-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QBrWBrxDGZRgT8HP07y6KktH1AlZmLvMbplpfh+CpA+IRkH9wTiDdWiMpcmeyUYa OD85YUOfo9bisIqHSpHqSw== 0000936392-04-000877.txt : 20041209 0000936392-04-000877.hdr.sgml : 20041209 20041209132643 ACCESSION NUMBER: 0000936392-04-000877 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20041209 DATE AS OF CHANGE: 20041209 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PLANET TECHNOLOGIES, INC CENTRAL INDEX KEY: 0000896861 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 330502606 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-49423 FILM NUMBER: 041192684 BUSINESS ADDRESS: STREET 1: 9985 BUSINESS PARK AVE STE A CITY: SAN DIEGO STATE: CA ZIP: 92131 BUSINESS PHONE: 8585495130 MAIL ADDRESS: STREET 1: 9985 BUSINESSPARK AVE STREET 2: STE A CITY: SAN DIEGO STATE: CA ZIP: 92131 FORMER COMPANY: FORMER CONFORMED NAME: PLANET POLYMER TECHNOLOGIES INC DATE OF NAME CHANGE: 19950516 FORMER COMPANY: FORMER CONFORMED NAME: PLANET POLYMER TECHNOLOGY INC DATE OF NAME CHANGE: 19950511 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Fosberg J Roberts CENTRAL INDEX KEY: 0001310882 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: BUSINESS PHONE: 707-433-4031 MAIL ADDRESS: STREET 1: 2440 TOYON ROAD CITY: HEALDSBURB STATE: CA ZIP: 95448 SC 13D 1 a03910sc13d.htm SCHEDULE 13D Planet Technologies, Inc.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. )*

Planet Technologies, Inc.
(Name of Issuer)

Common Shares, no par value
(Title of Class of Securities)

727044 20 8
(Cusip Number)

J. Roberts Fosberg
2440 Toyon Road
Healdsburg, California 95448
(858) 824-0888
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

November 30, 2004
(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

Persons who respond to the collection of information contained in this form are not
required to respond unless the form displays a currently valid OMB control number.

SEC 1746 (11-03)

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CUSIP No. 727044 20 8
  1. Name of Reporting Person:
J. Roberts Fosberg		 I.R.S. Identification Nos. of above persons (entities only):
  2. Check the Appropriate Box if a Member of a Group (See Instructions):
    (a) x  
    (b) o  
  3. SEC Use Only:
  4. Source of Funds (See Instructions):
OO
  5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e): o
  6. Citizenship or Place of Organization:
United States
Number of
Shares
Beneficially
Owned by
Each Reporting
Person With
7. Sole Voting Power:
158,382
8. Shared Voting Power:
0
9. Sole Dispositive Power:
158,382
10.Shared Dispositive Power:
0
  11.Aggregate Amount Beneficially Owned by Each Reporting Person:
158,382
  12.Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions):
o
  13.Percent of Class Represented by Amount in Row (11):
8.3%
  14.Type of Reporting Person (See Instructions):
IN

TABLE OF CONTENTS

Item 1. Security and Issuer
Item 2. Identity and Background
Item 3. Source and Amount of Funds or Other Consideration
Item 4. Purpose of Transaction
Item 5. Interest in Securities of the Issuer
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
Item 7. Material to be Filed as Exhibits
SIGNATURE
EXHIBIT 1
EXHIBIT 2

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Item 1. Security and Issuer

     This statement on Schedule 13D (this “Statement”) relates to the common stock, no par value (the “Common Shares”), of Planet Technologies, Inc., a California corporation (“Planet” or the “Company”). The principal executive offices of Planet are located at 6835 Flanders Drive, Suite 100, San Diego, California 92121.

Item 2. Identity and Background

     (a) J. Roberts Fosberg (“Reporting Person”)

     (b) 2440 Toyon Road, Healdsburg, California 95448

     (c) Retired

     (d) During the last five years, the Reporting Person has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

             (e) During the last five years, the Reporting Person has not been party to a civil proceeding of a judicial or administrative body of competent jurisdiction which resulted in a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities law or finding any violations with respect to such laws.

     (f) United States.

Item 3. Source and Amount of Funds or Other Consideration

     The common stock shares of Planet were issued to the Reporting Person as consideration for his interest in Allergy Free, LLC, and pursuant to that Asset Purchase Agreement entered into by Planet and Allergy Free as of November 30, 2004, wherein Planet acquired the assets of Allergy and assumed certain of the liabilities of Allergy Free.

Item 4. Purpose of Transaction

     The Reporting Person has not formulated any plans, proposals or otherwise that relate to or would otherwise result in any matter required to be disclosed pursuant to paragraphs (a) through (j) of Item 4 of Schedule 13D.

Item 5. Interest in Securities of the Issuer

     (a) The Reporting Person beneficially owns 158,382 shares of common stock of Planet, or Eight & 3/10th Percent (8.3%) of the total outstanding common stock of Planet.

1

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     (b) The Reporting Person has the sole power to vote and dispose or direct the disposition of all 158,382 shares of common stock of Planet.

     (c) Other than the transaction reported on this Schedule 13D, the Reporting Person has not effected any transaction in shares of the common stock of Planet during the preceding 60 days.

     (d) No other person is known to have the right to receive the power to direct the receipt of dividends from, or proceeds from the sale of, such securities.

     (e) Not applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

     Shares were issued pursuant to the terms of the Asset Purchase Agreement. The Reporting Person is entitled to the rights of the holder of securities under the Registration Rights Agreement dated November 30, 2004.

Item 7. Material to be Filed as Exhibits

     Exhibit 1. Asset Purchase Agreement, and amendments thereto, between Planet and Allergy Free effective November 30, 2004.

     Exhibit 2. Registration Rights Agreement between Planet and Allergy Free dated November 30, 2004.

2

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SIGNATURE

     After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete, and correct.
         
  REPORTING PERSON:
 		  
Date: December 9, 2004  By:   /s/ J. Roberts Fosberg    
    J. Roberts Fosberg   
       
 

Attention: Intentional misstatements or omissions of fact constitute Federal criminal violations (See 18 U.S.C. 1001)

3

EX-1 2 a03910exv1.txt EXHIBIT 1 Exhibit 1 ASSET PURCHASE AGREEMENT DATED AS OF MARCH 18, 2004 BY AND AMONG PLANET POLYMER TECHNOLOGIES, INC. AND ALLERGY FREE, LLC ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT, dated as of March 18, 2004, (this "Agreement"), by and between Planet Polymer Technologies, Inc., a California corporation ("Purchaser"), and Allergy Free, LLC, a California limited liability company ("Seller"). R E C I T A L S WHEREAS, Seller is engaged in the business of designing, manufacturing, selling and distributing consumer products for use by allergy sensitive persons, including, without limitation, air filters, bedding and similar products (the "Seller Business"); WHEREAS, Purchaser is engaged in the business of developing and licensing unique hydrosoluable polymer and biodegradable materials in the fields of agricultural and industrial manufacturing (the "Purchaser Business"); WHEREAS, Seller desires to sell, and Purchaser desires to purchase, all of the assets, properties and rights relating to the Seller Business, other than the Excluded Assets (as defined below), pursuant to this Agreement. A G R E E M E N T NOW, THEREFORE, in reliance on the representations and warranties and agreements and subject to the terms and conditions hereinafter set forth, the parties hereby agree as follows: 1. DEFINITIONS. The following terms, as used herein, have the following meanings: "Accounts Receivable" shall mean the Seller Accounts Receivable or the Purchaser Accounts Receivable as the context requires, consistent with the meaning ascribed to such term in Section 2(i). "Acquisition" shall mean the transaction contemplated by this Agreement. "Acquisition Date" will have the meaning ascribed to such term in Section 4(d). "Affiliate" means, with respect to any Person, a Person directly or indirectly controlling, controlled by or under common control with the Person, through the ownership of all or part of the Person. "Agreement" will have the meaning ascribed to such term in the Preamble. "Applicable Law" means any domestic or foreign, federal, state or local statute, law, common law, ordinance, policy, guidance, rule, administrative interpretation, regulation, order, writ, injunction, directive, judgment, decree, permit or other requirement of any Governmental Authority. "Arbitrator" will have the meaning ascribed to such term in Section 5(b). "Assets" shall mean the Seller Assets or the Purchaser Assets as the context requires, consistent with the meaning ascribed to such term in Section 2. "Assumed Liabilities" will have the meaning ascribed to such term in Section 3. "best knowledge" or "to the best of knowledge" a Person will be deemed to have knowledge of a particular fact or other matter if: (i) that Person is actually aware of that fact or matter; or (ii) a prudent Person could be expected to discover or otherwise become aware of that fact or matter in the course of conducting an investigation regarding the accuracy of any representation or warranty contained in this Agreement. "Business" shall mean the Seller Business or the Purchaser Business as the context requires. "Business Day" means a day of the week (but not a Saturday, Sunday, or holiday) on which banking institutions in San Diego are open. All references to "days" in this Agreement will be to calendar days unless specifically referenced as a Business Day. "Change of Control" means (i) the acquisition, directly or indirectly, by any person, entity or group (within the meaning of Section 13(d)(3) of the Exchange Act) of the beneficial ownership of securities or more than fifty percent (50%) of the total combined voting power of all outstanding securities of Purchaser; (ii) a merger or consolidation in which Purchaser is not the surviving entity, except for a transaction in which the shareholders immediately prior to such merger or consolidation hold, in the aggregate, securities possessing more than fifty percent (50%) of the total combined voting power of all outstanding voting securities of the surviving entity immediately after such merger or consolidation; (iii) a reverse merger in which Purchaser is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of all outstanding voting securities of Purchaser are transferred to or acquired by a Person different from the shareholders of Purchaser immediately prior to such merger; or (iv) the sale, license, transfer and/or other disposition (in one transaction or a series of related transactions) of all or substantially all of the assets of Purchaser. "Closing" will have the meaning ascribed to such term in Section 4(d). "Closing Balance Sheet" shall mean a balance sheet of Seller as of the Acquisition Date prepared in accordance with GAAP (other than normal year-end adjustments) delivered by Seller to Purchaser. "Code" means the Internal Revenue Code of 1986 as amended, and the Treasury Regulations promulgated thereunder. "Confidential Information" means all nonpublic information respecting Purchaser or its Affiliate's business including, but not limited to, the Business and the products, research and development, processes, customer lists, marketing plans and strategies of Purchaser or its Affiliates, whether or not relating to the Business. Confidential Information does not include information that is, or becomes, available to the public unless such availability occurs through an unauthorized act on either Member's part. "Consideration Allocation" will have the meaning ascribed to such term in Section 4(c). "Contracts" shall mean the Seller Contracts or the Purchaser Contracts as the context requires, consistent with the meaning ascribed to such term in Section 2(h). "Copyrights" means all of the following: (i) all copyrights, all registrations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United States Copyright Office or in any similar office or agency of the United States, any State or territory thereof, or any other country or any political subdivision thereof, and (ii) all reissues, extensions or renewals thereof. "Damages" means all demands, claims, actions or causes of action, assessments, losses, damages, costs, expenses, liabilities, judgments, awards, fines, sanctions, penalties, charges and amounts paid in settlement, including (i) interest on cash disbursements in respect of any of the foregoing at a rate of five percent (5%) per annum from the date each such cash disbursement is made until the Person incurring the same is indemnified in respect thereof, and (ii) reasonable costs, fees and expenses of attorneys, accountants and other agents of the Person. "directly or indirectly" means as an individual, general partner, limited partner, shareholder, member, officer, director, principal, agent, employee, consultant, advisor or in any other relationship or capacity. "Environmental Laws" will have the meaning ascribed to such term in Section 6(r)(i). "Equipment" means all machinery and equipment, including processing equipment, conveyors, machine tools, tools, tooling, data processing and computer equipment, including embedded software and peripheral equipment and all engineering, processing and manufacturing equipment, office machinery, furniture, materials handling equipment, tools, attachments, accessories, automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other equipment of every kind and nature, trade fixtures and fixtures not forming a part of real property, together with all additions and accessions thereto, replacements therefor, all parts therefor, all substitutes for any of the foregoing, fuel therefor, and all manuals, drawings, instructions, warranties and rights with respect thereto, and all products and proceeds thereof and condemnation awards and insurance proceeds with respect thereto. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Excluded Assets" will have the meaning ascribed to such term in Section 2. "Excluded Liabilities" will have the meaning ascribed to such term in Section 3. "FDA" means the Food and Drug Administration. "Financial Statements" will have the meaning ascribed to such term in Section 6(d)(i). "Fixed Assets" will have the meaning ascribed to such term in Section 2(b). "Fraud" means any fraud, misrepresentation, theft, embezzlement, dishonesty or moral turpitude. "GAAP" means generally accepted accounting principles as applied on a consistent basis. "Governmental Authority" means any foreign or domestic, federal, territorial, state or local governmental authority, instrumentality, court, government commission, tribunal or organization, or any regulatory, administrative or other agency, including the FDA, or any political or other subdivision, department or branch of any of the foregoing. "Hazardous Substances" means any substance, material or waste that is regulated by any Governmental Authority, including, without limitation, (i) petroleum; (ii) asbestos; and (iii) any material or substance that is defined as a "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste," or "restricted hazardous waste" under any provision of any Applicable Law, including, without limitation, Section 307 and Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq. (33 U.S.C. Sections 1317, 1321), Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 6903), and Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq. (42 U.S.C. Section 9601). "Indemnified Party" will have the meaning ascribed to such term in Section 14(b). "Indemnifying Party" will have the meaning ascribed to such term in Section 14(b). "Independent" means a person who is not and never has been an officer, director, employee, or equity owner or either party or any Affiliate of either party. "Intangible Property" will have the meaning ascribed to such term in Section 2(c). "Intellectual Property" will have the meaning ascribed to such term in Section 6(j) and 7(k). "Inventory" will have the meaning ascribed to such term in Section 2(a). "IRS" means the Internal Revenue Service. "Issued and Outstanding Stock" shall mean the issued and outstanding shares of Purchaser's common stock as of the Acquisition Date, plus any options, warrants or other rights to acquire common stock of Purchaser, or any stock or instrument convertible into common stock of Purchaser, at a price per common share of less than $1.00, subject to any applicable adjustments. "Know-how" will have the meaning ascribed to such term in Section 2(d). "Letter of Credit Rights" means rights to payment or performance under a letter of credit, whether or not Seller, as beneficiary, has demanded or is entitled to demand payment or performance. "Liability" or "Liabilities" means, with respect to any Person, any liability or obligation of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise and whether or not the same is required to be accrued on the financial statements of the Person or is disclosed on any Schedule or Exhibit hereto. "License" means any rights under any written agreement owned or acquired by a party granting any right (i) to use any Copyright or Copyright registration; (ii) any right with respect to any invention on which a Patent is in existence; (iii) to use any Trademark; or (iv) any other license of rights or interests held or acquired by such party. "Liens" means any security interests, liens, pledges, charges, options, rights of first refusal, encumbrances, claims or other third party rights of any kind. "Material Adverse Effect" means a change in, or effect on, the operations, affairs, condition (financial or otherwise), results of operations, assets, properties, Liabilities, earnings, prospects, reserves or any other aspect of the Business that results in a material adverse effect on, or a material adverse change in the Assets or the Business. "Member" or "Members" shall mean the members of Seller. "Patents" means all of the following in which either party holds any interest: (i) all letters patent of the United States or of any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or of any other country, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State or territory thereof, or any other country, and (ii) all reissues, continuations, continuations-in-part or extensions thereof. "Permit" will have the meaning ascribed to such term in Section 6(n)(iv). "Person" means an individual, corporation, partnership, joint venture, trust, limited liability company or other business entity. "Private Stock" means shares of Purchaser's unregistered common stock, issued to Seller. "Proceeding" or "Proceedings" means any lawsuit, claim, hearing, arbitration, proceeding (public or private), governmental investigation, or legal, administrative or other action. "Proprietary Information" will have the meaning ascribed to such term in Section 2(e). "Purchaser" will have the meaning ascribed to such term in the Preamble. "Purchaser Indemnitees" will have the meaning ascribed to such term in Section 12. "Purchaser's Documents" will have the meaning ascribed to such term in Section 7(b). "Purchaser SEC Reports" will have the meaning ascribed to such term in Section 7(e). "Reference Balance Sheet" will have the meaning ascribed to such term in Section 6(d)(i). "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Seller" will have the meaning ascribed to such term in the Preamble. "Seller's Documents" will have the meaning ascribed to such term in Section 6(a). "Stock Price" shall mean $.06 per share of Purchaser's common stock and where applicable adjusted to reflect the Reverse Stock Split. "Subordinated Convertible Note" will have the meaning ascribed to such term in Section 4(b) and shall be in the form and content of Exhibit "A" attached hereto and incorporated herein by reference. "Subsidiary" means, with respect to any Person, (i) any corporation in which such Person, then owns stock possessing more than fifty percent (50%) of the total combined voting power of all classes of stock, (ii) any partnership in which such Person is a general partner or (iii) any limited liability company, partnership or other entity in which such Person possesses a fifty percent (50%) or greater interest in the total capital or total income of such limited liability company, partnership or other entity. "Tax" or "Taxes" means any taxes, fees, levies, duties, tariffs, imposts, and governmental impositions or charges of any kind in the nature of (or similar to) taxes, payable to any taxing authority, including any Governmental Authority and any taxing agency thereof, including, without limitation, (i) any federal, state, local or foreign net income tax, alternative or add-on minimum tax, profits or excess profits tax, franchise tax, gross income, adjusted gross income or gross receipts tax, employment related tax (including employee withholding or employer payroll tax, FICA or FUTA), real or personal property tax or ad valorem tax, sales and use tax, excise tax, stamp tax or duty, any withholding or back up withholding tax, value added tax, severance tax, prohibited transaction tax, premiums tax, environmental tax, intangibles tax, occupation tax, net worth tax, estimated tax, transfer and gains tax, (ii) any interest or any penalty, addition to tax or additional amount imposed by any Governmental Authority responsible for the imposition of any such tax, and (iii) any liability with respect to the foregoing as a result of being a member of any affiliated, consolidated, combined, unitary, or similar group, as a result of any transferee liability in respect of the foregoing, as a result of any agreement or otherwise by operation of law. "Tax Returns" mean any return, report, form or other information filed or required to be filed with the IRS or any other federal, foreign, state local, provincial taxing authority with respect to any Tax, including any claim for refund of Taxes and any amendments or supplements of any of the foregoing. "Trademarks" means all of the following owned, adopted or acquired by a Party: (i) all trademarks, trade names, corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof; (ii) all reissues, extensions or renewals thereof; and (c) all goodwill associated with or symbolized by any of the foregoing. 2. PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions of this Agreement, Seller agrees to sell, transfer, convey, assign, and deliver to Purchaser, and Purchaser agrees to purchase, all of the business assets, properties, real or personal, and rights of every nature, kind and description, tangible and intangible, as reflected on the Closing Balance Sheet used or useable in the Seller Business, owned by, leased by, or in the possession of the Seller (the "Assets"), except that the Assets shall not include any of the assets set forth on Schedule 2 hereto (the "Excluded Assets") all of which shall be retained by Seller and shall not be sold or conveyed to Purchaser hereunder. Without limiting the generality of the preceding sentence, the Assets include the following: (a) Inventory, wherever located, used or useable in the Business (the "Inventory") consisting of inventory, merchandise, goods and other personal property that are held by or on behalf of Seller for sale or lease or are furnished or are to be furnished under a contract of service, or that constitute raw materials, work in process, finished goods, returned goods, or materials or supplies of any kind, nature or description used or consumed or to be used or consumed in Seller's business or in the processing, production, packaging, promotion, delivery or shipping of the same, including all supplies and embedded software; (b) Fixed and other physical assets, wherever located, used or useable in the Business consisting of Equipment, and fixtures ("Fixed Assets"); (c) All Patents, Copyrights and Trademarks used or useable in the Business, and all agreements of any nature whatsoever with respect to any of the foregoing (the "Intangible Property"), including, without limitation, the rights to all brand names; (d) All inventions, discoveries, improvements, computer software, data, skill, expertise, procedures and processes used or useable in the Business and owned by Seller and all agreements of any nature whatsoever with respect thereto (the "Know-how"); (e) All other trade secrets and proprietary information relating to the Business, including customer lists, market surveys and all agreements of any nature whatsoever with respect thereto (the "Proprietary Information"); (f) All right, title and interest of Seller in and to Licenses, transferable permits, exemptions, approvals, franchises and privileges relating to the Business to the extent transferable under Applicable Law; (g) All books, records, accounts, correspondence and other information which has been reduced to writing relating to or arising out of the Business, including accounting records, legal records, technical information and manuals, designs, blueprints, models, drawings, specifications, patterns and any computer record of any of the foregoing; (h) All of Seller's claims and rights under all leases, contracts, agreements, and purchase and sales orders, whether written or oral, relating in any manner to the Business including, without limitation, those set forth on Schedule 6(k) hereto (collectively, the "Contracts"); (i) All accounts owned or acquired by Seller including, accounts receivable, notes and notes receivable, other receivables, book debts and other forms of obligations to Seller and Letter of Credit Rights relating to the Business ("Accounts Receivable"); (j) All prepaid items, deposits, bank accounts, certificated securities, all certificates of deposit, and all promissory notes and other evidences of indebtedness and other similar assets relating to the Business; (k) All interests in partnerships, joint ventures and other business associations relating to the Business; (l) All rights of Seller under express or implied warranties from the suppliers of Seller with respect to the Assets to the extent transferable under Applicable Law; (m) All proceeds under insurance policies (excluding proceeds under insurance policies that relate to Excluded Assets or Excluded Liabilities) ; (n) All of Seller's claims and causes of action against others relating to the Business (except to the extent related to the Excluded Assets or Excluded Liabilities); and (o) All goodwill associated with the Business or Assets, together with the right to represent to third parties that Purchaser is the successor to the Business. 3. ASSUMED LIABILITIES; EXCLUDED LIABILITIES. Except for the liabilities of Seller relating to the Business set forth on Schedule 3 (the "Assumed Liabilities"), which Purchaser agrees to assume, Purchaser does not assume, agree to perform or discharge, indemnify Seller against, or otherwise have any responsibility for Liabilities of Seller, whether fixed or contingent, known or unknown, matured or unmatured, liquidated or unliquidated, secured or unsecured, and whether arising prior to, on or after the date hereof (collectively, the "Excluded Liabilities"). Without limiting the generality of the preceding sentence, the Excluded Liabilities include the following: (a) Any Liability of Seller arising out of or relating to products of Seller to the extent sold on or prior to the Acquisition Date except as set forth on Schedule 6(t); (b) Any Liability of Seller under any Contract that arises after the Acquisition Date, but that arises out of any breach thereof by Seller that occurred on or prior to the Acquisition Date; (c) Any Liability for Taxes of Seller or any Member, including (i) any Taxes arising as a result of Seller's operation of the Business or ownership of the Assets occurring on or prior to the Acquisition Date, (ii) any Taxes that will arise as a result of the sale of the Assets pursuant to this Agreement except as otherwise expressly provided in Section 8(e), and (iii) any deferred Taxes of any nature; (d) Any Liability arising out of or relating to obligations owed to Members or Seller's credit facilities or any security interest related thereto except as set forth on Schedule 3(d); (e) any Liability resulting from the failure to comply with any Environmental Law by Seller arising out of or relating to the operation of the Business or Seller's leasing or operation of real property occurring on or prior to the Acquisition Date; (f) Any Liability under any employment, severance, retention or termination agreement of Seller with any employee of Seller; (g) Any Liability of Seller arising out of or relating to any employee or independent contractor grievance, including those under any employment, severance, retention or termination agreement of Seller, arising out of facts occurring on or prior to the Acquisition Date; (h) Any Liability to distribute to any of Seller's members any part of the consideration received hereunder; (i) Any Liability of Seller based upon the operations of the Business by Seller on or prior to the Acquisition Date arising out of any Proceeding to which Seller is a party pending as of the Acquisition Date; (j) Any Liability of Seller arising out of or resulting from Seller's compliance or noncompliance with any Applicable Law; (k) Any Liability of Seller arising out of or resulting from Seller's compliance or noncompliance with any judgment, order, writ, prohibition, injunction or decree of any Governmental Authority; (l) Any Liability of Seller under this Agreement; and (m) Any Liability of Seller based upon Seller's acts or omissions occurring after the Acquisition Date. 4. PURCHASE PRICE AND CLOSING. In full consideration for the Assets and the confidentiality and non-compete agreements contained in Section 8(a) of this Agreement, Purchaser shall pay to Seller the aggregate consideration as follows: (a) Stock Consideration. At the Closing, Purchaser will issue and deliver to Seller 28,193,900 shares of Private Stock ("Stock Consideration"), subject to adjustment as provided in Section 4(b) below. (b) Subordinated Convertible Note. At the Closing, purchaser will issue and deliver to Seller the Subordinated Convertible Note in the approximate amount of Two Million Eight Hundred Seventeen Thousand Five Hundred ($2,817,500.00) (the exact principal amount will be determined at the Closing and will be equal to the then principal amount of indebtedness of Seller for money borrowed) (the "Note Payment"). If the principal amount is not more than $450,000 the interest rate shall be 5.5% per annum. Otherwise the interest rate shall be the prime rate as announced from time to time in The Wall Street Journal under "Money Rates." Seller may elect to accept additional shares of Private Stock as additional Stock Consideration and reduce the principal amount of the Note Payment by a per share amount equal to the per share offering price for the Private Placement described in Section 8(n) up to a maximum $2,450,000.00 reduction of the Note Payment principal amount. The Note Payment and Stock Consideration are collectively referred to as the Purchase Consideration. (c) Purchase Consideration Allocation. (i) The parties shall allocate the Purchase Consideration (plus all consideration attributable to the portion of the Assumed Liabilities which are treated as purchase price for federal income tax purposes) to each Asset or groups thereof in accordance with the applicable provisions of Section 1060 of the Code (the "Consideration Allocation") and generally as set forth in Schedule 4(c). (ii) Each party agrees to timely file an IRS Form 8594 reflecting the Consideration Allocation for the taxable year that includes the Acquisition Date. (iii) Each party hereto shall adopt and utilize the Consideration Allocation for purposes of all Tax Returns filed by them and shall not voluntarily take any position inconsistent with the foregoing in connection with any examination of any Tax Return, any refund claim, any litigation proceeding or otherwise, except that Purchaser's cost for the Assets may differ from the amount so allocated to the extent necessary to reflect Purchaser's capitalized acquisition costs other than the amount realized by Seller. In the event that any taxing authority disputes the Consideration Allocation, the party receiving notice of the dispute shall promptly notify the other parties hereto of such dispute and the parties hereto shall cooperate in good faith in responding to such dispute in order to preserve the effectiveness of the Consideration Allocation. (d) Closing. Upon the terms and subject to the conditions set forth in this Agreement, the closing of the sale and purchase of the Assets (the "Closing") shall take place on the date as soon as reasonably practicable following satisfaction of the conditions to Closing set forth in Section 9 to this Agreement ("Acquisition Date"), at the offices of Blanchard, Krasner & French, APC, 800 Silverado Street, 2nd Floor, La Jolla, CA 92037. 5. POST-ACQUISITION PURCHASE CONSIDERATION ADJUSTMENT. (a) Indemnity Obligations. If either party is required to indemnify the other party pursuant to Sections 12 and 13 of this Agreement, the Purchase Consideration will be adjusted as provided in this Section 5 of this Agreement. (b) Dispute Resolution. In the event that either party disagrees with any demand for indemnification by the other party, such party shall give written notice of its objections thereto within forty-five (45) days of any claim for indemnification ("Dispute Notice"). If a party does not timely deliver a Dispute Notice, the claim for indemnity will be final and binding on the parties. If a party timely delivers a Dispute Notice, then during the 30-day period following such delivery, Seller and Purchaser shall attempt to resolve any differences which they may have with respect to any matters specified in the Dispute Notice (which resolution, if any, shall be final and binding on all parties). If, at the end of such 30-day period Seller and Purchaser shall have failed to reach written agreement with respect to all such matters, then all such matters specified in the Dispute Notice with respect to which an agreement has not been reached (the "Disputed Matters") shall be submitted to and arbitrated by an independent certified public accounting firm selected by Independent members of Purchaser's Board of Directors (the "Arbitrator"). The Arbitrator shall consider only the Disputed Matters. The Arbitrator shall act promptly, and the Arbitrator's decision with respect to all Disputed Matters shall be final and binding upon the parties hereto. The prevailing party in the arbitration shall be entitled to the reimbursement from the non-prevailing party of the prevailing party's reasonable attorney's and accountant's fees and costs incurred in connection with the arbitration. The fees and expenses of the Arbitrator incurred in connection with its review and determination of any Disputed Matters shall also be borne by the non-prevailing party. (c) Adjustment to Purchase Price. If Seller is the Indemnifying Party, Seller shall cause to be surrendered to the Purchaser shares of Private Stock equal to the dollar amount of Seller's indemnity obligation divided by the Stock Price, but in no event more than one hundred thousand (100,000) shares (after giving effect to the Reverse Stock Split). If Purchaser is the Indemnifying Party, Purchaser shall cause to be issued to Seller shares of Purchaser common stock equal to the dollar amount of Purchaser's indemnity obligation divided by the Stock Price, but in no event more than one hundred thousand (100,000) shares (after giving effect to the Reverse Stock Split). 6. REPRESENTATIONS AND WARRANTIES OF SELLER. In order to induce Purchaser to enter into this Agreement, as of the Acquisition Date, except as set forth in the Disclosure Schedules attached hereto, Seller represents and warrants to Purchaser that: (a) Legal Authority, Binding Effect. Seller has the full capacity, power and authority to execute and deliver this Agreement and to transfer the Assets as contemplated herein. Seller has full capacity, right, power and authority to execute, deliver and perform its obligations under this Agreement and all other agreements, certificates and documents (collectively, the "Seller's Documents") executed or delivered or to be executed or delivered by Seller in connection herewith. This Agreement and the other Seller's Documents constitute legal, valid and binding obligations of Seller, enforceable in accordance with their respective terms. (b) Organization, Good Standing. Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of California, and has full power and authority to own, lease and operate its assets and properties and to conduct the Business as it is now being conducted. Seller is duly qualified or licensed to do business and is in good standing as a foreign company under the laws of those jurisdictions in which the conduct of its business or the ownership or leasing of its assets requires such qualification. The copies of Seller's Articles of Organization, as amended (certified by the Secretary of State of California), and Operating Agreement which have been previously delivered to Purchaser or its representative are correct and complete. (c) Capitalization. The Members identified on Schedule 6(c) hold one hundred percent (100%) of the membership interests in Seller. Seller has no Subsidiaries and has no equity in any corporation, partnership, joint venture or other entity and Seller has conducted its business only through Seller. (d) Financial Statements. (i) Seller has delivered to Purchaser the unaudited balance sheet of Seller as of December 31, 2003 (the "Reference Balance Sheet"), and the related unaudited statements of operations and members' equity for the fiscal year then ended (the "Financial Statements"). (ii) Except as set forth on Schedule 6(d)(ii), the Financial Statements are complete, are in accordance with Seller's books and records regularly maintained by management, have been prepared in accordance with GAAP, consistently applied by Seller, and present fairly the financial position, results of operations and changes in financial position of Seller as of the dates and for the periods indicated. (iii) There are no liabilities, debts, obligations or claims against the Business or the Assets of any nature, absolute or contingent, which in the aggregate exceeds $10,000, except (a) as and to the extent reflected or reserved against on the Reference Balance Sheet, (b) specifically described and identified as an exception to this paragraph in any of the Schedules delivered to Purchaser pursuant to this Agreement, (c) incurred since the Reference Balance Sheet Date, in the ordinary course of business consistent with prior practice and Section 6(f) hereof, or (d) open purchase or sales orders or agreements for delivery of goods and services in the ordinary course of business consistent with prior practice; provided Seller is not in default thereunder. (e) Liabilities. As of December 31, 2003, all liabilities of Seller are set forth or adequately reserved against or otherwise disclosed in the Financial Statements, in each case in accordance with GAAP, consistently applied by Seller. Since December 31, 2003, Seller has incurred no other Liabilities, except for those incurred in the ordinary course of business as theretofore conducted which are not materially adverse to the operations or prospects (financial or otherwise) of the Business, except for the liabilities set forth on Schedule 6(e). (f) No Adverse Change. Except as set forth on Schedule 6(f), since December 31, 2003, Seller has operated its business only in the ordinary course of business as theretofore conducted, and there has been no: (i) Material Adverse Effect, or any event or development which, individually or together with other such events, could reasonably be expected to result in a Material Adverse Effect; (ii) suffered any damage or destruction resulting in a loss or cost to Seller of more than $10,000 in the aggregate, whether or not covered by insurance; (iii) amendment of its Articles of Organization or Operating Agreement; (iv) issuance of any additional units or other Seller securities or issuance, sale or grant of any option or right to acquire or otherwise dispose of any of its authorized but unissued units or other company securities; (v) declaration or payment of any distribution in cash or property on its units; (vi) repurchase or redemption of shares of its units or other Seller securities; (vii) incurrence, performance or payment or other discharge, of any obligation or liability (absolute or contingent), except for current obligations and liabilities incurred in the ordinary course of business consistent with past practice; (viii) entering into of any employment agreement with, or becoming liable for any bonus, profit-sharing or incentive payment to, or increasing of the compensation or benefits of, any of its officers, directors or employees; (ix) sale, transfer or acquisition of any properties or assets, tangible or intangible, other than in the ordinary course of business; (x) material changes in its customary method of operations including marketing, selling and pricing policies and maintenance of business premises, fixtures, furniture and equipment; (xi) modification, amendment or cancellation of any of its existing leases or entering into any contracts, agreements, leases or understandings other than in the ordinary course of business or entering into of any loan agreements; (xii) investments other than in certificates of deposit or short-term commercial paper; (xiii) capital expenditure or addition or commitment to make a capital expenditure or addition, when considered as a whole is in excess of an aggregate of $10,000; (xiv) Liens or restrictions of any of the Business or the Assets; (xv) commencement of any litigation, action or proceeding before any court, governmental or regulatory body or arbitrational tribunal relating to the Business or the Assets; or (xvi) changes in respect of any election concerning Taxes or Tax Returns, adopted or changed any accounting method, filed any amended Tax Return, entered into any closing agreement with respect to Taxes, settled any Tax claim or assessment or surrendered any right to claim a refund of Taxes or obtained or entered into any Tax ruling, agreement, contract, understanding, arrangement or plan. (g) Taxes. Seller has duly, timely and properly filed within the time prescribed by law, all Tax Returns required to be filed by it with respect to the income, business or operations of Seller with the appropriate Governmental Authority in all jurisdictions in which such Tax Returns are required by law to be filed and such Tax Returns were complete and accurate. Seller has paid in full all Taxes due or claimed to be due on or in respect of all such Tax Returns. Seller is not the subject of any pending or, to the best knowledge of Seller, threatened tax examination nor is it a party to any proceeding or inquiry by any governmental authority for the assessment or the proposed assessment or for the collection of Taxes nor has any claim for the assessment or proposed assessment or for the collection of Taxes been asserted against Seller. There are no Liens for Taxes that are due and unpaid on any of the assets or properties of Seller. All amounts required to be withheld by Seller in connection with its business or operations from customers with respect to the sale of goods, or from or on behalf of employees for income, social security and unemployment insurance taxes, have been collected or withheld and either paid to the appropriate governmental agency or set aside and, to the extent required by the Code or other Applicable Law, held in accounts for such purpose. (h) Title to Property; Condition; All Assets. Seller has and will transfer to Purchaser good and marketable title to all the Assets, free and clear of all Liens except as described in Schedule 6(h) hereto. Such Assets are in good order and working condition, subject to ordinary wear and tear, and are adequate and suitable for the purposes for which they are presently being used and their use by Seller complies in all material respects with Applicable Law. The Assets constitute all of the properties and assets necessary to conduct the Business as it is presently conducted. (i) Real Property and Fixed Assets. (i) Seller does not own any real property. Schedule 6(i) hereto contains a list and brief description of all real property leased by Seller. Seller's buildings and other structures (whether leased or owned) are in good operating condition and repair, subject to ordinary wear and tear, and are adequate and suitable for the purposes for which they are presently being used and their use by Seller complies in all material respects with Applicable Law. (ii) All leases are valid, binding and enforceable in accordance with their terms and are in full force and effect. No event or condition exists, or to the best knowledge of Seller, is alleged by any of the other parties thereto to exist, which constitutes, or with giving of notice or lapse of time or both would constitute, a default under, or a basis for termination of, any such lease. Seller does not owe any brokerage commissions with respect to any such leased space. Seller has delivered to Purchaser prior to the execution of this Agreement true and complete copies of all such leases (including any amendments and renewal letters). (j) Patents, Trademarks and Copyrights. Seller has interests in or the right to use the Intangible Property, the Know-how and the Proprietary Information (collectively, the "Intellectual Property") disclosed in Schedule 6(j) hereto, each of which Seller has all right, title and interest in or valid and binding rights under contract to use, and the use thereof in the operation of the Business does not and will not infringe the rights of any other Person. Other than the Intellectual Property disclosed in Schedule 6(j) hereto, no other Intellectual Property is necessary in the conduct of the Business of Seller. Except as disclosed in Schedule 6(j), with respect to the Intellectual Property: (i) Seller has the exclusive right to use the Intellectual Property, (ii) all registrations with and applications to any Governmental Authority in respect of the Intellectual Property are valid and in full force and effect and are not subject to the payment of any Taxes or maintenance fees or the taking of any other actions by Seller to maintain their validity or effectiveness, (iii) there are no restrictions on the direct or indirect transfer of any contract, or any interest therein, held by Seller in respect of the Intellectual Property, (iv) Seller has delivered to Purchaser prior to the execution of this Agreement documentation with respect to any invention, process, design, computer program or other know-how or trade secret included in the Intellectual Property, which documentation is accurate in all material respects and reasonably sufficient in detail and content to identify and explain such invention, process, design, computer program or other know-how or trade secret and to facilitate its full and proper use without reliance on the special knowledge or memory of any person, (v) Seller has taken reasonable security measures to protect the secrecy, confidentiality and value of its trade secrets (vi) Seller has not received any notice that it is, in default (or with the giving of notice or lapse of time or both, would be in default) under any contract to use the Intellectual Property, (vii) to the best knowledge of Seller, no Intellectual Property is being infringed by any other Person and (viii) Seller does not pay any royalty to a third party with respect to its use of any Intellectual Property. Except at set forth on Schedule 6(j), Seller has not received notice, either verbally or in writing, that Seller is infringing any Intellectual Property of any other Person in connection with the conduct of the Business, no claim is pending or has been made, either verbally or in writing, to such effect and Seller is not infringing any Intellectual Property of any other Person in connection with the conduct of the Business. (k) Contracts and Commitments. Schedule 6(k) contains a list of all material leases, contracts, agreements and purchase and sales orders, whether written, or to Seller's best knowledge, oral, relating to the Business and to which Seller is a party or and by which any of the Assets is bound. True and complete copies of the foregoing (or, in the case of oral contracts, accurate summaries) have been delivered to Purchaser. Except as set forth on Schedule 6(k), all Contracts are in full force and effect and constitute legal, valid and binding obligations of the respective parties thereto. Seller has performed all obligations required to be performed by it pursuant to the Contracts and no default, or event which with notice or lapse of time or both would constitute a default, exists in respect thereof on the part of Seller or the other parties thereto. Except as set forth on Schedule 6(k), each of the Contracts will according to its terms continue in full force and effect with no change to the material terms thereof following the transfer of the Assets to Purchaser under this Agreement. The continuation, validity and effectiveness of all the Contracts under the current material terms thereof (including without limitation the current rentals under any leases or licenses) will in no way be affected by the transfer of the Assets to Purchaser under this Agreement. All the Contracts have been entered into on an arms-length basis and none is materially burdensome to the Business. Except as set forth on Schedule 6(k), Seller has no contracts, agreements or arrangements (a) providing for the payment of any bonus or commission based on sales or earnings, or (b) with any officer, member, director, consultant (other than fee agreements with Seller's accountants and attorneys), agent or Affiliate of Seller, or (c) relating to employment or severance or termination benefits (other than employment arrangements terminable at will without liability on the part of Seller and other than for severance or termination benefits required by statute or regulation). (l) Inventory. Except as set forth on Schedule 6(l) and to Seller's best knowledge, the Inventory is in good condition, does not include any items below standard quality, damaged or spoiled, obsolete or of a quality or quantity not usable or salable in the ordinary course of the business of Seller as currently conducted within normal inventory "turn" experience, the value of which has not been fully written down, or with respect to which adequate reserves have not been provided. All items included in the inventory of Seller are the property of Seller, free and clear of any Lien, have not been pledged as collateral, are not held by Seller on consignment from others and conform in all respects to all specifications and warranties applicable to such inventory or its use or sale imposed by any Governmental Authority. All in-process and finished products in the Inventory have been produced in compliance with Seller's applicable quality control procedures. The values at which such inventory are carried in accordance with GAAP. The amount and mix of the Inventory of supplies, in-process and finished products is consistent with Seller's past business practices. (m) Accounts Receivable. All of the Accounts Receivable reflected on the Financial Statements and thereafter acquired through the date hereof constitute only valid claims against third parties not affiliated with Seller or Members arising in the ordinary course of the Business. The Accounts Receivable arose in the ordinary course of business for goods or services delivered or rendered, are payable upon ordinary trade terms, constitute only legal, valid and binding obligations of the respective debtors enforceable in accordance with their terms and are not subject to counterclaims or setoffs. (n) Compliance with Laws; Restrictions; Permits. (i) Except as set forth on Schedule 6(n)(i), Seller is conducting the Business, and all of its properties and assets are, in compliance with Applicable Law. (ii) Seller is not aware and has not received any written or verbal notification of any present or past failure so to comply or of any past or present events, activities or practices of Seller or incidents or actions of Seller or plans of Seller which may be construed to indicate interference with or prevention of continued compliance with Applicable Law or which may give rise to any common law or statutory liability, or otherwise form the basis of any claim, action, suit, proceeding, hearing or investigation. (iii) The authorization, execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby do not and will not (1) violate any of the provisions of Seller's Articles of Organization or Operating Agreement, (2) violate, conflict with, result in a breach of or constitute a default under, require any notice or consent under, give rise to a right of termination of, or accelerate the performance required by, any terms or provisions of any lease, contract, agreement or purchase or sale order, whether written, or oral, to which Seller is a party or is bound, or any of its assets or business is subject, (3) result in the creation of any Lien on any of Seller's assets or properties or (4) violate any judgment, order, writ, prohibition, injunction or decree of any court or other governmental body to which Seller is a party, subject to or bound by. (iv) Set forth on Schedule 6(n)(iv) is a list of all approvals, authorizations, certificates, consents, licenses, orders and permits or other similar authorizations of any Governmental Authority necessary for the operation of the Business in substantially the same manner as currently operated. No other governmental or other registration, filing, application, permit, notice, transfer, consent, approval, order, qualification or waiver (collectively, a "Permit") is required under Applicable Law to be obtained by Seller or Purchaser by virtue of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby or to avoid the loss of any such Permit. (o) Compensation of and Indebtedness to and from Employees. (i) Schedule 6(o)(i) sets forth a true and complete list of the names of and positions held by each employee of Seller and the current compensation of each such employee, including salary, bonus, other incentive compensation and other perquisites and benefits. (ii) Except as set forth in Schedule 6(o)(ii), Seller has no financial obligation and is not otherwise indebted to any person who is an officer, director, member or employee of Seller, or to any relative of any such person or to any entity controlled directly or indirectly by, or otherwise affiliated with, such person, in any amount whatsoever other than for compensation for services rendered since the start of the current pay period of Seller generally utilized for its employees and for normal and customary business expenses, nor is any officer, director, member or employee of Seller, or any relative of such person or any entity controlled directly or indirectly by, or otherwise affiliated with, such person, indebted to Seller except for normal and customary business reimbursement advances made in the ordinary course of business. (p) Insurance. Schedule 6(p) hereto lists all insurance policies covering Seller or any aspect of the Business, indicating the type of coverage, name of insured, the insurer, the amount of coverage, the premium and the expiration date of each policy. The insurance coverage provided by any of the policies described above will not terminate or lapse by reason of the transactions contemplated by this Agreement. Each policy listed is valid and binding and in full force and effect, no premiums due thereunder have not been paid, and Seller has not received any notice of cancellation or termination in respect of any such policy or notice that Seller is in default thereunder. (q) Litigation. Except as set forth in Schedule 6(q), there are presently no actions, suits, disputes, claims, proceedings or investigations pending or threatened against or affecting Seller, the Business or the Assets, at law or in equity, before or by any court, agency, or other governmental authority, including, without limitation, litigation with competitors, customers or with contractors or suppliers who have performed work on or supplied equipment or materials relating to the Business or the properties of Seller. To the best knowledge of Seller, there is no basis for any such action, suit, dispute, claim, proceeding or investigation and none of the foregoing has been pending during the last three years. There is no outstanding order, injunction or decree of any court, governmental authority or arbitration tribunal against or affecting Seller, the Business or the Assets. (r) Environmental Matters. (i) Seller's business, assets and properties are and have been operated and maintained in compliance with all environmental protection laws and regulations of any Applicable Law (the "Environmental Laws"). No event has occurred which, with or without the passage of time or the giving of notice, or both, would constitute non-compliance by Seller with, or a violation by Seller of, the Environmental Laws. (ii) No real property leased, occupied or used in the Business contains any underground storage tanks or Hazardous Substances. Seller has not caused or permitted to exist, as a result of an intentional or unintentional act or omission, a disposal, discharge or release of Hazardous Substances originating on or from any site which currently is or formerly was owned, leased, occupied or used in connection with the Business, except where such disposal, discharge or release was pursuant to and in compliance with the conditions of a permit issued by the appropriate Governmental Authority. There are no properties owned, leased, occupied or used in connection with the Business which are listed, or proposed for listing, on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., or on a registry or inventory of inactive hazardous waste sites maintained by any state (i) which currently is or formerly was owned, leased, occupied or used or (ii) with respect to which Seller has received notice that it is considered to be a potentially responsible person. (s) Customers and Suppliers. No supplier or customer of the Business has cancelled or otherwise terminated, or made any written threat to Seller to cancel or otherwise terminate, for any reason, including the consummation of the transactions contemplated hereby, its relationship with the Business or has at any time on or after January 1, 2004, decreased materially its services or supplies to the Business in the case of any such supplier, in each case if and only to the extent that such cancellation, termination or threat, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. To Seller's best knowledge, no supplier or customer intends to cancel or otherwise terminate or decrease materially its services or supplies to the Business or its usage of the services or products of the Business, as the case may be, in each case if and only to the extent that such cancellation, termination or reduction, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (t) Products. (i) Schedule 6(t) sets forth all claims asserted or, to the best knowledge of Seller, threatened at any time since January 1, 2002 against the Business in respect of personal injury, wrongful death or property damage alleged to have resulted from products provided by the Business, together with a description of each such claim or action initiated with respect thereto and the disposition thereof. (ii) The Business has not experienced product recall or warranty claims, other than warranty claims less than $1,000.00 since the year ended December 31, 2003. (u) Securities Purchase Representations. Seller and each Member of Seller is an accredited investor within the meaning of Rule 501 under the Securities Act. Seller and each Member has such knowledge and experience in financial or business matters as to be able to evaluate the merits and risks of the transactions contemplated by this Agreement. Seller has had an opportunity to ask questions of and to receive answers satisfactory to it from Purchaser in respect of the investment it is making in the Private Stock. Seller and each Member has access to the Purchaser SEC Reports. Seller has not been organized solely for the purpose of acquiring the Private Stock. Seller and each Member to whom Private Stock may be distributed is acquiring the Private Stock solely for its own account for investment, not as a nominee or an agent, and without a view to or in connection with, the sale or distribution of any part thereof. (v) Disclosure. No representation or warranty contained in this Agreement, and no statement contained in the Schedules to this Agreement or in any certificate, list or other writing furnished to Purchaser pursuant to any provision of this Agreement (including without limitation the Financial Statements), contains any untrue statement of a material fact, or when taken as a whole, omits to state a material fact necessary in order to make the statements herein or therein, in the light of the circumstances under which they were made, not misleading. There is no fact known to Seller which Seller believes has or could have a Material Adverse Effect on the Business; which has not been set forth in this Agreement, including without limitation any Schedules or Exhibits hereto, the Financial Statements or certificate delivered in accordance with the terms hereof or any document or statement in writing which has been supplied by or on behalf of Seller or by any employee of Seller in connection with the transactions contemplated by this Agreement. Seller has furnished or caused to be furnished to Purchaser complete and correct copies of all agreements, instruments and documents set forth on a Schedule hereto or underlying a disclosure set forth on any Schedule hereto. Each of the Schedules hereto is complete and correct. 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER. As an inducement for Seller to enter into this Agreement and to consummate the transactions contemplated hereby, Purchaser represents and warrants to Seller that: (a) Organization and Good Standing. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has full power and authority to own, lease and operate its assets and properties and to conduct Purchaser's Business as it is now being conducted. Purchaser is duly qualified or licensed to do business and is in good standing as a foreign corporation under the laws of those jurisdictions in which the conduct of its business or the ownership or leasing of its assets requires such qualification. The copies of Seller's Articles of Incorporation, as amended (certified by the Secretary of State of California), and Bylaws which have been previously delivered to Seller or its representative are correct and complete. (b) Legal Authority, Binding Effect. Purchaser has the full right, power and authority to enter into and perform this Agreement and all other agreements, certificates and documents executed or delivered or to be executed or delivered by Purchaser in connection herewith (collectively, with this Agreement, "Purchaser's Documents"). The execution, delivery and performance by Purchaser of Purchaser's Documents have been duly authorized by the Board of Directors of Purchaser and, when approved by the Shareholders of Purchaser by all other necessary corporate action of Purchaser. This Agreement has been duly executed and delivered by Purchaser and Purchaser's Documents are (or when executed and delivered by Purchaser will be) legal, valid and binding obligations of Purchaser (to the extent each of them is a party thereto), enforceable in accordance with their respective terms. (c) Restrictions. Except as set forth on Schedule 7(c), the authorization, execution, delivery and performance of Purchaser's Documents and the consummation of the transactions contemplated hereby and thereby do not and will not (i) violate any of the provisions of the charter or bylaws of Purchaser (ii) violate, conflict with, result in a breach of or constitute a default under, require any notice or consent under, give rise to a right of termination of, or accelerate the performance required by, any terms or provisions of any agreement, instrument or writing of any nature to which Purchaser is a party or is bound or any of its assets or business is subject, or (iv) violate, conflict with or result in a breach of, or require any notice, filing or consent under, any statute, rule, regulation or other provision of law, or any order, judgment or other direction of a court or other tribunal, or any other governmental requirement, permit, registration, license or authorization applicable to Purchaser. (d) Private Stock. As of the Acquisition Date, the Stock Consideration shall be duly authorized and validly issued, fully paid, nonassessable and issued without violation of any preemptive rights. (e) Public Filings. Purchaser has filed all required forms, reports and documents ("Purchaser SEC Reports") with the SEC since January 1, 2002, each of which has complied in all material respects with all applicable requirements of the Securities Act and the Exchange Act, each as in effect on the dates such forms, reports and documents were filed. None of such Purchaser SEC Reports, including, without limitation, any financial statements or schedules included or incorporated by reference therein, contained when filed any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein in light of the circumstances under which they were made not misleading. The financial statements included in the Purchaser SEC Reports have been prepared in accordance with GAAP applied on a consistent basis by Purchaser (except as may be indicated in the notes thereto), and fairly present in all material respects the consolidated financial position of Purchaser as of the dates thereof and their consolidated results of operations and changes in financial position for the periods then ended, except, in the case of unaudited interim financial statements, for normal year-end audit adjustments and the fact that certain information and notes have been condensed or omitted in accordance with the applicable rules of the SEC. (f) Liabilities. As of December 31, 2003, all liabilities of Purchaser are set forth or adequately reserved against or otherwise disclosed in the Financial Statements, in each case in accordance with GAAP, consistently applied by Purchaser. Since December 31, 2003, Purchaser has incurred no other Liabilities, except for those incurred in the ordinary course of business as theretofore conducted which are not materially adverse to the operations or prospects (financial or otherwise) of the Purchaser's Business, except for the liabilities set forth on Schedule 7(f). (g) No Adverse Change. Since December 31, 2003, Purchaser has operated its business only in the ordinary course of business as theretofore conducted, and there has been no: (i) Material Adverse Effect, or any event or development which, individually or together with other such events, could reasonably be expected to result in a Material Adverse Effect; (ii) suffered any damage or destruction resulting in a loss or cost to Purchaser of more than $10,000 in the aggregate, whether or not covered by insurance; (iii) amendment of its Articles of Incorporation or Bylaws; (iv) issuance of any additional shares or other Purchaser securities or issuance, sale or grant of any option or right to acquire or otherwise dispose of any of its authorized but unissued shares or other company securities; (v) declaration or payment of any distribution in cash or property on shares; (vi) repurchase or redemption of shares or other Purchaser securities; (vii) incurrence, performance or payment or other discharge, of any obligation or liability (absolute or contingent), except for current obligations and liabilities incurred in the ordinary course of business consistent with past practice; (viii) entering into of any employment agreement with, or becoming liable for any bonus, profit-sharing or incentive payment to, or increasing of the compensation or benefits of, any of its officers, directors or employees; (ix) sale, transfer or acquisition of any properties or assets, tangible or intangible, other than in the ordinary course of business; (x) material changes in its customary method of operations including marketing, selling and pricing policies and maintenance of business premises, fixtures, furniture and equipment; (xi) modification, amendment or cancellation of any of its existing leases or entering into any contracts, agreements, leases or understandings other than in the ordinary course of business or entering into of any loan agreements; (xii) investments other than in certificates of deposit or short-term commercial paper; (xiii) capital expenditure or addition or commitment to make a capital expenditure or addition, when considered as a whole is in excess of an aggregate of $10,000; (xiv) Liens or restrictions of any of Purchaser's Business or Purchaser's Assets; (xv) commencement of any litigation, action or proceeding before any court, governmental or regulatory body or arbitrational tribunal relating to Purchaser's Business or Purchaser's Assets; or (xvi) changes in respect of any election concerning Taxes or Tax Returns, adopted or changed any accounting method, filed any amended Tax Return, entered into any closing agreement with respect to Taxes, settled any Tax claim or assessment or surrendered any right to claim a refund of Taxes or obtained or entered into any Tax ruling, agreement, contract, understanding, arrangement or plan. (h) Taxes. Purchaser has duly, timely and properly filed within the time prescribed by law, all Tax Returns required to be filed by it with respect to the income, business or operations of Purchaser with the appropriate Governmental Authority in all jurisdictions in which such Tax Returns are required by law to be filed and such Tax Returns were complete and accurate. Purchaser has paid in full all Taxes due or claimed to be due on or in respect of all such Tax Returns. Purchaser is not the subject of any pending or, to the best knowledge of Purchaser and each Member, threatened tax examination nor is it a party to any proceeding or inquiry by any governmental authority for the assessment or the proposed assessment or for the collection of Taxes nor has any claim for the assessment or proposed assessment or for the collection of Taxes been asserted against Purchaser. There are no Liens for Taxes that are due and unpaid on any of the assets or properties of Purchaser. All amounts required to be withheld by Purchaser in connection with its business or operations from customers with respect to the sale of goods, or from or on behalf of employees for income, social security and unemployment insurance taxes, have been collected or withheld and either paid to the appropriate governmental agency or set aside and, to the extent required by the Code or other Applicable Law, held in accounts for such purpose. (i) Title to Property; Condition; All Assets. Purchaser has good and marketable title to all of Purchaser's Assets, free and clear of all Liens except as described in Schedule 7(i) hereto. Such Assets are in good order and working condition, subject to ordinary wear and tear, and are adequate and suitable for the purposes for which they are presently being used and their use by Purchaser complies in all material respects with Applicable Law. Purchaser's Assets constitute all of the properties and assets necessary to conduct Purchaser's Business as it is presently conducted. There are no individual refundable deposits, prepaid expenses, or deferred charges due Purchaser and Purchaser has made no loans or advances to any Person. (j) Real Property and Fixed Assets. (i) Purchaser does not own any real property. Schedule 7(j) hereto contains a list and brief description of all real property leased by Purchaser. Purchaser's buildings and other structures (whether leased or owned) are in good operating condition and repair, subject to ordinary wear and tear, and are adequate and suitable for the purposes for which they are presently being used and their use by Purchaser complies in all material respects with Applicable Law. (ii) All leases are valid, binding and enforceable in accordance with their terms and are in full force and effect. No event or condition exists, or to the best knowledge of Purchaser, is alleged by any of the other parties thereto to exist, which constitutes, or with giving of notice or lapse of time or both would constitute, a default under, or a basis for termination of, any such lease. Purchaser does not owe any brokerage commissions with respect to any such leased space. Purchaser has delivered to Purchaser prior to the execution of this Agreement true and complete copies of all such leases (including any amendments and renewal letters). (k) Patents, Trademarks and Copyrights. Purchaser has interests in or the right to use the Intangible Property, the Know-how and the Proprietary Information (collectively, the "Intellectual Property") disclosed in Schedule 7(k) hereto, each of which Purchaser has all right, title and interest in or valid and binding rights under contract to use, and the use thereof in the operation of Purchaser's Business does not and will not infringe the rights of any other Person. Other than the Intellectual Property disclosed in Schedule 7(k) hereto, no other Intellectual Property is necessary in the conduct of the Business of Purchaser. Except as disclosed in Schedule 7(k), with respect to the Intellectual Property: (i) Purchaser has the exclusive right to use the Intellectual Property, (ii) all registrations with and applications to any Governmental Authority in respect of the Intellectual Property are valid and in full force and effect and are not subject to the payment of any Taxes or maintenance fees or the taking of any other actions by Purchaser to maintain their validity or effectiveness, (iii) there are no restrictions on the direct or indirect transfer of any contract, or any interest therein, held by Purchaser in respect of the Intellectual Property, (iv) Purchaser has delivered to Seller prior to the execution of this Agreement documentation with respect to any invention, process, design, computer program or other know-how or trade secret included in the Intellectual Property, which documentation is accurate in all material respects and reasonably sufficient in detail and content to identify and explain such invention, process, design, computer program or other know-how or trade secret and to facilitate its full and proper use without reliance on the special knowledge or memory of any person, (v) Purchaser has taken reasonable security measures to protect the secrecy, confidentiality and value of its trade secrets (vi) Purchaser has not received any notice that it is, in default (or with the giving of notice or lapse of time or both, would be in default) under any contract to use the Intellectual Property, (vii) to the best knowledge of Purchaser and each of its officers and directors, no Intellectual Property is being infringed by any other Person and (viii) Purchaser does not pay any royalty to a third party with respect to its use of any Intellectual Property. Except as set forth on Schedule 7(k), Purchaser has not received notice, either verbally or in writing, that Purchaser is infringing any Intellectual Property of any other Person in connection with the conduct of Purchaser's Business, no claim is pending or has been made, either verbally or in writing, to such effect and Purchaser is not infringing any Intellectual Property of any other Person in connection with the conduct of the Business. (l) Contracts and Commitments. Schedule 7(l) contains a list of all material leases, contracts, agreements and purchase and sales orders, whether written, or to Purchaser's best knowledge, oral, relating to Purchaser's Business and to which Purchaser is a party or and by which any of Purchaser's Assets is bound. True and complete copies of the foregoing (or, in the case of oral contracts, accurate summaries) have been delivered to Seller. Except as set forth on Schedule 7(l), all of Purchaser's Contracts are in full force and effect and constitute legal, valid and binding obligations of the respective parties thereto. Purchaser has performed all obligations required to be performed by it pursuant to the Contracts and no default, or event which with notice or lapse of time or both would constitute a default, exists in respect thereof on the part of Purchaser or the other parties thereto. Except as set forth on Schedule 7(l), each of the Contracts will according to its terms continue in full force and effect with no change to the material terms thereof following the transfer of the Closing under this Agreement. The continuation, validity and effectiveness of all the Contracts under the current material terms thereof (including without limitation the current rentals under any leases or licenses) will in no way be affected by the transfer of the Private Stock to Seller under this Agreement or for any reason as a result of Seller entering into the Royalty Liquidation Trust pursuant to Section 8(l) of this Agreement. All the Contracts have been entered into on an arms-length basis and none is materially burdensome to Purchaser's Business. Except as set forth on Schedule 7(l), Purchaser has no contracts, agreements or arrangements (a) providing for the payment of any bonus or commission based on sales or earnings, or (b) with any officer, member, director, consultant (other than fee agreements with Purchaser's accountants and attorneys), agent or Affiliate of Purchaser, or (c) relating to employment or severance or termination benefits (other than employment arrangements terminable at will without liability on the part of Purchaser and other than for severance or termination benefits required by statute or regulation). (m) Inventory. Purchaser has no inventory. (n) Accounts Receivable. All of Purchaser's Accounts Receivable reflected on the financial statements of Purchaser and thereafter acquired through the date hereof constitute only valid claims against third parties not affiliated with Purchaser arising in the ordinary course of Purchaser's Business. The Accounts Receivable arose in the ordinary course of business for goods or services delivered or rendered, are payable upon ordinary trade terms, constitute only legal, valid and binding obligations of the respective debtors enforceable in accordance with their terms and are not subject to counterclaims or setoffs. (o) Compliance with Laws; Restrictions; Permits. (i) Except as set forth on Schedule 7(o)(i), Purchaser is conducting its Business, and all of its properties and Assets are, in compliance with Applicable Law. (ii) Purchaser is not aware and has not received any written or verbal notification of any present or past failure so to comply or of any past or present events, activities or practices of Purchaser or incidents or actions of Purchaser or plans of Purchaser which may be construed to indicate interference with or prevention of continued compliance with Applicable Law or which may give rise to any common law or statutory liability, or otherwise form the basis of any claim, action, suit, proceeding, hearing or investigation. (iii) The authorization, execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby do not and will not (1) violate any of the provisions of Purchaser's Articles of Incorporation or Bylaws, (2) violate, conflict with, result in a breach of or constitute a default under, require any notice or consent under, give rise to a right of termination of, or accelerate the performance required by, any terms or provisions of any lease, contract, agreement or purchase or sale order, whether written, or oral, to which Purchaser is a party or is bound, or any of its Assets or Business is subject, (3) result in the creation of any Lien on any of Purchaser's Assets or properties or (4) violate any judgment, order, writ, prohibition, injunction or decree of any court or other governmental body to which Purchaser is a party, subject to or bound by. (iv) Set forth on Schedule 7(o)(iv) is a list of all approvals, authorizations, certificates, consents, licenses, orders and permits or other similar authorizations of any Governmental Authority necessary for the operation of the Business in substantially the same manner as currently operated. No other governmental or other registration, filing, application, permit, notice, transfer, consent, approval, order, qualification or waiver (collectively, a "Permit") is required under Applicable Law to be obtained by Purchaser or Seller by virtue of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby or to avoid the loss of any such Permit. (p) Compensation of and Indebtedness to and from Employees and Consultants. (i) Purchaser currently has no employees, but Purchaser has had employees in the past. (ii) Except as set forth in Schedule 7(p)(ii), Purchaser has no financial obligation and is not otherwise indebted to any person who is or was an officer, director, shareholder, consultant or former employee of Purchaser, or to any relative of any such person or to any entity controlled directly or indirectly by, or otherwise affiliated with, such person, in any amount whatsoever other than for compensation for services rendered since the start of the current fiscal year of Purchaser generally utilized for its employees and for normal and customary business expenses, nor is any officer, director, shareholder or former employee of Purchaser, or any relative of such person or any entity controlled directly or indirectly by, or otherwise affiliated with, such person, indebted to Purchaser except for normal and customary business reimbursement advances made in the ordinary course of business. (q) Insurance. Schedule 7(q) hereto lists all insurance policies covering Purchaser or any aspect of Purchaser's Business, indicating the type of coverage, name of insured, the insurer, the amount of coverage, the premium and the expiration date of each policy. The insurance coverage provided by any of the policies described above will not terminate or lapse by reason of the transactions contemplated by this Agreement. Each policy listed is valid and binding and in full force and effect, no premiums due thereunder have not been paid, and Purchaser has not received any notice of cancellation or termination in respect of any such policy or notice that Purchaser is in default thereunder. (r) Litigation. Except as set forth in Schedule 7(r), there are presently no actions, suits, disputes, claims, proceedings or investigations pending or threatened against or affecting Purchaser, Purchaser's Business or Purchaser's Assets, at law or in equity, before or by any court, agency, or other governmental authority, including, without limitation, litigation with competitors, customers or with contractors or suppliers who have performed work on or supplied equipment or materials relating to the Business or the properties of Purchaser. To the best knowledge of Purchaser, there is no basis for any such action, suit, dispute, claim, proceeding or investigation and none of the foregoing has been pending during the last three years. There is no outstanding order, injunction or decree of any court, governmental authority or arbitration tribunal against or affecting Purchaser, its Business or its Assets. (s) Environmental Matters. (i) Purchaser's business, assets and properties are and have been operated and maintained in compliance with all environmental protection laws and regulations of any Applicable Law (the "Environmental Laws"). No event has occurred which, with or without the passage of time or the giving of notice, or both, would constitute non-compliance by Purchaser with, or a violation by Purchaser of, the Environmental Laws. (ii) No real property leased, occupied or used in the Business contains any underground storage tanks or Hazardous Substances. Purchaser has not caused or permitted to exist, as a result of an intentional or unintentional act or omission, a disposal, discharge or release of Hazardous Substances originating on or from any site which currently is or formerly was owned, leased, occupied or used in connection with the Business, except where such disposal, discharge or release was pursuant to and in compliance with the conditions of a permit issued by the appropriate Governmental Authority. There are no properties owned, leased, occupied or used in connection with Purchaser's Business which are listed, or proposed for listing, on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., or on a registry or inventory of inactive hazardous waste sites maintained by any state (i) which currently is or formerly was owned, leased, occupied or used or (ii) with respect to which Purchaser has received notice that it is considered to be a potentially responsible person. (t) Customers and Suppliers. No supplier or customer of Purchaser's Business has cancelled or otherwise terminated, or made any written threat to Purchaser to cancel or otherwise terminate, for any reason, including the consummation of the transactions contemplated hereby, its relationship with the Business or has at any time on or after January 1, 2004, decreased materially its services or supplies to the Business in the case of any such supplier, in each case if and only to the extent that such cancellation, termination or threat, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. To Purchaser's best knowledge, no supplier or customer intends to cancel or otherwise terminate or decrease materially its services or supplies to the Business or its usage of the services or products of the Business, as the case may be, in each case if and only to the extent that such cancellation, termination or reduction, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (u) Products. (i) Schedule 7(u) sets forth all claims asserted or, to the best knowledge of Purchaser, threatened at any time since January 1, 2002 against Purchaser's Business in respect of personal injury, wrongful death or property damage alleged to have resulted from products provided by the Business, together with a description of each such claim or action initiated with respect thereto and the disposition thereof. (ii) Purchaser's Business has not experienced product recall or warranty claims, other than warranty claims less than $1,000.00 since the year ended December 31, 2003. (v) Disclosure. No representation or warranty contained in this Agreement, and no statement contained in the Schedules to this Agreement or in any certificate, list or other writing furnished to Seller pursuant to any provision of this Agreement (including without limitation Purchaser's Financial Statements), contains any untrue statement of a material fact, or when taken as a whole, omits to state a material fact necessary in order to make the statements herein or therein, in the light of the circumstances under which they were made, not misleading. There is no fact known to Purchaser which Purchaser believes has or could have a Material Adverse Effect on Purchaser's Business, which has not been set forth in this Agreement, including without limitation any Schedules or Exhibits hereto, the financial statements of Purchaser or certificate delivered in accordance with the terms hereof or any document or statement in writing which has been supplied by or on behalf of Purchaser or by any employee of Purchaser in connection with the transactions contemplated by this Agreement. Purchaser has furnished or caused to be furnished to Seller complete and correct copies of all agreements, instruments and documents set forth on a Schedule hereto or underlying a disclosure set forth on any Schedule hereto. Each of the Schedules hereto is complete and correct. 8. COVENANTS OF THE PARTIES. (a) Covenant Against Competition and Disclosure. (i) During the period commencing on the date hereof and ending on December 31, 2006, neither Seller nor any officer, director or controlling person of Seller or Purchaser shall, directly or indirectly, for itself or themselves or on behalf of any other Person, (A) engage in any business competitive with the Seller Business (including within the definition of the Business, without limitation, any business of the type or types conducted by Seller at any time during the two year period preceding the date hereof or under development by Seller on the date hereof) in any county or other political subdivision of any state of the United States of America or of any other country in the world where Seller has conducted any aspect of Business (including the sale of any products) at any time during the two (2) year period preceding the date hereof, (B) disclose to any Person other than Purchaser or Seller, any information relating to the business of Seller or Purchaser (including without limitation information relating to accounts, financial dealings, transactions, trade secrets, Intellectual Property, customer lists and pricing lists), whether or not marked or otherwise identified as confidential or secret, (C) solicit, divert, take away or attempt to take away, with respect to the products of either Business as presently conducted, any of Seller's or Purchaser's customers or suppliers, or (D) hire any employee or induce or attempt to induce any employee to leave his or her employment with Purchaser without the prior written consent of Purchaser. At the request of Seller and/or Purchaser, Seller and Purchaser shall use their best efforts to cause their respective officer, directors, and controlling persons to enter into agreements for the benefit of Purchaser and Seller consistent with the terms of this Section 8(a)(i) effective as of the Acquisition Date (the "Non-Competition Agreements") (ii) Seller acknowledges that the restrictions contained in this Section 8(a) are reasonably necessary to protect the good will transferred to Purchaser and the legitimate business interests of Purchaser and that any violation of such restrictions will result in irreparable injury to Purchaser and the Business acquired by Purchaser hereunder for which damages will not be an adequate remedy. Purchaser shall therefore be entitled to preliminary and injunctive relief as well as to an equitable accounting of earnings, profits and other benefits arising from such violation and any other remedies at law or in equity available to Purchaser. The parties hereto agree that the duration and area for which the covenants set forth in this Section 8(a) are to be effective are reasonable. In the event that any court determines that the time period or the area, or both of them, are unreasonable, the parties hereto agree that the covenants shall remain in full force and effect for the greatest time period and in the greatest area that would not render them unenforceable. (iii) Purchaser acknowledges that the restrictions contained in this Section 8(a) are reasonably necessary to protect the good will of Purchaser and the legitimate business interests of Purchaser and that any violation of such restrictions will result in irreparable injury to Seller and the Business in which Seller is acquiring a substantial equity interest hereunder for which damages will not be an adequate remedy. Seller shall therefore be entitled to preliminary and injunctive relief as well as to an equitable accounting of earnings, profits and other benefits arising from such violation and any other remedies at law or in equity available to Seller. The parties hereto agree that the duration and area for which the covenants set forth in this Section 8(a) are to be effective are reasonable. In the event that any court determines that the time period or the area, or both of them, are unreasonable, the parties hereto agree that the covenants shall remain in full force and effect for the greatest time period and in the greatest area that would not render them unenforceable. (b) Employment of Scott Glenn. Purchaser's Board of Directors will offer to employ Scott Glenn as the President and Chief Executive Officer of Purchaser for a term of three (3) years after the Acquisition Date subject to the terms of the letter agreement attached hereto as Exhibit "B" and incorporated herein by reference, and Seller will cause Scott Glenn to accept such employment. (c) Employment of Other Employees. Purchaser will offer employment to all other employees (other than Members) of the Business on terms substantially equivalent to the salary and benefits provided to such employees by Seller. Any such employees so employed will be at-will employees terminable by Purchaser at any time with or without cause, subject to Purchaser's normal termination policies considering the length of employment of such employee by Purchaser and Seller. Seller agrees to use its best efforts to assist Purchaser in hiring as its employees any employees of Seller under substantially similar terms to the terms under which such employee was employed by Seller. Purchaser will use its best efforts to obtain from H. Mac Busby, Ron Sunderland and Robert Petcavich a general release of all known or unknown claims either may have arising out of or in connection with performing services for the Company as an employee, agent and/or consultant (other than claims for indemnity under the Purchaser's Articles of Incorporation or Bylaws which arise out of their respective actions taken in good faith as directors or officers of Purchaser). (d) Retention of Independent Contractors. Seller agrees to use its best efforts to assist Purchaser in engaging as its independent contractors the current key independent contractors of Seller as set forth on Schedule 8(d) hereto, on substantially similar terms under which such independent contractor was engaged by Seller. Purchaser will offer to engage Robert Petcavich as a consultant to the Company pursuant to a consulting contract on terms and conditions reasonably acceptable to Seller and Dr. Petcavich. (e) Sales Taxes. All sales and other transfer taxes relating to the sale of the Seller Assets pursuant to the terms hereof shall be shared equally between Seller and Purchaser. (f) Bulk Sales. Seller shall cooperate with Purchaser as reasonably requested by Purchaser to comply with Applicable Law relating to bulk sales or transfers of assets. (g) Assignment of Contracts and Rights. Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Asset or any claim or right or any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without the consent of a third party thereto, would constitute a breach or other contravention thereof, be ineffective with respect to any party thereto or in any way adversely affect the rights of Seller or, upon transfer, Purchaser thereunder. Seller agrees that it will use its best efforts to obtain the necessary consents to the assignment of each Seller Contract or other Seller Asset which by its terms requires the consent of any of the other contracting parties thereto to an assignment thereof to Purchaser. If such consent is not obtained with respect to any such Contract or other Asset, Seller and Purchaser will cooperate in an arrangement reasonably satisfactory to Purchaser and Seller under which Purchaser shall obtain, to the extent practicable, the claims, rights and benefits and assume the corresponding obligations thereunder in accordance with this Agreement, including subcontracting, sub-licensing or sub-leasing to Purchaser, or under which Seller shall enforce for the benefit of Purchaser, with Purchaser assuming Seller's obligations, any and all claims, rights and benefits of Seller against a third party thereto. Seller will promptly pay to Purchaser when received all monies received by Seller under any Contract or other Asset or any claim, right or benefit arising thereunder not transferred to Purchaser pursuant to this Section 8(j). Purchaser agrees to perform at its sole expense all of the obligations of Seller to be performed after the Acquisition Date under any such Contract or other Asset the benefits of which Purchaser is receiving pursuant to the provisions of this Section 8(g). (h) Power of Attorney. Seller hereby constitutes and appoints Purchaser the true and lawful attorney of Seller, with full power of substitution, in the name of Seller or in the name of Purchaser, but for the benefit of Purchaser and at the expense of Purchaser (provided, however, that, Seller's obligations will not in any way be limited as a result of Purchaser undertaking such expense) (1) to collect, assert or enforce any claim, right or title of any kind in or to the Assets, to institute and prosecute all actions, suits and proceedings which Purchaser may deem proper in order to collect, assert or enforce any such claim, right or title, to defend and compromise all actions, suits and proceedings in respect of any Asset, and to do all such acts and things in relation thereto as Purchaser shall deem advisable and (2) to endorse, without recourse, the name of Seller on any check or other evidence of indebtedness received by Purchaser on account of any Asset. Seller acknowledges that such powers are coupled with an interest and shall not be revocable by it in any manner or for any reason, including its dissolution, and that Purchaser shall be entitled to retain for its own account any amounts collected pursuant to such powers, including any amounts payable as interest in respect thereof. Such powers shall be granted by such powers of attorney and other instruments as shall be reasonably requested by counsel for Purchaser. (i) Change of Name. On the Acquisition Date, Seller will change its name to a name not using the name "Allergy Free" or any name confusingly similar to "Allergy Free." On the Acquisition Date, subject to availability, Purchaser will change its name to "Planet Technologies, Inc." (j) Transfer of Trade Names and Trademarks. Prior to the Acquisition Date, Seller will cause all trade names and trademarks which are used in the Seller Business to be transferred to Seller, and Members shall cause any such transfers to be promptly recorded in the appropriate offices in order to give effect to, and to reflect, such transfers. (k) Surrender of Certain Options. Purchaser will use its best efforts to cause all options at an exercise price above $1.00 per share, pre split, but considering any applicable anti-dilution adjustments, to be surrendered and cancelled and the closing of the transaction by Seller will be contingent upon the surrender and cancellation of substantially all of such out-of-the-money options. (l) Distribution of Royalty Rights. Immediately prior to the Closing, Purchaser shall assign to US Bank, or another Person, as Trustee, for the benefit of Purchaser's shareholders of record as of the record date of the meeting called to vote on the Acquisition, the right to receive all royalties payable to Purchaser pursuant to those certain Sale and Licensing Agreements between Purchaser and Agway, Inc., each dated March 31, 2003, relating to Purchaser's FreshSeal and Optigen technology ("Agway Agreements"), the rights under which have been sold by Agway to BASF and Alltech, respectively, and that certain Purchase, Sale and License Agreement between Purchaser and Ryer Enterprises, LLC, dated May 1, 2003, relating to Purchaser's MIM technology ("Ryer Agreement"). The Trustee will be instructed to distribute royalties received, if any, quarterly. The Agway Agreements and Ryer Agreement are collectively referred to as the Sale and Licensing Agreements. Other than the right to receive and collect royalties, Purchaser will retain all other rights and obligations under the Sale and License Agreements. Purchaser will also assign to the Trustee substantially all of the monthly installments received from Ryer post closing, in cash, in one or more payments to create a cash reserve at the Trustee in such amounts as the Trustee and Purchaser shall agree to provide a reserve from which the Trustee may pay its trustee's fees and reimbursement for costs and expenses incurred by the Trustee in connection with enforcing payment of the royalties. In the event Purchaser incurs costs or expenses in connection with obligations under the Sale and Licensing Agreements, Purchaser shall be entitled to reimbursement from the trust for such costs and expenses to the extent of any undistributed royalties received by the Trustee, provided such rights shall be subordinate to any rights of the Trustee for payment of its fees and expenses. In the event pursuant to the Sale and Licensing Agreement, Purchaser recovers the exclusive or nonexclusive right to exploit such technologies, Purchaser may do so for Purchaser's own account and with no obligation to pay royalties to the Trustee. (m) Reverse Stock Split. Effective as of the Acquisition Date or immediately thereafter, Purchaser will implement a reverse split of it shares by a ratio of 50:1 (the "Reverse Stock Split"). (n) Private Placement. Concurrently with the Acquisition, Purchaser will offer to shareholders of Purchaser and Members of Seller the opportunity to purchase from Purchaser Common Stock in an unregistered Private Placement at a purchase price equal to the greater of (i) $0.03 per share or (ii) 70% of weighted average market price of Purchaser Common Stock for the ten (10) Business Day period immediately preceding the Acquisition Date (the "Private Placement"). The aggregate offering will be up to $2,000,000 plus any debt converted by Seller, and subscriptions will be limited to accredited investors and up to thirty-five (35) other investors. If the offering is oversubscribed, shares will first be allocated to Purchaser shareholders on a pro rata basis, second to Seller Members and the balance, if any, to new investors. (o) Board of Directors. The parties will use their best efforts to cause the appointment and election of a board of directors of Purchaser effective immediately after closing consisting of Scott L. Glenn, Chairman, Robert Petcavich, H. Mac Busby, Michael Trinkle and Ellen Preston. (p) Registration Rights. Prior to the Effective Date, Purchaser and Seller shall enter into a Registration Rights Agreement on reasonable and customary terms pursuant to which Purchaser will agree to use its best effort to cause the Private Stock and shares issuable upon conversion of the Subordinated Convertible Note to be registered under the Securities Act within 180 days after the Acquisition Date. 9. CONDITIONS. (a) Conditions to Each Party's Obligations. The respective obligation of each of the parties hereto to consummate the Acquisition is subject to the fulfillment or written waiver by the parties hereto prior to the Acquisition Date of each of the following conditions: (i) Shareholder Approvals. This Agreement shall have been duly approved by the affirmative vote of holders of not less than a majority of the outstanding Members of Seller, in accordance with applicable law. The principal terms of this Agreement shall have been approved by the affirmative vote of the holders of not less than a majority of the outstanding shares of Purchaser, in accordance with applicable law. (ii) Regulatory Matters. Purchaser shall have obtained an affirmative response to its "No Action Letter" to the SEC, relating to distribution of the right to receive royalty payments to the Trustee as described in Section 8(l). (iii) No Injunction. No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and prohibits consummation of the transactions contemplated by this Agreement. (b) The obligation of the Seller to consummate the Acquisition is also subject to the fulfillment or written waiver prior to the Acquisition Date of each of the following additional conditions: (i) Representations and Warranties. The representations and warranties of Purchaser set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Acquisition Date as though made on and as of the Acquisition Date (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct as of such date). For purposes of this paragraph, such representations and warranties shall be deemed to be true and correct in all material respects unless the failure or failures of such representations and warranties to be true and correct in all material respects, either individually or in the aggregate, and without giving effect to any materiality, material adverse effect or similar qualifications set forth in such representations and warranties, will have or would reasonably be expected to have a Material Adverse Effect on Purchaser. Purchaser shall have performed, in all material respects, each of its covenants and agreements contained in this Agreement. The Seller shall have received a certificate, dated the Acquisition Date, signed on behalf of Purchaser by the Chief Executive Officer and the Chief Financial Officer of Purchaser to such effect. (ii) Performance of Obligations of Parent. Purchaser shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Acquisition Date, and the Seller shall have received a certificate, dated the Acquisition Date, signed on behalf of Purchaser by the Chief Executive Officer and the Chief Financial Officer of Purchaser to such effect. (iii) Satisfaction of Covenants. Purchaser shall have retained Scott Glenn as President and Chief Executive Officer, entered into a consulting agreement with Robert Petcavich, and taken all steps necessary to effectuate the Reverse Stock Split, election of the board of directors, Private Placement, surrender of out of the money options and distribution of the royalty rights, all as more fully provided in Section 8 of this Agreement. (c) The obligation of the Purchaser to consummate the Acquisition is also subject to the fulfillment or written waiver prior to the Acquisition Date of each of the following additional conditions: (i) Representations and Warranties. The representations and warranties of Seller set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Acquisition Date as though made on and as of the Acquisition Date (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct as of such date). For purposes of this paragraph, such representations and warranties shall be deemed to be true and correct in all material respects unless the failure or failures of such representations and warranties to be true and correct in all material respects, either individually or in the aggregate, and without giving effect to any materiality, material adverse effect or similar qualifications set forth in such representations and warranties, will have or would reasonably be expected to have a Material Adverse Effect on Seller The Purchaser shall have received a certificate, dated the Acquisition Date, signed on behalf of Seller by the Chief Executive Officer and the Chief Financial Officer of Seller to such effect. (ii) Performance of Obligations of Purchaser. Seller shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Acquisition Date, and Purchaser shall have received a certificate, dated the Acquisition Date, signed on behalf of Seller by the Chief Executive Officer and the Chief Financial Officer of Seller to such effect. (iii) Satisfaction of Covenants. Purchaser shall have retained Scott Glenn as President and Chief Executive Officer, and taken all steps necessary to effectuate the election of the board of directors, the Private Placement, and distribution of the royalty rights, all as more fully provided in Section 8 of this Agreement. 10. TERMINATION. (a) This Agreement may be terminated: (i) Mutual Consent. At any time prior to the Acquisition Date, by the mutual consent of Purchaser and Seller. (ii) Breach. At any time prior to the Acquisition Date, by Purchaser or Seller in the event of a breach or any representation, warrant, covenant or obligation contained herein by Seller, in the case of termination by Purchaser, or by Purchaser, in the case of termination by Seller, which breach cannot be or has not been cured within thirty (30) days after the giving of written notice to the breaching party or parties of such breach provided that such breach would be reasonably likely, individually or in the aggregate with other breaches, to result in a Material Adverse Effect with respect to Purchaser or Seller, as the case may be. (iii) Delay. At any time prior to the Acquisition Date by Purchaser or Seller in the event that the Acquisition is not consummated by June 20, 2004, except that Purchaser or Seller, as the case may be, shall not have the right to terminate pursuant to this Sub-Section 10(a)(iii) to the extent that the failure to close arises out of or results from the knowing action or inaction of the party seeking to terminate pursuant to this Sub-Section 10(a)(iii), which action or inaction is in violation of its obligations under this Agreement. (iv) At any time prior to the Acquisition Date, by Purchaser if Purchaser receives a written proposal or offer with respect to a merger, reorganization, share exchange, consolidation or similar transaction involving, or any purchase of all or substantially all of the assets of the Purchaser or more than 50% of the outstanding equity securities, of the Purchaser (any such proposal or offer being hereinafter referred to as an "Acquisition Proposal"), if and only to the extent that, the Board of Purchaser determines in good faith that (i) acceptance of the Acquisition Proposal would be legally required in order for the directors to comply with their respective fiduciary duties under applicable law, (ii) such Acquisition Proposal, if accepted, is reasonably likely to be consummated, taking into account all legal, financial and regulatory aspects of the proposal, and the Person making the proposal, and (iii) if consummated, the Acquisition Proposal would result in a transaction more favorable to the Purchaser's shareholders from a financial point of view than the transaction contemplated by this Agreement. The Purchaser agrees that its officers or directors shall not, and that it shall direct and use its reasonable best efforts to cause its employees, agents and representatives not to, directly or indirectly, initiate, solicit or otherwise encourage any inquiries or the making of any proposal or offer with respect to an Acquisition Proposal. Purchaser agrees that it will notify Seller immediately if any inquiries, proposals or offers are received by, or any discussions or negotiations are sought to be initiated or continued with, Purchaser or any of its representatives relating to a potential Acquisition Proposal. (v) Due Diligence. By either party, if at or prior to April 15, 2004, such party notifies the other party that it has decided not to pursue the transaction contemplated by this Agreement, following review of the information regarding the other party not provided to such party prior to the date of this Agreement. (b) Effect of Termination. In the event of termination of this Agreement pursuant to this Section 10, no party to this Agreement shall have any liability or obligation to any other party hereunder except as set forth in Sub-Sections (i) and (ii) and provided that termination will not relieve a breaching party and liability for any willful breach of any covenant, agreement, representation or warranty or this Agreement giving rise to such termination. (i) If this Agreement is terminated by the Purchaser pursuant to Sub-Section (10)(a)(iv), upon such termination, Purchaser shall pay to the Seller a termination fee of $50,000.00 (the "Termination Fee"). (ii) If this Agreement is terminated by either party pursuant to Section 10(a)(v), such party shall pay to the other party upon such termination a due diligence fee of $25,000.00 ("Due Diligence Fee"). (iii) Each party agrees that the agreements contained in Sub-Sections (i) and (ii) above are an integral part of the transactions contemplated by this Agreement, that without such agreements the parties would not have entered into this Agreement, and that such amounts do not constitute a penalty. 11. DELIVERIES. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, the parties shall make the following deliveries: (a) Instruments of Conveyance. Seller is delivering to Purchaser bills of sale, instruments of transfer, assignment and conveyance, and other instruments as the parties and their respective counsel shall deem reasonably necessary or appropriate, to convey, transfer and assign to Purchaser and effectively vest in Purchaser all right, title and interest in and to, and good and marketable title to, the Assets. (b) Possession. Seller shall transfer and deliver to Purchaser on the Acquisition Date such keys, passwords, codes, lock and safe combinations and other similar items as Purchaser shall require to obtain immediate and full possession and control of the Assets, and shall also make available to Purchaser at their then existing locations the originals of all documents in Seller's possession that are required to be transferred to Purchaser by this Agreement. (c) Opinion of Counsel. Each party shall deliver to the other party an opinion of counsel for such party substantially in the form and content of Exhibit "C" addressed to the other party and dated the Acquisition Date. In rendering such opinion, counsel may rely upon certificates of public officials and upon certificates of officers as to factual matters. (d) Contract Assumption. Purchaser shall deliver to Seller instruments of assumption of the Contracts listed on Schedule 6(k). (e) Closing Balance Sheet. Seller shall deliver to Purchaser the Closing Balance Sheet. 12. INDEMNIFICATION BY SELLER. Subject to the limitations set forth in Section 5(c) and Section 14(c), Seller shall indemnify, defend and save Purchaser and its officers, directors and shareholders (collectively, the "Purchaser Indemnitees"), harmless from, against, for and in respect of any and all Damages suffered, sustained, incurred or required to be paid by any Purchaser Indemnitee caused by, resulting from or arising out of (A) the claims of any broker or finder engaged by Seller, (B) the untruth, inaccuracy or breach of any representation or warranty of Seller contained in or made in connection with this Agreement or any Schedule or Exhibit hereto or any other Seller's Document, (C) the breach of any agreement or covenant of Seller contained in or made in connection with this Agreement, (D) any failure of Seller to pay, perform or discharge any of the Excluded Liabilities in accordance with the terms thereof, (E) any Liabilities in connection with noncompliance with the provisions of any Applicable Law relating to bulk sales or transfers of assets in connection with the transactions contemplated by this Agreement (other than an Assumed Liability). 13. INDEMNIFICATION BY PURCHASER. Subject to the limitations set forth in Section 5(c) and Section 14(c), subject to the limitations hereinafter set forth, Purchaser shall indemnify, defend and save Seller, and its Members, officers and directors ("Seller Indemnitees"), harmless from, against, for and in respect of any and all Damages suffered, sustained, incurred or required to be paid by any Seller Indemnitee because of (A) the claims of any broker or finder engaged by Purchaser, (B) the untruth, inaccuracy or breach of any representation, warranty, agreement or covenant of Purchaser contained in or made in connection with this Agreement or any Schedule or Exhibit hereto or any other Purchaser's Document (c) the breach of any agreement or covenant of Purchaser contained in or made in connection with this Agreement, and (D) any Liability arising out of the operation of the Business after the Acquisition Date, except to the extent the foregoing is otherwise subject to indemnification by Seller under this Agreement. 14. FURTHER PROVISIONS REGARDING INDEMNIFICATION. (a) Survival. (i) All representations, warranties, covenants, agreements and obligations of each of Seller Purchaser and Purchaser in this Agreement or in Seller's Documents and Purchaser's Documents and all claims of an Indemnified Party (as defined below) in respect of any breach of any representation, warranty, covenant, agreement or obligation of any Indemnifying Party (as defined below) contained in this Agreement, shall survive the consummation of the transactions contemplated herein and shall expire on the second (2nd) anniversary of the Acquisition Date. (ii) Notwithstanding anything herein to the contrary, indemnification for claims for which written notice as provided in Section 14(b) has been given prior to the expiration of the representation, warranty, covenant, agreement or obligation upon which such claim is based shall not expire, and claims for indemnification may be pursued, until the final resolution of such claim. (iii) Nothing in this Section 14(a) shall modify in any respect any covenant, agreement or obligation to be performed by any party pursuant to the provisions of this Agreement. (iv) Nothing contained in this Agreement or otherwise shall in any way limit any claim, suit, cause of action or remedy that may be available to any party based on Fraud. (b) Defense of Claims. Whenever any claim shall arise for indemnification hereunder, the party entitled to indemnification (the "Indemnified Party") shall promptly notify the other party (the "Indemnifying Party") in writing of the claim and, when known, the facts constituting the basis for such claim. The Indemnifying Party may, upon written notice to the Indemnified Party within 30 calendar days of receipt of the notice specified in the first sentence of this paragraph, assume the defense of any such claim if the Indemnifying Party acknowledges to the Indemnified Party the Indemnified Party's right to indemnify pursuant hereto in respect of the entirety of such claim. If the Indemnifying Party assumes the defense of any such claim, the Indemnifying Party shall select counsel acceptable to the Indemnified Party to conduct the defense of such claim, shall take all steps necessary in the defense or settlement thereof and shall at all times diligently and promptly pursue the resolution thereof. If the Indemnifying Party shall have assumed the defense of any claim in accordance with this Section 13(b), the Indemnifying Party shall be authorized to consent to a settlement of, or the entry of any judgment arising from, any such claim, without the prior written consent of the Indemnified Party; provided, however, that (i) the Indemnifying Party shall pay or cause to be paid all amounts arising out of such settlement or judgment concurrently with the effectiveness thereof; (ii) the Indemnifying Party shall not be authorized to encumber any of the assets of the Indemnified Party or to agree to any restriction that would apply to the Indemnified Party or to its conduct of business; and (iii) a condition to any such settlement shall be a complete release of the Indemnified Party with respect to such claim which contains no admission of liability on the part of the Indemnified Party. The Indemnified Party shall be entitled to participate in the defense of any such action, with its own counsel and at the expense of the Indemnifying Party. The Indemnified Party shall, and shall cause each of its Affiliates, officers, employees, consultants and agents to, cooperate fully with the Indemnifying Party in the defense of any claim or Proceeding being defended by the Indemnifying Party pursuant to this Section 14(b). If the Indemnifying Party does not assume the defense of any claim resulting therefrom in accordance with the terms of this Section 13(b), the Indemnified Party may defend against such claim in such manner as it may deem appropriate, including settling such claim after giving notice of the same to the Indemnifying Party, on such terms as the Indemnified Party may deem appropriate. (c) Indemnification Threshold. No claim for indemnification will be made by any Indemnified Party against any Indemnifying Parties unless the aggregate of all Damages incurred by the Indemnified Parties exceeds $10,000, in which case the Indemnifying Parties shall be liable for such Damages including the initial $10,000. 15. GENERAL PROVISIONS. (a) Further Assurances. The parties shall cooperate and take such actions, and execute such other documents subsequent to the Acquisition Date as either may reasonably request in order to carry out the provisions or purpose of this Agreement. (b) Notices. All notices or other communications in connection with this Agreement shall be in writing and shall be deemed given (a) if personally delivered, when delivered, (b) if mailed, two Business Days after having been sent by registered or certified mail, postage prepaid, return receipt requested, or (c) if sent through an overnight delivery service in circumstances to which such service guarantees next-day delivery, the day following be so sent, as follows: (i) If to Seller: Scott Glenn Allergy Free, LLC 6835 Flanders Drive, Ste 500 San Diego, California 92121 With a copy to: Glen Roberts, Esq. P.O. Box 580 Del Mar, California 92014 (ii) If to Purchaser: c/o H. Mac Busby Planet Polymer Technologies, Inc. 3852 Alameda Place San Diego, California 92103 With a copy to: Blanchard, Krasner & French Attn: Robert W. Blanchard 800 Silverado Street, Second Floor La Jolla, California 92037 (c) Entire Agreement; Amendment; No Waiver. This Agreement (which includes the Schedules and Exhibits hereto) sets forth the parties final and entire agreement with respect to its subject matter and supersedes any and all prior understandings and agreements. This Agreement can be amended or supplemented, and any provision hereof can be waived, only by a written instrument making specific reference to this Agreement, in the case of amendment or supplement, signed by all the parties hereto, or in the case of a waiver, signed by the party against whom enforcement of such waiver is sought. No waiver by a party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent occurrence. No failure or delay by a party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. (d) Public Announcements. Seller agrees that they will not make any public announcement, including any announcement to the employees of the Business, or otherwise cause to be publicized in any manner by way of press interviews, responses to press questions or inquiries, press releases or otherwise in any manner designed for release to the general or trade press, any aspect or proposed aspect of this transaction (including but not limited to the price paid and other terms of the transaction) without the mutual agreement of Purchaser. (e) Successors; Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors and assigns. This Agreement or any of its rights, interests or obligations hereunder may not be assigned or transferred by either party without the prior written consent of the other party. (f) Captions. The section and paragraph headings in this Agreement and in the Schedules hereto are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (g) Fees and Expenses. Whether or not the transactions contemplated hereby are consummated, the parties hereto shall pay their own respective expenses. (h) Severability; Construction. If any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, invalid, unenforceable or void, such provision shall be construed and enforced as if it had been more narrowly drawn so as not to be illegal, invalid, unenforceable or void, and such illegality, invalidity or unenforceability shall have no affect upon and shall not impair the enforceability of any other provision of this Agreement. The parties hereto intend that each representation, warranty and covenant contained herein will have independent significance. If any party has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) that the party has not breached will not detract from or mitigate the fact that the party is in breach of the first representation, warranty or covenant. (i) Governing Law; Exclusive Jurisdiction. This Agreement shall be governed by and construed and interpreted in accordance with the internal law of the State of California (without reference to its rules as to choice or conflict of law). Each of the parties hereto agrees that any legal action or proceeding against it or any of its property with respect to this Agreement or any other agreement executed in connection herewith, except as otherwise provided herein, shall be brought exclusively in the Superior Courts for the County of San Diego, State of California, or the Federal District Court for the Southern District of California, and all related appellate courts, and the parties irrevocably consent to the jurisdiction of such courts. (j) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. [The remainder of this page is intentionally left blank] IN WITNESS WHEREOF, the parties have duly executed this Agreement on the date first above written. PLANET POLYMER TECHNOLOGIES, INC. By: ______________________________________ H. Mac Busby, President ALLERGY FREE, LLC By: SR Technologies Associates, Manager By: ______________________________________ Scott Glenn, President FIRST AMENDMENT TO THE ASSET PURCHASE AGREEMENT DATED AS OF MARCH 18, 2004 BY AND AMONG PLANET POLYMER TECHNOLOGIES, INC. AND ALLERGY FREE, LLC This first amendment ("Amendment") to the Asset Purchase Agreement ("Agreement") dated as of March 18, 2004 by and among Planet Polymer Technologies, Inc. ("Purchaser") and Allergy Free, LLC ("Seller") is made and entered into as of June 11, 2004 by and among the parties to the Agreement and is made with reference to the following: RECITALS WHEREAS, the parties entered into the Agreement as of March 18, 2004; WHEREAS, the ability of the parties to close the transaction has been delayed due to factors outside of the control of either party, the parties now desire to amend the Agreement; AGREEMENT NOW THEREFORE, in consideration of the above recitals and the mutual promises and agreements contained in this Amendment, and for valuable consideration, the receipt and sufficiency of which is hereby acknowledged and agreed, the parties hereby agree as follows: 1. In accordance with Section 4(b) of the Agreement, Seller has elected to reduce the Subordinated Convertible Note to $356,430 and take additional shares of common stock of Purchaser for the balance of the outstanding indebtedness of Allergy Free to its members determined at $.05 per share. 2. Section 8(l) is hereby amended and restated as follows: "(1) Distribution of Royalty Rights. Immediately prior to the Closing, Purchaser shall assign to US Bank, or another Person, as Trustee, for the benefit of Purchaser's shareholders of record on April 15, 2004, the right to receive all royalties payable to Purchaser pursuant to those certain Sale and Licensing Agreements between Purchaser and Agway, Inc., each dated March 31, 2003, relating to Purchaser's FreshSeal and Optigen technology ("Agway Agreements"), the rights under which have been sold by Agway to BASF and Alltech, respectively, and that certain Purchase, Sale and License Agreement between Purchaser and Ryer Enterprises, LLC, dated May 1, 2003, as amended, relating to Purchaser's MIM technology ("Ryer Agreement"). The Trustee will be instructed to distribute royalties received, if any, quarterly. The Agway Agreements and Ryer Agreement are collectively referred to as the Sale and Licensing Agreements. Purchaser will also assign to US Bank or another Person, as Trustee, for the benefit of C1-1 Purchaser's shareholders of record as of April 15, 2004, all proceeds received from Ryer or its Successor in prepayment of the Ryer Note, less fees and expenses related to accepting such prepayment and amending the Ryer Agreement. The terms of the Ryer Note are described more fully in the Ryer Agreement. Other than the right to receive and collect (i) royalties and (ii) proceeds received in prepayment of the Ryer Note, Purchaser will retain all other rights and obligations under the Sale and License Agreements. In the event Purchaser incurs costs or expenses in connection with obligations under the Sale and Licensing Agreements, Purchaser shall be entitled to reimbursement from the trust for such costs and expenses to the extent of any undistributed royalties received by the Trustee, provided such rights shall be subordinate to any rights of the Trustee for payment of its fees and expenses. In the event pursuant to the Sale and Licensing Agreement, Purchaser recovers the exclusive or nonexclusive right to exploit such technologies, Purchaser may do so for Purchaser's own account and with no obligation to pay royalties to the Trustee." 3. Section 10(a)(iii) of the Agreement is hereby amended and restated as follows: "(iii) Delay. At any time prior to the Acquisition Date by Purchaser or Seller in the event that the Acquisition is not consummated by August 31, 2004, except that Purchaser or Seller, as the case may be, shall not have the right to terminate pursuant to this Sub-Section 10(a)(iii) to the extent that the failure to close arises out or results from the knowing action or inaction of the party seeking to terminate pursuant to this Sub-Section 10 (a)(iii), which action or inaction is in violation of its obligations under this Agreement." 4. Purchaser has selected June 15, 2004 as the "record date" for which shareholders of Purchaser will be entitled to vote on whether to approve the Acquisition. 5. Section 8(n) of the Agreement is hereby amended and restated as follows: "8.(n) Concurrently with the Acquisition, Purchaser will offer to shareholders of Purchaser and Members of Seller the opportunity to purchase from Purchaser Common Stock in an unregistered Private Placement at a purchase price equal to $0.05 per share (the "Private Placement"). The aggregate offering will be up to $2,000,000 and subscriptions will be limited to accredited investors and up to thirty-five (35) other investors. If the offering is oversubscribed, shares will first be allocated to Purchaser shareholders on a pro rata basis, second to Seller Members and the balance, if any, to new investors." C1-2 IN WITNESS WHEREOF, the parties have duly executed the amendment to agreement on the date first written above. PLANET POLYMER TECHNOLOGIES, INC. By: ______________________ H. Mac Busby, President ALLERGY FREE, LLC By: SR Technologies Associates, Manager By: ______________________ Scott Glenn, President C1-3 SECOND AMENDMENT TO THE ASSET PURCHASE AGREEMENT DATED AS OF MARCH 18, 2004 BY AND AMONG PLANET POLYMER TECHNOLOGIES, INC. AND ALLERGY FREE, LLC This second amendment ("Amendment") to the Asset Purchase Agreement ("Agreement") dated as of March 18, 2004, as amended June 11, 2004, by and among Planet Polymer Technologies, Inc. ("Purchaser") and Allergy Free, LLC ("Seller") is made and entered into as of October 6, 2004 by and among the parties to the Agreement and is made with reference to the following: RECITALS WHEREAS, the parties entered into the Agreement as of March 18, 2004, as amended June 11, 2004; WHEREAS, the ability of the parties to close the transaction has been delayed due to factors outside of the control of either party, the parties now desire to amend the Agreement; AGREEMENT NOW THEREFORE, in consideration of the above recitals and the mutual promises and agreements contained in this Amendment, and for valuable consideration, the receipt and sufficiency of which is hereby acknowledged and agreed, the parties hereby agree as follows: 1. In accordance with Section 4(b) of the Agreement, Seller has elected to reduce the Subordinated Convertible Note to $274,300 and the parties agree the balance of the purchase price shall be paid by delivery of 82,732,970 shares of common stock of Purchaser. 2. Section 8(l) is hereby amended to change the record date for distribution or the Royalty Rights to September 30, 2004. 3. Section 10(a)(iii) of the Agreement is hereby amended to replace August 31, 2004 with November 30, 2004. 4. Purchaser has selected September 30, 2004 as the "record date" for which shareholders of Purchaser will be entitled to vote on whether to approve the Acquisition. 5. Section 8(n) of the Agreement is hereby amended to provide that shares not purchased in the Private Placement concurrently with the closing may be purchased up to 30 days after the closing or such later date as the board of Purchaser shall approve." C1-1 IN WITNESS WHEREOF, the parties have duly executed the amendment to agreement on the date first written above. PLANET POLYMER TECHNOLOGIES, INC. By: ______________________ H. Mac Busby, President ALLERGY FREE, LLC By: SR Technologies Associates, Manager By: ______________________ Scott Glenn, President C1-2 EX-2 3 a03910exv2.txt EXHIBIT 2 Exhibit 2 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is dated as of November 30, 2004 by and between Planet Polymer Technologies, Inc., a California corporation (the "Company"), and Allergy Free, L.L.C., a California limited liability company (the "Investor"). RECITALS A. On the date hereof, the Company is issuing to the Investor certain unregistered common stock of the Company ("Private Stock") and a Subordinated Convertible Note that may be convertible into additional Private Stock, pursuant to the terms and conditions of that certain Asset Purchase Agreement dated as of March 18, 2004, and as amended June 11, 2004 and October 6, 2004 ("Asset Purchase Agreement"), by and among the Company and the Investor. B. In order to induce the Investor to enter into the Asset Purchase Agreement, the Company has agreed to provide the Investor certain rights set forth in this Agreement. C. In connection with entering into the Asset Purchase Agreement, the parties are willing to execute this Agreement and to be bound by the provisions hereof. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and covenants contained herein, the Investor and the Company (collectively, the "Parties") agree as follows: 1. Definitions. For purposes of this Statement: "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor statute. "Holder" means (i) the Investor, (ii) the partners, members or stockholders of the Investor collectively provided that such partners, members or stockholders act through the Investor or its successor, (iii) purchasers of Private Stock in the private placement described in the Asset Purchase Agreement, and (iv) any person or entity to whom the Investor or any person or entity identified in clause (ii) and clause (iii) of this definition sells, transfers or assigns 25% or more of the Registrable Securities issued pursuant to the Purchase Agreement, other than in a sale pursuant to Rule 144 under the Securities Act or a registration effected pursuant to this Agreement. "Register," "registered," and "registration" refer to an underwritten registration effected by preparing and filing with the Securities and Exchange Commission (the "Commission") a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering by the Commission of effectiveness of such registration statement or document. "Registration Expenses" means all expenses in connection with the Company's performance of or compliance with its obligations under this Agreement, including, without limitation, all (i) registration, qualification and filing fees; (ii) fees, costs and expenses of compliance with securities or blue sky laws (including reasonable fees, expenses and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities under the laws of such jurisdictions as the managing underwriter or underwriters in a registration may designate, subject to the limitation as set forth in subsection (h) of Section 5 hereof); (iii) printing expenses; (iv) messenger, telephone and delivery expenses; (v) fees, expenses and disbursements of counsel for the Company and of all independent certified public accountants retained by the Company (including the expenses of any special audit and "cold comfort" letters required by or incident to such performance); (vi) Securities Act liability insurance if the Company so desires; (vii) fees, expenses and disbursements of any other individuals or entities retained by the Company in connection with the registration of the Registrable Securities; (viii) fees, costs and expenses incurred in connection with the listing of the Registrable Securities on each national securities exchange or automated quotation system on which the Company has made application for the listing of its Common Stock; and (ix) internal expenses of the Company (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties and expenses of any annual audit). Registration Expenses shall not include selling commissions, discounts or other compensation paid to underwriters or other agents or brokers to effect the sale of Registrable Securities, or counsel fees and any other expenses incurred by Holders in connection with any registration that are not specified in the immediately preceding sentence. "Registrable Securities" means any shares of Common Stock of the Company owned by any Holder or that may be acquired by any Holder upon the conversion of any convertible security or the exercise of any warrant, option or other right owned by any Holder, but only to the extent such shares constitute "restricted securities" under Rule 144 under the Securities Act. "Requestor" means the Holder or Holders requesting the registration in question. Actions taken by the Requestor shall be taken by those Holders making such request who hold a majority of the Registrable Securities held by such Holders. "Securities Act" means the Securities Act of 1933, as amended, or any successor statute. 2. Demand Registrations. (a) Request for Registration. If at any time after the date hereof one or more Holders who in the aggregate hold at least 25% of the Registrable Securities submits a written request (a "Demand Notice") to the Company that the Company register Registrable Securities under and in accordance with the Securities Act (a "Demand Registration"), then the Company shall: (i) within five days after receipt of such Demand Notice, give written notice of the proposed registration to all other Holders; and - 2 - (ii) as soon as practicable, use diligent efforts to effect such registration as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holders joining in such request as are specified in written requests received by the Company within 20 days after the date the Company mails the written notice referred to in clause (i) above. Notwithstanding the foregoing, if the Company shall furnish to the Holders a certificate signed by the president of the Company stating that in the good faith judgment of the board of directors of the Company, it would be seriously detrimental to the Company or its stockholders for a registration statement to be filed on or before the date filing would be required in connection with any Demand Registration and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer such filing or delay its effectiveness for a reasonable period not to exceed 90 days provided that such right shall not be exercised more than once with respect to a request for registration hereunder during any period of twelve consecutive months. The Company will pay all Registration Expenses in connection with such withdrawn request for registration. Notwithstanding the foregoing, the Company shall not be required to effect any registration requested within less than 120 days after the filing of another registration filed by the Company in which all of the Registrable Securities requested to be included in such registration by participating Holders were so included. (b) Underwriting. In connection with any registration under this Section 2, if the Requestors intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2(a). In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. The Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement with one or more underwriters selected by the Requestors having terms and conditions customary for such agreements (which underwriter or underwriters shall be reasonably acceptable to the Company). Notwithstanding any other provision of this Section 2, if the managing underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the managing underwriter may limit the number of Registrable Securities to be included in such registration. The Company shall so advise all Holders distributing Registrable Securities through such underwriting, and the number of Registrable Securities that may be included in the registration and underwriting shall be allocated in proportion, as nearly as practicable, to the respective amounts of Registrable Securities required to be included (determined without regard to any requirement of a request to be included in such registration) in such registration held by all Holders at the time of filing the registration statement. To facilitate the allocation of shares in accordance with the above provisions, the Company may round the number of shares allocated to any Holder to the nearest 100 shares. (c) Shelf Registration. If at the time the Company registers Registrable Securities under the Securities Act pursuant to this Section 2, the sale or other disposition of such Registrable Securities by the Holders may be made pursuant to a registration statement on Form - 3 - S-3 (or any successor form that permits the incorporation by reference of future filings by the Company under the Exchange Act), and such registration statement, unless otherwise directed by the Requestor, shall be filed as a "shelf" registration statement pursuant to Rule 415 under the Securities Act (or any successor rule). Any such shelf registration shall cover the disposition of all Registrable Securities in one or more underwritten offerings, block transactions, broker transactions, at-market transactions and in such other manner or manners as may be specified by the Requestor. Except as provided in Section 5(b) hereof, the Company shall use its reasonable best efforts to keep such "shelf" registration continuously effective as long as the delivery of a prospectus is required under the Securities Act in connection with the disposition of the Registrable Securities registered thereby and in furtherance of such obligation, shall supplement or amend such registration statement if, as and when required by the rules, regulations and instructions applicable to the form used by the Company for such registration or by the Securities Act or by any other rules and regulations thereunder applicable to shelf registrations. Upon their receipt of a certificate signed by the president of the Company in accordance with the procedure set forth in the penultimate paragraph of Section 2(a) hereof, the Holders will refrain from making any sales of Registrable Securities under the shelf registration statement for a period of up to 90 days; provided that this right to cause the Holders to refrain from making sales shall not be exercised by the Company more than twice, or for an aggregate period of more than 90 days, in any twelve-month period (counting as a permitted exercise any exercise by the Company of its right to defer the filing or delay its effectiveness of a registration statement under the penultimate paragraph of Section 2(a)). 3. Company Registration. (a) Notice of Registration. If at any time or from time to time, the Company shall determine to register any of its capital stock, whether or not for its own account, other than a registration relating to employee benefit plans or a registration effected on Form S-4, the Company shall: (i) provide to each Holder written notice thereof at least ten days prior to the filing of the registration statement by the Company in connection with such registration; and (ii) include in such registration, and in any underwriting involved therein, all those Registrable Securities specified in a written request by each Holder received by the Company within five days after the Company mails the written notice referred to above, subject to the provisions of Section 3(b) below. (b) Underwriting. The right of any Holder to registration pursuant to this Section 3 shall be conditioned upon the participation by such Holder in the underwriting arrangements specified by the Company in connection with such registration and the inclusion of the Registrable Securities of such Holder in such underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall (together with the Company) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company and take all other actions, and deliver such opinions and certifications, as may be reasonably requested by such managing underwriter. Notwithstanding any other provision of this Section 3, if the managing underwriter - 4 - determines that marketing factors require a limitation of the number of shares to be underwritten, the managing underwriter may limit the number of Registrable Securities to be included in such registration. The Company shall so advise all Holders distributing Registrable Securities through such underwriting, and there shall be excluded from such registration and underwriting, to the extent necessary to satisfy such limitation, first shares held by the Holders and, thereafter, to the extent necessary, shares which the Company wishes to register for its own account. As among the Holders as a group, the number of Registrable Securities that may be included in the registration and underwriting shall be allocated in proportion, as nearly as practicable, to the respective amounts of Registrable Securities required to be included (determined without regard to any requirement of a request to be included in such registration) in such registration held by all Holders at the time of filing the registration statement. To facilitate the allocation of shares in accordance with the above provisions, the Company may round the number of shares allocated to any Holder to the nearest 100 shares. (c) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 3 whether or not any Holder has elected to include Registrable Securities in such registration. 4. Expense of Registration. All Registration Expenses incurred in connection with the registration and other obligations of the Company pursuant to Sections 2, 3 and 5 shall be borne by the Company, and all underwriting discounts and selling commissions incurred in connection with any such registrations shall be borne by the Holders of the securities so registered pro rata on the basis of the number of shares so registered. The Company shall not, however, be required to pay for expenses of any registration proceeding begun pursuant to Sections 2, 3 or 5, the request of which has been subsequently withdrawn by the Holders unless the withdrawal is based upon material adverse information concerning the Company of which the Holders were not aware at the time of such request. 5. Registration Procedures. If and whenever the Company is required by the provisions of this Agreement to effect the registration of Registrable Securities, the Company shall: (a) promptly prepare and file with the Commission a registration statement with respect to such Registrable Securities on any form that may be utilized by the Company and that shall permit the disposition of the Registrable Securities in accordance with the intended method or methods of disposition thereof, and use its reasonable diligent efforts to cause such registration statement to become effective as promptly as practicable and remain effective thereafter as provided herein, provided that prior to filing a registration statement or prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of any registration statement, the Company will furnish to each of the Investor whose Registrable Securities are covered by such registration statement, their counsel and the underwriters copies of all such documents proposed to be filed sufficiently in advance of filing to provide them with a reasonable opportunity to review such documents and comment thereon; (b) prepare and file with the Commission such amendments (including post-effective amendments) and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and current and to comply with the provisions of the Securities Act with respect to the sale or - 5 - other disposition of all Registrable Securities covered by such registration statement, including such amendments (including post-effective amendments) and supplements as may be necessary to reflect the intended method of disposition by the prospective seller or sellers of such Registrable Securities, provided that except in the case of a shelf registration under Section 2(c) such registration statement need not be kept effective and current for longer than 120 days subsequent to the effective date of such registration statement; (c) subject to receiving reasonable assurances of confidentiality, for a reasonable period after the filing of such registration statement, and throughout each period during which the Company is required to keep a registration effective, make available for inspection by the selling holders of Registrable Securities being offered, and any underwriters, and their respective counsel, such financial and other information and books and records of the Company, and cause the officers, directors, employees, counsel and independent certified public accountants of the Company to respond to such inquiries as shall be reasonably necessary, in the judgment of such counsel, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; (d) promptly notify the selling holders of Registrable Securities and any underwriters and confirm such advice in writing, (i) when such registration statement or the prospectus included therein or any prospectus amendment or supplement or post-effective amendment has been filed, and, with respect to such registration statement or any post-effective amendment, when the same has become effective, (ii) of any comments by the Commission, by the National Association of Securities Dealers Inc. ("NASD"), and by the blue sky or securities commissioner or regulator of any state with respect thereto or any request by any such entity for amendments or supplements to such registration statement or prospectus or for additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of such registration statement or the initiation or threatening of any proceedings for that purpose, (iv) if at any time the representations and warranties of the Company cease to be true and correct in all material respects, (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (vi) at any time when a prospectus is required to be delivered under the Securities Act, that such registration statement, prospectus, prospectus amendment or supplement or post-effective amendment, or any document incorporated by reference in any of the foregoing, contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading; (e) furnish to each selling holder of Registrable Securities being offered, and any underwriters, prospectuses or amendments or supplements thereto, in such quantities as they may reasonably request and as soon as practicable, that update previous prospectuses or amendments or supplements thereto; (f) use reasonable diligent efforts to (i) register or qualify the Registrable Securities to be included in a registration statement hereunder under such other securities laws or blue sky laws of such jurisdictions within the United States of America as any selling holder of such Registrable Securities or any underwriter of the securities being sold shall reasonably - 6 - request, (ii) keep such registrations or qualifications in effect for so long as the registration statement remains in effect and (iii) take any and all such actions as may be reasonably necessary or advisable to enable such holder or underwriter to consummate the disposition in such jurisdictions of such Registrable Securities owned by such holder; provided, however, that the Company shall not be required for any such purpose to (x) qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not otherwise be required to qualify but for the requirements of this Section 5(f), (y) subject itself to taxation in any such jurisdiction or (z) consent to general service of process in any such jurisdiction; (g) cause all such Registrable Securities to be listed or accepted for quotation on each securities exchange or automated quotation system on which the Company's Common Stock then trades; and (h) otherwise use reasonable diligent efforts to comply with all applicable provisions of the Securities Act, and rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering a period of at least twelve months which shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder. 6. Indemnification. In the event any of the Registrable Securities are included in a registration statement under this Agreement: (a) to the extent permitted by law, the Company will indemnify each Holder who participates in such registration, each of its officers and directors and partners, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement or prospectus, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of any rule or regulation promulgated under the Securities Act applicable to the Company in connection with any such registration, qualification or compliance (each, a "Violation"), and the Company will reimburse each such Holder, each of its officers and directors and partners and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any Violation which occurs in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder or underwriter and stated to be specially for use therein, and provided further, that the indemnity agreement described in this Section 6(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld. - 7 - (b) Each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers and its legal counsel and independent accountants, each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, and each other such Holder, each of its officers and directors and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statement therein not misleading, and will reimburse the Company, such Holders, such directors, officers, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder and stated to be specifically for use therein. (c) Each party entitled to indemnification under this Section 6 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought provided that failure to give such prompt notice shall not relieve the Indemnifying Party of its obligations hereunder unless it is materially prejudiced thereby, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld). Such Indemnified Party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be that of such Indemnified Party unless (i) the Indemnifying Party has agreed to pay such fees and expenses or (ii) the Indemnifying Party shall have failed to assume the defense of such action or proceeding and employ counsel reasonably satisfactory to such Indemnified Party in any such action or proceeding or (iii) the named parties to any such action or proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party and such Indemnified Party shall have been advised by counsel that there may be one or more legal defenses available to such Indemnified Party which are different from or additional to those available to the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing of an election to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of such action or proceeding on behalf of such Indemnified Party, it being understood, however, that the Indemnifying Party then shall have the right to employ separate counsel at its own expense and to participate in the defense thereof, and shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties, which firm shall be designated in writing by a majority of the Indemnified - 8 - Parties who are eligible to select such counsel). No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. No Indemnified Party may consent to entry of any judgment or enter into any settlement without the prior written consent of the Indemnifying Party. (d) If the indemnification provided for in this Section 6 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying the Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party with respect to such loss, liability, claim, damage or expenses in the proportion that is appropriate to reflect the relative fault of the Indemnifying Party and the Indemnified Party in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 7. Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Registrable Securities to the public without registration, after such time as a public market exists for the Common Stock, the Company shall use reasonably diligent efforts to: (a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, beginning 90 days after the Company registers a class of securities under Section 12 of the Exchange Act or completes a registered offering under the Securities Act; (b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); and (c) Furnish to any Holder promptly upon request a written statement as to its compliance with the reporting requirements of Rule 144 (at any time after 90 days after the Company completes a registered offering under the Securities Act), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), and a copy of the most recent annual or quarterly report of the Company. 8. Termination of Registration Rights. No Holder shall be entitled to exercise any right provided for in this Agreement after the earlier of (a) five years after the date hereof and (b) the date all Registrable Securities held by such Holder may be sold in a single three-month period under Rule 144 under the Securities Act. - 9 - 9. Information To Be Provided by the Holders. Each Holder whose Registrable Securities are included in any registration pursuant to this Agreement shall furnish the Company such information regarding such Holder and the distribution proposed by such Holder as may be reasonably requested in writing by the Company and as shall be required in connection with such registration or the registration or qualification of such securities under any applicable state securities law. 10. "Stand-Off" Agreement. Each Holder, if requested by the managing underwriter of a registered public offering of securities by the Company, shall agree not to sell or otherwise transfer or dispose of any Registrable Securities or other securities of the Company then held by such Holder for a specified period of time that is customary under the circumstances (not to exceed 180 days) following the effective date of the registration statement for such offering, provided that (a) no such agreement shall be required unless the other principal stockholders of the Company enter into a similar agreement covering the same period of time and (b) such agreement shall contain terms customary for such agreements. The Company may impose stop transfer instructions to enforce any required agreement of the Holders under this Section 10. 11. Miscellaneous. (a) Notices. All notices, requests and other communications hereunder shall be in writing and shall be deemed to have been duly given at the time of receipt if delivered by hand or by facsimile transmission or three days after being mailed, registered or certified mail, return receipt requested, with postage prepaid, to the address or facsimile number (as the case may be) listed below the signature of each Party on such Party's signature page hereto if any Party shall have designated a different address or facsimile number by notice to the other Parties given as provided above, then to the last address or facsimile number so designated. (b) Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed and interpreted in such manner as to be effective and valid under applicable law. (c) Waiver or Modification. Any amendment or modification of this Agreement shall be effective only if evidenced by a written instrument executed by the Company and by Investor that hold a majority of the total Registrable Securities. (d) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to the principles of conflicts of laws thereof. (e) Attorneys' Fees. In the event of any dispute involving the terms hereof, the prevailing parties shall be entitled to collect legal fees and expenses from the other party to the dispute. (f) Further Assurances. Each Party agrees to act in accordance herewith and not to take any action that is designed to avoid the intention hereof. - 10 - (g) Successors and Assigns. This Agreement and the rights and obligations of the Parties hereunder shall inure to the benefit of, and be binding upon, their respective successors, assigns and legal representatives. (h) Defined Terms. Certain defined terms used herein and not otherwise defined herein shall have them meanings ascribed to such terms in the Asset Purchase Agreement. [Remainder of page intentionally left blank] [signatures appear on following pages] - 11 - [COMPANY SIGNATURE PAGE] IN WITNESS WHEREOF, the undersigned Party has executed this Agreement as of the day and year first above written. PLANET POLYMER TECHNOLOGIES, INC. By: ______________________________________ Name: Scott Glenn Title: Chairman, CEO and President ADDRESS FOR NOTICE: Planet Polymer Technologies, Inc. 6835 Flanders Drive, Suite 100 San Diego, California 92121 Attention: Scott Glenn Chairman, CEO and President Facsimile: (858) 824-0891 with a copy to: Blanchard, Krasner & French 800 Silverado Street, 2nd Floor La Jolla, California 92037 Attention: Robert W. Blanchard Facsimile: (858) 551-2440 - 12 - [INVESTOR SIGNATURE PAGE] IN WITNESS WHEREOF, the undersigned Investor has executed this Agreement as of the day and year first above written. ALLERGY FREE, L.L.C. By: ______________________________________ Name: Scott Glenn Title: Managing Director ADDRESS FOR NOTICE: Allergy Free, L.L.C. 6835 Flanders Drive, Suite 500 San Diego, California 92121 Attention: Scott Glenn, Managing Director Facsimile: (858) 824-0891 with a copy to: Glen Roberts, Esq. P.O. Box 580 Del Mar, California 92014 -13- -----END PRIVACY-ENHANCED MESSAGE-----