Exhibit 99.2
AMENDMENT NO. 1 TO ACQUISITION AGREEMENT AND PLAN OF MERGER
This Amendment No. 1 to Acquisition Agreement and Plan of Merger (this
"Amendment"), dated as of March 7, 2005, among IBF Fund Liquidating, LLC, a
Delaware limited liability company ("IBF"), U.S. ▇▇▇▇▇, Inc., a Delaware
corporation (the "Company"), USM Acquisition Sub, Inc., a Delaware corporation
("Merger Sub"), and Sunset Brands, Inc., a Nevada corporation (the "Purchaser"),
amends the Acquisition Agreement and Plan of Merger, dated as of February 18,
2005, among IBF, the Company, Merger Sub and the Purchaser (the "Merger
Agreement"). Capitalized terms used and not defined herein have the meanings set
forth in the Merger Agreement.
WHEREAS, pursuant to Section 1.7 of the Merger Agreement, the Purchaser is
required to deliver to Continental Stock Transfer & Trust Company or such other
entity as shall be mutually agreed by Purchaser and the Shareholder
Representative (the "Deposit Escrow Agent"), no later than five (5) Business
Days after the Merger Agreement is fully executed by the Parties (i) Five
Hundred Thousand Dollars ($500,000) in cash (the "Deposit Cash"), and (ii)
500,000 shares of Sunset Common in the name of the Company (the "Deposit Shares"
and, collectively with the Deposit Cash, the "Deposit").
WHEREAS, pursuant to Section 1.8 of the Merger Agreement, the Purchaser is
required to deposit the Holdback Cash and the Holdback Units into the Escrow
Account to be held for the satisfaction of any Purchaser Claim and the Working
Capital Adjustment, if any.
WHEREAS, the parties hereto have agreed that (i) the Deposit will be
deposited into escrow on the date hereof to be held and disbursed by the Deposit
Escrow Agent in accordance with the terms of the Escrow Agreement, dated as of
the date hereof, among the Purchaser, the Company, the Shareholder
Representative and the Escrow Agent (the "Deposit Escrow Agreement"), and (ii)
the Holdback Cash and the Holdback Units will be deposited into escrow on the
Closing Date to be held and disbursed by Continental Stock Transfer & Trust
Company or such other entity as shall be mutually agreed by Purchaser and the
Shareholder Representative (the "Escrow Agent") in accordance with the terms of
an escrow agreement to be entered into on the Closing Date by the Purchaser, the
Company, the Shareholder Representative and the Indemnity Escrow Agent (the
"Indemnity Escrow Agreement").
WHEREAS, the parties hereto wish to amend the Merger Agreement as provided
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendment to Merger Agreement.
(a) Section 1.7 of the Merger Agreement is hereby amended and
restated to read in its entirety as follows:
"Deposit. No later than March 8, 2005, the Purchaser shall deliver
to Continental Stock Transfer & Trust Company or such other entity as
shall be mutually
agreed by Purchaser and the Shareholder Representative (the "Deposit
Escrow Agent") (i) Five Hundred Thousand Dollars ($500,000) in cash (the
"Deposit Cash"), and (ii) 500,000 shares of Sunset Common (as defined
below) in the name of the Company (the "Deposit Shares" and, collectively
with the Deposit Cash, the "Deposit"). The Deposit, together with any
interest thereon but less any applicable escrow fees and expenses to which
the Deposit Escrow Agent is entitled pursuant to an escrow agreement to be
entered into on March 7, 2005 by the Purchaser, the Company, the
Shareholder Representative (as representative of the Selling Parties) and
the Deposit Escrow Agent (the "Deposit Escrow Agreement"), shall
constitute the "▇▇▇▇▇▇▇ Money" and shall be held by the Deposit Escrow
Agent pursuant to the Deposit Escrow Agreement. Subject to and in
accordance with the terms of the Deposit Escrow Agreement, at the Closing,
(x) the Deposit Escrow Agent shall release the Deposit Shares to Purchaser
for cancellation, and (y) the Deposit Escrow Agent shall deposit the
Deposit Cash (together with all income and gain, dividends or
distributions earned or received on the Deposit) into the Escrow Account.
Except as the Parties may otherwise agree in writing, in the event this
Agreement is terminated prior to Closing in accordance with the provisions
of Article IX of this Agreement, the ▇▇▇▇▇▇▇ Money shall be dispersed in
accordance with Section 9.2 e. of this Agreement."
(b) Section 1.8 of the Merger Agreement is hereby amended and
restated to read in its entirety as follows:
"Holdback. At the Closing, (i) the Deposit Escrow Agent shall
deposit with Continental Stock Transfer & Trust Company or such other
entity as shall be mutually agreed by Purchaser and the Shareholder
Representative (the "Escrow Agent") the Deposit Cash from the escrow
account established pursuant to the Deposit Escrow Agreement (the "Deposit
Account"), and (ii) Purchaser shall deposit with the Escrow Agent (A)
eight hundred thousand dollars ($800,000) in cash (together with the
Deposit Cash, the "Holdback Cash"), and (B) Merger Units (the "Holdback
Units" and collectively, with the Holdback Cash, the "Holdback") having an
aggregate value equal to One Million Two Hundred Thousand Dollars
($1,200,000), with such Holdback to be held for the satisfaction of any
Purchaser Claim (as hereinafter defined) and the Working Capital
Adjustment, if any. The Holdback Units shall be issued in the names of the
Selling Parties in accordance with the Distribution Percentages (as
defined below). Upon determination of the Final Working Capital
Adjustment, the Escrow Agent shall disburse to the Purchaser and/or the
Selling Parties Holdback Cash and/or Holdback Units in accordance with the
provisions of Section 1.9 below. The remaining Holdback after payment of
the Final Working Capital Adjustment (the "Indemnity Holdback"), shall be
held and disbursed in accordance with the provisions of Section 1.10
below. For the purposes of this Agreement, the cash and securities held by
the Deposit Escrow Agent in the Deposit Account and by the Escrow Agent in
the Escrow Account shall be valued as follows: (i) all Holdback Units held
by the Escrow Agent in the Escrow Account shall be valued at the price per
Unit at which they were sold pursuant to the Series B Financing (e.g.
$1,200,000 at the time of deposit with the Escrow Agent); (ii) all shares
of Sunset Common issued upon the conversion of Merger Shares or Merger
Warrants comprising the Holdback Units shall be valued at the face value
of the Merger Shares so converted or
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the exercise price of the Merger Warrants so converted; and (iii) all cash
(including interest earned thereon) received upon the sale of any Sunset
Common or as a result of the payment of any dividends by Purchaser on any
Holdback Units in the Escrow Account shall be valued at its face amount.
(c) The first paragraph of Section 1.10 of the Merger Agreement is
hereby amended and restated to read in its entirety as follows:
"Escrow. At the Closing, (i) the Deposit Escrow Agent shall
deposit with the Escrow Agent the Deposit Cash from the Deposit Account,
and (ii) Purchaser shall deposit with the Escrow Agent (A) eight hundred
thousand dollars ($800,000) in cash, and (B) warrant and stock
certificates evidencing the Holdback Units. The parties agree that
Purchaser may, and may instruct its transfer agent to, place stop transfer
orders on the Holdback Units for so long as they are subject to the Escrow
Agreement. The portion of the Holdback Units deposited with the Escrow
Agent by or on behalf of each of the Selling Parties shall be determined
on a pro rata basis in proportion to each such Selling Party's
Distribution Percentage as reflected in Exhibit A to this Agreement, as
such Exhibit may be updated by the Company prior to Closing. The terms by
which the Escrow Agent shall hold and distribute the Holdback Units shall
be set forth in an escrow agreement to be entered into on the Closing Date
by the Purchaser, the Company, the Shareholder Representative (as
representative of the Selling Parties) and the Escrow Agent (the "Escrow
Agreement"). The Escrow Agreement shall be in a customary form reasonably
acceptable to the parties thereto and shall provide as follows:"
(d) Section 1.17 of the Merger Agreement is hereby amended such that
all references to the "Escrow Agreement" set forth therein shall mean,
collectively, the Deposit Escrow Agreement and the Indemnity Escrow
Agreement.
(e) Sections 9.1 e., 9.2 a. and 9.2 e. of the Merger Agreement are
hereby amended to delete each use of the term "Escrow Agent" therefrom and
replace it, in each case, with "Deposit Escrow Agent".
2. Miscellaneous.
(a) The Merger Agreement is ratified and confirmed in all respects
and shall remain in full force and effect in accordance with its terms as
amended by this Amendment. Nothing herein shall affect in any respect the
Company's right to receive the ▇▇▇▇▇▇▇ Money pursuant to Section 9.2 e. of
the Merger Agreement.
(b) Except for the specific amendments set forth in Section 1 above,
nothing herein shall be deemed to be an amendment or waiver of any
covenant or agreement contained in the Merger Agreement, and the parties
hereto hereby agree that all of the covenants and agreements contained in
the Merger Agreement are hereby ratified and confirmed in all respects.
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(c) This Amendment may be executed in two or more counterparts, each
of which will be deemed an original but all of which together will
constitute one and the same instrument.
(d) This Amendment shall be construed, performed and enforced in
accordance with the laws of the State of Delaware.
(e) The parties hereto shall, at any time and from time to time
following the execution of this Amendment, execute and deliver all such
further instruments and take all such further action as may be reasonably
necessary or appropriate in order to carry out the provisions of this
Amendment.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
U.S. ▇▇▇▇▇, INC.,a Delaware corporation
By /s/ ▇▇▇▇▇▇▇ Verde
--------------------------------------
Name: ▇▇▇▇▇▇▇ Verde
Title: President
SUNSET BRANDS, INC., a Nevada
corporation
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President and CEO
USM ACQUISITION SUB, INC., a
Delaware corporation
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
IBF FUND LIQUIDATING LLC,
individually and as Shareholder
Representative
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Manager
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