall all be deemed waived upon the Closing:

 

  (a) Representations, Warranties and Covenants

 

All of the representations and warranties of Purchaser contained herein shall be
true and correct in all material respects on and as of the date hereof and on
and as of the Closing Date, and Purchaser shall have complied with and performed
in all material respects all of the covenants and agreements to be complied with
and performed by Purchaser on or prior to the Closing Date.

 

  (b) No Material Adverse Proceedings

 

As of the Closing Date, no action, investigation, suit or proceeding by any
governmental or regulatory commission, agency or authority, and no action, suit
or

 

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proceeding by any other person or entity, shall be pending or threatened which
challenges or seeks to enjoin, prohibit or prevent this Agreement or any
transaction contemplated hereby, or which claims material damages as a result of
the consummation of the transactions contemplated hereby.

 

  (c) Required Consents

 

All third party consents, waivers and releases under any agreements, leases,
mortgages, licenses, permits and other instruments to which Purchaser is a
party, including, without limitation, all consents, approvals, orders and
authorizations of, and all registrations, qualifications, designations,
declarations or filings with, any federal, state, local or foreign government
authority having jurisdiction over Purchaser or any of its properties, required
in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, shall have been obtained
on or prior to, and shall be in full force and effect as of, the Closing Date.

 

  (d) Deliveries

 

Purchaser shall have delivered to Seller all documents required to be delivered
to Seller on the Closing Date pursuant to Section 4.3 hereof.

 

VI. REPRESENTATIONS AND WARRANTIES

 

6.1 Representations and Warranties of Seller

 

Seller hereby represents and warrants to Purchaser, on and as of the date hereof
and on and as of the Closing Date, as follows:

 

  (a) Organization and Standing

 

Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of California. Seller is duly qualified to do
business and is in good standing in each jurisdiction set forth on Schedule
6.1(a) and in which the character of the properties owned or held under lease by
it or the nature of the business transacted by it makes such qualification
necessary or where its failure to qualify to do business would adversely affect
Seller, its financial condition, its business or its ability to perform the
transactions contemplated by this Agreement. Seller has all requisite corporate
power and authority and all requisite and sufficient licenses, franchises,
permits and authorizations (collectively, the “Licenses”) to own and lease its
properties and assets, including the Purchased Assets, and to carry on the
Savannah Business as and where presently conducted. All Licenses held by Seller
in connection with the Savannah Business are more particularly described on
Schedule 6.1(a) attached hereto and made a part hereof are included as part of
the Purchased Assets, to the extent assignable under applicable law. No
governmental proceeding is pending or threatened to cancel, modify or fail to
renew any such License.

 

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  (b) Corporate Action

 

Seller has full corporate power and authority to execute and deliver this
Agreement, to sell, assign, transfer and deliver the Purchased Assets to
Purchaser, and otherwise to perform all of its obligations hereunder and to
consummate the transactions contemplated hereby. All shareholder, corporate and
other proceedings required to be taken by or on the part of Seller to execute,
deliver and carry out this Agreement and to authorize Seller to sell, assign,
transfer, convey and deliver the Purchased Assets to Purchaser have been duly
and properly taken. Assuming the due authorization, execution and delivery
hereof by Purchaser, this Agreement constitutes the legal, valid and binding
obligation of Seller, enforceable in accordance with its terms, and all
instruments of transfer and other documents to be delivered in connection
herewith, when executed and delivered, will constitute legal, valid and binding
obligations of Seller, enforceable in accordance with their respective terms.

 

  (c) No Default

 

The execution and delivery of this Agreement by Seller, its compliance with the
terms hereof and its consummation of the transactions contemplated hereby will
not violate, conflict with or result in a breach of any provision of the
Articles of Incorporation or By-laws of Seller, or (whether with due notice or
lapse of time or otherwise) constitute a default, require the consent of any
third party (except as set forth on Schedule 6.1(d) hereto), create any right of
acceleration or result in the creation of any Lien under, or otherwise result in
a breach or violation of, any contract, agreement, lease, commitment, indenture,
mortgage, trust deed, note, bond, debenture, License or other instrument or
obligation, or any judgment, order or decree of any court, administrative agency
or other governmental authority, to which Seller is a party or otherwise subject
or by which Seller or any of its properties (including the Purchased Assets) may
be bound, except where such violation, conflict or breach would not adversely
affect Seller, its financial condition, the Savannah Business, the Purchased
Assets or Seller’s ability to perform the transactions contemplated by this
Agreement. Neither the execution and delivery of this Agreement by Seller, nor
its compliance with the terms hereof and its consummation of the transactions
contemplated hereby, will violate, conflict with or contravene in any material
respect any statute or any judicial or governmental regulation, order,
injunction, judgment or decree binding on Seller, and Seller has not received
any notice which is inconsistent with the foregoing, except where such
violation, conflict or contravention would not adversely affect Seller, its
financial condition, its Savannah Business, the Purchased Assets or Seller’s
ability to perform the transactions contemplated by this Agreement.

 

  (d) Consents

 

The execution and delivery of this Agreement by Seller, and its consummation of
the transactions contemplated hereby, will not require the approval, consent or
authorization of any third party, any federal, state or local court, government
authority or regulatory body or creditor where failure to obtain such approval,
consent or authorization, would adversely affect Seller, its financial
condition, the Savannah Business, the Purchased Assets or Seller’s

 

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ability to perform the transactions contemplated by this Agreement, or give any
party with rights under any instrument, agreement, contract, mortgage, judgment,
award, order or other restriction the right to terminate, modify or otherwise
change any of the current rights or obligations of Seller, except as set forth
on Schedule 6.1(d) attached hereto and made a part hereof, all of which have
been obtained or made or will be obtained or made, and all of which are in full
force and effect and will be so, as of the Closing Date. Except as set forth on
Schedule 6.1(d) hereto, the failure of any person or entity not a party hereto
to authorize or approve this Agreement and the transactions contemplated hereby
will not give any person or entity the right to enjoin, rescind or otherwise
prevent or impede the sale of the Purchased Assets to Purchaser in accordance
with the terms of this Agreement, to reach in any fashion the Purchased Assets
in the hands of Purchaser following the Closing, or to obtain damages from, or
any other judicial relief against, Purchaser, as a result of any transactions
carried out in accordance with the provisions of this Agreement.

 

  (e) Financial Statements

 

Attached hereto as Schedule 6.1(e) are the financial statements of the Savannah
Business for each of the two (2) fiscal years ended June 30, 2004 and June 30,
2005 and an interim financial statement of the Savannah Business for the
six-month period ended December 31, 2005 (collectively, the “Financial
Statements”), consisting of the balance sheets at such dates and the related
statements of income, shareholders’ equity and changes in cash flow for the
twelve (12) months then ended, together with appropriate disclosures (which are
included as part of Schedule 6.1(e) hereto). The Financial Statements present
fairly the financial position of the Savannah Business on such dates and the
results of the operations and changes in the financial position of the Savannah
Business as of the dates and for the periods indicated, and were prepared in
conformity with generally accepted accounting principles consistently applied.

 

  (f) Absence of Undisclosed Liabilities

 

Since December 31, 2005, the Savannah Business has not incurred any debt,
obligation or liability (whether fixed, absolute, accrued, contingent or
otherwise and whether direct or indirect, primary or secondary, known or
unknown), except as clearly and fully reflected on the Financial Statements or
arising out of the ordinary course of business.

 

  (g) Title to and Sufficiency of Purchased Assets

 

Seller has and will convey to Purchaser good and marketable title to all of the
Purchased Assets, free and clear of any Liens, except as set forth on Schedule
6.1(g) attached hereto and made a part hereof, all of which Liens, shall be
released on or prior to the Closing Date. All of the Purchased Assets, including
claims, contracts, orders, leases, licenses and other rights, are assignable
without the prior consent of any third party except as set forth on Schedule
6.1(d) hereto. The Purchased Assets comprise all assets and properties required
for the continued conduct of the Savannah Business by the Purchaser as it is now
being conducted by the Seller.

 

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  (h) Condition of Assets

 

All Purchased Assets being acquired by Purchaser hereunder are (1) except as set
forth on Schedule 6.1(h) attached hereto and made a part hereof, in the
possession of Seller, (2) to Seller’s knowledge, in useable condition and
repair, ordinary wear and tear excepted, and (3) to the best of Seller’s
knowledge, there are no applicable adverse zoning, building or land use codes or
rules, ordinances, regulations or other restrictions relating to zoning or land
use that currently, to Seller’s knowledge, may prospectively prevent, or cause
the imposition of material fines or penalties as a result of, the use of all or
any portion of the Real Estate in the Savannah Business as presently conducted.

 

  (i) Intellectual Property

 

Schedule 6.1(i) attached hereto and made a part hereof represents a true and
complete list of all Intellectual Property (as defined in Section 1.1(e) hereof)
owned or used by or registered in the name of Seller in connection with the
Savannah Business, as well as all licensing or similar agreements relating to
the foregoing to which Seller is a party, either as a licensor or licensee.
Seller owns or possesses adequate and enforceable licenses or other rights to
use all Intellectual Property in the conduct of the Savannah Business being
acquired by Purchaser hereunder, is not in material default under any such
licensing or similar agreement, and has not received any notice or other
knowledge of conflict with or infringement of any rights of others, and no
officer, director, employee, shareholder or former shareholder of Seller has any
rights in or to any of the Intellectual Property. Seller has not received any
notice, nor does Seller have any knowledge, that any of the Intellectual
Property is being infringed upon or appropriated by any third party. Seller owns
and possesses adequate and enforceable rights to use and transfer all of the
Intellectual Property and all design drawings, trade secrets, processes and
other technical data used or usable in the Savannah Business, all of which are
included as part of the Purchased Assets. The use in the Savannah Business of
any Intellectual Property and other technical or proprietary data has not
required and does not require the payment of any royalty or similar payment to
any person, firm or corporation, and, on the Closing Date, Seller will transfer
to Purchaser good and marketable title thereto, free and clear of any Liens.

 

  (j) Litigation

 

Except as set forth on Schedule 6.1(j) attached hereto and made a part hereof,
no claims, actions, suits, legal or administrative proceedings, governmental
investigations or any labor matters are pending or, to the best of Seller’s
knowledge after due and reasonable inquiry, threatened against or adversely
affecting Seller, the Savannah Business or any of the Purchased Assets, nor, to
the best of Seller’s knowledge after due and reasonable inquiry, does any basis
for any such claim, action, suit, legal or administrative proceeding,
governmental investigation or labor matter exist. No outstanding or unsatisfied
judgments, decrees, settlements, orders, rulings, writs or injunctions exist
involving Seller, the Savannah Business or any of the Purchased Assets which
(either by reason of compliance or default) may reasonably be expected to
adversely affect Seller, the Savannah Business or any of the

 

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Purchased Assets, or which relate in any way to the transactions contemplated by
this Agreement.

 

  (k) Compliance with Laws

 

Seller’s operation and ownership of the Savannah Business and the Purchased
Assets are in compliance with all laws, statutes, rules, regulations and other
requirements imposed by federal, state, local and other governmental authorities
applicable to Seller, the compliance with which are material to the operation
and ownership of the Savannah Business and the Purchased Assets, including,
without limitation, all such laws, statutes, rules, regulations and other
requirements relating to environmental, health and safety and equal employment
opportunity standards and controls in all jurisdictions where Seller is
currently doing business.

 

  (l) No Violation of Environmental Laws

 

Seller’s operation and ownership of the Savannah Business and the Purchased
Assets are in compliance in all material respects with all applicable laws and
regulations relating to pollution, the environment, human safety and health,
transportation or the production, storage, labeling or disposition of Hazardous
Materials (as hereinafter defined). There are no underground storage or fuel
tanks located on or under the Real Estate except as disclosed on Schedule
6.1(l). Seller has timely filed all reports required to be filed, has obtained
all required approvals and permits and has generated and maintained all required
data, documentation, and records under any such applicable laws or regulations
where the failure to file such reports, obtain such approvals and permits or
generate and maintain such data documentation and records would adversely affect
Seller, its financial condition, its business or its ability to perform the
transactions contemplated by this Agreement. Neither Seller nor any other person
has placed, held, located, stored, buried, dumped, disposed, spilled or released
any Hazardous Materials on, beneath or about any of the properties used, owned
or leased by Seller, including, without limitation, the Real Estate, except for
storage of inventories of such chemicals to be used in the ordinary course of
business of Seller (which inventories, if any, were stored in accordance with
applicable laws and regulations and in a manner such that there was no release
of any such chemicals into the environment which could cause the incurrence of
clean up or other response costs under the Resource Conservation and Recovery
Act of 1976, as amended, or the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (“CERCLA”), or other
comparable federal, state or local laws or regulations). Seller has not received
any notice from the U.S. Environmental Protection Agency or any state, local or
other domestic or foreign governmental agency or authority (collectively, the
“E.P.A.”), or any other public or private entity, advising it that it is
responsible or potentially responsible for corrective action or investigation or
response costs concerning a release, a threatened release or cleanup of
Hazardous Materials and has no reason to believe that such notice may be
forthcoming. As used herein, the term “Hazardous Materials” shall include, but
is not limited to, chemicals, wastes, and hazardous, dangerous or toxic
substances, materials or wastes (1) produced by or resulting from any business,
commercial or industrial activity, operation or process, including

 

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any “Hazardous Substances,” “Pollutants” or “Contaminants” (as such terms are
defined in CERCLA), (2) in the form of or containing petroleum or petroleum
hydrocarbons, or (3) that are regulated by or defined in any so-called
“Superfund” law, or any other federal, state or local statute, law, ordinance,
code, rule or regulation concerning protection of the environment, human safety
and health, or transportation, as now or hereinafter in effect prior to the
Closing Date.

 

  (m) Taxes

 

All Taxes (as hereinafter defined) due or to become due by reason of the
Purchased Assets or the operation of the Savannah Business by Seller prior to
the Closing Date have been or will be paid when due, or are being or will be
contested in good faith. No tax Liens upon any Purchased Assets exist, except
Liens for Taxes not yet due and payable. For purposes of this Agreement, “Tax”
or “Taxes” shall mean all taxes, including, without limitation, income, capital
stock, gross receipts, net proceeds, ad valorem, value added, goods and
services, turnover, sales, use, real estate transfer, property, personal
property (tangible and intangible), stamp, leasing, lease, user, excise,
franchise, transfer, fuel, vehicle sales, excess profits, occupational and
interest equalization, unitary, severance, withholding, social security,
employment and other taxes, duties, assessments, imposts and charges (including,
without limitation, the recapture of any tax items such as investment tax
credits), together with all interest, penalties and additions imposed concerning
such amounts, which are due or claimed to be due by federal, state or local
taxing authorities or which are payable concerning the Savannah Business.

 

  (n) Insurance

 

Seller presently maintains and has at all times prior to the date hereof
maintained, liability, including product liability, casualty, property loss,
errors and omissions, surety bonds and other insurance coverage upon the
properties included in the Purchased Assets and related to the conduct of the
Savannah Business, in such amounts, of such kinds and with such insurance
carriers as are generally deemed appropriate and sufficient for companies of a
similar size engaged in similar types of business and operations or that may be
required by third parties.

 

  (o) Employment Matters and Labor Relations

 

Schedule 6.1(o) lists all employees and officers of the Savannah Business on the
date hereof, along with the amount of the current annual salaries and the total
compensation paid or due for services to each such employee or officer for the
calendar year ended December 31, 2005. Except as set forth on Schedule 6.1(o)
attached hereto and made a part hereof, Seller is not a party to an agreement
with any employee or any collective bargaining agreement or other contract with
any labor or employee union representing any of the employees of the Savannah
Business. Except as described on Schedule 6.1(o) hereto, no strikes, lockouts or
work stoppages are pending or, to the knowledge of Seller, threatened, nor are
any material labor disputes or material grievances pending against or affecting
Seller,

 

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nor does any default, or any event which, with the passage of time or giving of
notice or both, will become a default, exist under the aforesaid collective
bargaining agreements. Seller has had no strikes or lockouts pending or
threatened within the last two (2) years. Except as set forth in
Schedule 6.1(o), to the best knowledge of Seller, no key employee or group of
employees of the Savannah Business has any plans or expressed any plans to
terminate employment with Seller.

 

  (p) Employee Benefit Plans

 

  (i) Attached hereto as Schedule 6.1(p) is a true and complete list of all
“Employee Welfare Benefit Plans” (as defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”)), existing on the
date hereof that are or have been maintained or contributed to by Seller
(including, for this purpose and for the purpose of all of the representations
contained in this Section 6.1(p), any other entities which by reason of
Section 414 of the United States Internal Revenue Code of 1986, as amended (the
“Code”), are treated together with Seller as a single employer under Code
Section 414)) for the benefit of employees of the Savannah Business.

 

  (ii) Except as listed in Schedule 6.1(p) hereto, Seller does not maintain or
contribute to any “Employee Pension Benefit Plan” (as defined in Section 3(2) of
ERISA) for the benefit of employees of the Savannah Business. Except as listed
in Schedule 6.1(p) hereto, Seller does not maintain or contribute to, nor has
Seller maintained or contributed to during the last six years, any
“Multiemployer Plans,” as defined in Section 3(37) of ERISA, for the benefit of
employees of the Savannah Business.

 

  (iii) Except as listed in Schedule 6.1(p) hereto, Seller does not maintain any
material retirement or deferred compensation plan or arrangement, including
foreign plans or arrangements, savings, incentive or non-qualified stock option,
restricted stock, stock appreciation rights or stock purchase plan, unemployment
compensation plan, personnel policy, holiday pay, moving expense reimbursement,
sick leave, vacation pay, bonus or benefit arrangement, insurance or
hospitalization program or any other fringe benefit arrangement, whether written
or oral for any employee, consultant or agent of the Savannah Business, whether
pursuant to contract, arrangement, custom or informal understanding, which does
not constitute an “Employee Benefit Plan” (as defined in Section 3(3) of ERISA),
or for which Purchaser may have any liability after the Closing Date.

 

  (iv)

All plans and arrangements listed on Schedule 6.1(p) hereto comply, and in the
past have complied, in all material respects in form and

 

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operation with all requirements of applicable United States federal, state,
local and other law or regulation, whether domestic or foreign. Seller
represents and warrants that all contributions and other payment obligations
required to be made on or before the Closing Date under or in connection with
the plans and arrangements listed on Schedule 6.1(p) hereto have been or will be
paid in full on or as of the Closing Date, and Seller agrees to indemnify and
hold Purchaser harmless from and against any and all such liabilities, debts and
claims asserted against Purchaser in connection therewith.

 

  (q) Contracts and Other Commitments

 

  (i) Except as set forth on Schedule 6.1(q) attached hereto and made a part
hereof and except for the Assigned Contracts, Seller has no outstanding
contracts or other commitments, written or oral, for the performance or receipt
of services, or for the payment of moneys, or for the purchase, sale, lease,
license, use or acquisition of real or personal property of any kind or
character that are or may reasonably be expected to be material to Seller, the
Savannah Business or the Purchased Assets. Specifically, and not in limitation
of the foregoing, except as set forth on Schedule 6.1(q) hereto and except for
the Assigned Contracts, Seller has no written or oral contract, agreement or
understanding with any supplier, sales representative, commission agent,
distributor, dealer, consultant or similar person, nor any written or oral
employment contract, agreement or understanding with any person, which relates
to the Savannah Business or the Purchased Assets which calls for payments of
$25,000 or more in any year after the Closing Date.

 

  (ii) Seller has delivered or otherwise made available to Purchaser a copy of
all Assigned Contracts, as well as all contracts and other commitments set forth
on Schedule 6.1(q) hereto, and all other agreements, instruments and documents
relating thereto, all of which are true and complete.

 

  (iii)

Seller is in compliance in all material respects with the provisions of each of
the Assigned Contracts, as well as each of the contracts and other commitments
set forth on Schedule 6.1(q) hereto, and no default exists by any party to any
such contract, lease or commitment that would adversely affect Seller, its
financial condition, its business or its ability to perform the transactions
contemplated by this Agreement. All Assigned Contracts are valid, subsisting and
in full force and effect and enforceable in accordance with their respective
terms. Seller has not received a notice, and to the best of its knowledge Seller
is not

 

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aware, that any party to any Assigned Contract intends to cancel, terminate or
refuse to renew such Assigned Contract.

 

  (r) Receivable Ledgers

 

Attached hereto as Schedule 6.1(r) are ledgers of the accounts receivable of the
Savannah Business as of the date hereof (collectively, the “Receivable
Ledgers”). The Receivable Ledgers (i) accurately and completely reflect all
outstanding accounts receivables of Seller in connection with the Savannah
Business as of the date hereof, and (ii) provide an accurate aging of each such
account as of the date hereof. The accounts receivables arose in the ordinary
course of business of Seller, are not subject to any counterclaim or set-off. It
is agreed that Seller shall retain title to and shall collect for its own
account all accounts receivable of the Savannah Business existing prior to
Closing.

 

  (s) Inventory

 

The inventory schedules dated January 31, 2006 and attached hereto as Schedule
6.1(s) (collectively, the “Inventory Schedules”) and are a true and complete
list of all inventory, including, without limitation, all raw material, work in
process and finished goods, owned by Seller in connection with the operation of
the Savannah Business as of such date. All of the inventory has been valued at
the lower of cost or market, utilizing first-in, first-out valuations in
accordance with generally accepted accounting principles consistently applied.
All of the inventory listed on the Inventory Schedules, all items comprising
inventory that were valued in the inventory accounts on the balance sheets
included in the Financial Statements, and all other inventory existing as of the
Closing Date, each as verified pursuant to the closing inventory, are or were
items of a quality usable or saleable in the ordinary course of business of
Seller consistent with past practices at the aggregate amount reflected on such
balance sheet. All of the items comprising inventory of Seller listed on the
Inventory Schedules existed as of such date. Except as set forth on Schedule
6.1(s) hereto, no items out of inventory referenced above are obsolete or
damaged. No items of inventory referenced above are subject to any buy-back
arrangement or similar sales promotion offered by Seller to its customers in
connection with the Savannah Business. No material adverse change has occurred
in the quality or condition of such inventory since the date of the Inventory
Schedules. In addition to and not in limitation of the foregoing, all inventory
referenced above consists of items of a quality and quantity useable and
saleable in the normal course of the Savannah Business after the Closing
provided that Purchaser operates the Savannah Business in substantially the same
manner as operated by Seller during the year immediately preceding the Closing
Date, and the volume of production or purchase of inventory and supplies, or of
orders therefor, has not been reduced or increased by Seller in anticipation of
the transactions contemplated by this Agreement. Seller has not received any
request, nor is Seller aware of any third party’s intention to request, that
Seller accept a significant return of goods or products sold or leased to such
third party by Seller.

 

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  (t) No Material Adverse Change

 

Since December 31, 2005, Seller has conducted the Savannah Business and its
respective operations in the ordinary and regular course and, except as
described in Schedule 6.1(t) attached hereto and made a part hereof, there has
not been any material adverse change in, or any event, condition or contingency
or any damage, destruction or loss (whether or not covered by insurance) that
shall result in, or may result in, any material adverse change in, the Purchased
Assets or the conduct, business, operations, properties, or condition (financial
or otherwise) of the Savannah Business. Seller has no knowledge of any facts or
circumstances that hinder or adversely affect, or in the future are reasonably
likely to hinder or adversely affect, the Purchased Assets or the conduct,
business, operations, properties or condition (financial or otherwise) of the
Savannah Business.

 

  (u) Suppliers

 

Attached hereto as Schedule 6.1(u) is a complete and accurate list of the twenty
(20) largest suppliers of products and services to the Savannah Business by
dollar volume during the twelve (12) month period ended as of December 31, 2005.
To the best of Seller’s knowledge, since December 31, 2005 no supplier has
declined to continue to act as such or indicated any present or future intention
to cease to do so or to materially change the form of its arrangements with
Seller concerning the Savannah Business.

 

  (v) Customer Relationships

 

Attached hereto as Schedule 6.1(v) is a complete and accurate list of the twenty
(20) largest customer relationships by dollar volume of the Savannah Business
during the twelve (12) month period ended as of December 31, 2005 (each a “Major
Customer”), indicating the existing contractual arrangements, if any, with each
Major Customer. To the best of Seller’s knowledge after due and reasonable
inquiry and except as set forth in Schedule 6.1(v), no material outstanding
disputes exist with any Major Customer and no Major Customer has since
December 31, 2005 refused to, or stated its intention not to, continue its
relationship with Seller or the Savannah Business, nor has any Major Customer
changed or indicated its intent to change its arrangements with Seller or the
Savannah Business except as indicated by the Seller on Schedule 6.1(v).

 

  (w) Fees and Commissions

 

No agent, broker, investment banker, person or firm acting on behalf or under
the authority of Seller is or will be entitled to any broker’s, finder’s,
originator’s or investment banker’s fees or any other commission or similar fee
directly or indirectly from any of the parties hereto in connection with the
transactions contemplated hereby, and no such fees are or will be chargeable to
or for the account of Purchaser, nor have any such fees been paid, nor will any
such fees be paid or payable out of, or in any manner constitute a Lien against,
the Purchased Assets.

 

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  (x) Misstatement or Omission

 

No representation or warranty by Seller in this Agreement or in any other
agreement, document or instrument executed in connection herewith, including any
exhibit, schedule, written statement, certificate or other document furnished or
to be furnished by Seller pursuant hereto or thereto or in connection with the
transactions contemplated hereby or thereby, contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
required to be stated herein or therein necessary to make the statements
contained herein or therein not misleading. Copies of all documents heretofore
furnished by Seller to Purchaser are true, correct and complete copies of such
documents, including all amendments or modifications thereto.

 

  (y) Title to Real Estate

 

Seller owns fee simple title to the Real Estate. The Real Estate is owned free
and clear of all liens, claims and encumbrances, except for those matters
appearing on Schedule B of the Title Commitment. There are no claims, causes of
action or other litigation or proceedings pending or threatened with respect to
the ownership or operation of the Real Estate or any part thereof.

 

  (z) Utilities, Permits

 

All utilities necessary for use, operation and occupancy of the Real Estate are
installed on the Real Estate and all requirements for the unrestricted use of
such utilities are fulfilled. All building, zoning, safety, health, fire, water
district, disability access, sewerage and environmental protection agency
permits and other licenses and permits which are required by any governmental
authority for the use, occupancy and operation of the Real Estate have been
obtained by or furnished to Seller and are in full force and effect.

 

  (aa) No Violation

 

The Real Estate and the use, occupancy and operation of the Real Estate do not
violate any currently applicable laws, statutes, ordinances, rules, orders or
regulations of any kind whatsoever (including without limitation, those relating
to environmental protection, zoning, disability access, building, fire, health
or safety), any contractual arrangements with third parties or any covenants,
conditions, easements, rights of way or restrictions of record. Neither Seller
nor any agent of Seller has received any notice, written or otherwise, alleging
any such violation. The Real Estate is in full compliance with zoning
requirements, including without limitation, those relating to setbacks, height,
parking, floor area ratio, fire lanes and percentage of land coverage.

 

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  (bb) Condemnation; Assessments; Etc.

 

There is no existing, pending, contemplated, threatened or anticipated
(i) condemnation of any part of the Real Estate, (ii) widening, change of grade
or limitation on use of streets abutting the Real Estate, (iii) special tax or
assessment to be levied against the Real Estate, (iv) change in the zoning
classification of the Real Estate, or (v) change in the tax assessment of the
Real Estate.

 

6.2 Representations and Warranties of Purchaser.

 

Purchaser hereby represents and warrants to Seller on and as of the date hereof
and on and as of the Closing Date as follows:

 

  (a) Organization and Standing

 

Purchaser is duly organized, validly existing and in good standing under the
laws of the State of Georgia. Purchaser has all requisite power and authority
and all requisite and sufficient licenses, franchises, permits and
authorizations to own and lease its properties and assets and to carry on its
business as and where currently conducted.

 

  (b) Corporate Action

 

Purchaser has full power and authority to execute and deliver this Agreement, to
purchase the Purchased Assets from Seller, and otherwise to perform all of its
obligations hereunder and to consummate the transactions contemplated hereby.
All and other proceedings required to be taken by or on the part of Purchaser to
execute, deliver and carry out this Agreement and to purchase the Purchased
Assets have been duly and properly taken. Assuming the due authorization,
execution and delivery hereof by Seller, this Agreement constitutes a legal,
valid and binding obligation of Purchaser, enforceable in accordance with its
terms, and all other documents to be delivered in connection herewith, when
executed and delivered, will constitute legal, valid and binding obligations of
Purchaser, enforceable in accordance with their respective terms.

 

  (c) No Default

 

The execution and delivery of this Agreement by Purchaser, its compliance with
the terms hereof and its consummation of the transactions contemplated hereby
will not violate, conflict with or result in a breach of any provision of the
Articles of Incorporation or By-laws of Purchaser or (whether with due notice or
lapse of time or otherwise) constitute a default, require the consent of any
third party, give rise to any right of acceleration, or otherwise result in a
breach or violation of, any contract, agreement, lease, commitment, indenture,
mortgage, trust deed, note, bond, debenture, license or other instrument or
obligation, or any judgment, order or decree of any court, administrative agency
or other governmental authority, to which Purchaser is a party or otherwise
subject.

 

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  (d) Consents

 

The execution and delivery of this Agreement by Purchaser, and its consummation
of the transactions contemplated hereby, will not require the approval, consent
or authorization of any third party, any federal, state or local court,
government authority or regulatory body or creditor, or give any party with
rights under any instrument, agreement, contract, mortgage, judgment, award,
order or other restriction the right to terminate, modify or otherwise change
any of the current rights or obligations of Purchaser, except as set forth on
Schedule 6.1(d) attached hereto and made a part hereof. Except as set forth on
Schedule 6.1(d) hereto, the failure of any person or entity not a party hereto
to authorize or approve this Agreement and the transactions contemplated hereby
will not give any person or entity the right to enjoin, rescind or otherwise
prevent or impede the purchase of the Purchased Assets by Purchaser in
accordance with the terms of this Agreement, or to obtain damages or other
judicial relief against Purchaser, as a result of any transactions carried out
in accordance with the provisions of this Agreement.

 

  (e) Fees and Commissions

 

Except as set forth on Schedule 6.2(e) hereto, no agent, broker, investment
banker, person or firm acting on behalf or under the authority of Purchaser is
or will be entitled to any broker’s, finder’s, originator’s or investment
banker’s fees or any other commission or similar fee directly or indirectly from
any of the parties hereto in connection with the transactions contemplated
hereby.

 

  (f) Misstatement or Omission

 

No representation or warranty by Purchaser in this Agreement or in any other
agreement, document or instrument executed in connection herewith contains or
will contain any untrue statement of a material fact, or omits or will omit to
state a material fact required to be stated herein necessary to make the
statements contained herein not misleading.

 

VII. COVENANTS AND AGREEMENTS

 

7.1 Returned Items

 

Seller shall be liable for all finished goods included in inventory at the
Closing Date which are returned or rejected after the Closing Date due to
failure to meet specifications or damage and which cannot be sold for such
reasons. Seller shall reimburse Purchaser on a dollar-for-dollar basis for any
such returned items in accordance with the claim procedures set forth in Article
VIII of this Agreement.

 

7.2 Accounts Receivable

 

All accounts receivable of the Savannah Business related to products shipped
prior to the Closing Date shall remain the property of Seller and shall be
collected by Seller for its own account. All accounts receivable of the Savannah
Business related to products shipped on or after the Closing Date shall be the
property of Purchaser and shall be collected by

 

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Purchaser for its own account. After the Closing, Purchaser and Seller shall
cooperate with each other as may be necessary with regard to the determination
of accounts receivable as being either pre-Closing or post-Closing. Specific
provision with regard to the allocation and collection of accounts receivables
of the Savannah Business following the Closing shall also be set forth in the
Transition Services Agreement.

 

7.3 Employees and Independent Contractors

 

(a) Purchaser is not obligated to hire any employees of Seller but may interview
all such employees. Subject to any applicable legal requirements, Purchaser will
have reasonable access to the Savannah Facility and personnel records (including
performance appraisals, disciplinary actions, grievances and medical records) of
Seller for the purpose of preparing for and conducting employment interviews
with all employees and will conduct the interviews as expeditiously as possible
prior to the Closing Date. Access will be provided by Seller upon reasonable
prior notice during normal business hours. Except as may be otherwise provided
or contemplated under the Transition Services Agreement, Seller will terminate
the employment of all of its employees of the Savannah Business effective
immediately before the Closing.

 

(b) Seller shall pay and be responsible for all severance payments, accrued
compensation and benefits, and all related costs, for any of Seller’s employees
or independent contractors who are not retained by Purchaser after the Closing.
For any of Seller’s employees hired or independent contractors who are retained
by Purchaser after the Closing, Seller shall be responsible for all accrued
compensation, vacation, benefits, severance and other costs accrued prior to the
Closing Date, or prior to such subsequent date as provided in the Transition
Services Agreement, and Purchaser shall be responsible for accrued compensation,
vacation, benefits and other costs accrued after to the Closing Date or after
such subsequent date as provided in the Transition Services Agreement.

 

7.4 Cooperation

 

Seller shall, after the Closing Date, provide reasonable cooperation to insure
the smooth transfer of research and development, marketing and sales,
manufacturing and technical know-how and other aspects of the transition of
ownership of the Purchased Assets and the manufacture, sale, distribution and
marketing of the products of the Savannah Business.

 

7.5 Insurance

 

Seller shall maintain product liability insurance for products manufactured,
packaged or existing as part of finished goods inventory prior to or as of the
Closing Date, for a period of not less than twenty-four (24) months after the
Closing Date.

 

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7.6 Right of Inspection; Access

 

  (a) Purchaser’s Access Before Closing

 

Between the date of this Agreement and the Closing Date, and upon reasonable
advance notice received from Purchaser, Seller shall (a) afford Purchaser and
its representatives and prospective lenders and their representatives
(collectively, “Purchaser Group”) full and free access, during regular business
hours, to Savannah Facility personnel, Savannah Facility properties (including
subsurface testing), contracts, governmental authorizations, books and records
and other documents and data, such rights of access to be exercised in a manner
that does not unreasonably interfere with the operations of the Savannah
Facility; (b) furnish Purchaser Group with copies of all such contracts,
governmental authorizations, books and records and other existing documents and
data as Purchaser may reasonably request; (c) furnish Purchaser Group with such
additional financial, operating and other relevant data and information as
Purchaser may reasonably request; and (d) otherwise cooperate and assist, to the
extent reasonably requested by Purchaser, with Purchaser’s investigation of the
properties, assets and financial condition related to the Savannah Business and
the Purchased Assets. In addition, Purchaser shall have the right to have the
Real Estate and other Purchased Assets inspected by Purchaser Group, at
Purchaser’s sole cost and expense, for purposes of determining the physical
condition and legal characteristics of the Real Estate and other Purchased
Assets. In the event subsurface or other destructive testing is recommended by
any of Purchaser Group, Purchaser shall be permitted to have the same performed.
Purchaser at its sole cost shall restore the Real Estate and other Purchased
Assets to the same condition such properties were in immediately prior to
Purchaser’s investigations and shall otherwise indemnify and hold Seller
harmless from any direct damages or liabilities incurred by Seller as a result
of Purchaser’s investigations under this Section.

 

  (b) Purchaser’s Access After Closing

 

After the Closing Date, Seller shall permit Purchaser and its counsel,
accountants and other representatives access during normal business hours, upon
at least two (2) business days prior notice, to all of the records and files
retained by Seller relating to the Savannah Business or the Purchased Assets for
any period prior to the Closing. In connection herewith, Seller hereby agrees to
retain all such records for a period of not less than five (5) years after the
Closing Date in order to afford Purchaser such access, and Purchaser shall have
the right at any time to make copies thereof. If Seller wishes to destroy any
such records at any time during such period, Seller shall give Purchaser not
less than sixty (60) days prior written notice thereof, whereupon Purchaser may
elect to take possession of such records. In addition, Seller shall provide
Purchaser, to the extent feasible, with access to any officers, employees and
agents of Seller, as may be necessary in connection with the prosecution or
defense of any tax audits or third party claims, suits or actions by or against
Purchaser.

 

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  (c) Seller’s Access After Closing

 

After the Closing Date, Purchaser shall permit Seller reasonable access during
normal business hours, upon at least two (2) business days prior notice, to any
records and files of the Savannah Business transferred pursuant to this
Agreement, relating to a period prior to the Closing Date, and to any employees
of Purchaser formerly employed by Seller, as may be necessary in connection with
the prosecution or defense of any tax audits or third party claims, suits or
actions by or against Seller relating to the Savannah Business. In connection
herewith, Purchaser hereby agrees to retain all such books and records for a
period of not less than five (5) years after the Closing Date in order to afford
Seller such access, and Seller shall have the right at any time to make copies
thereof. If Purchaser wishes to destroy any such books or records at any time
during such period, Purchaser shall give Seller not less than sixty (60) days
prior written notice thereof, whereupon Seller may elect to take possession of
such books and records. In addition, Purchaser shall provide Seller, to the
extent feasible, with access to any officers, employees and agents of Purchaser,
as may be necessary in connection with the prosecution or defense of any tax
audits or third party claims, suits or actions by or against Seller.

 

7.7 Negative Covenants, Etc. by Seller

 

  (a) Restriction on Operation of Aseptic Facility

 

For a period of five (5) years after the Closing Date, Seller, and its
successors and assigns, shall not, directly or indirectly invest in, own,
manage, operate, finance, control, advise, render services to or guarantee the
obligations of any person, entity or facility that is located anywhere in the
portion of the United States outlined on Exhibit A (the “Territory”) and is
engaged in or is planning to become engaged in the aseptic packaging business,
provided, however, that Seller may purchase or otherwise acquire up to (but not
more than) one percent (1%) of any class of the securities of any person or
entity (but may not otherwise participate in the activities of such person or
entity) if such securities are listed on any national or regional securities
exchange.

 

  (b) Non-Solicitation.

 

For a period of five (5) years after the Closing Date, Seller, and its
successors and assigns, shall not, directly or indirectly:

 

(i) cause, induce or attempt to cause or induce any customer, supplier,
licensee, licensor, franchisee, employee, consultant or other business relation
of Purchaser to cease doing business with Purchaser, to deal with any competitor
of Purchaser or in any way interfere with its relationship with Purchaser; or

 

(ii) cause, induce or attempt to cause or induce any customer, supplier,
licensee, licensor, franchisee, employee, consultant or other business relation
of Seller on the Closing Date or within the year preceding the Closing Date to
cease

 

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doing business with Purchaser, to deal with any competitor of Purchaser or in
any way interfere with its relationship with Purchaser; or

 

(iii) hire, retain or attempt to hire or retain any employee or independent
contractor of Purchaser or in any way interfere with the relationship between
Purchaser and any of its employees or independent contractors.

 

  (c) Non-Disparagement

 

After the Closing Date, Seller will not disparage Purchaser or any of
Purchaser’s shareholders, directors, officers, employees or agents, and
Purchaser will not disparage Seller or any of Seller’s shareholders, directors,
officers, employees or agents

 

  (d) Blue-Penciling

 

If any provision or part of this Section 7.7 is held to be unenforceable because
of the duration of such provision or the area covered thereby, the parties
hereto agree to modify such provision, or that the court making such
determination shall have the power to modify such provision, to reduce the
duration or area of such provision, or both, or to delete specific words or
phrases herefrom (“blue-penciling”), and, in its reduced or blue-penciled form,
such provision shall then be enforceable and shall be enforced.

 

  (e) Equitable Remedies

 

Seller recognizes and agrees that Purchaser conducts its business throughout the
Territory and elsewhere, and, therefore, the geographical scope of the
non-competition covenants contained in Section 7.7(a) hereof is reasonable. It
is further recognized and agreed that Purchaser would not have entered into or
consummated the transactions contemplated by this Agreement without the
covenants contained in this Section 7.7, and that irreparable injury will result
to Purchaser and its businesses and properties in the event of a breach of any
covenant contained herein by Seller, that such injury would be difficult if not
impossible to ascertain and, therefore, that any remedy at law for any such
breach will be inadequate. As a result, Purchaser shall be entitled to temporary
and permanent injunctive relief without the necessity of proving actual damage
to Purchaser by reason of any such breach. In the event that an enforcement
action is brought by Purchaser pursuant hereto, Purchaser shall be entitled to
recover from Seller the reasonable costs and attorneys’ fees incurred in
connection therewith. Nothing contained in this Section 7.7 shall prevent
Purchaser from electing to seek any monetary or other relief in addition to or
in lieu of any equitable relief for breach of any of the covenants contained
herein. Whenever used in this Section 7.7, subject to the terms of
Section 7.7(a), the term “Purchaser” shall be deemed to include any successor or
any other person or entity that may hereafter acquire all or any portion of the
aforesaid Savannah Business being acquired by Purchaser hereunder during the
period of this covenant not to compete.

 

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  (f) Independent Covenants

 

The covenants contained in this Section 7.7 shall be construed and enforced
independently of any other provision of this Agreement or any other
understanding or agreement between the parties, and the existence of any claim
or cause of action of Seller against Purchaser, of whatever nature, shall not
constitute a defense to the enforcement of the covenants contained herein
against Seller.

 

7.8 Confidentiality

 

Seller hereby covenants and agrees that, at all times from and after the Closing
Date, it shall keep secret and maintain in strictest confidence, and shall not
use for its benefit or for the benefit of others, and shall not cause or allow
any of Seller’s agents, officers, directors or employees to so disclose or use,
any Confidential Information (as hereinafter defined). As used in this
Agreement, “Confidential Information” shall mean any and all information, in
whatever form, primarily relating to the Savannah Business or the Purchased
Assets, including, without limitation, any Intellectual Property, which
information is sufficiently secret to derive economic value, actual or
potential, from not being generally known to other persons who can obtain
economic value from its disclosure or use and is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy or confidentiality.

 

7.9 Publicity and Disclosure

 

Following the Closing Date, Seller shall not disclose to any third party the
terms of the transactions contemplated hereunder or the nature of discussions
with respect thereto without the prior written consent of Purchaser, other than
information regarding the transactions which becomes publicly available;
provided, however, that Seller shall not be prohibited from disclosing
information, the disclosure of which Purchaser, after reasonable notice, refuses
to give its consent, if such disclosure is required by law or by regulatory
authorities or from disclosing such information to Seller’s investors, banks,
advisors, attorneys and accountants in connection with the conduct of Seller’s
business and as may be necessary to enforce Seller’s rights under this
Agreement. Purchaser agrees to provide Seller with advance copies of Purchaser’s
press release and 8K filing related to this Agreement.

 

7.10 No Shop

 

Seller hereby agrees that from the date of this Agreement until the Closing Date
(as extended), neither Seller, nor any of its officers, directors, stockholders,
representatives, agents or brokers will, for itself or on behalf of Seller,
solicit, negotiate with or provide any information to any party other than
Purchaser relative to (a) any sale of the Purchased Assets (other than in the
ordinary course of business); (b) any change in control of the Savannah
Business; (c) any merger, consolidation of joint venture involving the Savannah
Business; and (d) any other similar transaction involving Savannah Business or
the Purchased Assets. Furthermore, Seller shall promptly notify Purchaser of any
contacts by third parties relative to the foregoing.

 

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7.11 Earnest Money Deposit

 

Each of Purchaser and Seller acknowledge and agree that Purchaser has deposited
with Seller an earnest money deposit (the “Earnest Money Deposit”) of Two
Hundred Fifty Thousand Dollars ($250,000). Upon the Closing, the Earnest Money
Deposit shall be applied to the Purchase Price. If the Closing does not occur by
May 1, 2006 (unless such date is extended by the parties), then Seller shall
retain the Earnest Money Deposit as liquidated damages in lieu of any and all
other remedies hereunder, provided that Seller (a) has negotiated the
transaction contemplated by this Agreement in good faith with Purchaser; (b) has
complied with the provisions of Section 7.6 (Inspection, Access) and
Section 7.10 (No-Shop); and (c) is not in breach of any other material provision
of this Agreement.

 

7.12 Financial Statements to Be Prepared by Seller

 

Seller agrees and covenants to cause the audited financial statements of the
Savannah Business listed on Schedule 7.12 hereto to be prepared and delivered to
Seller no later than thirty (30) days following the Closing Date. Purchaser
shall pay or reimburse Seller for the reasonable outside accountants’ fees
incurred for the preparation of such audited financial statements. Seller will
also prepare and deliver to Purchaser the non-audited financial statements of
the Savannah Business listed on Schedule 7.12 by no later than thirty (30) days
following the Closing Date. Seller agrees and acknowledges that the financial
statements listed on Schedule 7.12 are required under certain securities law
reporting requirements applicable to Purchaser and its affiliates, and that
Purchaser will be materially damaged as the result of Seller’s failure to
perform under this Section.

 

VIII. INDEMNIFICATION

 

8.1 Seller’s Indemnification

 

(a) Notwithstanding the investigation by Purchaser, its attorneys or any of its
agents or representatives, the representations, warranties and covenants of
Seller set forth herein, or in any document or instrument delivered in
connection herewith or pursuant hereto, and the liabilities of Seller with
respect thereto, shall survive as follows: (i) the representations and
warranties set forth in Section 6.1(a) (Organization and Standing);
Section 6.1(b) (Corporate Action); Section 6.1(g) (Title); Section 6.1(l)
(Environment); Section 6.1(m) (Taxes); Section 6.1(p) (Employee Benefit Plans);
and Section 6.1(y) (Title to Real Estate) hereof shall survive the Closing until
the expiration of the applicable statute of limitations for bringing claims
under such provisions; and (ii) all other representations and warranties of
Seller contained herein shall, unless otherwise provided in this Agreement,
survive the Closing for a period of two (2) years, at which time they shall
expire.

 

(b) Seller shall indemnify, protect, defend and hold Purchaser, its parent, its
subsidiaries, its affiliates and its and their respective shareholders,
directors, officers, employees, agents, representatives, successors and assigns
(collectively, the “Purchaser Group”), harmless from and against any and all
Losses (as hereinafter defined) imposed on, accrued against, sustained or
incurred by the Purchaser Group or any one of them resulting from or arising out
of or by virtue of: (i) any misrepresentation or breach of warranty made herein
by Seller or

 

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non-compliance with, non-performance of or breach by Seller of any of the
covenants of this Agreement to be performed by Seller; (ii) any and all
liabilities arising out of or in connection with the conduct of the Savannah
Business or any other business of Seller on or prior to the Closing Date; and
(iii) any claim for products liability asserted against Purchaser for or
relating to products, equipment or parts manufactured sold or distributed by
Seller, or in finished goods inventory, on or prior to the Closing Date, or
related to products, equipment or parts purchased by Purchaser pursuant hereto.

 

8.2 Purchaser’s Indemnification

 

(a) The representations and warranties of Purchaser set forth herein, or in any
document or instrument delivered in connection herewith or pursuant hereto, and
the liabilities of Purchaser with respect thereto, shall survive the Closing
Date for a period of two (2) years, at which time they shall expire.

 

(b) Purchaser shall indemnify, protect, defend and hold Seller, its
subsidiaries, its affiliates and its and their respective shareholders,
directors, officers, employees, agents, representatives, successors and assigns
(collectively, the “Seller Group”), harmless from and against any and all Losses
imposed on, accrued against, sustained or incurred by the Seller Group or any
one of them resulting from or arising out of or by virtue of; (i) any
misrepresentation or breach of warranty made herein by Purchaser or
non-compliance with or breach by Purchaser of any of the covenants of this
Agreement to be performed by Purchaser; and any of the agreements contemplated
hereby; and (ii) any and all liabilities and obligations arising out of or in
connection with the conduct of the Savannah Business by Purchaser after the
Closing Date.

 

8.3 Limitations

 

Notwithstanding anything contained herein to the contrary, no claim for
indemnification pursuant to Section 8.1 or Section 8.2 shall be required to be
paid unless and until the party making such claim shall have incurred in excess
of Fifty Thousand Dollars ($50,000) in Losses, in the aggregate, with respect to
indemnification claims made by such party, and, in such event, said
indemnification shall apply to Losses going back to the first dollar of Losses.
The foregoing limitation shall not apply: (A) to any claim for indemnification
made by any one or more of the Seller Group arising out of any failure of
Purchaser to pay the Purchase Price; or (B) to any claim for indemnification
made by any one or more of the Purchaser Group arising out of any failure of
Seller to satisfy all of the liabilities and obligations of Seller or the
Savannah Business in existence as of the Closing Date. In addition to the
foregoing, notwithstanding anything contained herein to the contrary, the
indemnification obligations of Seller or Purchaser pursuant to this Article VIII
shall in no event exceed, in the aggregate, the sum of Five Million Dollars
($5,000,000). Notwithstanding the foregoing, there shall be no maximum limit on
the amount of indemnification obligations of Seller or Purchaser pursuant to
this Article VIII in the case of Losses that are due to the fraudulent act or
acts of Seller or Purchaser, as the case may be.

 

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8.4 Losses

 

For purposes of this Agreement, “Losses” shall mean all claims, actions,
proceedings, judgments, causes of action, liabilities (whether fixed, absolute,
accrued, contingent or otherwise and whether direct or indirect, primary or
secondary, known or unknown), losses, demands, costs, assessments, damages,
diminution in value, interest, penalties or expenses (including, without
limitation, reasonable attorneys’ fees and expenses and costs of litigation).

 

8.5 Set-Off

 

Purchaser shall have the right, without limitation, to set-off any and all
amounts owed by Seller to Purchaser under Section 8.1 hereof, or under any other
provision of this Agreement, and, in such event, the monthly payments required
to be made by Purchaser to Seller thereunder shall be adjusted accordingly.

 

8.6 Procedure for Indemnification—Third-Party Claims

 

(a) If a complaint, claim or legal action is brought or made by a third party
(“Third Party Claim”) as to which Seller or Purchaser is entitled to
indemnification (“Indemnified Party”), the Indemnified Party shall give written
notice of such Third Party Claim to the indemnifying party (“Indemnifying
Party”) promptly after the Indemnified Party receives notice of that claim,
which notice shall include a copy of any letter complaint or similar writing
received by the Indemnified Party; provided, however, that any failure to
provide, or delay in providing, such notification shall not constitute a bar or
defense to indemnification except to the extent the Indemnifying Party has been
prejudiced.

 

(b) The Indemnifying Party shall have the right to assume the defense of such
Third Party Claim with counsel reasonably satisfactory to the Indemnified Party.
After notice from the Indemnifying Party to the Indemnified Party of the
Indemnifying Party’s election to assume defense of the Third Party Claim, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal or
other expenses subsequently incurred by the Indemnified Party in defending such
Third Party Claim except provided below. If the Indemnifying Party elects to
assume the defense and select counsel, the Indemnified Party may participate in
the defense through its own separate counsel, but the fees and expenses of such
counsel shall be paid by the Indemnified Party unless (i) otherwise specifically
agreed in writing by the Indemnifying Party, or (ii) counsel selected by the
Indemnifying Party determines that, because of a conflict of interest between
the Indemnifying Party and the Indemnified Party, counsel for the Indemnifying
Party cannot adequately represent both parties in defending the action (in which
case the Indemnifying Party shall not have the right to direct the defense of
the Third Party Claim on the Indemnified Party’s behalf).

 

(c) The Indemnifying Party’s failure to notify an Indemnified Party of its
election to defend such Third Party Claim within thirty (30) days after notice
of the Third Party Claim

 

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was given to the Indemnifying Party shall be deemed a waiver by the Indemnifying
Party of its rights to defend the Third Party Claim.

 

(d) If the Indemnifying Party notifies the Indemnified Party of its election to
defend such Third Party Claim, the Indemnifying Party’s obligations shall
include taking all steps necessary in defending the Third Party Claim and
holding the Indemnified Party harmless against any and all Damages caused by or
arising out of any settlement approved by the Indemnified Party or any judgment
in connection with such claim or litigation.

 

(e) If the Indemnifying Party does not assume the defense of the Third Party
Claim, the Indemnified Party may defend against such claim or litigation in such
manner as it deems appropriate. The Indemnifying Party shall promptly reimburse
the Indemnified Party for the Losses caused by or arising out of such
settlement, or for the amount of any judgment rendered on the Third Party Claim,
and for all costs and expenses the Indemnified Party reasonably incurred in
defending the claim.

 

(f) The Indemnifying Party may settle any Third Party Claim, in its sole
discretion, without the Indemnified Party’s prior written consent, provided that
such settlement involves only the payment of cash by the Indemnifying Party to
the claimant and does not impose any other obligation on the Indemnifying Party
or any liability or obligation on the Indemnified Party.

 

8.7 Procedure for Indemnification—Other Claims

 

A claim for indemnification by a party hereunder for any matter not involving a
Third Party Claim may be asserted by written notice from that party to the other
party from whom indemnification is sought. Such written notice shall state in
reasonable detail the basis for the indemnification claim hereunder and the
facts and circumstances surrounding such claim and, to the extent known or
reasonably estimated, the dollar amount of Losses. The party against whom
indemnification is sought shall respond to such notice within a reasonable time
but in any event within ten (10) business days following receipt of the notice.

 

IX. EXPENSES

 

9.1 Professional Expenses

 

Except as otherwise provided in this Agreement, each of the parties hereto shall
pay all of its own respective costs and expenses with respect to legal,
accounting, consulting, appraisal and professional fees, as well as printing and
other related expenses, incurred or to be incurred by such party in connection
with the negotiation and preparation of this Agreement and the consummation of
the transactions contemplated hereby; provided, however, that no such fees or
expenses shall in any manner constitute a Lien against the Purchased Assets.

 

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X. TERMINATION

 

10.1 Termination

 

This Agreement may be terminated at any time prior to the Closing Date:

 

  (a) by mutual written consent duly authorized by Seller and Purchaser;

 

  (b) by Seller if:

 

  (i) the transactions contemplated by this Agreement shall not have been
consummated on or prior to May 1, 2006, unless the failure to consummate the
transactions is due to a material breach of this Agreement by Seller;

 

  (ii) any condition set forth in Section 5.2 of this Agreement has not been
satisfied or waived in writing by May 1, 2006, unless the failure to satisfy
such condition is due to a material breach of this Agreement by Seller;

 

  (iii) any warranty or representation made by Purchaser is discovered to be or
to have become untrue, incomplete or misleading, and, in the case of a breach
that is capable of cure, such breach remains uncured for a period of thirty (30)
days after such notice is given and, in the case of a breach that is not capable
of cure, termination shall have immediate effect; or

 

  (iv) Purchaser shall have breached one or more covenants of this Agreement in
any material respect and, in the case of a breach that is capable of cure, such
breach remains uncured for a period of thirty (30) days after such notice is
given and, in the case of a breach that is not capable of cure, termination
shall have immediate effect;

 

  (c) by Purchaser if:

 

  (i) the transactions contemplated by this Agreement shall not have been
consummated on or prior to May 1, 2006, unless the failure to consummate the
transactions is due to a material breach of this Agreement by Purchaser;

 

  (ii) any condition set forth in Section 5.1 of this Agreement has not been
substantially satisfied or waived in writing by May 1, 2006, unless the failure
to satisfy such condition is due to a material breach of this Agreement by
Purchaser;

 

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  (iii) any warranty or representation made by Seller is discovered to be or to
have become untrue, incomplete or misleading and, in the case of a breach that
is capable of cure, such breach remains uncured for a period of thirty (30) days
after such notice is given and, in the case of a breach that is not capable of
cure, termination shall have immediate effect; or

 

  (iv) Seller shall have breached one or more covenants of this Agreement in any
material respect and, in the case of a breach that is capable of cure, such
breach remains uncured for a period of thirty (30) days after such notice is
given and, in the case of a breach that is not capable of cure, termination
shall have immediate effect.

 

10.2 Notice of Termination; Effect of Termination

 

Any termination of this Agreement under Section 10.1 above will be effective
immediately upon the delivery of written notice of the terminating party to the
other parties hereto. In the event of the termination of this Agreement, this
Agreement shall be of no further force or effect, provided, however, that
nothing herein shall relieve any party from liability for any breach of this
Agreement. No termination of this Agreement shall affect the obligations of any
party contained in the Confidentiality Agreement, which obligations shall
survive termination of this Agreement in accordance with the terms of that
Confidentiality Agreement.

 

10.3 Extension; Waiver

 

At any time prior to the Closing Date any party hereto may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. Delay in exercising any right under this Agreement shall
not constitute a waiver of such right.

 

XI. MISCELLANEOUS

 

11.1 Entire Agreement; Amendment

 

This Agreement and any others referred to herein or attached hereto constitute
the entire agreement and understanding of the parties hereto with respect to the
subject matter hereof and thereof, and supersede all prior and contemporaneous
negotiations, undertakings and agreements, written or oral, between the parties.
No representation, inducement, agreement, promise, understanding or waiver
altering, modifying, taking from or adding to the terms and conditions hereof
shall have any force or effect unless the same is in writing and validly
executed by all parties hereto.

 

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11.2 Binding Effect; Assignment

 

This Agreement shall be binding upon and inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted
assigns. This Agreement shall not be assignable by Seller without the prior
written consent of Purchaser.

 

11.3 Notices

 

Any notice, request, instruction or other communication to be given hereunder by
any party hereto shall be in writing and shall be deemed to have been duly given
on the date of delivery, provided delivery is actually tendered at the
appropriate address, addressed to the persons identified below (i) in person, or
(ii) by courier service or express delivery, or (iii) by facsimile copy or
(iv) three (3) calendar days after deposit in the mail by first class certified
mail, postage prepaid, return receipt requested, all addressed as set forth
below:

 

If to Seller, to:    California Natural Products      1250 East Lathrop Road  
   Lathrop, CA 95330      Attn: Mr. Pat Mitchell      Telephone No.:
___________________      Telecopier No.: ___________________ With copy to:   
Gianelli & Fores, a Professional Law Corporation      1014 16th Street     
Modesto, CA 95354      Attn: Michael L. Gianelli      Telephone No.: (209)
521-6260      Telecopier No.: (209) 521-5971 If to Purchaser, to:    Universal
Food & Beverage Company      3830 Commerce Drive      St. Charles, IL 60174     
Attn: Duane N. Martin      Telephone No.: (630) 584-8670      Telecopier No.:
(630) 584-8674 With copy to:    Holland & Knight LLP      One Mid America Plaza,
Suite 1000      Oakbrook Terrace, Illinois 60181-4710      Attn: Carl A.
Neumann, Esq.      Telephone No.: (630) 954-2100      Telecopier No.: (630)
954-2112

 

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or to such other person or persons at such address or addresses as may be
designated by written notice to the other parties pursuant to this Section 11.3.

 

11.4 Severability

 

If any provision of this Agreement is found invalid, unenforceable or in
violation of any law by a court of competent jurisdiction, such provision shall
be modified only to the extent necessary to enable such provision to be valid
and enforceable, without affecting the remaining portions of this Agreement,
which shall remain in full force and effect; provided, however, that the
severing of any such provision will not materially change the substance of this
Agreement. As so amended, this Agreement shall be enforced to the fullest extent
possible to give effect to the intention of the parties expressed herein.

 

11.5 Mutual Contribution

 

The parties to this Agreement and their counsel have mutually contributed to its
drafting. No provision of this Agreement shall be construed against any party on
the ground that such party drafted the provision or caused it to be drafted, or
that the provision contains a covenant of such party.

 

11.6 Waivers

 

No delay on the part of any party in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any waiver of any right, power or
privilege operate as a waiver of any other right, power or privilege, nor shall
any single or partial exercise of any right, power or privilege preclude any
other or further exercise thereof or of any other right, power or privilege. The
rights and remedies herein provided are cumulative and are not exclusive of any
rights or remedies which the parties otherwise may have at law or in equity.

 

11.7 Headings

 

The headings of articles and sections of this Agreement and of the schedules and
exhibits hereto are for convenience only and are not intended to limit,
restrict, expand or otherwise affect the meaning or interpretation of the
provisions of this Agreement.

 

11.8 Applicable Law

 

This Agreement is governed by and shall be construed and enforced in accordance
with the laws of the State of Georgia.

 

11.9 Venue

 

All actions or proceedings in any way, manner or respect, arising out of or from
or related to this Agreement shall be litigated only in a court having
jurisdiction for the County of Chatham, State of Georgia. Each party hereby
consents and submits to the jurisdiction of

 

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any local, state or federal court located within or otherwise having
jurisdiction over Chatham County, Georgia.

 

11.10  Attorney Fees

 

If any action at law or in equity is brought to enforce or interpret the
provisions of this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys’ fees and all other costs and expenses of litigation from
the other party, which amounts may be set by the court in the trial of such
action or may be enforced in a separate action brought for that purpose, and
which amounts shall be in addition to any other relief which may be awarded.

 

11.11  Beneficiaries of Agreement

 

The rights and obligations contained in this Agreement are hereby declared by
the parties hereto to have been provided expressly for the exclusive benefit of
such persons and entities (as applicable) as set forth herein, and shall not
benefit, and do not benefit, any unrelated third parties.

 

11.12  Counterparts

 

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

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, each of the parties hereto has executed, or caused to be
executed on its behalf by its duly authorized representative, this Asset
Purchase Agreement as of the date first written above.

 

PURCHASER: UNIVERSAL FOOD & BEVERAGE COMPANY OF GEORGIA By:  

/s/ Duane N. Martin

    Duane N. Martin, Chief Executive Officer SELLER: CALIFORNIA NATURAL PRODUCTS
By:  

/s/ Pat Mitchell

    Pat Mitchell, President

 

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LIST OF SCHEDULES

 

Schedule 1.1(a)    Description of Real Estate Schedule 1.1(b)    Operating
Assets, Equipment, Machinery Schedule 1.1(d)    Assigned Contracts Schedule 3.2
   Allocation of Purchase Price Schedule 5.1(d)    Assigned Contracts – Customer
Consents Required Schedule 6.1(a)    Foreign Qualifications; Licenses Schedule
6.1(d)    Required Consents Schedule 6.1(e)    Financial Statements Schedule
6.1(g)    Liens Schedule 6.1(h)    Purchased Assets Not In Possession of Seller
Schedule 6.1(i)    Intellectual Property Schedule 6.1(j)    Litigation Schedule
6.1(k)    Underground Tanks Schedule 6.1(o)    Employees Schedule 6.1(p)   
Employee Benefit Plans Schedule 6.1(q)    Contractual Obligations Schedule
6.1(r)    Receivable Ledgers Schedule 6.1(s)    Inventory Schedule 6.1(t)   
Material Adverse Change Schedule 6.1(u)    Top 20 Suppliers Schedule 6.1(v)   
Top 20 Customers Schedule 6.2(d)    Buyer’s Consents Schedule 6.2(e)    Fees,
Commissions Schedule 7.12    List of Financial Statements to Be Prepared By
Seller

 

The Schedules have not been filed with the Merger Agreement in accordance with
the Commission’s rules. The Company agrees to furnish a copy of the Schedules to
the Commission upon request.

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LIST OF EXHIBITS

 

Exhibit A    Non-Competition Territory