EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
by and among
QUALITY BOTANICAL INGREDIENTS, INC.,
a Delaware corporation
("Purchaser")
HEALTH SCIENCES GROUP, INC.
("HESG")
and
QUALITY BOTANICAL INGREDIENTS, INC.,
a New Jersey corporation
("Seller")
and
CORROLA, INC. ("Corrola") and XXXXXX X. XXXXXXX ("Xxxxxxx")
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EXHIBITS
Exhibit A Form of General Assignment and Xxxx of Sale
Exhibit B Form of Assignment and Assumption Agreement
Exhibit C Form of Non-Competition Agreement
Exhibit D Form of Lease Amendment and Assignment Agreement
Exhibit E Form of MRA Option Agreement
Exhibit F Form of Employment Agreement
Exhibit G Form of Lock-up Agreement
Exhibit H Form of Escrow Agreement
Exhibit I Form of Opinion of Seller's counsel
SCHEDULES
Schedule 1.2 Assets
Schedule 1.9 LaSalle Obligations
Schedule 2.2 Purchase Price Allocation
Schedule 2.3(c) Transaction Price
Schedule 2.3(e) Calculation of Performance Goals
Schedule 4.1 Exception to Conduct of Business
Schedule 5.1 Organizational Documents
Schedule 5.2(b) Conflicts
Schedule 5.2(c) Notices and Consents
Schedule 5.3 Shareholder Agreements
Schedule 5.4 Financial Statements
Schedule 5.5 Real Property
Schedule 5.5(b) Encumbrances
Schedule 5.7 Accounts Receivables
Schedule 5.9 Undisclosed Liabilities
Schedule 5.10 Taxes; Tax Returns
Schedule 5.11 Litigation
Schedule 5.12 Compliance with Laws
Schedule 5.13 Scheduled Contracts
Schedule 5.14 Employee Benefit Plans
Schedule 5.15 Material Customers; Non-standard Arrangements
Schedule 5.17 Transactions with Affiliates
Schedule 5.18 Franchises, Permits and Licenses
Schedule 5.19 Employees
Schedule 5.20 Insurance
Schedule 5.21 Intellectual Property; Infringements
Schedule 5.24 Accredited Investor Status
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ASSET PURCHASE AGREEMENT
The parties to this Asset Purchase Agreement ("Agreement") dated as of
November 30, 2002 are Quality Botanical Ingredients, Inc., a Delaware
corporation ("Purchaser"), Health Sciences Group, Inc., a Colorado corporation
("HESG"), Quality Botanical Ingredients, Inc., a New Jersey corporation
("Seller"), Corrola, Inc., a New Jersey corporation located c/o Quality
Botanical Ingredients, Inc., 000 Xxxxxxxx Xxxx, Xxxxx Xxxxxxxxxx, Xxx Xxxxxx
00000 and the sole shareholder of Seller ("Corrola") and Xxxxxx X. Xxxxxxx, an
individual resident at 0000 Xxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000 and the
person with sole voting control of all of the outstanding capital stock of
Corrola ("Schortz"). As used herein, Corrola and Schortz are collectively
referred to as the "Shareholders".
Seller desires to sell and Purchaser desires to buy substantially all
the assets of Seller (the "Assets") used or useful in Seller's business of
manufacturing and processing bulk botanicals and other ingredients (the
"Business"), except those expressly excluded herein (the "Excluded Assets"), on
the terms and conditions of this Agreement.
In consideration of the mutual representations, warranties, covenants
and agreements hereinafter contained, the parties hereto, each intending to be
legally bound hereby, agree as follows:
ARTICLE I
SUMMARY OF TRANSACTIONS
Section 1.1. Assets Purchased.
Purchaser hereby agrees to purchase from Seller and Seller hereby
agrees to sell to Purchaser the Assets. The Assets include, but are not limited
to, the following:
(a) substantially all of Seller's cash, accounts receivable, notes
receivable, deposits, prepaid expenses, inventories and intangible properties;
(b) the tangible assets of Seller, including equipment, fixed assets,
furniture, materials and supplies;
(c) saleable, usable and merchantable inventory as selected and
determined by the Purchaser in its discretion;
(d) leasehold or tenant improvements;
(e) customer lists and customer sales files;
(f) all contract rights, causes of action, claims, refunds and demands
of whatever nature, including rights to returned or repossessed goods and rights
as unpaid vendor arising out of the Business;
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(g) all books and records relating to the Business and Seller (except
minute books and stock record books);
(h) all intellectual property owned by, or licensed by, Seller,
including all patents, patent applications, know-how and un-patented ideas,
trade secrets, trademarks and service marks (including registrations and
applications therefore), trade names (including the name "Quality Botanical
Ingredients, Inc.", and all variants thereof), copyrights, and other intangible
proprietary rights recognized under applicable law; and
(i) substantially all of Seller's intangibles and goodwill.
At Closing, Seller will deliver to Purchaser a xxxx of sale for the
Assets, substantially in the form of Exhibit A (the "General Assignment and Xxxx
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of Sale").
Section 1.2. Excluded Assets.
Purchaser and Seller agree that the assets listed on Schedule 1.2 will
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be expressly excluded from the purchase and sale hereunder.
Section 1.3. Assumption of Liabilities.
At Closing, Purchaser will enter into an assignment and assumption
agreement, substantially in the form of Exhibit B (the "Assignment and
Assumption Agreement") providing for Purchaser to assume those liabilities of
Seller described in Section 3.1 hereof. Except as expressly provided in this
Agreement, Purchaser is not assuming any liabilities of Seller.
Section 1.4. Non-Competition and Confidentiality Agreement.
At Closing, Schortz will each enter into a non-competition and
confidentiality agreement with Purchaser, substantially in the form of Exhibit C
(the "Non-Competition and Confidentiality Agreements").
Section 1.5. Real Property Leases.
At Closing, Purchaser will enter into a lease amendment and assignment
agreement with the Seller and MRA Associates, LLC ("MRA") with respect to the
real property described in Schedule 5.5 (the "Real Property") substantially in
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the form of Exhibit D (the "Lease Assignment Agreement"). Purchaser and Seller
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acknowledge that Commerce Bank, the holder of the first mortgage on the Real
Property (the "First Mortgage"), will not consent to the assignment of the lease
pursuant to the Lease Assignment Agreement. Seller shall use its best efforts,
at Purchaser's cost, to refinance the First Mortgage with a lender who will
consent to the Lease Assignment Agreement prior to the Closing or as soon
thereafter as possible.
Section 1.6. MRA Option.
At Closing, Shareholders will cause MRA to give Purchaser a five-year
option to purchase the real estate and property assets of MRA for $2,250,000.00
(less any mortgages, liens or other outstanding liabilities or encumbrances),
substantially in the form of Exhibit E (the "MRA Option Agreement").
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Section 1.7. Employment Agreement.
At Closing, Purchaser will enter into an employment agreement with
Xxxxxx X. Xxxxxxx, substantially in the form of Exhibit F (the "Employment
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Agreement").
Section 1.8. Corporate Taxes; Limited Payment.
(a) All federal, state and local tax returns and reports for the Seller
for the period prior to the Closing will be promptly prepared and filed by
Seller. All such tax returns must be reviewed by Purchaser prior to filing.
(b) To the extent of any payments payable to any taxing authority by
Seller or the Shareholders and attributable to periods on or through the Closing
Date, Purchaser will pay Seller, upon presentation by Seller to Purchaser of
written notice after the Closing, the amount of any such taxes due up to $50,000
in the aggregate to enable Seller or the Shareholders to pay such taxes when
due. Any such payment shall be deemed part of the Purchase Price and shall be
allocable to goodwill. In the event that any taxing authority refunds any of the
amount paid by Purchaser in respect of Seller's taxes, Seller shall promptly pay
the amount of such refund to Purchaser.
Section 1.9. LaSalle Business Credit Corporation Line of Credit.
At Closing, Purchaser shall pay all amounts due and owing (the "LaSalle
Obligations") from Seller to LaSalle Business Credit Corporation ("LaSalle") as
set forth on Schedule 1.9 hereto.
Section 1.10. Consent of Third Parties.
Nothing in this Agreement shall be construed as an attempt or agreement
to assign any Asset which is not capable of being validly assigned, conveyed and
transferred without the consent of a third party unless such consent shall have
been obtained and remains in full force and effect at the Closing. If such
consent in respect of an Asset is not obtained prior to the Closing or does not
remain in full force and effect at the Closing, Purchaser and Seller will use
reasonable efforts to enter into a mutually agreeable, reasonable and lawful
arrangement under which Purchaser obtains the benefits and assumes the
obligations in respect thereto (but only to the extent such obligations would
have constituted Assumed Liabilities if such assignment occurred on the Closing
Date) from and after the Closing Date in accordance with this Agreement,
including subcontracting, sublicensing or subleasing to Purchaser, and under
which Seller would enforce for the benefit of Purchaser, with Purchaser assuming
the obligations to the same extent as if they would have constituted an Assumed
Liability, any and all rights of Seller against a third person party thereto.
ARTICLE II
PURCHASE PRICE
Section 2.1. Purchase Price.
The purchase price for the Assets and Business of Seller (the "Purchase
Price") shall be comprised of (i) the Assumed Liabilities (as defined in Section
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3.1) plus (ii) $200,000 paid pursuant to Section 2.3(b), plus (iii) the Stock
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Purchase Component payable pursuant to Section 2.3(c) plus (iv) the LaSalle
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Obligations payable pursuant to Section 1.9. Section 2.2 Purchase Price
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Allocation.
The Purchase Price will be allocated in accordance with Schedule 2.2
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hereto. The parties agree that (a) they will allocate to accounts receivable
consideration paid and received equal to the face value of such receivables as
of the Closing Date less reserves as reflected on the Closing Date Balance
Sheet; (b) they will allocate to inventory consideration paid and received equal
to the lower of cost or market value as of the Closing Date less reserves as
reflected on the Closing Date Balance Sheet; and (c) the parties will adopt and
abide by the allocations provided for herein in all federal and state tax
filings, and will take no position inconsistent therewith.
Section 2.3. Payment of Purchase Price.
Purchaser shall pay the Purchase Price as follows:
(a) Assumed Liabilities. At the Closing, Purchaser will assume the
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Assumed Liabilities described in Section 3.1.
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(b) Cash Payments. Seller acknowledges that HESG paid $100,000 to
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certain unsecured creditors of Seller on behalf of Seller on December 5, 2002
and will to pay to such unsecured creditors an additional $100,000 within sixty
to ninety days of the date hereof or as otherwise agreed with such unsecured
creditors. Seller has executed and delivered to HESG a Promissory Note dated
December 4, 2002 in the amount of $100,000 (the "Promissory Note"); Corrola has
executed and delivered to HESG a Pledge Agreement dated December 4, 2002 (the
"Pledge Agreement"); and Schortz has executed and delivered to HESG a Guarantee
dated December 4, 2002 (the "Guarantee"). At the Closing, the Promissory Note,
Pledge Agreement and Guarantee will be terminated and cancelled. In addition, at
Closing, Purchaser will pay the LaSalle Obligations to LaSalle by wire transfer
or other immediately available funds.
(c) Stock Purchase Component. (i) At Closing, subject to the holdback
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set forth in Section 2.3(d) below, Purchaser will deliver 1,000,000 shares of
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unregistered common stock (the "Shares") of HESG to Seller, such Shares to have
a value of $900,000 based on the average closing bid price of the common stock
of HESG as reported within the public markets for the fifteen (15) trading days
prior to the date hereof (the "Transaction Price"). The aggregate number of
Shares delivered pursuant to this Section 2.3(c), as adjusted pursuant to clause
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(ii) below, will be referred to herein as the "Stock Purchase Component".
(ii) In the event that the average closing bid price of the HESG Common
Stock is not $2.75 or more during any fifteen (15) consecutive trading days
during the period from the nine month anniversary of the Closing Date to the
twelve month anniversary of the Closing Date (the "Measurement Period"), the
Purchaser will deliver promptly the number of additional shares of Common Stock
of HESG (the "Additional Shares") calculated in accordance with the next
sentence. The number of Additional Shares to be issued shall be the lesser of
(A) 1,250,000 shares and (B) the amount determined by subtracting from $2.75 the
highest average closing bid price of the HESG Common Stock achieved over a
fifteen (15) day moving average during the Measurement Period (the "Highest
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Price"), multiplying the resulting dollar amount by 1,000,000 and then dividing
the result by the Highest Price. Any Additional Shares issued shall be
considered "Shares" and shall be included in the "Stock Purchase Component" for
purposes of this Agreement. All shares of HESG common stock issued in connection
with the transactions contemplated hereby, including the Shares and the
Performance Bonus Shares, will be subject to a standard lock-up agreement,
substantially in the form of Exhibit G (the "Lock-up Agreement").
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(d) Holdback Payment. At Closing, in accordance with the terms of an
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escrow agreement, substantially in the form of Exhibit H (the "Escrow
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Agreement"), Purchaser will deliver into escrow 433,333 shares of HESG Common
Stock (the "Holdback"). The Holdback will be subject to set-off for (i) any net
accounts receivable of Seller in existence as of the Closing as shown on the
Closing Date Balance Sheet and determined in accordance with Seller's customary
practices (the "Net Accounts Receivable") that are not collected within 150 days
of the Closing, and (ii) any other Indemnity Claims (as defined herein) under
this Agreement which arise during the period of the Holdback. Seller covenants
that it will assist Purchaser in the collection of outstanding Net Accounts
Receivables in a manner consistent with past collection practices of Seller. Any
uncollected Net Accounts Receivable set-off against the Holdback will be
reassigned back to Seller and any amounts subsequently collected by Purchaser on
account of such Net Accounts Receivable will be promptly turned over to Seller.
No later than nine months after the Closing Date, subject to Purchaser's right
to set-off, the Shares remaining in escrow, if any, will be delivered to Seller.
(e) Performance Bonus. Purchaser will deliver to Seller an additional
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200,000 restricted shares of common stock, subject to adjustment as described
below (the "Performance Bonus Shares") of HESG (over and above the Stock
Purchase Component) to Seller if Purchaser, or such other subsidiary or division
of HESG as shall operate the Assets after the Closing, achieves the following
performance goals during the twelve month period beginning on the day after the
Closing Date (the "Measurement Period"):
(i) gross revenues of at least 120% of the gross revenues of Seller for
the fiscal year ended December 31, 2001; and
(ii) gross operating margins of at least 25.3%;
Such performance goals shall be calculated in a manner mutually
agreeable to Seller and Purchaser in accordance with the principles set forth by
Schedule 2.3(e) hereto.
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In the event that Additional Shares are required to be issued pursuant
to Section 2.3(c)(ii), Purchaser shall deliver to Seller a number of additional
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Performance Bonus Shares equal to the lesser of (A) 250,000 and (B) the amount
determined by subtracting the Highest Price from $2.75, multiplying the
resulting dollar amount by 200,000 and then dividing the result by the Highest
Price.
ARTICLE III
ASSUMPTION OF LIABILITIES
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Section 3.1. Assumption of Certain Liabilities.
As consideration for the transfer of the Assets and Business to
Purchaser, Purchaser agrees to assume at the Closing (a) the liabilities of
Seller shown on Seller's December 31, 2001 balance sheet; (b) the obligations of
future performance of Seller under the contracts and liabilities listed on
Schedule 5.13 as being assumed by Purchaser; and (c) any liabilities which are
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entered into or incurred by Seller in the ordinary course of Seller's business
(as provided in Article IV) after December 31, 2001 and prior to the Closing
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Date, to the extent permitted by the provisions of Article IV, but not including
any federal or state income tax liability relating to the operation of Seller
prior to the Closing Date; all of the foregoing liabilities being referred to
herein as the "Assumed Liabilities".
Section 3.2. Limitation of Purchaser's Liabilities.
Seller and Shareholders agree that except as expressly set forth in
Section 3.1 hereof, the Purchaser will not assume or pay any debts, liabilities,
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or obligations of Seller or Shareholders and, without limiting the generality of
the foregoing, will not assume or pay:
(a) any obligations or liabilities to employees of Seller incurred by
Seller prior to the Closing Date and not disclosed on the Interim Balance Sheet,
including without limitation any obligation or liability under any collective
bargaining agreement, or any pension, profit-sharing or other employee benefit
plan affecting any employee or former employee of Seller;
(b) any environmental liabilities;
(c) any contingent liabilities based on Seller's sale or lease of
defective products or equipment, Seller's failure to adequately warn any
purchaser or user of its products and equipment or Seller's breach of any
express or implied warranty made in connection with the sale or lease of any
products or equipment;
(d) except as set forth in Section 1.8(b) or 10.1, any tax liabilities
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(and penalty and interest) of Seller or Shareholders;
(e) any liabilities or obligations incurred by Seller after the Closing
Date;
(f) any liabilities or obligations incurred by Seller or Shareholders
in connection with this Agreement and the transactions provided for herein,
including without limitation, counsel and accounting fees;
(g) any liabilities or obligations of Seller under any written
contract, lease or other agreement which is not terminable by Purchaser without
penalty on advance notice of thirty (30) or fewer days, other than the Scheduled
Contracts being assumed; or
(h) any liabilities or obligations of Seller to the extent the same is
(A) not disclosed or reserved against on Seller's December 31, 2001 balance
sheet or in this Agreement (or in a schedule attached hereto), or if such
liability or obligation is so disclosed or reserved, the amount by which such
liability or obligation as finally determined exceeds the amount thereof so
disclosed or reserved, unless such excess amount results from transactions in
the ordinary course of Seller's Business, or (B) not incurred in the ordinary
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course of business after December 31, 2001 as provided in Article IV hereof.
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Section 3.3. Retention of Liabilities Not Assumed by Purchaser.
Except for those liabilities set forth in Section 3.1 hereof, Seller
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shall retain all liabilities of Seller.
Section 3.4. Bulk Sales Tax Act.
Purchaser and Seller shall comply with the Bulk Sales Tax Act of the
State of New Jersey.
ARTICLE IV
CONDUCT OF SELLER'S BUSINESS
Section 4.1. Conduct of Business Prior to Closing.
From and after December 31, 2001 and pending the Closing, Seller and
Shareholder covenant and agree that except as set forth in Schedule 4.1:
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(a) Seller's Business has been and will be conducted only in the
ordinary and usual course of its Business, including normal commitments for the
purchase of supplies and services and the sale of goods and services;
(b) no contract requiring payments by or to Seller in excess of $20,000
in any annual period has been or will be entered into by or on behalf of Seller,
other than in the ordinary and usual course of its Business;
(c) Seller has not made and will not make any bonuses or salary or wage
increases nor any contributions to any profit-sharing or pension plan, other
than in the ordinary and usual course of its Business;
(d) Seller has used and will use good faith efforts to preserve
Seller's business organization intact, to keep available the services of present
employees and to preserve Seller's reputation and goodwill and its relationship
with its suppliers, customers, and others having relationships with it;
(e) no reorganization, declaration, setting aside or payment of any
dividend or other distribution in respect of any of Seller's capital stock, or
any direct or indirect redemption, purchase, or other acquisition of any such
stock has been or will be effected by Seller or Shareholders;
(f) Seller has not paid, loaned or advanced and will not pay, loan or
advance, any amounts to any Shareholder or any member of a Shareholder's family,
except as disclosed in this Agreement or a schedule attached hereto;
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(g) Seller has not entered into and will not enter into any agreement
or arrangement with any Shareholder or any member of a Shareholder's family,
except as disclosed in this Agreement or a schedule attached hereto.
(h) Seller has not sold or leased and will not sell or lease any of its
assets or properties, tangible or intangible, except in the ordinary course of
its business;
(i) Seller has not and will not grant a new security interest in or
otherwise encumber in any manner any of its assets or properties;
(j) Seller has not incurred and will not incur any indebtedness for
borrowed money except in the ordinary course of business pursuant to a credit
agreement listed in Schedule 5.13; and
(k) Seller has maintained and will maintain the Assets in good
condition and repair and adequately insured.
Section 4.2. Access and Information.
Seller will give to Purchaser and to Purchaser's officers, employees,
counsel, accountants, auditors, and other independent contractors,
representatives and designees full and unlimited access, during normal business
hours and upon reasonable advance notice throughout the period after the signing
hereof and prior to Closing, to Seller's offices, plants, properties, documents,
contracts, commitments, title reports, surveys, tax returns, books and records,
files and employees, related to Seller or the Business, will furnish Purchaser
with copies of any such documents and will allow Purchaser (and its said
representatives and designees) to inspect the accounting work papers and other
records of Seller's independent auditors relating to the Business to the extent
available, all in order that Purchaser and its designees may have full
opportunity to make such legal, financial, tax, technical, accounting and other
reviews and investigations of the Assets and the Business as Purchaser will
desire to make. Purchaser's review and investigation hereunder will in no way be
deemed to relieve Seller or Shareholder from any of the representations,
warranties and agreements made herein. Purchaser will reimburse Seller for any
reasonable out-of-pocket expense incurred in connection with the requirements of
this Section 4.2. Notwithstanding anything to the contrary contained in this
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Section 4.2, the confidentiality agreement contained in paragraph 12 of the
Letter of Intent, dated March 20, 2002, between Seller and HESG (the
"Confidentiality Agreement") shall remain in full force and effect and shall
survive the execution and delivery of this Agreement.
Section 4.3. Compliance with Laws, etc.
Seller will comply with all laws applicable to it and to the conduct of
the Business and Seller will cause the Business to be conducted in such a manner
that on the Closing Date the representations and warranties contained in this
Agreement will be as though such representations and warranties were made on and
as of such date, except as otherwise indicated.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
OF SELLER AND SHAREHOLDERS
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Seller and Shareholders, with respect to Seller, the Assets and the
Business, jointly and severally represent, warrant and agree, as of the date
hereof, that:
Section 5.1. Organization and Good Standing.
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey, with full corporate power
and authority to conduct its business as it is now being conducted, to own or
use the properties and assets that it purports to own or use, and to perform all
its obligations under the Scheduled Contracts (as hereinafter defined). Seller
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction where the failure to
be so qualified would have a material adverse effect on the Business or the
Assets. Schedule 5.1 contains true and correct copies of Seller's Organizational
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Documents.
Section 5.2. Authorization; No Conflict.
(a) This Agreement and the transactions contemplated hereby have been,
or will have been prior to Closing, duly authorized and approved by Seller, its
officers, directors and shareholders, and this Agreement, upon such approval,
constitutes the legal, valid, and binding obligation of Seller and Shareholders,
enforceable against Seller and Shareholders in accordance with its terms. Upon
the execution and delivery by Seller, Shareholders or MRA, as applicable, of the
General Assignment and Xxxx of Sale, Assignment and the Assumption Agreement,
the Non-Competition Agreement, the Lease Assignment Agreement, the Employment
Agreement, the Escrow Agreement and any other agreement or instrument executed
and delivered by Seller, Shareholders or MRA to effectuate the transactions
contemplated hereby (collectively, the "Ancillary Documents"), the Ancillary
Documents will constitute the legal, valid, and binding obligations of Seller
and Shareholders, or MRA, as the case may be, enforceable against Seller and
Shareholders, or MRA, as the case may be, in accordance with their respective
terms. Seller and Shareholders have the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and the Ancillary
Documents and to perform their obligations under this Agreement and the
Ancillary Documents. Seller and the Shareholders will in good faith cause MRA to
take any and all such action as may be necessary such that the representations
and warranties of this Section 5.2(a) would be true if such affiliate were a
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party hereto.
(b) Except as described in Schedule 5.2(b), neither the execution and
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delivery of this Agreement and the Ancillary Documents nor the consummation or
performance of any of the transactions contemplated hereby or thereby will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of Seller, or (B) any
resolution adopted by the board of directors or the shareholders of
Seller;
(ii) to the knowledge of Seller, contravene, conflict with, or result
in a violation of, or give any governmental body or other Person the
right to challenge any of the transactions contemplated hereby or to
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exercise any remedy or obtain any relief under, any Legal Requirement
or any Order to which Seller or Shareholders, or any of the assets
owned or used by Seller, may be subject;
(iii) to the knowledge of Seller, contravene, conflict with, or result
in a violation of any of the terms or requirements of, or give any
governmental body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any governmental authorization that is held by
Seller or that otherwise relates to the Business, or any of the Assets;
(iv) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any Scheduled Contract provided
that the consents listed in Schedule 5.2(c) and Schedule 5.13 are
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obtained; or
(v)result in the imposition or creation of any encumbrance upon or with
respect to any of the Assets.
(c) Except as described in Schedule 5.13 with respect to the Scheduled
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Contracts and in Schedule 5.2(c) with respect to all other matters, neither
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Seller nor any Shareholder is or will be required to give any notice to or
obtain any consent from any Person in connection with the execution and delivery
of this Agreement or any Ancillary Documents or the consummation or performance
of any of the transactions contemplated hereby and thereby. Schedule 5.2(c)
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shall also specify whether each consent referenced therein is required to be
obtained before or after Closing.
Section 5.3. Capitalization.
Seller's authorized capital stock consists solely of 1,000 shares of
common stock, of which 200 shares of common stock are issued and outstanding.
Corrola is the sole record and beneficial owner of all of the outstanding shares
of Seller. Schortz and the Botanical Trust (the "Trust") own all of the issued
and outstanding shares of capital stock of Corrola. Schortz is the sole trustee
of Trust and has sole power and authority to vote and make investment decisions
on its behalf.
All of Seller's issued and outstanding shares have been validly issued
and are fully paid and non-assessable. Except for the outstanding shares
described above or in Schedule 5.3, no Person has, or has any right or interest
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in, or claim to or by reason of, any equity securities of Seller, and there are
no outstanding options, warrants, agreements, subscriptions or rights of any
kind obligating Seller to issue any equity securities or any securities or debt
obligations convertible into or exchangeable for any equity securities of
Seller. Except as described in Schedule 5.3, there is no agreement, restriction
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or claim restricting the transfer of, or otherwise relating to, the shares of
Seller. Seller does not own or control directly or indirectly, any stock or
other securities of, nor in any manner control, any corporation, association, or
business organization.
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Section 5.4. Financial Information; Material Adverse Change.
(a) Attached as Schedule 5.4 are: (i) consolidated balance sheets of
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Seller as at December 31, 2001, and the related consolidated statements of
income, changes in stockholders' equity, and cash flow for the fiscal year then
ended (including the notes thereto, the "Balance Sheet"), and (ii) an unaudited
consolidated balance sheet of Seller as at September 30, 2002, and the related
unaudited consolidated statements of income, changes in stockholders' equity,
and cash flow for the nine months then ended, including in each case the notes
thereto (the "Interim Balance Sheet"). Such financial statements and notes
fairly present the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of Seller as at the respective dates of and
for the periods referred to in such financial statements, all in accordance with
generally accepted accounting principles, consistently applied ("GAAP"),
subject, in the case of interim financial statements, to normal recurring
year-end adjustments (the effect of which will not, individually or in the
aggregate, be materially adverse) and the absence of notes (that, if presented,
would not differ materially from those included in the Balance Sheet). No
financial statements of any person other than Seller are required by GAAP to be
included in the consolidated financial statements of Seller.
(b) Since the date of the Balance Sheet through the date hereof, there
has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of Seller, and, to the best of
Seller's knowledge, no event has occurred or circumstance exists that may result
in such a material adverse change; nor has there been any damage, destruction or
loss adversely affecting the Assets or Business
Section 5.5. Assets.
(a) Schedule 5.5 contains a complete and accurate list of all real
------------
property, leaseholds, or other interests therein owned or occupied by Seller
(the "Real Property"). Seller has delivered or made available to Purchaser
copies of the deeds and other instruments (as recorded) by which Seller acquired
such real property and interests, and copies of all title insurance policies,
opinions, abstracts, and surveys in the possession of Seller and relating to
such property or interests. Seller owns (with good and marketable title in the
case of real property, subject only to the matters permitted by Section 5.5(b))
-------------
all the properties and assets (whether real, personal, or mixed and whether
tangible or intangible) that they purport to own, including all of the
properties and assets reflected in the Balance Sheet and the Interim Balance
Sheet (except for assets held under capitalized leases disclosed or not required
to be disclosed on Schedule 5.5 and personal property sold since the date of the
------------
Balance Sheet and the Interim Balance Sheet, as the case may be, in the ordinary
course of business), and all of the properties and assets purchased or otherwise
acquired by Seller since the date of the Balance Sheet (except for personal
property acquired and sold since the date of the Balance Sheet in the ordinary
course of business and consistent with past practice), which subsequently
purchased or acquired properties and assets (other than inventory and short-term
investments) are listed on Schedule 5.5.
-------------
(b) Except as described in Schedule 5.5(b), all material properties and
---------------
assets reflected in the Balance Sheet and the Interim Balance Sheet are free and
clear of all encumbrances and are not, in the case of real property, subject to
any rights of way, building use restrictions, exceptions, variances,
17
reservations, or limitations of any nature except, with respect to all such
properties and assets, (i) mortgages or security interests shown on the Balance
Sheet or the Interim Balance Sheet as securing specified liabilities or
obligations, with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, (ii) mortgages or
security interests incurred in connection with the purchase of property or
assets after the date of the Interim Balance Sheet (such mortgages and security
interests being limited to the property or assets so acquired), with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (iii) liens for current taxes not yet due, and
(iv) with respect to real property, (1) minor imperfections of title, if any,
none of which is substantial in amount, materially detracts from the value or
impairs the use of the property subject thereto for the use heretofore
conducted, or impairs the operations of Seller, and (2) zoning laws and other
land use restrictions that do not impair the present or anticipated use of the
property subject thereto.
Section 5.6. Condition and Sufficiency of Assets.
To the knowledge of Seller, the buildings, plants, structures, and
equipment of Seller are structurally sound, are in operating condition and
repair, and are adequate for the uses to which they are being put, and none of
such buildings, plants, structures, or equipment is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost. To the knowledge of Seller, the building, plants,
structures, and equipment of Seller are sufficient for the continued conduct of
Seller's businesses after the Closing in substantially the same manner as
conducted prior to the Closing.
Section 5.7. Accounts Receivable.
Schedule 5.7 contains a complete and accurate list of all accounts
------------
receivable of Seller as of the date of the Interim Balance Sheet, which list
sets forth the aging of such accounts receivable.
Section 5.8. Inventories.
All inventory of Seller, whether or not reflected in the Balance Sheet
or the Interim Balance Sheet, consists of a quality and quantity usable and
salable in the ordinary course of business, except for obsolete items and items
of below-standard quality, all of which have been written off or written down to
net realizable value or reserved (which reserves are adequate and calculated
consistent with past practice and, in the case of the reserve as of the Closing
Date, will not represent a greater percentage of the inventories as of the
Closing Date than the reserve, if any, reflected in the Interim Balance Sheet
represented of the inventory reflected therein) in the Balance Sheet or the
Interim Balance Sheet or on the accounting records of Seller as of the Closing
Date, as the case may be. All inventories not written off have been priced at
the lower of cost or market on an average weighted cost basis. The quantities of
each item of inventory (whether raw materials, work-in-process, or finished
goods) are not excessive, after giving effect to the reserves, but are
reasonable in the present circumstances of Seller.
Section 5.9 No Undisclosed Liabilities.
18
Except as set forth in Schedule 5.9, Seller has no liabilities or
------------
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities or obligations
reflected or reserved against in the Balance Sheet or the Interim Balance Sheet
and current liabilities incurred in the ordinary course of business since the
respective dates thereof.
Section 5.10. Taxes.
Except as set forth in Schedule 5.10, Seller has filed all federal,
-------------
state and local tax returns and reports required by law to have been filed by
it, and has paid all taxes, assessments, and penalties due and payable by it.
There are no federal, state or local tax liens (other than a lien for property
taxes not delinquent) against any of the Assets, nor are there any overdue
federal, state or local taxes with respect to the Business or any of the Assets.
At Closing, all taxes and other assessments and levies which Seller is required
by law to withhold or collect, will have been duly withheld and collected, and
if due, will be paid over to or deposited with the proper governmental
authorities, except as disclosed in the Interim Balance Sheet. Except as set
forth in Schedule 5.10, Seller has furnished to Purchaser true and correct
copies of all income tax returns of Seller for the three most recent fiscal
years and any subsequent interim fiscal period for which Seller has filed such
tax returns, and true and correct copies of all real estate and personal
property tax bills and tax returns of Seller for the most recent full fiscal
year and period for which Seller has filed such tax returns or received such tax
bills. Seller is not presently under nor has it received any notice of, any
contemplated investigation or audit by the Internal Revenue Service or any state
or local government or governmental agency concerning Seller's taxes.
Section 5.11. Litigation.
Except as disclosed in Schedule 5.11, there is no action, suit,
-------------
proceeding, or investigation pending or, to Seller's knowledge, currently
threatened against Seller that questions the validity of this Agreement or any
Ancillary Documents or the right of Seller to enter into such agreements, or to
consummate the transactions contemplated hereby or thereby, or that might
result, either individually or in the aggregate, in any material adverse change
in the assets, business, properties, prospects, or financial condition of
Seller. The foregoing includes any action, suit, proceeding, or investigation
pending or currently threatened involving the prior employment of any of
Seller's employees, their use in connection with Seller's business of any
information or techniques allegedly proprietary to any of their former
employers, their obligations under any agreements with prior employers, or
negotiations by Seller with potential backers of, or investors in, Seller or its
proposed business. Seller is not a party to or, to the best of its knowledge,
named in or subject to any order, writ, injunction, judgment, or decree of any
court, government agency, or instrumentality. To the best knowledge of Seller,
no complaints or charges of unlawful conduct have been made against Seller, any
employees or officers of Seller, or any of the Shareholders that relate in any
way to the Assets or Business. Purchaser is not assuming any liability with
respect to any pending or threatened litigation or administrative investigation
or proceeding or with respect to any such complaints or charges of unlawful
conduct.
Section 5.12. Compliance with Laws.
19
Except as set forth in Schedule 5.12, Seller, its Assets and Business
-------------
are in compliance with each Legal Requirement that is or was applicable to it or
to the conduct or operation of its business or the ownership or use of any of
its assets except for such non-compliance as would not have a material adverse
effect on the Assets or the Business. To Seller's knowledge, no event has
occurred or circumstance exists that (with or without notice or lapse of time)
(a) may constitute or result in a violation by Seller of, or a failure on the
part of Seller to comply with, any Legal Requirement, or (b) may give rise to
any obligation on the part of Seller to undertake, or to bear all or any portion
of the cost of, any remedial action of any nature except for any such violation,
failure or obligation as would not have a material adverse effect on the
Business or Assets. Neither Seller nor any Shareholder has received any notice
or other communication (whether oral or written) from any governmental body or
any other person which is pending as of the date hereof regarding (x) any
actual, alleged, possible, or potential violation of, or failure to comply with,
any Legal Requirement, or (y) any actual, alleged, possible, or potential
obligation on the part of Seller to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature. Without limiting the generality
of the foregoing, to the best of Seller's and the Shareholders' knowledge,
Seller is not in violation of any applicable Legal Requirement relating to the
environment or occupational health and safety, and to the best of their
knowledge, no material expenditures are required in order to comply with any
such existing statute, law, or regulation.
Section 5.13. Contracts.
Schedule 5.13 is a complete list of each oral or written contract,
-------------
agreement, lease, mortgage, note, open written purchase order, or any other
obligation or commitment of Seller or of any Shareholder pertaining to Seller,
the Assets or Business requiring payment by or to Seller in excess of $20,000 in
any annual period and which Purchaser shall assume (the "Scheduled Contracts").
True and correct copies of each of the Scheduled Contracts have been furnished
to Purchaser. Each of the Scheduled Contracts contains the entire agreement of
the parties thereto, with respect to the subject matter thereof, is in full
force and effect, is valid and enforceable in accordance with its terms, is
adequate to accomplish the purposes for which it is intended and contains only
terms normal and reasonable for the conduct of the Business. To Seller's
Knowledge, no party is in default under any such Scheduled Contract, nor has any
event occurred which, after the giving of notice or the passage of time or both,
would constitute a default under any such Scheduled Contract. Schedule 5.13,
-------------
shall also specify (i) whether the consent or approval of any third party is
required to transfer or assign a Scheduled Contract and (ii) in each case where
a consent or approval is required, whether it is to be obtained before or after
Closing. Except as noted on Schedule 5.13, as of the Closing Date, Seller will
-------------
not be in default under any Scheduled Contract.
Section 5.14. Employee Benefit Plans.
Except as described in Schedule 5.14, Seller has no bonus, pension,
-------------
profit sharing, or retirement income, stock purchase, stock option,
hospitalization insurance or similar agreements, plans or practices, formal or
informal, covering any of the employees employed in the Business, or under which
Seller has any present or future obligation or liability or under which any
current or former employee of Seller has any present or future rights to
benefits (the "Employee Plans"). Each Employee Plan which is an employee pension
20
benefit plan, as defined in Section 3.2 of ERISA, which is intended to be
qualified within the meaning of Section 401(a) of the Code (the "Pension Plan"),
has been determined by the Internal Revenue Service to be qualified. Except as
set forth in Schedule 5.14, each Employee Plan has been operated and
-------------
administered in accordance with the requirements of ERISA and the Code. Seller
is not and has never been a party to a Multi-Employer Plan and has no current or
due "withdrawal liability" with respect to any such Multi-Employer Plan.
Purchaser is not assuming any liability of Seller to any of Seller's employees
by reason of any Employee Plans. Seller shall terminate all of the Employee
Plans as soon as practicable after the Closing at Seller's expense. Seller is
not a party to any collective bargaining agreements or other labor union or
similar agreements, and Seller is not the subject of or threatened by any strike
or other labor disturbance by any group of employees, and no attempt or plan to
organize Seller's employees is threatened or contemplated. Except as disclosed
in Schedule 5.11, there are no claims, nor, to the best knowledge of Seller, has
-------------
any event occurred which could be the basis for any claim under workmen's
compensation, occupational safety and health, ERISA or similar laws and
regulations.
Section 5.15. Customers and Suppliers.
Seller has furnished to Purchaser a complete list of all of Seller's
customers with whom Seller has done business within the past twelve months.
Except as disclosed in Schedule 5.15, none of Seller's customers accounted for
-------------
more than 5% of Seller's revenues during such period. Seller has not received
any written notice that any customer or supplier of Seller intends to terminate
or modify its relationship with Seller and Seller agrees to immediately notify
Purchaser of any change or prospective change in any such relationship occurring
prior to or after the Closing. Except as described in Schedule 5.15, Seller has
-------------
not engaged in any forward selling or granted any sales or terms of sale to any
customer not consistent with past practice. There are no customer prepayments or
deposits, except to the extent disclosed in Schedule 5.15.
-------------
Section 5.16. Books of Account, Returns and Reports.
Seller's books of account reflect all items of income and expense, and
all of Seller's assets, liabilities and accruals.
Section 5.17. Transactions with Affiliates.
Except as disclosed in this Agreement, Schedule 5.17 or another
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schedule attached hereto, neither Seller nor any of its shareholders, officers
or directors, nor any relative of any of their shareholders, officers or
directors owns any shares of stock or other securities of, or has any other
direct or indirect interest in, any person, firm, corporation or entity which
has a material business relationship (as creditor, lessor, or otherwise) with
Seller.
Section 5.18 Franchises, Permits and Licenses.
Schedule 5.18 contains a complete and correct list or summary
-------------
description of all material franchises, permits, licenses, approvals and other
authorizations from federal, state and local governmental authorities held by
Seller in connection with the conduct of the Business or the Real Property as
21
presently conducted. True and complete copies of each such written franchise,
permit, license, approval and authorization have been delivered to Purchaser. To
the best of Seller's knowledge, no claim is pending or threatened to revoke any
of said franchises, permits, licenses, approvals, and other authorizations or to
declare them invalid in any respect. There are no additional material
franchises, permits, licenses, approvals or authorizations necessary for the
conduct of the Business or the Real Property as presently conducted.
Section 5.19. Employees.
Schedule 5.19 is a complete list of all the employees of Seller
-------------
employed in the business and, for each such employee, his or her current title,
exempt or non-exempt status, salary or wage, date of hire, and bonuses and
salary increases within the past year. Except as disclosed in Schedule 5.19,
-------------
there are no employment contracts with any of the employees that require Seller
to employ an employee for a fixed term or restrict the right of Seller to
terminate such employee. To the best of Seller's knowledge, no former employee
of Seller is currently engaged, directly or indirectly, in competition with
Seller, except as disclosed on Schedule 5.19.
-------------
Section 5.20. Insurance.
Seller has in full force and effect the insurance coverages listed in
Schedule 5.20. Said insurance is in compliance with all the leases and contracts
-------------
of Seller and will insure the Assets and Business of Seller through the Closing.
Section 5.21. Intellectual Property.
Schedule 5.21 contains a complete list of patents and pending patent
-------------
applications of Seller. Except for agreements with its own employees or
consultants which contain provisions regarding ownership of intellectual
property and standard end-user license agreements, there are no outstanding
options, licenses, or agreements of any kind relating to the foregoing, nor is
Seller bound by or a party to any options, licenses, or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, and proprietary rights and processes of
any other person or entity. Except as described in Schedule 5.21, Seller has not
-------------
received any communications alleging that it has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights, trade secrets, or other proprietary rights or
processes of any other person or entity. Except as described in Schedule 5.21,
-------------
neither Seller nor Shareholders is aware that any of its employees is obligated
under any contract (including licenses, covenants, or commitments of any nature)
or other agreement, or subject to any judgment, decree, or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interests of Seller or that would conflict with Seller's
business as proposed to be conducted. Neither the execution nor delivery of this
Agreement, nor the carrying on of Seller's business by the employees of Seller,
nor the conduct of Seller's business as proposed, will, to the best of Seller's
and the Shareholders' knowledge, conflict with or result in a breach of the
terms, conditions, or provisions of, or constitute a default under, any
contract, covenant, or instrument under which any of such employees is now
obligated. Seller and the Shareholders do not believe it is or will be necessary
22
to use any inventions of any of its employees (or persons it currently intends
to hire) made prior to their employment by Seller.
Section 5.22. Conditions Affecting Seller.
To the best of Seller's knowledge, there are no conditions existing
with respect to Seller's markets, products, facilities, personnel or raw
material supplies which might materially and adversely affect the Assets, the
Business or business prospects of Seller, other than such conditions as may
affect the industry in which Seller participates as a whole.
Section 5.23. Disclosure.
No representation or warranty by Seller or Shareholders herein or in
any statement, certificate, schedule or document furnished or to be furnished by
Seller or Shareholder to Purchaser pursuant hereto or in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading.
Section 5.24 Investment.
Seller and Shareholders each (a) understand that the Shares and the
Performance Bonus Shares, if any, have not been, and will not be, registered
under the Securities Act of 1933, or under any state securities laws, and are
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (b) are acquiring the Shares and
the Performance Bonus Shares, if any, solely for its or his own account for
investment purposes, and not with a view to the distribution thereof, (c) is a
sophisticated investor with knowledge and experience in business and financial
matters, (d) has received certain information concerning the Purchaser and has
had the opportunity to obtain additional information as desired in order to
evaluate the merits and the risks inherent in holding the Shares and the
Performance Bonus Shares, if any, (e) is able to bear the economic risk and lack
of liquidity inherent in holding the Shares and the Performance Bonus Shares, if
any, and (f) is an accredited investor (as defined under the Securities Act of
1933).
Section 5.25. Knowledge
For purposes of this Article V, the phrase "to the best of Seller's
knowledge", and phrases of similar import will mean all matters that are known
by a Shareholder, the management of Seller, the members of the board of
directors of Seller, or one or more of any of the foregoing.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF PURCHASER
Purchaser and HESG hereby jointly and severally represent, warrant and
agree, as of the date hereof, that:
Section 6.1. Organization and Good Standing.
23
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to conduct its business as it is now being conducted, and has
requisite corporate power and authority to execute and perform this Agreement
and the transactions contemplated hereby. HESG is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado,
with full corporate power and authority to conduct its business as it is now
being conducted, and has requisite corporate power and authority to execute and
perform this Agreement and the transactions contemplated hereby.
Section 6.2. No Violation; No Consents.
Purchaser and HESG have taken or will take prior to Closing all
necessary or appropriate action to enable Purchaser and HESG to enter into,
execute, deliver and perform this Agreement including, without limitation, the
reservation by HESG of that number of authorized Shares which are or may be
required to be delivered by Purchaser as Shares, Additional Shares, Performance
Bonus Shares or Options (as defined in the Employment Agreement) or the Option
Payment (as defined in the Option Agreement) (collectively, the "Transaction
Shares"). The execution and the performance of this Agreement, and the
consummation of the transactions contemplated hereby including the issuance and
delivery of the Transaction Shares, (a) to the knowledge of HESG and Purchaser
will not violate any Legal Requirements applicable to either of them, (b) does
not and will not violate any provision of the Organizational Documents of
Purchaser or HESG, and (c) will not violate or result in the breach of any term
or provision of, or constitute a default or accelerate maturities under any loan
or other similar agreement, instrument, indenture, mortgage, deed of trust, or
other restriction to which Purchaser or HESG is a party or by which any of
Purchaser's or HESG's property is bound.
Section 6.3. Validity of Agreement.
This Agreement and the transactions contemplated hereby, including the
issuance and delivery of the Transaction Shares, have been duly authorized and
approved by the board of directors of Purchaser and HESG, as applicable, and
this Agreement has been duly executed and delivered by Purchaser and HESG and is
the legal, valid and binding obligation, enforceable in accordance with its
terms, of Purchaser and HESG. No other proceedings are necessary to authorize
this Agreement and the transactions contemplated hereby, or the performance or
compliance by Purchaser and HESG with any of the terms, provisions or conditions
hereof.
Section 6.4. Financial.
Purchaser has or will have as of the Closing Date the financial
capability of completing the transactions contemplated hereby.
Section 6.5. Litigation.
Except as disclosed in Schedule 6.5, there is no action, suit,
------------
proceeding, or investigation pending or, to Purchaser's or HESG's knowledge,
currently threatened against Purchaser or HESG that questions the validity of
this Agreement or any Ancillary Documents or the right of Purchaser or HESG to
24
enter into such agreements, or to consummate the transactions contemplated
hereby or thereby, or that might result, either individually or in the
aggregate, in any material adverse change in the assets, business, properties,
prospects, or financial condition of HESG and its subsidiaries, taken as a
whole.
Section 6.6. SEC Reports.
Since December 31, 2001, HESG has timely filed all forms, reports,
statements and other documents required to be filed with the Securities and
Exchange Commission (the "SEC"), including, without limitation (1) all Annual
Reports on Form 10-K, (2) all Quarterly Reports on Form 10-Q, (3) all Current
Reports on Form 8-K, (4) all other reports or registration statements and (5)
all amendments and supplements to all such reports and registration statements
(collectively, the "SEC Reports"), except where the failure to file any such
forms, reports, statements or other documents would not have a material adverse
effect on HESG's or Purchaser's ability to perform the transactions contemplated
hereby. HESG has never filed a proxy statement or held any meetings of
stockholders (whether annual or special). The SEC Reports (x) were prepared in
all material respects in accordance with all Legal Requirements (including, with
respect to the SEC Reports, the Securities Act and the Securities Exchange Act
of 1934, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such SEC Reports) and (y) did not at the time they were filed
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
Section 7.1. Survival of Representations and Warranties.
The representations and warranties of the parties contained in this
Agreement or in any schedule or exhibit or other writing delivered pursuant to
the provisions of this Agreement or in connection with the transactions
contemplated hereby, will survive the Closing for a period of one year after the
Closing Date except for (i) representations and warranties regarding equipment
of Seller which will lapse at Closing and (ii) representations and warranties
with respect to taxes and title, which will survive for the applicable statute
of limitations. Liability for intentional misrepresentation will survive without
regard to the foregoing limitation. Nothing contained in this Section 7.1 will
-----------
be deemed to affect the continuing obligations of the parties hereto, including,
without limitation, the obligations of the parties under Section 7.2 hereof
-----------
Section 7.2. Indemnification.
The parties agree to indemnify each other as follows:
(a) Seller's and Shareholders' Indemnity. Seller and Shareholders,
-------------------------------------
jointly and severally, agree to indemnify and defend Purchaser, and its
successors and assigns, and to hold them harmless from and against any and all
damages, claims, deficiencies, losses, liabilities, obligations, and expenses
(including reasonable attorneys' fees) of every kind and description arising
25
from or relating to (i) the operation of the Business prior to the Closing
including any liability arising out of the actions, decisions or orders of the
New Jersey Department of Environmental Protection with respect to events
occurring prior to the Closing; (ii) any misrepresentation or breach of warranty
hereunder by Seller or Shareholders; or (iii) other nonfulfillment of any of
Seller's or Shareholders' obligations under this Agreement ("Indemnity Claims").
(b) Purchaser's Indemnity. Purchaser and HESG each agrees to indemnify
---------------------
and defend Seller, and its successors and assigns, and Shareholders, and to hold
them harmless from and against any and all damages, claims, deficiencies,
losses, liabilities, obligations, and expenses (including reasonable attorneys'
fees) of every kind and description arising from or relating to (i) the
operation of the Business by Purchaser subsequent to the Closing, (ii) any
misrepresentation or breach of warranty hereunder by Purchaser or HESG, (iii)
other nonfulfillment of any of Purchaser's obligations under this Agreement, or
(iv) any claim against a Shareholder or the beneficiary of the Trust with
respect to any Assumed Liability or under a personal guarantee of any Assumed
Liability ("Indemnity Claims").
(c) Notice and Defense of Third Party Claims. A party hereto agreeing
----------------------------------------
to be responsible for or to indemnify against any matter pursuant to this
Agreement is referred to herein as the "Indemnifying Party" and a party entitled
to indemnification hereunder is referred to as the "Indemnified Party." An
Indemnified Party under this Agreement will give written notice to the
Indemnifying Party hereunder with respect to any assertion by a third party of
any liability which the Indemnified Party has reason to believe might give rise
to an Indemnity Claim under this Agreement. Such notice will set forth in
reasonable detail the nature of such action or claim, and include copies of any
written complaint, summons, correspondence or other communication from the party
asserting the claim or initiating the action. As to any such Indemnity Claim
which involves a third party, the Indemnifying Party will assume and thereafter
control the defense of such Indemnity Claim. The Indemnified Party will be
entitled, together with the Indemnifying Party, to participate in the defense,
compromise or settlement of any such matter through the Indemnified Party's own
attorneys and at its own expense, but the Indemnifying Party will have control
thereof. The Indemnified Party will provide such cooperation and such access to
its books, records and properties as the Indemnifying Party will reasonably
request with respect to such matters and the parties hereto agree to render each
other such assistance as they may reasonably require of each other in order to
ensure the proper and adequate defense thereof. An Indemnifying Party will not
make any settlement of any Indemnity Claims, other than Indemnity Claims
strictly for monetary damages as to which the Indemnifying Party agrees to be
responsible, without the written consent of the Indemnified Party, which consent
will not be unreasonably withheld. Notwithstanding the foregoing, an Indemnified
Party may withhold consent to a settlement involving injunctive or other
equitable relief against the Indemnified Party or its assets, employees or
business in its discretion.
(d) Resolutions of Disputes; Notice of Dispute. The parties should use
------------------------------------------
all good faith efforts to resolve amicably any dispute arising under this
Agreement. To the extent that the parties have been unable to resolve any such
dispute within thirty (30) days after written notice given by either party to
26
the other party, such dispute shall be settled by means of arbitration as
provided herein upon written notice given by either party to the other party
(the "Dispute Notice") and to the umpire hereafter established. Except to the
extent required by law, the proceedings shall be confidential and shall not be
disclosed or discussed with persons not parties to this Agreement without the
consent of both parties. In the event a party to a dispute may suffer
irreparable harm or injury, such party shall have the ability to seek
provisional remedies, including but not limited to injunctive relief and other
equitable remedies, to the fullest extent permitted by law pending completion of
the process provided under this Section 7.2(d) through 7.2(m). Nothing herein
-------------- ------
shall require either party to submit to arbitration hereunder any dispute
arising out of or relating to a third party claim properly commenced in a court
of law or equity against a party to this Agreement if such third party refuses
to submit to arbitration as described herein.
(e) Umpires. Within thirty (30) days after the Dispute Notice is given,
-------
the parties shall select one (1) umpire meeting the requirements of Subsection
(i) below. In addition to meeting the requirements of Subsection (i) below, the
--------------
umpire must also satisfy the requirements described in Subsection (ii) below.
---------------
(i) The umpire shall be an individual residing in the States of New
York or New Jersey who has been a licensed attorney in the jurisdiction
in which he practices law, with a minimum of twenty (20) years
experience in a practice that is substantially corporate and commercial
in nature.
(ii) In addition to the requirements described in Subsection (i) above,
--------------
the umpire selected hereunder must:
(A) be free of any potential for bias or conflict of interest
with respect to either of the parties hereto, directly or indirectly or
by virtue of any direct or indirect financial interest, family
relationship or close friendship; and
(B) be in a position to hear the dispute immediately and
thereafter render a resolution within the time specified herein.
(iii) If the umpire is not selected within the period of time
specified, each party shall promptly select an umpire, which umpires
shall select a third umpire who shall be the sole umpire. Such
selection shall be in accordance with the requirements of this Section
-------
7.2(e). The umpire to be selected pursuant to this Section 7.2(e) must
------ --------------
be designated within thirty (30) days after the expiration of the
period described in this Section 7.2(e) above.
(iv) Anything to the contrary herein notwithstanding, the following
persons are not eligible to be an umpire under this Section 7.2(e): (a)
--------------
an employee or principal of any party to the dispute; or (c) any person
having material or undisclosed financial or personal interests
dependent on the success or failure of any of the parties.
27
(v) An umpire shall disqualify himself if he is unable to handle the
process promptly so as to render a resolution within a reasonable time,
but in no event to exceed forty-five (45) days after final hearing
and/or briefs are submitted and in all events not to extend beyond six
months from the date the umpire is chosen, or such longer period to
which the parties and the umpire may agree.
(f) Time and Place of Arbitration. The arbitration shall be held at
-----------------------------
such place as the umpire may determine within the immediate Woodbridge, New
Jersey area, or such other location to which the parties may agree, to commence
not later than ten (10) days after the umpire has been determined in accordance
with Section 7.2(e). The parties shall present their arguments to the umpire in
--------------
the form of a written submission and may, if permitted by the umpire, present
oral argument to the umpire and witnesses to testify, but such witness testimony
shall only be with respect to the disputed facts of the matter.
(g) Fees. All fees and expenses (including transcripts, room rental and
-----
fees of the umpire) of alternative dispute resolution, shall be paid as follows:
25% by the party served with the Dispute Notice and 25% by the person(s) serving
the Dispute Notice, with the remaining 50% allocated 10% to the prevailing party
and 40% to the nonprevailing party, as determined by the umpire (if the umpire
does not determine a prevailing party then equally to the parties). The umpire
shall have the right to decide that a party has acted in bad faith (in which
case he may shift the other party's entire share of fees and expenses to the bad
faith party). The fees payable to the umpire shall be his usual hourly rates for
consulting or dispute resolution services, as the same may be in effect from
time to time. Each party shall pay its own legal fees, costs and disbursements.
(h) Discovery. Each party shall be entitled to discovery only by way of
----------
inspection and copying of all relevant documents within the care, custody or
control of a party or a witness. All discovery shall be complete within thirty
(30) days of the appointment of the umpire. All documents to be relied upon by
any party to the proceeding shall be provided to the others no later than two
weeks before the hearing date for the proceedings. No depositions shall be taken
except as may be ordered by the umpire and then only in the event there is a
dispute as to relevant facts. The time periods for discovery may be extended by
the umpire for good cause, provided that he is able to meet the time
requirements of Sections 7.2(e) and (l).
(i) Hearing. There shall be no live testimony taken at any hearing held
-------
by the umpire except such live testimony as may be ordered by the umpire and
then only in the event of a dispute with respect to relevant facts.
(j) Provisional Remedies. When appropriate under applicable New Jersey
--------------------
substantive and procedural law, the umpire shall have full and complete
authority to award provisional relief, on an ex parte basis or otherwise.
Additionally, notwithstanding any other provision of this Agreement, in the
event an umpire is not yet selected, the parties hereto shall be permitted to
apply to a court of competent jurisdiction for appropriate injunctive relief in
the event of a breach of this Agreement.
28
(k) Monetary Remedies. Damages shall be limited to compensatory
------------------
damages, which is defined as recovery of otherwise unrecovered costs or expenses
resulting from any Indemnity Claim for which an Indemnified Party is entitled to
seek indemnification pursuant to Section 7.2(a) or 7.2(b), as applicable, except
-------------- -----
in the case of fraud or willful misconduct of the Indemnifying Party. No party
shall be entitled to damages that are indirect, consequential or punitive,
including, but not limited to, loss of profits, loss of use of property or
business interruption except in the case of fraud or willful misconduct of the
Indemnifying Party. Each party shall bear its own costs and expenses, including
reasonable attorneys' fees, except as may be permitted by Section 7.2(g) hereof.
--------------
The limitations described in this Section 7.2(k) shall only apply to arbitration
--------------
proceedings under this Agreement and shall specifically not apply to any
proceeding properly commenced in a court of law or equity.
(l) Time for Resolution. The umpire shall make the award and serve
--------------------
notice thereof upon all parties within six (6) months of the date the umpire is
designated, or such longer period to which the parties to the dispute and the
umpire may agree.
(m) Umpire's Decision. The umpire shall make his decision through
-----------------
written findings of fact and conclusions of law distributed to the parties to
the dispute. He shall apply the substantive law of the State of New Jersey
without giving effect to any conflict of laws provisions thereof. The umpire's
decision shall be appealable to a court of competent jurisdiction only on the
basis of mistakes of law or mathematical errors in the decision, or fraud in
which case the umpire's award will be deemed to have been procured by "undue
means" and "beyond his power." Any party may apply to a court of competent
jurisdiction to have the umpire's decision confirmed, reviewed, modified,
affirmed or remanded to the umpire with directions."
(n) Indemnification Limitation. Notwithstanding anything in this
--------------------------
Section 7.2 to the contrary, the Indemnifying Party shall only be liable for
-----------
indemnification with respect to Indemnity Claims under this Section 7.2 to the
-----------
extent that any such Indemnity Claims exceed, in the aggregate, $25,000 (the
"Basket Amount"), and then only for the amount by which such Indemnity Claims
exceed the Basket Amount. Purchaser's sole remedy against any Shareholder
pursuant to the provisions of this Section 7.2 shall be the right to return of
-----------
the Shares delivered or to be delivered to Seller pursuant to Section 2.3, with
-----------
the number of Shares in satisfaction of any Indemnity Claim determined based on
the greater of the value of the Shares as of the Closing Date (with such value
determined in accordance with Section 2.3(c)) or the value of the Shares as of
---------------
the time that Purchaser makes the Indemnity Claim (with such value based on the
average closing bid price of the Shares on the 15 trading days preceding the
date on which the Indemnity Claim is made).
(o) Brokers. Each party hereto agrees to indemnify the other and agrees
-------
to hold the other harmless against any claim or claims for brokerage or other
commission relative to the transactions contemplated herein due to any acts or
things done by its employees, agents or consultants.
Section 7.3. Purchaser's Right of Setoff.
29
In the event of (i) an Indemnity Claim against Seller which is agreed
to or not disputed within 10 days, or (ii) an Indemnity Claim against Seller
after judgment or award or adverse to Seller as provided above, which remains
uncured or unsettled for 60 days or more after notice of the Indemnity Claim is
given by Purchaser to Seller, then Purchaser and/or its affiliates will have the
right, but not the obligation, to set off the amount of the Indemnity Claim
against any then remaining obligation of Purchaser and/or its affiliates to
Seller, regardless of the source of such obligation.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE CLOSING
Section 8.1. Conditions To Purchaser's Performance.
Purchaser's obligations to purchase and pay the purchase price for the
Assets are subject to the following express conditions:
(a) Representations and Warranties True. The representations and
------------------------------------
warranties of Seller and Shareholders contained in this Agreement will be true
and correct on and as of the Closing Date (as if made on the Closing Date), and
Seller will have delivered to Purchaser a certificate to such effect, dated as
of the Closing Date and signed by its President, which certificate will be in
form and substance reasonably satisfactory to Purchaser.
(b) Covenants Performed. All of the covenants of Seller and
--------------------
Shareholders set forth herein and which were to be performed at or prior to the
Closing Date will have been duly performed, and Seller will certify to such
effect in the certificate provided for in Section 8.1(a) hereof.
--------------
(c) Litigation. There will not have been instituted or threatened, on
-----------
or before the Closing Date, any action or proceeding before any court or
governmental agency or body or by a public authority with respect to the
acquisition of the Assets or Business as contemplated hereby.
(d) Other Agreements. All Ancillary Documents will have been fully
-----------------
executed and delivered.
(e) Consents. Seller will have obtained all required consents or
---------
approvals in writing of all parties whose consent or approval is required to be
obtained prior to the Closing Date as set forth on Schedule 5.3(b) and Section
--------------- -------
5.13.
-----
(f) Opinion of Counsel. Counsel for Seller will have delivered to
------------------
Purchaser an opinion, dated as of the Closing Date in the form set forth on
Exhibit I.
----------
(g) Audits and Inspections. Seller will have permitted Purchaser to
-----------------------
make such audits and inspections as Purchaser deems reasonably appropriate as
provided for in Article 4 hereof. Such audits and inspections by Purchaser will
not affect any of the representations and warranties made by Seller and
Shareholders in this Agreement and will not, under any circumstances constitute
a waiver of Purchaser's indemnification rights under Article VII hereof, or
-----------
otherwise relieve Seller or Shareholders of any liability thereunder.
30
(h) Phase I Environmental Report. Purchaser shall have received a Phase
-----------------------------
I environmental report regarding the Real Property satisfactory to it.
(i) Financing. Purchaser or HESG shall have received, no later than the
----------
Closing Date, debt financing from LaSalle and equity financing from a third
party sufficient to enable Purchaser to satisfy the LaSalle Obligations and any
other requirements imposed by LaSalle, in each case on terms satisfactory to
Purchaser and HESG.
(j) Audit Report. Purchaser shall have received the unqualified or
-------------
"clean" audit report of Amper, Politziner & Xxxxxx, independent certified public
accountants, with respect to the financial statements referred to in Section
5.4(a)(i) hereof, and such financial statements as audited and reported on by
Amper Politziner & Xxxxxx shall not include any material adverse changes from
the version of such financial statements delivered upon execution of this
Agreement.
Section 8.2. Conditions to Seller's Performance.
Seller's obligations pursuant to this Agreement are subject to the
following conditions:
(a) Representations and Warranties True. The representations and
-----------------------------------
warranties of Purchaser contained in this Agreement will be true and correct on
and as of the Closing Date (as if made on the Closing Date), and Purchaser will
have delivered to Seller a certificate to such effect, dated as of the date of
Closing and signed by its President or a Vice President, which certificate will
be in form and substance reasonably satisfactory to Seller.
(b) Covenants Performed. All of the covenants of Purchaser set forth
--------------------
herein and which were to be performed at or prior to the Closing Date will have
been duly performed.
(c) Litigation. There will not have been instituted or threatened, on
-----------
or before the Closing Date, any action or proceeding before any court or
governmental agency or body or by a public authority with respect to the
acquisition of the Assets or Business as contemplated hereby.
(d) Other Agreements. All Ancillary Documents will have been fully
-----------------
executed and delivered.
(e) Declaration. Seller shall have obtained a letter of
------------
non-applicability, negative declaration or administrative consent order from the
New Jersey Department of Environmental Protection authorizing the sale of the
Business.
(f) Promissory Note, Pledge Agreement and Guarantee. The Promissory
------------------------------------------------
Note, Pledge Agreement and Guarantee shall have been cancelled and terminated.
ARTICLE IX
THE CLOSING
Section 9.1. Closing Date.
31
Subject to the terms and conditions herein contained, the parties agree
to close this transaction (the "Closing") at the offices of Xxxxxx Xxxxxx White
& XxXxxxxxx LLP, on December 13, 2002 (the "Closing Date") or on such other date
and at such other place as the parties may agree upon in writing. Seller and
Purchaser may agree to extend the Closing for a reasonable period of time not to
exceed 30 days, such agreement not to be unreasonably withheld.
Section 9.2. Seller's Deliveries at Closing.
Seller will deliver or cause to be delivered to Purchaser at the
Closing the following:
(a) Duly executed copies of the Ancillary Documents to be executed by
Seller, Shareholders or MRA.
(b) Certified copies of resolutions of the Board of Directors of Seller
and its shareholders, authorizing the making, execution, and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(c) A certificate of good standing from the Secretary of State of the
State of New Jersey for Seller.
(d) The opinion of counsel described in Section 8.1(g) hereof.
--------------
(e) The certificate described in Section 8.1(a) hereof.
--------------
Section 9.3. Purchaser's Deliveries at Closing.
Purchaser will deliver or cause to be delivered to Seller and
Shareholders at Closing the following:
(a) The cancelled Promissory Note and evidence of termination of the
Pledge Agreement and Guarantee.
(b) Evidence that the LaSalle Obligations have been satisfied.
(c) Certificates representing the Shares to be delivered pursuant to
Section 2.3(c)(i).
------------------
(d) Duly executed copies of all Ancillary Documents.
(e) Certified copies of resolutions of the Board of Directors of
Purchaser and HESG authorizing the making, execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(f) A Certificate of good standing from the Secretary of State of the
State of Delaware for Purchaser.
ARTICLE X
EXPENSES
32
Section 10.1. Expenses.
Whether or not the transactions contemplated by this Agreement are
consummated, each of the parties hereto will pay the fees and expenses of such
party's respective counsel, accountants, other experts and any other expenses
incurred by such party incident to the negotiation, preparation and execution of
this Agreement. All sales and transfer taxes, including but not limited to the
costs of obtaining the negative declaration, letter of non-applicability, or
administrative consent order referred to in Section 8.2(e) arising by reason of
-------------
the transactions contemplated by this Agreement and all costs associated with
the change of Seller's name will be borne by Purchaser.
ARTICLE XI
CONSTRUCTION
Section 11.1. Choice of Laws.
This Agreement and the agreements appended hereto and delivered
herewith will be governed by and construed and enforced in accordance with the
laws of the State of New Jersey, without regard to conflicts of laws principles.
Section 11.2. No Presumption; Headings.
Purchaser, Seller and Shareholders have participated jointly in the
negotiation and drafting of this Agreement and the Ancillary Documents. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement and the Ancillary Documents will be construed as if drafted jointly by
the parties and no presumption or burden of proof will arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement or the Ancillary Documents. All headings contained in this
Agreement are for reference only and will not affect the meaning or
interpretation of this Agreement in any manner. All words used in this Agreement
will be construed to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word "including" does not limit the
preceding words or terms.
Section 11.3. Invalid Provisions.
Should any part of this Agreement for any reason be declared invalid,
such decision will not affect the validity of any other portion, which remaining
portion will remain in force and effect as if this Agreement had been executed
with the invalid provisions thereof eliminated, and it is the declared intention
of the parties hereto that they would have executed the remaining portion of the
Agreement without including therein any such part or portion which may be
declared invalid.
ARTICLE XII
ASSIGNABILITY
Section 12.1. Binding Agreement.
33
This Agreement will be binding upon and inure to the benefit of each of
the parties hereto, their successors and permitted assigns.
Section 12.2. Assignability.
This Agreement will not be assignable in whole or in part by either
party except with the consent in writing of the other party, which consent will
not be unreasonably withheld. Any purported assignment without such consent will
be void. Notwithstanding the foregoing, Purchaser may assign its rights and
obligations hereunder to an affiliate of Purchaser without the necessity of
obtaining such consent.
ARTICLE XIII
NOTICES
Section 13.1. Written Notices.
All notices pursuant to this Agreement will be in writing.
Section 13.2. Notices.
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties): If to Purchaser: with a
copy thereof to its Counsel:
C/o Health Sciences Group, Inc. Xxxxxx Xxxxxx White & XxXxxxxxx LLP
Xxxxxx Xxxxxx Center 000 Xxxx 00xx Xxxxxx
0000 Xxxxxx Xxxxx, 0xx Xxxxx Xxx Xxxx, Xxx Xxxx 00000
Xxx Xxxxxxx, Xxxxxxxxxx 00000 Attention: Xxxxx Xxxx, Esq.
Attention: Xxxx Xxxxxxx Telephone: (000) 000-0000
Telephone: (000) 000-0000 Facsimile: (000) 000-0000
Facsimile: (000) 000-0000
If to Seller or any Shareholder: with a copy thereof to its Counsel:
Quality Botanical Ingredients, Inc. Greenbaum, Rowe, Xxxxx, Xxxxx, Xxxxx
000 Xxxxxxxx Xxxx & Xxxxxx XXX
Xxxxx Xxxxxxxxxx, Xxx Xxxxxx 00000-0000 00 Xxxx Xxxxxx Xxxxx
Xxxxxxxxx: Xx. Xxxxxx X. Xxxxxxx Iselin, New Jersey 07095
Telephone: (000) 000-0000 Attention: Xxxxxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000
34
ARTICLE XIV
NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Article XV, Seller and Shareholders will not, and will cause their
----------
representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
or proposals from, any Person (other than Purchaser or HESG) relating to any
transaction involving the sale of the Business or Assets (other than in the
ordinary course of business) of Seller, or any of the capital stock of Seller or
Shareholders, or any merger, consolidation, business combination, or similar
transaction involving Seller or any Shareholder.
ARTICLE XV
TERMINATION
Section 15.1. Termination Events
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Purchaser or Seller if a material breach of any provision
of this Agreement has been committed by the other party and such breach has not
been waived or cured within fifteen (15) days of notice thereof;
(b) (i) by Purchaser if any of the conditions in Section 8.1 has not
-----------
been satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Purchaser to comply
with its obligations under this Agreement) and Purchaser has not waived such
condition on or before the Closing Date; or (ii) by Seller, if any of the
conditions in Section 8.2 has not been satisfied of the Closing Date or if
-----------
satisfaction of such a condition is or becomes impossible (other than through
the failure of Seller to comply with their obligations under this Agreement) and
Seller has not waived such condition on or before the Closing Date;
(c) by mutual consent of Purchaser and Seller; or
(d) by either Purchaser or Seller if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before December
31, 2002, or such later date as the parties may agree upon.
Section 15.2. Effect of Termination
Each party's right of termination under Section 15.1 is in addition to
------------
any other rights it may have under this Agreement or otherwise, and the exercise
of a right of termination will not be an election of remedies. If this Agreement
is terminated pursuant to Section 15.1, all further obligations of the parties
------------
under this Agreement will terminate, except that the obligations in Section 10.1
------------
and under the Confidentiality Agreement will survive; provided, however, that if
this Agreement is terminated by a party because of the breach of the Agreement
by the other party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of the
35
other party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
ARTICLE XVI
FURTHER ASSURANCES AND MISCELLANEOUS
Section 16.1. Certain Definitions.
"Closing Date Balance Sheet" means a balance sheet as of the Closing
Date and a related statement of income, stockholders' equity, and cash flows for
the period from December 31, 2001 through the Closing Date, jointly prepared by
Seller and Purchaser within 60 days after the Closing Date in accordance with
generally accepted accounting principles, consistently applied in accordance
with the past practices of Seller.
"Code" will mean the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations (including temporary regulations) and rules
issued pursuant to that Act or any successor law.
"ERISA" will mean the Employee Retirement Income Security Act of 1974,
as amended, or any successor law, and regulations and rules issued pursuant to
that Act or any successor law.
"Legal Requirements" will mean all judgments, decrees, injunctions,
orders, writs, rulings, laws, ordinances, statutes, rules, regulations, codes
and other requirements of all federal, state and local governmental,
administrative and judicial bodies and authorities.
"Organizational Documents" will mean (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
Financial terms not defined in this Agreement will have the meanings of
such terms under generally accepted accounting principles. All other defined
terms will have the meaning given to such term in the respective Section of this
Agreement in which they are defined.
Section 16.2. Seller's Name.
At Closing Seller will convey and assign to Purchaser all of Seller's
right, title and interest in and to its corporate name and the name "Quality
Botanical Ingredients, Inc." and all variants thereof, and Seller will promptly
amend its Articles of Incorporation to adopt a dissimilar name at Purchaser's
expense.
Section 16.3. Employees.
36
Purchaser shall use good faith efforts to offer employment to each
employee of Seller in a comparable position and at the same salary and bonus if
applicable, to which each such employee is entitled as of the date hereof.
Purchaser shall assume the employment agreements disclosed on Schedule 5.13
hereto. In addition, Purchaser shall use commercially reasonable efforts to
offer such employees as soon as practicable after the Closing, employee benefit
plans comparable to those made available to such employees by Seller as of the
date hereof.
Section 16.4. Further Agreements and Cooperation.
(a) Each party hereto agrees to execute such further papers or
agreements and to take such other actions as may be necessary to effect the
purposes of this Agreement and carry out its provisions, including without
limitation such documents and actions as will ensure the orderly transfer of the
customers of the Business to Purchaser.
(b) To the extent necessary, as may be required on account of an IRS
audit of Seller and the like, Seller and its duly authorized representatives
will be afforded reasonable access to records related to the Business for any
such period or periods in question which are in the possession and control of
Purchaser.
(c) Purchaser will use good faith efforts to assist Seller and
Shareholders to have Schortz, and such other persons as may be mutually agreed
upon by the parties hereto, removed as personal guarantors of any of the Assumed
Liabilities, provided that Purchaser shall not be obligated to incur any costs
or expenses or pay any consideration in connection with the foregoing.
Section 16.5. Public Announcements.
Neither Seller nor HESG will issue any public announcement regarding
this Agreement or the transactions contemplated hereby without the consent of
the other party, except as required by any applicable Legal Requirements. If any
party is required to make such announcement by applicable Legal Requirements, it
shall use its best efforts to give the other party an opportunity to review and
comment on such announcement prior to its publication, provided that, in the
case of any announcement required to be made by HESG, pursuant to the Securities
Act of 1934, HESG shall not be obligated to incorporate any comments of Seller
that would, in the opinion of HESG's counsel result in a material misstatement.
Unless consented to by Purchaser in advance or required by Legal Requirements,
prior to the Closing Seller and Shareholders will keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
Seller, Shareholders and Purchaser will consult with each other concerning the
means by which Seller's employees, customers, and suppliers and others having
dealings with Seller will be informed of the transactions contemplated hereby,
and Purchaser will have the right to be present for any such communication.
Section 16.6. Audited Business.
Audited financial statements of Seller for the Business may be required
for Purchaser's parent, Health Science Group, Inc., to comply with the
requirements of Rule 3-05 and Article 11 of Regulation S-X and Form 8-K of the
37
Securities and Exchange Commission. Seller will cooperate with Purchaser to
allow completion (no later than 60 days following the Closing Date) of audited
financial statements of the Business to be prepared by Purchaser's auditors at
Purchaser's expense. Seller's cooperation will include execution of a mutually
agreeable "letter of representation" by Seller's management.
Section 16.7. Entire Agreement, No Oral Change.
This Agreement, together with the schedules and exhibits hereto,
embodies the entire agreement between the parties hereto and supersedes any and
all prior agreements and understandings between the parties hereto. This
Agreement may only be changed by written instrument signed by the party to be
charged.
Section 16.8. Risk of Loss.
Pending Closing, Seller will bear the risk of loss of or damage to the
Assets. Seller will promptly notify Purchaser of any such loss.
Section 16.9. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which will be deemed an original but all of which together will constitute one
and the same instrument.
38
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
QUALITY BOTANICAL INGREDIENTS, INC., QUALITY BOTANICAL INGREDIENTS, INC.,
a Delaware corporation a New Jersey corporation
By: /s/ Xxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------- ----------------------------
HEALTH SCIENCES GROUP, INC. SHAREHOLDERS:
By: /s/ Xxxx X. Xxxxxxx /s/ Xxxxxx X. Xxxxxxx
------------------------------- ------------------------------
XXXXXX X. XXXXXXX
CORROLA, INC.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------
39