**EXHIBIT10.2**

 

ASSET PURCHASE AND SALE AGREEMENT

 

THIS AGREEMENT is made as of this 12th day of October, 2004, by and betweenLEE PHARMACEUTICALS, INC., a corporation organized and existing under the lawsof the State of California (“Seller”) and THE WOOLFOAM CORPORATION, acorporation organized and existing under the laws of the State of New York (“Buyer”).

 

1.                                       Saleand Transfer of Assets. Seller agrees that it will sell, transfer, conveyand deliver to Buyer at the closing provided for in Section 3 hereof (the “Closing”)certain of the assets of Seller as more specifically defined in Section 2hereof (the “Assets’).

 

2.                                       Assetsof Seller. The Assets shall consist of the following:

 

(a)                                  Allrights, title and interest, including the goodwill associated therewith, of theSeller in the following product line (the “Product”), including any and allagreements (whether purchase, royalty, or license) (the “Ownership Agreements”)relating to the ownership of the Product, and all “Intangibles” (as defined in Section 8(g)hereof), related to the Product. The Product is Nose Better.

 

(b)                                 Theexisting purchase orders for inventory and other product supplies, supplier andcontract manufacturing agreements, written sales representatives anddistributorship agreements, and customer agreements or arrangements of Sellerrelating to the Product (the “Contracts”) are set forth on Exhibit “A”annexed hereto- Exhibit “A” sets forth all agreements and arrangementswith customers, suppliers, contract manufacturers, sales representatives ordistributors, whether oral or written, concerning the Product, includingcommissions, promotional allowances, rebates, return policies, quantitydiscounts and the like. Sller represents and warrants that all contracts setforth on Exhibit “A” hereto can be transferred and assigned by Seller toBuyer without obtaining the consent of any person or entity.

 

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(c)                                  Copiesof customer, supplier, sales representative and distributor lists,advertisements and ad sheets, artwork, catalog sheets, printing plates,historical data and records of Seller which Buyer determines in good faith,prior to Closing, it needs to carry on the business currently being conductedby Seller with respect to the Assets.

 

(d)                                 Thefinished goods Inventory of Seller related to the Product (as defined inSections 8(i) and 15 hereof).  (“FinishedGoods Inventory” is that inventory which the Seller has on hand as of theclosing date and Buyer will purchase immediately after the closing.  “Manufactured Inventory” is that inventorywhich the Seller will have a post-closing obligation to manufacture pursuant tothe terms and conditions of paragraph 15 hereof.)

 

(e)                                  Theequipment listed on Exhibit “B” hereto (the “Equipment”).

 

3.                                       Closing.The Closing of the transaction provided for in Section 1 shall take placeat the office of Seller’s counsel, Warmuth & Niu, LLP, 400 South AtlanticBlvd., Suite 203, Monterey Park, CA 91754; simultaneously with the execution thereof however, to the extentfeasible, the Closing will be accomplished by facsimile signature and overnightcourier services. When the transaction provided for in Section 1 hereof isclosed pursuant to this Agreement, the purchase of the Assets shall beeffective as of 5:01 pm P.D.T. on October 12, 2004. Any orders unfilled asof 5:01 pm P.D.T. on October 12, 2004, or received after such time anddate shall be turned over to Buyer and filled by Buyer and shall belong toBuyer. For any orders filled by Seller after 5:01 p.m., P.D.T., on October 12,2004, Seller shall on the Closing remit to Buyer the gross amounts received orto be received for such sales less the direct cost of such goods, relatedfreight and related sales commissions.

 

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4.                                       Paymentby Buyer.

 

(a)                                  Asconsideration for all the Assets (excluding the Inventory) and the servicesprovided in Section 14 hereof, Buyer shall pay Seller on the Closing, bycertified check or wire transfer, the sum of Seven Hundred Fifty Thousand Dollars($750,000).

 

(b)                                 Theparties hereto agree that the consideration for the Assets (except for theInventory) shall be allocated as follows: (i) One Hundred Eighty-Seven ThousandFive Hundred Dollars ($187,500) for the technical assistance services specifiedin Section 14(a) hereof, (ii) Two Hundred Fifty Thousand Dollars($250,000) for the market strategy assistant services specified in Section 14(b)hereof, (iii) Two Hundred Fifty Thousand Dollars ($250,000) for thetransitional customer services specified in Section 14(c) hereof, and (iv)Sixty-Two Thousand Five Hundred Dollars ($62,500.00) for the ownershipagreements.  Neither party hereto shallhave any liability to the other party hereto if the allocation of the purchaseprice for such Assets is disallowed by the Internal Revenue Service or anystate or local taxing authority.

 

5.                                       LimitedLiabilities Being Assumed: Accounts Receivable.

 

(a)                                  Onthe Closing, Buyer shall assume the following liabilities, and only thefollowing liabilities of Seller and no other liabilities of Seller:

 

(i)                                     TheContracts provided for in Section 2(b) hereof.

 

(b)                                 Withrespect to the liabilities assumed pursuant to Section 5(a)(i) hereof,Buyer shall assume those contractual liabilities, obligations and commitmentswhich arise after and mature after the Closing and those contractualliabilities, obligations and commitments which arise before the Closing but arepayable or require performance after the Closing as are specifically providedfor herein, and Seller shall be responsible for any liabilities, obligationsand commitments which arise on or before or are payable or require performanceon or before

 

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the Closing orwhich arise before the Closing but are payable or require performance after theClosing (except those specifically assumed herein by Buyer). The agreements setforth in Section 5(a)(i) hereof shall be transferred by Seller to Buyer onClosing.

 

(c)                                  Afterthe Closing, Seller shall hold harmless and indemnify Buyer against any and allliabilities of Seller not being assumed by Buyer pursuant to Section 5(a)hereof and any and all claims of whatever nature or kind against Seller. Afterthe Closing, Buyer shall hold harmless and indemnify Seller against thoseliabilities specifically assumed pursuant to this agreement by Buyer hereunderand no other liabilities.

 

(d)                                 Sellershall be responsible for collecting any of its accounts receivable that remainoutstanding as of the Closing for the Product. If Buyer receives any paymentsfor said accounts receivable owed to Seller, Buyer shall promptly remit suchpayments to Seller. Payments made by customers shall be credited to the oldestoutstanding invoice unless otherwise specified by the customer. Seller shallprovide Buyer with a then current listing of all such accounts receivable atClosing. From and after the date hereof, Buyer shall not, directly orindirectly, enter into any agreement or understanding, written or oral, withSeller’s customers or take any action which may jeopardize or adversely affectSeller’s ability to collect any of its accounts receivable.

 

(e)                                  Sellerwill be responsible for handling all Products it has sold prior to the Closingand which are actually returned to Seller or Buyer within 90 days of the Closing.Buyer will be responsible for handling all other returns of the Product. Buyershall not take any action which would encourage any returns of the Productssold by Seller.

 

(f)                                    Buyershall be responsible for any product liability claims arising from anoccurrence or sales of the Assets after the Closing. Buyer shall add theProduct to its

 

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productliability insurance and name Seller as an additional insured. Seller shallcontinue the Product on its liability insurance for six months after theClosing, and shall thereafter maintain product liability insurance in force asthe contract manufacturer of the product for the Buyer. Buyer shall beresponsible for any liability for the infringement of any Assets it sells afterthe Closing and Buyer shall be responsible for all other infringement claimsrelated to the Assets.

 

(g)                                 Sellershall pay for all co-op advertising or promotional activities, includingredemption of coupons that can be specifically identified as being issued priorto the Closing and which pertain to Product sold prior to the Closing, for alladvertising runs, and for any other marketing expenses incurred prior to theClosing, regardless of when the claim is presented relating to the Product.Seller shall forward to Buyer invoices for advertising or promotions scheduledto run after Closing, and Buyer shall make the payments therefore; provided,however, to the best of Seller’s Knowledge, the advertising and promotionalactivities scheduled to run after Closing, including outstanding coupons, andthe expenses therefore are set forth on Exhibit “C” hereto.Advertising and promotional obligations which are not set forth on Exhibit “C”that benefit Buyer (and the Product) not exceeding Two Thousand Five HundredDollars ($2,500), individually and up to Five Thousand Dollars ***($5,000)***in the aggregate shall bepaid by Buyer and any excess amounts shall be paid promptly by Seller.

 

(h)                                 Atthe Closing, Seller shall fax all unfilled orders for the Product to the Buyer.After the Closing, Seller shall promptly forward by  fax, copies of all orders that it receivesfor the Product. Seller shall promptly fax to Buyer a receiving report for allreturns Seller receives after the Closing.

 

6.                                       InstrumentsofConveyance and Transfer. At the Closing, Seller agrees to deliverto Buyer a Bill of Sale in the form of Annex I hereto for the Assets and anTrademark Assignment for the Product line in the form of Annex II hereto andshall assign to Buyer all

 

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OwnershipAgreements and Contracts which Seller has on hand at the date of Closing andall evidence of Intangibles. Seller shall execute such other instrumentsprepared by Buyer as Buyer may from time to time reasonably request to evidenceBuyer’s title to the Assets, including the Intangibles and rights to OwnershipAgreements and Contracts. Seller shall deliver to Buyer at the Closing, allOwnership Agreements, Contracts and the Intangibles on hand. On the Closing,Seller shall furnish Buyer three gum labels for each active customer (asdefined in Section 8(1)(i) hereof) Buyer will indemnify Seller for anysales tax liability owing to the State of California as a result of thistransaction.

 

7.                                       Useof Name. On and after the Closing, Seller shall cease to use the name ofthe Product and all confusingly similar names throughout the world. Buyer shallnot use any finished goods with labels bearing Seller’s name or trade namebeyond twelve months after the Closing, or until the current inventory ofcomponents is utilized by Buyer. Seller shall license to Buyer its rights touse its name with respect to the sale of inventory included in the Assets inthe ordinary course of business until such time as such inventory has beensold.

 

8.                                       Representationsand Warranties by Seller. Seller hereby represents and warrants that:

 

(a)                                  Seller’sBoard of Directors has authorized the execution, delivery and performance ofthis Agreement by Seller and at the Closing, Seller will deliver a copy of suchauthority to the Buyer, certified by the Secretary of Seller.

 

(b)                                 Sellerhas good and marketable title to all of the Assets in each case subject to nosecurity interest, lien, pledge, restriction, charge, claim or encumbrance andhas the legal authoirty to transfer and convey the Assets free of any suchclaims. Other than as set forth in Exhibit “D” hereto, no consent of anygovernmental authority is required to be obtained on the part of Seller topermit the transactions contemplated by this Agreement.

 

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(c)                                  Otherthan as set forth in Exhibit “D” hereto Seller has good and marketabletitle to all the Assets in each case subject to no security interest, lien,pledge, restriction, charge or encumbrance other than those which will be paidor satisfied at Closing. None of the Assets nor the operation or maintenancethereof, contravenes any administrative regulation or any provision of law insuch a way as to materially and adversely affect the business or properties ofSeller or involves any hazardous materials or waste.

 

(d)                                 Selleris not in default under any Ownership Agreement or Contract and there have beenno claims or defaults and there are no existing facts or conditions which, ifcontinued or upon the giving of notice, will result in any claims or defaultsunder any Ownership Agreement or Contracts.

 

(e)                                  Thereis no pending litigation or product liability claims relating to the Product.

 

(f)                                    Theexecution, delivery and performance by Seller of this Agreement, and theconsummation of the transactions herein contemplated, will not conflict with orresult in the breach or violation of, any judgment, order, writ, injunction ordecree of any domestic court or governmental department, commission, board,bureau, agency, or instrumentality, and Seller is not in default with respectto any such judgment, order, writ, injunction or decree. No governmental agencyhas at any time challenged or questioned the legal right or proposed anyrestriction on the legal right of Seller to produce, manufacture, offer or sellany of its products, including the Product, and services in the present manneror style thereof.

 

(g)                                 Exhibit“E” correctly sets forth a list of all Ownership Agreements, and allpatents, patent applications, copyrights, copyright registrations and

 

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applications,trademarks, trademark registrations and applications, trade names or commercialnames, and any other intangible assets (except for computer programs;industrial models; manufacturing procedures, process and design; assay andcontrol data; and trade secrets, know-how and formulas to manufacture theProduct), both domestic and foreign, presently owned, licensed, possessed, usedor held by Seller (collectively, the “Listed Intangibles”) relating to theProduct. As of the Closing, Seller will transfer to Buyer all ListedIntangibles and all computer programs; industrial models, manufacturingprocedures, process and designs; assay and control data; trade secrets,know-how and formulas presently owned by Seller needed and necessary tomanufacture the Product as they are currently made (the “ManufacturingIntangibles”). Seller owns the entire right, title and interest in and to theListed Intangibles and the Manufacturing Intangibles (collectively the “Intangibles”)and there are no computer programs, industrial models, process and designs,trade secrets and know-how not presently owned by Seller needed and necessaryto manufacture the Product as it is currently made. Except as set forth hereinor on any Exhibit hereto, there are no licenses, sublicenses or grants(including any contractors who manufacture any of the Product) relating to theuse of any of the same which are not owned by Seller and none of them so ownedare being infringed by others or subject to a pending, or threatened challengeof infringement of the rights of others. Seller owns all right, title andinterest in all Intangibles needed and necessary for the manufacture of theProduct, including but not limited to all formulas and know-how to manufacturethe Product. There is no contract manufacturer which has any rights to orownership interest in any Intangibles needed to manufacture the Product. ToSeller’s Knowledge, the conduct of the business of Seller relating to theAssets does not infringe any patent, patent rights, copyright, trademark, tradesecret, trade right, trade name, commercial name, trade secret or otherintangible assets. On the Closing, all Intangibles shall be transferred anddisclosed to Buyer by Seller including those in the possession of manufacturingcontractors.

 

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(h)                                 Selleris not obligated, absolutely or contingently, to anyperson for afinder’s fee, brokerage commission, or other similar payment in connection withthe transactions contemplated by this Agreement, and Seller agrees to indemnifyand hold Buyer harmless from any such payments or claims for such payments madeor threatened.

 

(i)                                     Asexhibited on Exhibit “F” annexed hereto, a physical inventory forthe finished goods of the Product was taken by Seller on dates set forth insuch Exhibit “F.” The finished goods inventory of Seller on Exhibit“F” hereto, does, and the finished goods inventory of Seller on the Closing(the “Inventory”) will, consist of items of quality which are good, usable andsalable in the ordinary course of the business of Seller if Seller had remainedin the business of selling the Inventory, has and will as of the Closing haveexpiration dates of not less than one year from the Closing and is not in anymaterial respect water spotted, torn, physically deteriorated or otherwisedamaged. All of the items included in the finished goods inventory (includingthe Inventory) on the dates such finished goods inventory (including theInventory) was or will be at the Closing the property of Seller. The Inventorypurchased at the Closing shall include only finished goods and shall notinclude work in process, raw materials, labels, display materials, bottles,bottling caps, packaging, shipping cartons and stickers and other supplies andcomponents necessary to manufacture the Product nor any packaging materials andfinished Product. No Inventory of Seller has been placed on consignment.

 

(j)                                     Setforth on Exhibit “G” annexed hereto is a list of all licenses,permits or other authorizations held by Seller from Federal, state or localauthorities (except local business licensees), including the Food and DrugAdministration, and such licenses, permits or other authorizations are the onlyones required by Seller to manufacture, offer and sell the

 

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Product, andto operate Seller’s facilities (or any manufacturing contractor’s facilities)relating to the Product as currently conducted by Seller (and such contractors)to the extent applicable. There is currently no government action relating tothe Product, nor was there any government action for the five (5) yearspreceding the date of Closing.

 

(k)                                  Sellerwill pay all of its own expenses whether or not the transactions contemplatedhereto are consummated. Seller will pay all income, franchise, payroll, salesand all other taxes arising out of Seller’s operations prior to and subsequentto Closing.

 

(l)                                     Attachedas (i) Exhibit “H” hereto is a list of active wholesale customers(customers who purchased any Product on or after January 1, 2003), (ii) Exhibit“I” hereto sets is a list of wholesale customers for the Product since January 1,2002, but who have not purchased products after December 31, 2002, (iii) Exhibit“J” hereto are the customers who do not pay the full list price for theProduct and (iv) Exhibit “K” hereto are lists of (A) each currentsupplier for components of the Product, including individual names and a copyof the last invoice and (B) all previous suppliers since January 1, 2002.

 

9.                                       Definitionsof Knowledge. References herein to “Seller’s or Buyer’s Knowledge” or “tothe Knowledge of Seller or Buyer” or similar references shall mean informationactually known by an officer of Seller or Buyer, as the case may be, with dueinquiry.

 

10.                                 Representationsand Warranties by Buyer.

 

(a)                                  Buyeris a corporation duly organized, validly existing and in good standing underthe laws of the State of New York and has all the requisite power and authorityto own its properties as presently owned and to carry on its business as nowconducted.

 

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(b)                                 Buyer’sBoard of Directors, if necessary, has authorized the execution, delivery andperformance of this Agreement.

 

(c)                                  ThisAgreement constitutes a legal, valid and binding obligation of Buyerenforceable against it in accordance with its terms.

 

(d)                                 Buyeris not obligated, absolutely or contingently, to any person for a finder’s fee,brokerage commission, or other similar payment in connection with thetransactions contemplated hereto this Agreement, and Buyer agrees to indemnifyand hold Seller harmless from any such claims for such payments made orthreatened.

 

(e)                                  Buyerwill pay all of its own expenses whether or not the transactions contemplatedhereto are consummated. Buyer will pay all income, franchise, payroll, salesand all other taxes relating to the sale of the Product subsequent to theClosing. Any applicable state, county or city sales and transfer taxes for thesale of the Assets shall be paid by Buyer.

 

(f)                                    ToBuyer’s knowledge, the execution and delivery by Buyer of this Agreement, andthe performance by Buyer of this Agreement and the consummation of thetransactions herein contemplated, will not conflict with, or result in a breachof the terms of, or constitute a default under or violation of, any law orregulation of any domestic governmental authority, or the Articles orCertificate of Incorporation or By-Laws of Buyer or any material agreement orinstrument to which Buyer is a party or by which Buyer is bound or to which itis subject, nor will it give to others any interests or rights, includingrights or termination, acceleration or cancellation, in or with respect to anyof the properties, assets, agreements, contracts or business of Buyer. To Buyer’sknowledge no consent of any governmental authority is required to be obtainedon the part of Buyer to permit the transactions contemplated by this Agreement.

 

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(g)                                 ToBuyer’s knowledge, the execution, delivery and performance by Buyer of thisAgreement, and the consummation of the transactions herein contemplated, willnot conflict with or result in the breach or violation of, any judgment, order,writ, injunction or decree of any domestic court or governmental department,commission, board, bureau, agency, or instrumentality, and Buyer is not indefault with respect to any such judgment, order, writ, injunction or decree.

 

11.                                 Expensesof Proceedings. In the event that any party hereto brings any type ofproceeding to enforce the terms and conditions of this Agreement or any Exhibithereto, the prevailing party in such proceeding shall be entitled to recoverfrom the unsuccessful party all reasonable attorneys’ fees and actualout-of-pocket costs incurred by said prevailing party.

 

12.                                 Non-Disclosure.Seller shall not disclose any records relating to the Product post-closing,except as required by law, including the rules and regulations of theSecurities and Exchange Commission, and except to its employees, attorneys andaccountants.

 

13.                                 PublicDisclosure. Buyer and Seller agree not to make or cause to be made, whetherorally or in writing or otherwise, any public announcement or disclosure withrespect to the transactions contemplated by this Agreement or any of theprovisions of this Agreement without prior written approval, which approvalshall not be unreasonably withheld, conditioned or delayed, by the otherparties hereto of the form and content of such announcement or disclosure andexcept as may be required by the rules and regulations of the Securities andExchange Commission.

 

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14.                                 Servicesby Seller.

 

(a)                                  Forthree years after the Closing, Seller shall provide to Buyer technicalassistance services relating to manufacturing of the Product, as set forth inthe Technical Assistance Agreement in the form of Annex III hereto.

 

(b)                                 Forthree years after the Closing, Seller shall provide to Buyer services relatingto the development of a marketing strategy for the Product, as set forth in theMarketing Strategy Assistance Agreement in the form of Annex IV hereto.

 

(c)                                  Forfour years after the Closing, Seller shall provide to Buyer services relatingto transitioning customers for the Product from Buyer to Seller, as set forthin the Transitional Customer Service Agreement in the form of Annex V hereto.

 

15.                                 Saleof Manufactured Inventory.

 

(a)                                  Selleragrees to supply Buyer with Nose Better gel and spray finished goodsrepresenting approximately two (2) years usage as defined by the unit movementfor the 12 months ended July 31, 2004. For Nose Better gel, that number is 69,626 units; for Nose Better spray,that number is 25,547 units.  In October 2004,Seller will provide approximately six months worth of finished goods.  Upon six weeks’ notice, Seller will provideadditional finished goods as needed in minimum orders of 12,000 units of NoseBetter gel and 6,000 units of Nose Better spray.  After 139,252 units of gel and 51,094 unitsof spray have been delivered, Seller will have no obligation to manufacture anyadditional goods.   The fixed price(F.O.B. So. El Monte, CA) per unit is shown on Exhibit “L”.  After the first two initial shipments offinished goods, Seller will then sell its Nose Better packaging raw materialsto Buyer that are brand specific to Nose Better:   bottles, tubes, caps, labels, kit boxes,instruction sheets, etc., at Seller’s landed cost.  After the first two shipments, the fixedprice will then be adjusted downward to reflect the raw

 

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materialsbeing provided from Buyer’s inventory, which will be stored by Seller at nocharge.  Seller will be invoicing Buyerfor the remaining items which are provided by Seller, including, but notlimited to, chemicals, labor and non-brand specific packaging items such asziplock bags and corrugated shippers. This price can be found on Exhibit “L”.

 

(b)                                 Onthe Closing, Seller shall sell to Buyer all items of Inventory of Seller onhand at the Closing and all items of Inventory owned by Seller and not on handon the Closing, and Buyer shall purchase from Seller all such Inventory on theClosing, provided, however, that the Inventory shall comply with Section 8(i)hereof.

 

(c)                                  Buyer,at Buyer’s expense and with Seller’s cooperation, shall arrange to pick up andremove all Inventory from Seller’s premises (or such other location where suchitems are located) promptly after Closing. Seller shall cause and pay for thereasonable loading of the Inventory on to Buyer’s trucks or trucks of a commoncarrier selected by Buyer. Title to the Assets shall be assumed to have passedupon the Closing, and upon Closing Buyer shall insure the Assets.

 

(d)                                 Fora period not to exceed thirty (30) days or until shipped to Buyer, whichever isless, Seller shall warehouse at no cost to Buyer the Inventory and Equipmentacquired pursuant to this Section 15 at the Closing. After the earlier of(i) said thirty (30) days or (ii) shipment to Buyer, Seller shall have nofurther warehousing obligations; provided, however, that if Seller undertakesany additional warehouse storage on Buyer’s behalf, Buyer shall be liable forthe direct costs of such warehousing plus a fifteen percent (15%) service fee.

 

(e)                                  Uponreceipt of the Product by Buyer, Buyer shall conduct a physical count of theInventory as of the Closing. Within fifteen (15) days after the receipt of the

 

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Inventory,Buyer shall make or cause to be made a calculation of the Inventory Amount ofeach component of the Inventory of the Product as of the Closing (the “Calculation”).The Calculation shall be made by appropriate accounting personnel in accordancewith generally accepted accounting principles applied consistently with Seller’spast practice and using the values set forth in Section 15(b) hereof Buyershall promptly provide Seller with a copy of the Calculation and all workpapers associated therewith.

 

(f)                                    If  Seller disagrees with all or any part of theCalculation, Seller shall have the right to notify Buyer of such disagreementand its reasons for so disagreeing, in which case Seller and Buyer shallattempt to resolve the disagreement. If within ten (10) days after the deliveryof the Calculation and all work papers associated therewith to Seller, Sellerand Buyer are unable to resolve the differences, if any, arising as a result ofthe Calculation, they or either of them shall submit a statement of allunresolved differences together with copies of the Calculation to a mutuallyagreed-upon independent certified public accounting firm (the “Accountants”)for a binding and nonappealable determination to be rendered within thirty (30)days after such submission. All fees and expenses of the Accountants incurredin this capacity shall be billed to and shared by Seller and Buyer equally.

 

(g)                                 Forthirty days after the second yearly anniversary of the Closing, Buyer can buyany and all raw material Seller has on hand for the Product at Seller’s actuallanded cost of such material FOB South El Monte, California. If Buyer is goingto exercise its right to buy such raw material, it shall notify Seller inwriting immediately prior to the second yearly anniversary of the Closing. Theprovisions of Section 15(d), (e), and (f) shall apply to any such purchaseand the full purchase price for such materials shall be paid within 30 days ofthe determination of the purchase price.

 

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16.                                 Notices.All notices and other communications hereunder shall be in writing arid shallbe deemed to have been duly given when received, if mailed, first class andcertified or registered, postage prepaid or sent by telefax, Federal Express oranother air courier service for next business day delivery which requires arecipient, addressed to the party for whom they are intended at the fo1lowingaddresses:

 

(a)                                  If to Buyer:

 

THE WOOLFOAM CORPORATION

3000 Hempstead Turnpike

Levittown, NY 11756

Attention:  Robin S. Stessel,President

Telefax:  (516) 731-5607

 

with a copyto:

 

Mark R. Blaustein, Esq.

Blaustein & Weinick, Esqs.

1205Franklin Avenue, Suite 340

GardenCity, New York  11530

Telefax:  (516) 248-5839

 

(b)                                 If to Seller:

 

LEE PHARMACEUTICALS, INC.

1434 Santa Anita Avenue

South El Monte, California 91273

Attn:  Ronald G. Lee, President

Telefax:  (626) 575-0513

 

with a copy to:

 

Scott Warmuth, Esq.

Warmuth & Niu, LLP

400 S. Atlantic Blvd., Suite 203

Monterey Park, California 91754

Telefax:  (626) 284-7186

 

Such names,addresses, telefaxes may be changed by written notice, as described in this Section 16.

 

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17.                                 EntireAgreement and Amendments. This Agreement, including the Exhibits andcertificates referred to herein which are a part hereof, contains the entireunderstanding of the parties hereto with respect to the subject mattercontained herein and may be amended or terminated only by a written instrumentexecuted by Seller and Buyer or their respective legal representatives,successors or permitted assigns. The Section headings contained in thisAgreement are for reference and convenience only and shall not be used in theinterpretation of this agreement.

 

18.                                 GoverningLaw. This Agreement shall be construed in accordance with the laws of theState of California, without regard to conflicts of law.

 

19.                                 Partiesin Interest. This Agreement shall inure to the benefit of and be bindingupon Seller and Buyer, and their respective successors and permitted assigns.

 

20.                                 NoMerger. This Agreement and all Exhibits and Annexes hereto shall survivethe closing and remain in fill force and effect under their respective terms.

 

21.                                 Facsimile.Execution. Execution of this Agreement or any Exhibits hereto shall be deemedbinding upon the party executing this Agreement or such Exhibits andnotwithstanding that delivery of the executed document may be by facsimiletransmission. Any party shall be entitled to rely on a faxed execution copy ofthis Agreement and such Exhibits with the same force and effect as if anoriginally inked execution copy were delivered. Inked original documents shallbe delivered to the other parties by Federal Express within three business dayof the facsimile transmission.

 

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N WITNESSWHEREOF, the parties hereto have duly executed this Agreement as of the datefirst written above.

 
|   | LEE  PHARMACEUTICALS, INC. |
|--------|----------------------------|
|   | a California  corporation  |
|   |                       |
|   |                       |
|   | By:                        | RONALD G.  LEE |   |
|   |                       | RONALD G.  LEE, President |
|   |                       |
|   |                       |
|   | THE WOOLFOAM  CORPORATION  |
|   | a New York  corporation    |
|   |                       |
|   |                       |
|   | By:                        | ROBIN  STESSEL |   |
|   |                       | ROBIN S.  STESSEL, President |
|        |                            |  |  |  |  |

 

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EXHIBITS

 
| A -            |   | Contracts                       |
|----------------|--------|---------------------------------|
|           |   |                            |
| B -            |   | Equipment                       |
|           |   |                            |
| C -            |   | Advertising                     |
|           |   |                            |
| D -            |   | Governmental  Orders,           |
|           |   | Security  Interest, Etc.        |
|           |   |                            |
| E -            |   | Ownership Agreement and Patents |
|           |   |                            |
| F -            |   | Inventory                       |
|           |   |                            |
| G*** ***- |   | Licenses                        |
|           |   |                            |
| H -            |   | Customers                       |
|           |   |                            |
| I -            |   | Former Customers                |
|           |   |                            |
| J -            |   | Special Pricing                 |
|           |   |                            |
| K.             |   | List of Suppliers               |
|           |   |                            |
| L.             |   | Two-Year Supply Agreement       |

 

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ANNEX

 
| I.     |   | Bill of Sale                             |
|--------|--------|------------------------------------------|
|   |   |                                     |
| II.    |   | Assignment                               |
|   |   |                                     |
| III.   |   | Technical  Assistance Agreement          |
|   |   |                                     |
| IV.    |   | Marketing  Strategy Assistance Agreement |
|   |   |                                     |
| V.     |   | Transitional  Customer Service Agreement |

 

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