Exhibit E
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AGREEMENT AND PLAN OF MERGER
by and among
ZUELLIG GROUP N.A., INC.
XXXXXX, INC.
AND CERTAIN OTHER PARTIES
dated
as of
December 8, 1998
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TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS.......................................................2
SECTION 2. THE MERGER........................................................7
2.1. The Mergers.........................................................7
2.2. The Closing.........................................................8
2.3. Effective Time......................................................8
2.4. Effect of the Merger................................................8
SECTION 3. EFFECT OF THE MERGER ON THE CAPITAL STOCK; MERGER
CONSIDERATION; EXCHANGE OF CERTIFICATES...........................9
3.1. Effect on Capital Stock; Merger Consideration.......................9
3.2. Certificate of Incorporation of Surviving Corporations..............9
3.3. By-laws of the Surviving Corporations...............................9
3.4. Directors and Officers..............................................9
3.5. Tax Treatment........................................................9
3.6. Accounting Treatment................................................10
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................10
4.1. Corporate Organization..............................................10
4.2. Subsidiaries........................................................11
4.3. Capitalization......................................................11
4.4. Corporate Proceedings, etc..........................................12
4.5. Consents and Approvals..............................................13
4.6. Compliance with Law.................................................13
4.7. Litigation..........................................................15
4.8. Change in Ownership.................................................15
4.9. Absence of Defaults, Conflicts, etc.................................16
4.10. Reports and Financial Statements...................................16
4.11. Absence of Certain Developments....................................17
4.12. Material Contracts.................................................18
4.13. Absence of undisclosed Liabilities.................................19
4.14. Employees..........................................................19
4.15. Tax Matters........................................................20
4.16. Employee Benefit Plans............................................21
4.17. Patents, Licenses, etc............................................22
4.18. Title to Tangible Assets...........................................22
4.19. Insurance..........................................................23
4.20. Transactions with Related Parties..................................23
4.21. Registration Rights................................................23
4.22. Private Offering...................................................24
4.23. Investment.........................................................24
4.24. Brokerage..........................................................25
4.25. Takeover Statute...................................................25
4.26. Material Facts.....................................................25
4.27. Debt...............................................................25
(i)
4.28. Company Real Property..............................................26
4.29. Corporate Minute Books.............................................27
4.30. Good Condition.....................................................27
4.31. Manufacturing Capacity.............................................27
SECTION 5. REPRESENTATIONS AND WARRANTIES OF ZGNA..........................27
5.1. Corporate Organization..............................................27
5.2. Contributed Subsidiaries............................................28
5.3. Capitalization......................................................28
5.4. Corporate Proceedings, etc..........................................29
5.5. Consents and Approvals..............................................30
5.6. Compliance with Law.................................................30
5.7. Litigation..........................................................32
5.8. Change in Ownership.................................................32
5.9. Absence of Defaults, Conflicts, etc.................................32
5.10. Reports and Financial Statements...................................33
5.11. Absence of Certain Developments....................................34
5.12. Material Contracts.................................................34
5.13. Absence of undisclosed Liabilities.................................35
5.14. Employees..........................................................35
5.15. Tax Matters........................................................37
5.16. Employee Benefit Plans............................................37
5.17. Patents, Licenses, etc............................................38
5.18. Title to Tangible Assets...........................................39
5.19. Insurance..........................................................39
5.20. Transactions with Related Parties..................................39
5.21. Registration Rights................................................40
5.22. Private Offering...................................................40
5.23. Investment.........................................................40
5.24. Brokerage..........................................................41
5.25. Material Facts.....................................................41
5.26. Debt...............................................................41
5.27. Financial Records..................................................42
5.28. Subsidiary Real Property...........................................42
5.29. Company Security Holdings..........................................43
5.30. Bank Accounts; Powers of Attorney..................................43
5.31. Corporate Minute Books.............................................43
5.32. Sufficient Assets..................................................43
5.33. Good Condition.....................................................43
5.34. Bank Commitment....................................................44
SECTION 6. ADDITIONAL COVENANTS OF THE PARTIES.............................44
6.1. Resale of Securities................................................44
6.2. Proxy Statement.....................................................45
6.3. Access to Information...............................................46
6.4. Stockholders Meeting................................................46
6.5. Execution and Delivery of Agreements................................46
6.6. Ordinary Course.....................................................47
6.7. Further Assurances..................................................49
6.8. Confidentiality.....................................................50
6.9. Standstill..........................................................50
6.10. Ownership of Shares................................................51
6.11. Noncompetition.....................................................52
6.12. Resignation of Directors...........................................53
(ii)
6.13. Subscription Right.................................................53
6.14. Letters of Accountants.............................................54
6.15. Efforts to Satisfy Conditions; Notice of Inability to Meet
Conditions.........................................................55
6.16. HSR................................................................55
6.17. Public Announcement................................................55
6.18. Cooperation in Defense.............................................56
6.19. Xxxxxx Xxxxxxxx....................................................56
6.20. Repayment of Debt..................................................56
SECTION 7. ZGNA'S CLOSING CONDITIONS.......................................56
7.1. Representations and Warranties......................................56
7.2. Compliance with Agreement...........................................57
7.3. Injunction..........................................................57
7.4. Stockholder Approval................................................57
7.5. Consents and Approvals..............................................57
7.6. NASDAQ Listing......................................................57
7.7. Adverse Development.................................................57
7.8. Transaction Documents...............................................57
7.9. Credit Agreements...................................................58
7.10. HSR Act............................................................58
7.11. Election of Officer and Directors..................................58
7.12. Officer's Certificate..............................................58
7.13. Counsel's Opinion..................................................58
7.15. Approval of Proceedings............................................58
7.16. Accountant's Letter................................................59
SECTION 8. COMPANY CLOSING CONDITIONS......................................59
8.1. Representations and Warranties......................................59
8.2. Compliance with Agreement...........................................59
8.3. Injunction..........................................................59
8.4. Stockholder Approval................................................59
8.5. Election of Officer and Directors...................................60
8.6. Adverse Development.................................................60
8.7. Credit Agreements...................................................60
8.8. Consents and Approvals..............................................60
8.9. HSR Act.............................................................60
8.10. Transaction Documents..............................................60
8.11. ZGNA's Certificates................................................60
8.12. Counsel's Opinion..................................................61
8.13. Completion of Mergers..............................................61
8.14. Approval of Proceedings............................................61
8.15. Accountant's Letter................................................61
8.16. Employees..........................................................61
8.17. Exclusive Distributorship Agreement................................62
SECTION 9. TERMINATION AND INDEMNIFICATION.................................62
9.1. Termination.........................................................62
9.2. Procedure and Effect of Termination.................................62
9.3. Survival of Representations, Warranties and Covenants...............63
9.4. Indemnification.....................................................63
9.5. Break-Up Fee........................................................68
(iii)
SECTION 10. MISCELLANEOUS..................................................69
10.1. Governing Law......................................................69
10.2. Paragraph and Section Headings.....................................69
10.3. Notices............................................................69
10.4. Expenses and Taxes.................................................70
10.5. Successors and Assigns.............................................70
10.6. Entire Agreement; Amendment and Waiver.............................70
10.7. Severability.......................................................71
10.8. Third Parties......................................................71
10.9. Counterparts.......................................................72
(iv)
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
as of December 8, 1998, is by and among Xxxxxx, Inc., a Colorado corporation
(the "Company"), QQB Holdings I, Inc., a Delaware corporation and a wholly
owned subsidiary of the Company ("Merger Sub 1"), QQB Holdings II, Inc., a New
York corporation and a wholly owned subsidiary of the Company ("Merger Sub
2"), QQB Holdings III, Inc., a Delaware corporation and a wholly owned
subsidiary of the Company ("Merger Sub 3"), Zuellig Group N.A., Inc., a
Delaware corporation ("ZGNA"), Zuellig Botanicals, Inc., a Delaware
corporation and a wholly owned subsidiary of ZGNA ("ZBI"), Zuellig Botanical
Extracts, Inc., a Delaware corporation and a wholly owned subsidiary of ZBI
("Zuellig Botanical Extracts"), ZetaPharm, Inc., a New York corporation and a
wholly owned subsidiary of ZGNA ("ZetaPharm"), and Xxxxxx Drug Company, Inc.,
a Delaware corporation and a wholly owned subsidiary of ZGNA ("Xxxxxx").
R E C I T A L S :
WHEREAS, ZGNA owns, directly or indirectly, all of the
issued and outstanding capital stock (the "Subsidiary Shares") of Zuellig
Botanical Extracts, ZetaPharm and Xxxxxx (collectively, the "Contributed
Subsidiaries");
WHEREAS, ZGNA and ZBI desire to assign, transfer and convey
the Subsidiary Shares to the Company solely in exchange for the Shares (as
herein defined), and the Company desires to issue and exchange the Shares to
ZGNA and ZBI solely in exchange for the Subsidiary Shares, all in accordance
with and subject to the terms and conditions of this Agreement;
WHEREAS, the acquisition of the Subsidiary Shares is to be
effected by a merger of Merger Sub 1 with and into Zuellig Botanical Extracts,
a merger of Merger Sub 2 with and into ZetaPharm and a merger of Merger Sub 3
with and into Xxxxxx (collectively, the "Mergers"); and
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Company and ZGNA are executing and delivering an Inventory
Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual representations, warranties, covenants and agreements herein
contained, the parties hereby agree as follows:
SECTION 1. DEFINITIONS
The terms defined in this Section 1, whenever used herein,
shall have the following meanings for all purposes of this Agreement.
"Affiliate" means any Person or entity, directly or
indirectly, controlling, controlled by or under common control with such
Person or entity.
"Agreement" shall have the meaning set forth in the preamble
hereto.
"Agreement Regarding Employees" shall mean the agreement
regarding employees, dated as of the Closing Date, by and between the Company
and ZBI, substantially in the form of Exhibit C.
"Approvals" shall have the meaning set forth in Section
4.6(b).
"Basket Amount" shall have the meaning set forth in Section
9.4(c).
"Benefit Arrangement" shall have the meaning set forth in
Section 4.16.
"Board" shall mean the board of directors of the Company.
"Business Day" shall mean a day other than a Saturday,
Sunday or other day on which banks in the State of New York are not required
or authorized to close.
"BCL" shall mean the New York Business Corporation Law.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq.
"Certificates of Merger" shall have the meaning set forth in
Section 2.3.
"Closing" shall have the meaning set forth in Section 2.2(a).
"Closing Date" shall have the meaning set forth in Section
2.2(a).
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"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commission" shall mean the Securities and Exchange
Commission.
"Commitment" shall have the meaning set forth in Section 4.8.
"Common Stock" shall mean the common stock, par value $0.001
per share, of the Company.
"Company" shall have the meaning set forth in the preamble
hereto.
"Company Indemnified Parties" shall have the meaning set forth
in Section 9.4(b).
"Company Key Agreements and Instruments" shall have the
meaning set forth in Section 4.9(a).
"Company Leased Real Properties" shall have the meaning set
forth in Section 4.28(b).
"Company Material Adverse Effect" shall have the meaning set
forth in Section 4.1(c).
"Company Owned Real Properties" shall have the meaning set
forth in Section 4.28(a).
"Company Permitted Encumbrances" shall have the meaning set
forth in Section 4.28(a).
"Company Real Properties" shall have the meaning set forth in
Section 4.28(b).
"Company SEC Reports" shall have the meaning set forth in
Section 4.10.
"Contributed Subsidiaries" shall have the meaning set forth in
the recitals hereto.
"CS Balance Sheets" shall have the meaning set forth in
Section 5.10.
"Damages" shall have the meaning set forth in Section 9.4(a).
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"Delaware Mergers" shall have the meaning set forth in
Section 2.1.
"DGCL" shall have the meaning set forth in Section 2.1.
"Effective Time" shall have the meaning set forth in Section
2.3.
"Environmental Laws" shall have the meaning set forth in
Section 4.6(c).
"Environmental Permits" shall have the meaning set forth in
Section 4.6(c).
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974.
"Escrow Agreement" shall mean the escrow agreement, dated as
of the Closing Date by and among the Company, ZGNA, ZBI and the Escrow Agent,
as defined therein, substantially in the form of Exhibit D.
"Exchange Act" shall mean the Securities Exchange Act of
1934, an amended.
"GAAP" shall have the meaning set forth in Section 4.10.
"Governance Agreement" shall mean the governance agreement,
dated as of the Closing Date, by and among the Company and ZGNA, substantially
in the form of Exhibit E.
"Hazardous Materials" shall have the meaning set forth in
Section 4.6(c).
"HSR" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" shall have the meaning set forth in
Section 9.4(h).
"Indemnifying Party" shall have the meaning set forth in
Section 9.4(h).
"Intellectual Property" shall have the meaning set forth in
Section 4.17.
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"Inventory Purchase Agreement" shall mean the inventory
purchase agreement between the Company and ZGNA, substantially as set forth as
Exhibit F hereto.
"Merger Subs" shall mean Merger Sub 1, Merger Sub 2 and
Merger Sub 3.
"Merger Sub 1" shall have the meaning set forth in the
preamble hereto.
"Merger Sub 2" shall have the meaning set forth in the
preamble hereto.
"Merger Sub 3" shall have the meaning set forth in the
preamble hereto.
"Merger Subs Organizational Documents" shall have the
meaning set forth in Section 4.1(a).
"Mergers" shall have the meaning set forth in the recitals
hereto.
"New York Merger" shall have the meaning set forth in Section
2.1.
"Option" shall mean the option to acquire 2,000,000 shares of
Common Stock granted to ZGNA on the date hereof.
"Person" shall mean an individual, partnership, joint-stock
company, corporation, limited liability company, trust or unincorporated
organization, or a government, agency, regulatory authority or political
subdivision thereof.
"Powders Option Agreement" shall mean the agreement between
the Company and ZBI pursuant to which ZBI will grant the Company an option to
acquire the powders business of ZBI, substantially in the form set forth as
Exhibit G hereto.
"Preferred Stock" shall have the meaning set forth in Section
4.3(a).
"Proceeding" shall have the meaning set forth in Section 4.7.
"Proposed Securities" shall have the meaning set forth in
Section 6.13(a).
"Proxy Statement" shall have the meaning set forth in Section
6.2(a).
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"Registration Rights Agreement" shall mean the registration
rights agreement, dated as of the date hereof, by and between the Company, ZBI
and ZGNA, substantially in the form set forth as Exhibit H hereto.
"Securities Act" shall mean the Securities Act of 1933, an
amended.
"Shares" shall mean such number of shares of Common Stock
obtained by multiplying (x) 0.49 times (y) the quotient obtained by dividing
the number of shares of Common Stock issued and outstanding immediately prior
to Closing by 0.51.
"Sourcing Agency Agreement" means the sourcing agency
agreement by and between the Company and Zuellig Botanicals, Inc.,
substantially in the form set forth as Exhibit I hereto.
"Stock Option Agreement" shall mean the agreement between
the Company and ZGNA pursuant to which the Company will grant ZGNA the Option,
substantially in the form set forth as Exhibit J hereto.
"Subscription Securities" shall have the meaning set forth in
Section 6.13(a).
"Subsidiary" shall mean a corporation of which a Person
owns, directly or indirectly, more than 50% of the Voting Stock.
"Subsidiary Key Agreements and Instruments" shall have the
meaning set forth in Section 5.9.
"Subsidiary Leased Real Properties" shall have the meaning
set forth in Section 5.28(b).
"Subsidiary Material Adverse Effect" shall have the meaning
set forth in Section 5.1(c).
"Subsidiary Owned Real Properties" shall have the meaning
set forth in Section 5.28(a).
"Subsidiary Permitted Encumbrances" shall have the meaning set
forth in Section 5.28(a).
"Subsidiary Real Properties" shall have the meaning set forth
in Section 5.28(b).
"Subsidiary Shares" shall have the meaning set forth in the
recitals hereto.
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"Surviving Corporations" shall have the meaning set forth in
Section 2.1.
"Surviving Corporations Common Stock" shall have the meaning
set forth in Section 3.1(b).
"Takeover Statute" shall mean any corporate takeover
provision under laws of the State of Colorado or any other state or federal
"fair price", "moratorium", "control share acquisition" or other similar
antitakeover statute or regulation.
"Taxes" shall mean all U.S. Federal, state, local or foreign
and other taxes, assessments, workers compensation contributions, duties,
withholdings, FICA and similar charges of any kind imposed by any taxing
authority, including interest, penalties and additions thereto.
"Termination Fee" shall have the meaning set forth in Section
9.5.
"Transaction Documents" shall mean this Agreement, the
Governance Agreement, the Escrow Agreement, the Stock Option Agreement, the
Sourcing Agency Agreement, the Agreement Regarding Employees, the Registration
Rights Agreement and the Powders Option Agreement.
"Voting Stock" shall mean securities of any class or classes
of a corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
"Xxxxxx" shall have the meaning set forth in the recitals
hereto.
"ZBI" shall have the meaning set forth in the preamble hereto.
"ZetaPharm" shall have the meaning set forth in the recitals
hereto.
"Zuellig Botanical Extracts" shall have the meaning set forth
in the recitals hereto.
"ZGNA" shall have the meaning set forth in the preamble
hereto.
"ZGNA Indemnified Parties" shall have the meaning set forth in
Section 9.4(a).
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SECTION 2. THE MERGER
2.1. The Mergers. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), at the Effective Time,
Merger Sub 1 shall be merged with and into Zuellig Botanicals Extracts and
Merger Sub 3 shall be merged with and into Xxxxxx (the "Delaware Mergers").
Upon the terms and subject to the conditions set forth in this Agreement, and
in accordance with the BCL, at the Effective Time, Merger Sub 2 shall be
merged with and into ZetaPharm (the "New York Merger"). Following the
Effective Time, the separate corporate existence of the Merger Subs shall
cease and Zuellig Botanicals Extracts, ZetaPharm and Xxxxxx shall each
continue as the surviving corporation (the "Surviving Corporations") as a
corporation incorporated under the laws of the State of Delaware, in the case
of Zuellig Botanicals Extracts and Xxxxxx, and as a corporation under the laws
of the State of New York, in the case of ZetaPharm, and shall succeed to and
assume all the rights and obligations of the Merger Sub that merged into them
in accordance with the DGCL and the BCL, as the case may be.
2.2. The Closing. The closing of the Mergers (the
"Closing") will take place at 10:00 a.m., New York City Time, on a date to be
specified by the parties (the "Closing Date"), which shall be no later than
the second business day after the satisfaction or waiver of the conditions set
forth in Sections 6 and 7, at the offices of Xxxxxxx Xxxx & Xxxxxxxxx, 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, unless another date or place is agreed to
in writing by the parties hereto. On the Closing Date, the Company shall
issue, sell and deliver to (i) ZGNA, as the stockholder of ZetaPharm and
Xxxxxx, a certificate representing the number of shares of Common Stock equal
to 45% multiplied by the Shares, duly registered in ZGNA's name and (ii) ZBI,
as the stockholder of Zuellig Botanical Extracts, a certificate representing
the number of shares of Common Stock equal to 55% multiplied by the Shares,
duly registered in ZBI's name.
2.3. Effective Time. Subject to the provisions of this
Agreement, the Contributed Subsidiaries and the Merger Subs shall file
Certificates of Merger (the "Certificates of Merger") executed in accordance
with the relevant provisions of the DGCL and the BCL and shall make all other
filings or recordings required under the DGCL and the BCL to effect the
Mergers as soon as practicable on or after the Closing Date. Each of the
Mergers shall become effective at such time as the Certificate of Merger in
respect of such Merger is duly filed with the Secretary of State of the State
of Delaware in the case of the Delaware Mergers, and the Secretary of State of
the State of New York in the case of the New York Merger, or at such later
time as may be specified in the relevant Certificate of Merger (the "Effective
Time"). The parties intend that all of the Mergers will become effective
simultaneously.
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2.4. Effect of the Mergers. Each Merger shall have the
effects set forth in the DGCL or the BCL, as the case may be. Without limiting
the generality of the foregoing, and subject thereto and any other applicable
laws, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Contributed Subsidiaries and the Merger Subs shall vest
in the Surviving Corporations, and all debts, liabilities, restrictions,
disabilities and duties of the Contributed Subsidiaries and the Merger Subs
shall become the debts, liabilities, restrictions, disabilities and duties of
the Surviving Corporation.
SECTION 3. EFFECT OF THE MERGER ON THE CAPITAL STOCK; MERGER
CONSIDERATION; EXCHANGE OF CERTIFICATES
3.1. Effect on Capital Stock; Merger Consideration. As of
the Effective Time, by virtue of the Mergers and without any action on the
part of any shareholder of the Contributed Subsidiaries:
(a) The shares of capital stock of each Contributed
Subsidiary issued and outstanding immediately before the Effective Time shall
be canceled and extinguished and be converted into the right to receive the
Shares.
(b) The shares of common stock of each Merger Sub
outstanding immediately prior to the Merger shall be converted into one share
of the common stock of the Surviving Corporation (the "Surviving Corporation
Common Stock"), which one share of the Surviving Corporation Common Stock
shall constitute all of the issued and outstanding capital stock of the
Surviving Corporation and shall be owned by the Company.
(c) At the Effective Time, the stock transfer books of the
Contributed Subsidiaries shall be closed and no transfer of shares shall be
made thereafter.
3.2. Certificate of Incorporation of Surviving
Corporations. The Certificate of Incorporation of each Contributed Subsidiary
in effect immediately prior to the Effective Time shall become the Certificate
of Incorporation of the respective Surviving Corporation from and after the
Effective Time and until thereafter amended as provided by law.
3.3. Bylaws of the Surviving Corporations. The Bylaws of
each Contributed Subsidiary in effect immediately prior to the Effective Time
shall be the Bylaws of the respective Surviving Corporation from and after the
Effective Time and until thereafter amended as provided by law.
3.4. Directors and Officers. The directors and officers of
the Surviving Corporation shall be such persons as mutually agreed by the
Company and ZGNA immediately prior to the Effective Time.
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3.5. Tax Treatment.
The Company and ZGNA intend to treat the transactions
contemplated by this Agreement to qualify for federal income tax purposes as a
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
Neither the Company nor ZGNA shall file or caused to be filed any tax returns
which is inconsistent with this tax treatment.
3.6. Accounting Treatment.
The parties acknowledge that the transactions contemplated
hereunder will not be accounted for as a pooling of interest.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to ZGNA as of the date
hereof that except as expressly set forth in the corresponding numbered
section in that certain Company Disclosure Schedule of even date herewith by
and between the Company and ZGNA:
4.1. Corporate Organization.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado. The
Articles of Incorporation and Bylaws of the Company and the Certificates of
Incorporation of the Merger Subs, each as amended through the date hereof
(collectively, the "Merger Subs Organizational Documents"), and which have
been delivered to ZGNA, are true and correct as of the date hereof. Merger Sub
I and Merger Sub III are corporations duly organized, validly existing and in
good standing under the laws of the State of Delaware and Merger Sub II is a
corporation duly organized, validly existing and in good standing under the
laws of New York.
(b) The Company has all requisite power and authority and
has all necessary approvals, licenses, permits and authorization to own its
properties and to carry on its business as now conducted. The Company has all
requisite power and authority to execute and deliver the Transaction Documents
and to perform its obligations hereunder and thereunder. The Merger Subs have
been organized for purposes of the Mergers and, except for transactions
related to their formation, have conducted no business. Each Merger Sub has
all requisite power and authority to execute and deliver this Agreement, to
consummate the Mergers and otherwise to perform its obligations hereunder.
(c) The Company has filed all necessary documents to qualify
to do business as a foreign corporation in, and the
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Company is in good standing under the laws of each jurisdiction in which the
conduct of the Company's business or the nature of the property owned requires
such qualification, except where the failure to so qualify would not have a
material adverse effect on the business, properties, prospects, profits or
condition (financial or otherwise) of the Company and its Subsidiaries taken
as a whole (a "Company Material Adverse Effect").
4.2. Subsidiaries.
Except as set forth on Section 4.2 of the Company Disclosure
Schedule, the Company has no Subsidiaries. Each Subsidiary listed on Section
4.2 of the Company Disclosure Schedule has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has all requisite corporate power and authority to own
its properties and assets and to conduct its business and is duly registered,
qualified and authorized to transact business and is in good standing in each
jurisdiction in which the conduct of its business or the nature of its
properties requires such registration, qualification or authorization, except
where the failure to be so registered, qualified or authorized would not have
a Company Material Adverse Effect. A list of each jurisdiction in which the
Company is qualified to do business is set forth in Section 4.2 of Company
Disclosure Schedule. All of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable, and is owned of record and beneficially, directly or
indirectly, by the Company free and clear of any mortgage, pledge, lien,
charge, security interest, claim or other legal or equitable encumbrance,
limitation or restriction other than the lien of The First National Bank of
Boston ("BankBoston") pursuant to its Security Agreement, dated April 9, 1997,
between the Company and BankBoston. There are no outstanding options,
warrants, agreements, conversion rights, preemptive rights or other rights to
subscribe for, purchase or otherwise acquire any issued or unissued shares of
capital stock of any Subsidiary.
4.3. Capitalization.
(a) On the date hereof, the authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock and 800,000 shares of
preferred stock, par value $1.00 per share (the "Preferred Stock"). On the
date hereof, the issued and outstanding shares of capital stock of the Company
consists of 10,468,163 shares of Common Stock and no shares of Preferred
Stock. The Company has 201,000 shares of treasury stock. As of the date
hereof, there are no bonds, debentures, notes or other evidences of
indebtedness having the right to vote on any matters on which the Company's
stockholders may vote issued or outstanding.
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(b) All the outstanding shares of capital stock of the
Company have been duly and validly issued and are fully paid and
non-assessable, and were issued in accordance with the registration or
qualification requirements of the Securities Act and any relevant state
securities laws or pursuant to valid exemptions therefrom. Upon issuance, sale
and delivery as contemplated by this Agreement, the Shares will be duly
authorized and validly issued obligations of the Company, free and clear of
any and all security interests, pledges, liens, charges, claims, options,
rights, restrictions on transfer, preemptive rights, proxies and voting or
other agreements, or other encumbrances of any nature whatsoever, except for
those provided for in the Transaction Documents and other than restrictions on
transfer imposed by federal or state securities laws.
(c) Except for the conversion and exchange rights which
attach to the warrants, options and convertible securities which are listed on
Section 4.3 of the Company Disclosure Schedule, there are no shares of Common
Stock or any other equity security of the Company issuable upon conversion,
exchange or exercise of any security of the Company or any Subsidiary of the
Company nor are there any rights, options, calls or warrants outstanding or
other agreements to acquire shares of Common Stock nor is the Company
contractually obligated to purchase, redeem or otherwise acquire any of its
outstanding shares. No stockholder of the Company is entitled to any
preemptive or similar rights to subscribe for shares of capital stock of the
Company.
4.4. Corporate Proceedings, etc.
(a) The Company has authorized the execution, delivery,
and performance of the Transaction Documents and each of the transactions and
agreements contemplated hereby and thereby. No other corporate action (other
than stockholder approval of the issuance of the Shares hereunder) is
necessary to authorize such execution, delivery and performance of the
Transaction Documents, and upon such execution and delivery by the parties
thereto each of the Transaction Documents shall constitute the valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights and general principles of
equity. The Company has authorized the issuance and delivery of the Shares in
accordance with this Agreement.
(b) Each Merger Sub has authorized the execution,
delivery, and performance of this Agreement and each of the transactions
contemplated hereby. No other corporate action of a Merger Sub (including
stockholder approval) is necessary to authorize such execution, delivery and
performance of this
-12-
Agreement, and upon such execution and delivery by the parties thereto this
Agreement shall constitute the valid and binding obligation of each Merger
Sub, enforceable against such Merger Sub in accordance with its terms, except
that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and general principles of equity.
4.5. Consents and Approvals.
(a) The execution and delivery by the Company of the
Transaction Documents, the issuance of the Shares, the performance by the
Company of its obligations hereunder and thereunder and the consummation by
the Company of the transactions contemplated hereby and thereby do not require
the Company or any of its Subsidiaries to obtain any consent, approval,
clearance or action of, or make any filing, submission or registration with,
or give any notice to, any Person or judicial authority.
(b) Except for possible submission under the HSR, the
execution and delivery by the Merger Subs of this Agreement, the performance
by the Merger Subs of their respective obligations hereunder and the
consummation by the Merger Subs of the transactions contemplated hereby do not
require the Merger Subs to obtain any consent, approval, clearance or action
of, or make any filing, submission or registration with, or give any notice
to, any Person or judicial authority.
4.6. Compliance with Law.
(a) The Company and each of its Subsidiaries are in
compliance in all material respects with, and are not in violation or default
in any material respect under, all foreign, federal, state and local laws,
ordinances, government rules and regulations applicable to their business
operations, properties, or assets, including without limitation laws or
regulations relating to: the Food and Drug Administration; the Foreign Corrupt
Practices Act; the environment; occupational health and safety; employer
benefits; ERISA plans; wages; work place safety; equal employment opportunity
and race; and religious, sex and age discrimination. No material expenditures
are or will be required in order to cause the current operations or properties
of the Company or any of its Subsidiaries to comply with any applicable laws,
ordinances, governmental rules or regulations in effect at the time of the
Closing.
(b) The Company and each of its Subsidiaries have all
licenses, permits, franchises or other governmental authorizations
("Approvals") necessary to the ownership of their property and to the
operation of their respective businesses, which if violated or not obtained
could reasonably be expected to
-13-
have a Company Material Adverse Effect. Neither the Company nor any Subsidiary
has finally been denied any application for any such Approvals necessary for
their property or for the operation of their business. There is no action
pending, or to the best knowledge of the Company or any of its Subsidiaries,
threatened or recommended by appropriate local, state, federal or foreign
agencies having jurisdiction thereof, to revoke, withdraw, or suspend any such
Approvals, or which would have a material adverse effect on such Approvals.
(c) Notwithstanding anything to the contrary contained in
this Agreement and in addition to the other representations and warranties
contained herein: (i) the Company and its operations are in material
compliance with all applicable laws, regulations and other requirements of
governmental or regulatory authorities or duties under the common law relating
to toxic or hazardous substances, wastes, pollution or to the protection of
health, safety or the environment (collectively, "Environmental Laws") and
have obtained and maintained in effect all licenses, permits and other
authorizations or registrations (collectively "Environmental Permits")
required under all Environmental Laws and are in material compliance with all
such Environmental Permits; (ii) the Company has not performed or suffered any
act which could give rise to, or has otherwise incurred, liability to any
Person (governmental or not) under CERCLA, or any other Environmental Laws,
nor has the Company received notice of any such liability or any claim
therefor or submitted notice pursuant to Section 103 of CERCLA to any
governmental agency with respect to any of its assets; (iii) no hazardous
substance, hazardous waste, contaminant, pollutant or toxic substance (as such
terms are defined in any applicable Environmental Law and collectively
referred to herein as "Hazardous Materials") has been released, placed, dumped
or otherwise come to be located on, at, beneath or near any of the assets or
properties owned or leased by the Company or any surface waters or
groundwaters thereon or thereunder in violation of any Environmental Laws or
that could subject the Company to liability under any Environmental Laws
(provided, however, that as to actions of Persons other than the Company and
its Subsidiaries or their predecessors this item (iii) is only to the best
knowledge of the Company); (iv) the Company does not own or operate, and has
never owned or operated, aboveground or underground storage tanks used for
storing petroleum products and which are subject to underground storage tank
removal or clean-up requirements in effect on the date hereof; (v) with
respect to any or all of the real properties leased by the Company, to the
Company's best knowledge (A) there are no asbestos-containing materials, urea
formaldehyde insulation, polychlorinated biphenyls or lead-based paints
present at any such properties, and (B) there are no wetlands as defined under
any Environmental Law located on any such properties; (vi) to the Company's
best knowledge none of the real
-14-
properties leased by the Company (A) has been used or is now used for the
generation, transportation, storage, handling, treatment or disposal of any
Hazardous Materials (other than de minimis quantities of Hazardous Materials
used in the normal course of the Company's business in material compliance
with all applicable Environmental Laws), or (B) is identified on a federal,
state or local listing of sites which require or might require environmental
cleanup; (vii) to the best of the Company's knowledge, no condition exists on
any of the real properties leased by the Company that upon the failure to act,
the passage of time or the giving of notice would give rise to liability under
any Environmental Law; (viii) to the best of the Company's knowledge, there
are no ongoing investigations or negotiations, pending or threatened
administrative, judicial or regulatory proceedings, or consent decrees or
other agreements in effect that relate to environmental conditions in, on,
under, about or related to the Company, its operations or the real properties
leased by the Company; and (ix) neither the Company nor its operations is
subject to reporting requirements under the federal Emergency Planning and
Community Right-to-Know Act, 42 U.S.C. ss. 11001 et seq., or analogous state
statutes and related regulations.
4.7. Litigation.
Except as disclosed in the Company SEC Reports, there is no
legal action, suit, arbitration or other legal, administrative or other
governmental investigation, inquiry or proceeding (whether federal, state,
local or foreign) (collectively "Proceeding") pending or, to the best of the
Company's knowledge, threatened against or affecting (i) the Company or any
Subsidiary or any of their respective properties, assets or businesses, except
for Proceedings that could not reasonably be expected to have a Company
Material Adverse Effect; or (ii) the transaction contemplated hereby. To the
best knowledge of the Company, the Company is not aware of any fact which
might result in or form the basis for any such Proceeding. Neither the Company
nor any Subsidiary is subject to any order, writ, judgment, injunction,
decree, determination or award of any court or of any governmental agency or
instrumentality (whether federal, state, local or foreign) which could
reasonably be expected to have a Company Material Adverse Effect.
4.8. Change in Ownership.
Neither the acquisition of the Shares by ZGNA nor the
consummation of the transactions contemplated by this Agreement will result in
(i) to the knowledge of the Company, any material adverse change in the
business operations of the Company or any of its Subsidiaries, (ii) the
acceleration of the vesting of any outstanding option, warrant, call,
commitment, agreement,
-15-
conversion right, preemptive right or other right to subscribe for, purchase
or otherwise acquire any of the shares of the capital stock of the Company or
any of its Subsidiaries, or debt securities of the Company or any of its
Subsidiaries (collectively "Commitments", and each individually a
"Commitment"), (iii) any obligation of the Company to grant, extend or enter
into any Commitment, or (iv) any right in favor of any Person to terminate or
cancel any Company Key Agreement or Instrument.
4.9. Absence of Defaults, Conflicts, etc.
(a) The execution and delivery of the Transaction Documents
and the issuance, exchange and delivery by the Company of any of the Shares do
not, and the fulfillment of the terms hereof and thereof by the Company will
not, result in a breach of any of the terms, conditions or provisions of, or
constitute a default under, or result in the modification of, or permit the
acceleration of rights under or termination of, any agreement, contract,
commitment, understanding, arrangement, restriction, indenture, mortgage, deed
of trust, credit agreement, note or other evidence of indebtedness, of the
Company or any of its Subsidiaries (i) involving $100,000 or more, (ii) the
termination of which is reasonably likely to have a Company Material Adverse
Effect or (iii) which is required to be filed as an exhibit to periodic
reports filed by the Company pursuant to the Exchange Act ("Company Key
Agreements and Instruments"), or the Organizational Documents, or any
arbitration award applicable to the Company or any of its Subsidiaries, or any
law, ordinance, code, standard, judgment, rule or regulation of any court or
local, federal, state or foreign regulatory board or body or administrative
agency having jurisdiction over the Company or any of its Subsidiaries or over
their respective properties or businesses.
(b) Neither any of the Company nor any of its Subsidiaries
is in default under or in violation of (and no event has occurred and no
condition exists which, upon notice or the passage of time (or both), would
constitute a default under) (i) the Organizational Documents, (ii) any Company
Key Agreement and Instrument, or (iii) any order, writ, injunction or decree
of any court or any Federal, state, local or other domestic or foreign
governmental department, commission, board, bureau, agency or instrumentality
or arbitration award, except, in the case of clause (ii), for defaults or
violations which would not have a Company Material Adverse Effect.
4.10. Reports and Financial Statements.
The Company has furnished ZGNA with true and complete copies
of the Company's (i) Annual Reports on Form 10-K for the fiscal years ended
April 30, 1997 and April 30, 1998, as filed with the Commission, (ii)
Quarterly Report on Form 10-Q for the quarter ended July 31, 1998, as filed
-16-
with the Commission, (iii) proxy statements related to all meetings of its
stockholders (whether annual or special) held since May 1, 1996, and (iv) all
other reports filed with or registration statements declared effective by the
Commission since May 1, 1996, except registration statements on Form S-8
relating to employee benefit plans, which are all the documents (other than
preliminary material) that the Company was required to file with the
Commission since that date (clauses (i) through (iv) being referred to herein
collectively as the "Company SEC Reports"). As of their respective dates, the
Company SEC Reports were duly filed and complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the Commission thereunder applicable to
such Company SEC Reports. As of their respective dates, the Company SEC
Reports did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
interim financial statements of the Company included in the Company SEC
Reports comply as to form in all material respects with applicable accounting
requirements of the Securities Act and with the published rules and
regulations of the Commission with respect thereto. The financial statements
included in the Company SEC Reports (i) have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent
basis (except as may be indicated therein or in the notes thereto and, in the
case of unaudited interim financial statements, the absence of all GAAP
required footnotes and normal year-end audit adjustments), (ii) present
fairly, in all material respects, the financial position of the Company and
its Subsidiaries as at the dates thereof and the results of their operations
and cash flow for the periods then ended subject, in the case of the unaudited
interim financial statements, to normal year-end audit adjustments and any
other adjustments described therein and the fact that certain information and
notes have been condensed or omitted in accordance with the Exchange Act and
the rules promulgated thereunder, and (iii) are in all material respects in
accordance with the books of account and records of the Company except as
indicated therein.
4.11. Absence of Certain Developments.
Except as disclosed in the Company SEC Reports, since April
30, 1998, there has been no (i) change or event which could reasonably be
expected to have a Company Material Adverse Effect (other than general trends
or new laws, rules, or regulations applicable to similarly situated
companies), (ii) declaration, setting aside or payment of any dividend or
other distribution
-17-
with respect to the capital stock of the Company, (iii) issuance of capital
stock (other than pursuant to the exercise of options, warrants or convertible
securities outstanding on the date hereof) or options, warrants or rights to
acquire capital stock (other than the rights granted to ZGNA hereunder or to
directors for attending meetings and serving as directors in accordance with
the historical arrangement), (iv) material loss, destruction or damage to any
property of the Company or any Subsidiary, whether or not insured, (v) except
as a result of the new bank credit facility contemplated herein, acceleration
or prepayment of any indebtedness for borrowed money or capital leases or the
refunding of any such indebtedness, (vi) labor trouble involving the Company
or any Subsidiary or any material change in their personnel or the general
terms and conditions of employment of key employees, (vii) waiver of any
valuable right in favor of the Company or any Subsidiary, (viii) loan or
extension of credit to any officer or employee of the Company or any
Subsidiary other than advances for travel-related expenses and similar
advances to officers and employees of the Company in the ordinary course of
business, (ix) acquisition, material writedown or write-off for accounting
purposes or disposition of any material assets (or any contract or arrangement
therefor) other than a possible sale or writedown of the paclitaxel business
and assets, (x) redemption or repurchase of any capital stock of the Company,
or any other material transaction by the Company or any Subsidiary otherwise
than for fair value in the ordinary course of business or (xi) termination of
an agreement or arrangement which would be a Company Key Agreement or
Instrument if in effect on the date hereof.
4.12. Material Contracts.
Section 4.12 of the Company Disclosure Schedule sets forth a
true and complete list of each Company Key Agreement and Instrument (oral or
written) to which the Company or its Subsidiary is a party of its assets bound
other than Company Key Agreements and Instruments (i) filed as an exhibit to a
Company SEC Report and (ii) under which the Company has no further liabilities
(whether accrued, absolute, contingent, liquidated or otherwise, whether due
or to become due, whether or not known to the Company) or obligations as of
the date hereof. Each Company Key Agreement and Instrument that is currently
in effect, is valid, binding and enforceable against the Company or such
Subsidiary and, to the Company's best knowledge, the other parties thereto, in
accordance with its terms, and in full force and effect on the date hereof. A
true and complete copy of each Key Agreement and Instrument of the Company has
been delivered or made available to ZGNA. There is no breach, violation or
default by the Company and no event (including, without limitation, the
consummation of the transactions contemplated herein) which, with notice or
lapse of time or both, would (i) constitute a breach,
-18-
violation or default by the Company under any Company Key Agreement or
Instrument, or (ii) give rise to any lien or right of termination,
modification, cancellation, prepayment, suspension, limitation, revocation or
acceleration against the Company under any Company Key Agreement or Instrument
except for breaches, violations or defaults that would not have a Company
Material Adverse Effect. To the best of the Company's knowledge, no other
party to any Company Key Agreement or Instrument is in material breach of any
such Company Key Agreement or Instrument, no waiver or indulgence has been
granted by any of the parties thereto and no party to any such Company Key
Agreement and Instrument has repudiated any provision thereof. The Company is
not a party to, nor are any of its assets subject to, any guaranty, "make
well" agreement or other arrangement to be responsible for the obligations of
another, including any obligation to maintain the financial condition of
another person.
4.13. Absence of Undisclosed Liabilities.
Neither the Company nor any of its Subsidiaries has any
debt, obligation or liability (whether accrued, absolute, contingent,
liquidated or otherwise, whether due or to become due, whether or not known to
the Company) arising out of any transaction entered into at or prior to
Closing, or any act or omission at or prior to Closing, or any state of facts
existing at or prior to Closing, including Taxes with respect to or based upon
transactions or events occurring at or prior to Closing, and including,
without limitation, unfunded past service liabilities under any pension,
profit sharing or similar plan, except liabilities disclosed in the Company
SEC Reports, current liabilities incurred since April 30, 1998, current
obligations (other than as a result of breach or default) under agreements set
forth on Section 4.12 of the Company Disclosure Schedule, and obligations
under agreements which are not required to be set forth on such schedule
entered into in the usual and ordinary course of business, none of which
(individually or in the aggregate) could have a Company Material Adverse
Effect.
4.14. Employees.
(a) The Company and its Subsidiaries are in full compliance
with all laws regarding employment, wages, hours, equal opportunity,
collective bargaining and payment of social security and other taxes except to
the extent that noncompliance would not have a Company Material Adverse
Effect. Since January 1, 1997, no complaint of any unfair labor practice or
discriminatory employment practice against the Company or any Subsidiary has
been filed or, to the best of the Company's knowledge, threatened to be filed
with or by the National Labor Relations Board, the Equal Employment
Opportunity Commission or any other administrative agency, local, foreign,
federal or
-19-
state, that regulates labor or employment practices, nor is any grievance
filed or, to the best of the Company's knowledge, threatened to be filed,
against the Company or any Subsidiary by any employee pursuant to any
collective bargaining or other employment agreement to which the Company or
any Subsidiary is a party or is bound, except as would not reasonably be
expected to have a Company Material Adverse Effect. The Company and its
Subsidiaries are in compliance with all applicable foreign, federal, state and
local laws and regulations regarding occupational safety and health standards
except to the extent that noncompliance will not have a Company Material
Adverse Effect, and, since April 30, 1996, have received no complaints from
any foreign, federal, state or local agency or regulatory body alleging
violations of any such laws and regulations. The Company is not bound or
subject to any arrangement with any labor union, and, to the Company's best
knowledge no union organizing activities are ongoing or threatened.
(b) All sums due for employee compensation and benefits and
all vacation time owing to any employees of the Company or any of its
Subsidiaries have been duly and adequately accrued on the accounting records
of the Company and its Subsidiaries.
(c) The Company is not aware that any of its executive
officers or persons whose principal occupation is the creation of intellectual
property 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 executive officer's or person's best efforts to promote
the interests of the Company or that would conflict with the Company's
business as proposed to be conducted.
(d) The Company is not aware that any officer or key
employee, or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing.
(e) Set forth on Section 4.14 of Company Disclosure Schedule
is (i) a list of employees of the Company with an annual base compensation
over $50,000, (ii) a list of all officers of the Company and (iii) a list of
all employment agreements to which the Company is a party (copies of which
have been delivered to ZGNA).
4.15. Tax Matters.
There are no Taxes due and payable by the Company or any of
its Subsidiaries which have not been paid except those being disputed in good
faith by appropriate proceeding with appropriate reserves being made therefore
on the accounting books
-20-
of the Company. The provisions for Taxes on the audited and unaudited balance
sheets delivered by the Company to ZGNA will be sufficient for the payment in
all material respects of all accrued and unpaid Taxes of the Company and its
Subsidiaries, whether or not assessed or disputed in good faith as of the
respective dates of such balance sheets. The Company and its Subsidiaries have
duly filed or received extensions to filing all foreign, federal, state and
local tax returns required to have been filed by them, and there are in effect
no waivers of applicable statutes of limitations with respect to taxes for any
year except where the failure to file such returns or the existence of waivers
of applicable statutes of limitations is not reasonably likely to have a
Company Material Adverse Effect. All such returns (including those delivered
by the Company to ZGNA) are true, complete and correct in all material
respects and have been prepared from, and are in accordance with, the books
and records of the Company and its Subsidiaries. Neither the Company nor its
Subsidiaries is a party to a Tax sharing agreement or liable for the Taxes of
any other person. Neither the Company nor its Subsidiaries have filed a
consent to the application of Section 341(f) of the Code. The Company and its
Subsidiaries have made all estimated income tax deposits and all other
required Tax payments or deposits and have complied for all prior periods with
the Tax withholding provisions of all applicable foreign, federal, state and
local laws applicable to them. Neither the Company nor any of its Subsidiaries
has been subject to a foreign, federal or state tax audit since April 30,
1996.
4.16. Employee Benefit Plans.
The Company and its Subsidiaries have no employee benefit
plans (as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974) covering former and current employees of the Company or any of
its Subsidiaries, or under which the Company or any of its Subsidiaries has
any obligation or liability. Section 4.16 of the Company Disclosure Schedule
lists all material plans, contracts, bonuses, commissions, profit-sharing,
savings, stock options, insurance, deferred compensation, or other similar
fringe or employee benefits covering former or current employees of the
Company or any of its Subsidiaries or under which the Company or any of its
Subsidiaries has any obligation or liability (each, a "Benefit Arrangement").
True and complete copies of all Benefit Arrangements have been provided or
made available to ZGNA prior to the date hereof. The Benefit Arrangements are
and have been administered in substantial compliance with their terms and with
the requirements of applicable law. No "prohibited transaction" within the
meaning of Section 4475 of the Code or Section 406 of ERISA, has occurred with
respect to any Benefit Arrangements. All payments to current or former
employees of the Company or
-21-
any of its Subsidiaries pursuant to the Benefit Arrangements are and have been
fully deductible under the Code.
4.17. Patents, Licenses, etc.
The Company or one of its Subsidiaries owns, free and clear
of all encumbrances, restrictions, liens, security interests and charges, and
has good and marketable title to, or holds adequate licenses or otherwise
possesses all such rights as are necessary to use all patents (and
applications therefor), patent disclosures, marks, trade names, copyrights
(and applications therefor), inventions, discoveries, processes, know-how,
scientific, technical, engineering and marketing data, formulae and techniques
used or proposed to be used, in or necessary for the conduct of its business
as now conducted (collectively, "Intellectual Property").
Neither the Company nor any of its Subsidiaries has received
notice nor has knowledge of any conflict or alleged conflict with the rights
of others pertaining to the Intellectual Property described in this Section
4.17 where the effect of such conflict could have a Company Material Adverse
Effect. To the Company's best knowledge, the Company's business, as presently
conducted, and as proposed to be conducted, does not infringe upon or violate
any patent rights, copyrights, marks, names, trade names or trade secrets of
others. To the Company's best knowledge, the Company and its Subsidiaries have
the right to use all trade secrets, processes, customer lists and other rights
incident to their respective businesses as now conducted.
To the Company's best knowledge, no employee of the Company
or any of its Subsidiaries has violated any employment agreement, non-compete
agreement or proprietary information agreement which he or she had with a
previous employer or other person, or any intellectual property policy of such
employer, or is a party to or threatened by any litigation concerning any
patents, marks, trade secrets, service names, trade names, copyrights,
licenses and the like.
4.18. Title to Tangible Assets.
The Company and its Subsidiaries have good title to their
properties and assets and good title to all their leasehold estates, in each
case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other
than or resulting from Taxes which have not yet become delinquent and minor
liens and encumbrances which do not in any case materially detract from the
value of the property subject thereto or materially impair the operations of
the Company and its Subsidiaries and which have not arisen otherwise than in
the ordinary course of business.
-22-
4.19. Insurance.
The Company and its Subsidiaries and their respective
properties are insured in such amounts, against such losses and with such
insurers as are prudent when considered in light of the nature of the
properties and businesses of the Company and its Subsidiaries and customary in
light of the Company's exposure. No notice of any termination, threatened
termination, or denial of a material claim made since January 1, 1997, of, or
under any of such policies has been received and such policies are in full
force and effect. A summary of all such policies, including whether they are
on a "claims made" basis, is attached as Section 4.19 of the Company
Disclosure Schedule. None of such policies will be terminated or reduced in
coverage as a result of the transactions described herein. All such policies
are in full force and effect and all premiums with respect thereto have been
paid. The Company has not failed to give any notice or present any claim under
any such insurance policy in due and timely fashion or as required by any of
such insurance policies or has not otherwise, through any act, omission or
non-disclosure, jeopardized or impaired full recovery of any claim under such
policies, and there are no claims by the Company under any of such policies to
which any insurance company is denying liability or defending under a
reservation of rights or similar clause.
4.20. Transactions with Related Parties.
Neither the Company nor any Subsidiary is a party to any
agreement with any of the Company's directors, officers or, to their best
knowledge stockholders holding more than 1/2% of the Company's stock, or, to
their best knowledge, any Affiliate or family member of any of the foregoing,
including but not limited to, under which it: (i) leases any real or personal
property (either to or from such Person), (ii) licenses technology (either to
or from such Person), (iii) is obligated to purchase any tangible or
intangible asset from or sell such asset to such Person, (iv) purchases
products or services from such Person or (v) has borrowed money from or lent
money to such Person. Neither the Company nor any Subsidiary employs as an
employee or engages as a consultant any family member of any of the Company's
directors or officers. To the best knowledge of the Company and except for the
Transaction Documents, there exist no agreements among stockholders of the
Company to act in concert with respect to their voting or holding of Company
securities.
4.21. Registration Rights.
Except as provided in the Registration Rights Agreement
executed on the date hereof between ZGNA and the Company, and except as
pursuant to its stock option plans, the Company is not
-23-
under any obligation to register any of its securities under the Securities
Act.
4.22. Private Offering.
Neither the Company nor anyone acting on its behalf has
sold or has offered any of the Shares for sale to, or solicited offers to buy
from, or otherwise approached or negotiated with respect thereto with, any
prospective purchaser of the Shares, other than ZGNA and ZBI. Neither the
Company nor anyone acting on its behalf shall offer the Shares for issue or
sale to, or solicit any offer to acquire any of the same from, anyone so as to
bring the issuance and sale of the Shares, or any part thereof, within the
provisions of Section 5 of the Securities Act. Based in part upon the
representations of ZGNA and ZBI set forth in Section 5, the offer, issuance
and sale of the Shares are and will be exempt from the registration and
prospectus delivery requirements of the Securities Act, and have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
4.23. Investment.
(a) The Company is acquiring the Subsidiary Shares for its
own account for investment and not with a view towards the resale, transfer,
pledge or distribution thereof, nor with any present intention of distributing
the Subsidiary Shares other than a pledge in favor of the Company's lender
pursuant to the credit agreement referred to in Section 7.9.
(b) The Company has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of its investment in the Contributed Subsidiaries as contemplated by
this Agreement, and is able to bear the economic risk of such investment for
an indefinite period of time. The Company has been furnished access to such
information and documents as it has requested and has been afforded an
opportunity to ask questions of and receive answers from representatives of
ZGNA and the Contributed Subsidiaries concerning the terms and conditions of
this Agreement and the Mergers contemplated hereby.
(c) The Company is an "accredited investor" as defined under
Regulation D of the Securities Act.
(d) The Company is located in Colorado and the offer and
sale of the Shares occurred in the States of Colorado and California.
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4.24. Brokerage.
Except for the Company's agreement with Xxxxx, Xxxxxxxx &
Xxxx, Inc. whose fees and expenses shall be paid by the Company, there are no
claims for brokerage commissions or finder's fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement made by or on behalf of the Company, and the Company agrees to
indemnify and hold ZGNA harmless against any costs or damages incurred as a
result of any such claim.
4.25. Takeover Statute.
ZGNA is not, as a result of its execution and delivery of
this Agreement, the performance of its obligations hereunder or the
acquisition of any Shares, prohibited from entering into a business
combination with the Company or any Subsidiary pursuant to the Business
Corporation Act of the State of Colorado. To the best knowledge of the
Company, no other Takeover Statute is applicable to the transactions
contemplated hereby.
4.26. Material Facts.
This Agreement, the Company Disclosure Schedules, and the
other agreements, documents, certificates or written statements furnished or
to be furnished to ZGNA through the Closing Date by or on behalf of the
Company in connection with the transactions contemplated hereby taken as a
whole, do not contain any untrue statement by the Company of a material fact
or omit to state a material fact necessary to make the statements contained
therein or herein, in light of the circumstances in which they were made, not
misleading. There is no fact which is known to the Company and which has not
been disclosed herein or otherwise by the Company to ZGNA which is reasonably
likely to have a Company Material Adverse Effect. Projections and forecasts
prepared by or on behalf of the Company and delivered to ZGNA have been
prepared in good faith and on a basis believed by the Company's management to
be reasonable, but are not guarantees of performance.
4.27. Debt.
As of the Closing Date, the "Debt" (as defined below) of the
Company will not exceed $10,000,000. For purposes of this Section, "Debt"
means debt for borrowed money (long term, for working capital purposes or
otherwise), obligations under letters of credit and capital lease obligations.
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4.28. Company Real Property.
(a) Section 4.28 of Company's Disclosure Schedule lists all
real property owned or leased by the Company and its Subsidiaries. The Company
and its Subsidiaries have title to its owned real properties (collectively,
the "Company Owned Real Properties") in each case, free and clear of all
imperfections of title and all encumbrances, except for (i) those consisting
of zoning or planning restrictions, easements, permits and other restrictions
or limitations on the use of such property or irregularities in title thereto
which, individually and in the aggregate, do not materially impair the use of
such property, (ii) warehousemen's, mechanics', carriers', landlords',
repairmen's or other similar encumbrances arising in the ordinary course of
business and securing obligations not yet due and payable, (iii) other
encumbrances which arise in the ordinary course of business and which
individually and in the aggregate do not materially impair its use of such
property or its ability to obtain financing by using such assets as
collateral, (iv) any state of facts, including, without limitation, easements,
encroachments or encumbrances, either shown by any survey or other inspection
or granted by the Company prior to the date hereof, of such Company Owned Real
Property which do not materially adversely interfere with the occupancy or
use, as presently used or occupied, of such Company Owned Real Property, (v)
liens for taxes and/or assessments not yet delinquent or which are being
contested in good faith through appropriate proceedings, (vi) all rights or
easements, if any, of any municipality or other public or private utility
company, to maintain telephone wires, pipes, conduits or other facilities
which enter or cross such Company Owned Real Property and (vii) any state of
facts, including without limitation, rights, easements, liens, encroachments
or encumbrances that any title report, title commitment or title insurance
policy would disclose (encumbrances referenced in clauses (i) through (vii)
collectively referred to as the "Company Permitted Encumbrances").
(b) The Company has delivered to ZGNA a true and complete
list of all of the leases and subleases to which the Company is a party as
described on Section 4.28 of Company's Disclosure Schedule (collectively, the
"Company Leased Real Properties," together with Company Owned Real Properties,
the "Company Real Properties"). The leases and subleases described on Section
4.28 of the Company Disclosure Schedule (i) have not been further modified or
amended and (ii) are in full force and effect. To the knowledge of the
Company, there is no default which remains uncured and would materially
adversely interfere with the occupancy or use, as presently used or occupied,
of any Company Leased Real Property. The Company is not obligated to purchase
any Company Leased Real Property and no Company Leased Real Property is
required to be accounted for under GAAP as a capitalized lease.
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4.29. Corporate Minute Books.
The corporate records of the Company are correct and
complete. True and correct copies of all minutes of meetings or other actions
by the directors, stockholders or incorporators of the Company for the past
five years have been provided and since its inception have previously been
provided or made available to ZGNA.
4.30. Good Condition.
The buildings, facilities, machinery, equipment, furniture,
leasehold and other improvements, fixtures, vehicles, structures, any related
capitalized items and other tangible property owned by or leased to the
Company (i) are to the Company's best knowledge, in all material respects in
good operating condition and repair (normal wear and tear excepted) and, in
the case of buildings or structures located on the Company Real Properties,
free of any structural or engineering defects, and (ii) to the Company's best
knowledge, are suitable in all material respects for their current use. The
Company has not received notice of, and has no knowledge of, any pending,
threatened or contemplated condemnation proceeding or similar taking affecting
the assets of the Company (including the Company Real Properties).
4.31. Manufacturing Capacity.
The Company currently (i) has, except for drying capacity
which it may outsource, the manufacturing capacity to manufacture 500 tons of
nutraceutical extracts per year and (ii) has or can readily hire manufacturing
and support personnel reasonably necessary to support such manufacturing
capacity.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF ZGNA
ZGNA and ZBI represent and warrant to the Company as of the
date hereof that except (i) as expressly set forth in the corresponding
numbered section in that certain ZGNA Disclosure Schedule of even date
herewith by and between the Company and ZGNA, and, (ii) as to the Transaction
Documents, the representations and warranties of ZGNA and ZBI are only to the
extent that ZGNA, ZBI or a Contributed Subsidiary is a party to such
Transaction Documents:
5.1. Corporate Organization.
(a) Each of ZGNA and ZBI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
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(b) Each of ZGNA and ZBI has all requisite power and
authority to execute and deliver the Transaction Documents and to perform its
obligations hereunder and thereunder.
(c) Each of ZGNA and ZBI has filed all necessary documents
to qualify to do business as a foreign corporation in, and each of ZGNA and
ZBI is in good standing under the laws of each jurisdiction in which the
conduct of its business or the nature of its property owned requires such
qualification, except where the failure to so qualify would not have a
material adverse effect on the business, properties, prospects, profits or
condition (financial or otherwise) of the Contributed Subsidiaries taken as a
whole (a "Subsidiary Material Adverse Effect").
5.2. Contributed Subsidiaries.
Each Contributed Subsidiary has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power and
authority to own its properties and assets and to conduct its business and is
duly registered, qualified and authorized to transact business and is in good
standing in each jurisdiction in which the conduct of its business or the
nature of its properties requires such registration, qualification or
authorization, except where the failure to be so registered, qualified or
authorized would not have a Subsidiary Material Adverse Effect. A list of each
jurisdiction in which a Contributed Subsidiary is qualified to do business is
set forth in Section 5.2 of ZGNA Disclosure Schedule. All of the issued and
outstanding capital stock of each Contributed Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable, and is owned
of record and beneficially, directly or indirectly, by ZGNA or ZBI free and
clear of any mortgage, pledge, lien, charge, security interest, claim or other
legal or equitable encumbrance, limitation or restriction. There are no
outstanding options, warrants, agreements, conversion rights, preemptive
rights or other rights to subscribe for, purchase or otherwise acquire any
issued or unissued shares of capital stock of any Contributed Subsidiary. No
Contributed Subsidiary has a Subsidiary or interest in a general partnership
or any interest in excess of 5% of the equity interest of any other entity.
5.3. Capitalization.
(a) On the date hereof and as of the Closing, the authorized
capital stock of (i) Zuellig Botanical Extracts consists of 100 shares of
common stock, par value $0.01 per share, (ii) ZetaPharm consists of 1,000
shares of common stock, par value $1.00 per share, and 10 shares of cumulative
preferred stock, par value $200,000 per share, and (iii) Xxxxxx consists of
1,000 shares of common stock, par value $1.00 per share. On the
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date hereof, the issued and outstanding shares of capital stock of (i) Zuellig
Botanical Extracts consists of 100 shares of its common stock, (ii) ZetaPharm
consists of 960 shares of its common stock and 10 shares of its cumulative
preferred stock and (iii) Xxxxxx consists of 80 shares of its common stock.
There are no bonds, debentures, notes, other evidences of indebtedness, or any
person other than ZGNA as a stockholder of ZetaPharm and Xxxxxx, or any person
other than ZBI as a stockholder of Zuellig Botanical Extracts, having the
right to vote on any matters on which the Contributed Subsidiaries'
stockholders may vote issued or outstanding. No Contributed Subsidiary has any
accrued but unpaid dividends.
(b) There are no shares of any equity or voting security of
the Contributed Subsidiaries issuable upon conversion, exchange or exercise of
any security of the Contributed Subsidiaries nor are there any rights,
options, calls or warrants outstanding or other agreements to acquire any
equity or voting security of any Contributed Subsidiaries nor is any
Contributed Subsidiary contractually obligated to purchase, redeem or
otherwise acquire any of its outstanding shares. No stockholder of any
Contributed Subsidiary is entitled to any preemptive or similar rights to
subscribe for shares of capital stock of the Contributed Subsidiaries.
5.4. Corporate Proceedings, etc.
(a) Each of ZGNA and ZBI has authorized the execution,
delivery, and performance of the Transaction Documents and each of the
transactions and agreements contemplated hereby and thereby. No other
corporate action (including stockholder approval) is necessary to authorize
such execution, delivery and performance of the Transaction Documents, and
upon such execution and delivery by the parties thereto each of the
Transaction Documents shall constitute the valid and binding obligation of
ZGNA and ZBI, enforceable against ZGNA and ZBI in accordance with its terms,
except that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and general principles of equity. Each of ZGNA
and ZBI has authorized the Mergers in accordance with this Agreement.
(b) The Contributed Subsidiaries have authorized the
execution, delivery, and performance of this Agreement and each of the
transactions contemplated hereby. No other corporate action (including
stockholder approval) is necessary to authorize such execution, delivery and
performance of this Agreement, and upon such execution and delivery by the
parties thereto this Agreement shall constitute the valid and binding
obligation of the Contributed Subsidiaries, enforceable against them in
accordance with its terms, except that such enforcement
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may be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and
general principles of equity. The Contributed Subsidiaries have authorized the
Mergers in accordance with this Agreement.
5.5. Consents and Approvals.
Except for submissions under the HSR, the execution and
delivery by ZGNA or ZBI of the Transaction Documents, the performance by ZGNA,
ZBI and the Contributed Subsidiaries of their obligations hereunder and
thereunder and the consummation by ZGNA, ZBI and the Contributed Subsidiaries
of the transactions contemplated hereby and thereby do not require ZGNA, ZBI
or any Contributed Subsidiaries to obtain any consent, approval, clearance or
action of, or make any filing, submission or registration with, or give any
notice to, any Person or judicial authority.
5.6. Compliance with Law.
(a) Each of the Contributed Subsidiaries is in compliance in
all material respects with, and is not in violation or default in any material
respect under, all foreign, federal, state and local laws, ordinances,
government rules and regulations applicable to its business operations,
properties, or assets, including without limitation laws or regulations
relating to: the Food and Drug Administration; the environment; the Foreign
Corrupt Practices Act; occupational health and safety; employer benefits;
ERISA plans; wages; work place safety; equal employment opportunity and race;
and religious, sex and age discrimination. No material expenditures are or
will be required in order to cause the current operations or properties of the
Contributed Subsidiaries to comply with any applicable laws, ordinances,
governmental rules or regulations in effect at the time of the Closing.
(b) Each of the Contributed Subsidiaries has all Approvals
necessary to the ownership of its property and to the operation of its
respective businesses, which if violated or not obtained could reasonably be
expected to have a Subsidiary Material Adverse Effect. None of the Contributed
Subsidiaries has finally been denied any application for any such Approvals
necessary for its property or for the operation of its business. There is no
action pending, or to the best knowledge of ZGNA or any of the Contributed
Subsidiaries, threatened or recommended by appropriate local, state, federal,
or foreign agencies having jurisdiction thereof, to revoke, withdraw, or
suspend any such Approvals, or which would have a material adverse effect on
such Approvals.
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(c) Notwithstanding anything to the contrary contained in
this Agreement and in addition to the other representations and warranties
contained herein: (i) the Contributed Subsidiaries and their respective
operations are in material compliance with all Environmental Laws and have
obtained and maintained in effect all Environmental Permits required under all
Environmental Laws and are in material compliance with all such Environmental
Permits; (ii) the Contributed Subsidiaries have not performed or suffered any
act which could give rise to, or have otherwise incurred, liability to any
Person (governmental or not) under CERCLA, or any other Environmental Laws,
nor have the Contributed Subsidiaries received notice of any such liability or
any claim therefor or submitted notice pursuant to Section 103 of CERCLA to
any governmental agency with respect to any of their assets; (iii) no
hazardous substance, hazardous waste, contaminant, pollutant or toxic
substance (as such terms are defined in any applicable Environmental Law) has
been released, placed, dumped or otherwise come to be located on, at, beneath
or near any of the assets or properties owned or leased by the Contributed
Subsidiaries or any surface waters or groundwaters thereon or thereunder in
violation of any Environmental Laws or that could subject the Contributed
Subsidiaries to liability under any Environmental Laws (provided, however,
that as to actions of Persons other than the Contributed Subsidiaries or their
predecessors, this item (iii) is only to the best knowledge of the Contributed
Subsidiaries); (iv) the Contributed Subsidiaries do not own or operate, and
have never owned or operated, aboveground or underground storage tanks used
for storing petroleum products and which are subject to underground storage
tank removal or clean-up requirements in effect on the date hereof; (v) with
respect to any or all of the real properties leased by the Contributed
Subsidiaries, to the best knowledge of the Contributed Subsidiary (A) there
are no asbestos-containing materials, urea formaldehyde insulation,
polychlorinated biphenyls or lead-based paints present at any such properties,
and (B) there are no wetlands as defined under any Environmental Law located
on any such properties; (vi) to the best knowledge of the Contributed
Subsidiaries none of the real properties leased by the Contributed
Subsidiaries (A) has been used or is now used for the generation,
transportation, storage, handling, treatment or disposal of any Hazardous
Materials (other than de minimis quantities of Hazardous Materials used in the
normal course of the Contributed Subsidiaries' business in material compliance
with all applicable Environmental Laws), or (B) is identified on a federal,
state or local listing of sites which require or might require environmental
cleanup; (vii) to the best of ZGNA's and Contributed Subsidiaries' knowledge,
no condition exists on any of the real properties leased by the Contributed
Subsidiaries that upon the failure to act, the passage of time or the giving
of notice would give rise to
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liability under any Environmental Law; (viii) to the best of ZGNA's and
Contributed Subsidiaries' knowledge, there are no ongoing investigations or
negotiations, pending or threatened administrative, judicial or regulatory
proceedings, or consent decrees or other agreements in effect that relate to
environmental conditions in, on, under, about or related to the Contributed
Subsidiaries, their respective operations or the real properties leased by the
Contributed Subsidiaries; and (ix) none of the Contributed Subsidiaries or
their respective operations is subject to reporting requirements under the
federal Emergency Planning and Community Right-to-Know Act, 42 U.S.C. ss.
11001 et seq., or analogous state statutes and related regulations.
5.7. Litigation.
There is no Proceeding (whether federal, state, local or
foreign) pending or, to the best of ZGNA's and the Contributed Subsidiaries'
knowledge, threatened against or affecting (i) any Contributed Subsidiary or
any of their respective properties, assets or businesses, except for
Proceedings that could not reasonably be expected to have a Subsidiary
Material Adverse Effect; or (ii) the transactions contemplated hereby. To the
best knowledge of ZGNA and the Contributed Subsidiaries, none of ZGNA or
Contributed Subsidiaries is aware of any fact which might result in or form
the basis for any such Proceeding. None of the Contributed Subsidiaries is
subject to any order, writ, judgment, injunction, decree, determination or
award of any court or of any governmental agency or instrumentality (whether
federal, state, local or foreign) which could reasonably be expected to have a
Subsidiary Material Adverse Effect.
5.8. Change in Ownership.
The consummation of the transactions contemplated by this
Agreement will not result in (i) to the knowledge of ZGNA and the Contributed
Subsidiaries, any material adverse change in the business operations of a
Contributed Subsidiary, (ii) the acceleration of the vesting of any
outstanding option, warrant, call, commitment, agreement, conversion right,
preemptive right or other right to subscribe for, purchase or otherwise
acquire any of the shares of the capital stock of the Contributed
Subsidiaries, or debt securities of the Contributed Subsidiaries, (iii) any
obligation of the Contributed Subsidiaries to grant, extend or enter into any
Commitment, or (iv) any right in favor of any Person to terminate or cancel
any Subsidiary Key Agreement or Instrument.
5.9. Absence of Defaults, Conflicts, etc.
(a) The execution and delivery of the Transaction Documents
do not, and the fulfillment of the terms hereof and
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thereof by ZGNA, ZBI or any Contributed Subsidiary will not, result in a
breach of any of the terms, conditions or provisions of, or constitute a
default under, or result in the modification of, or permit the acceleration of
rights under or termination of any agreement, contract, commitment,
understanding, arrangement, restriction, indenture, mortgage, deed of trust,
credit agreement, note or other evidence of indebtedness, of ZGNA, ZBI or any
of the Contributed Subsidiaries (i) involving $100,000 or more, (ii) the
termination of which is reasonably likely to have a Subsidiary Material
Adverse Effect or (iii) which is required to be filed as an exhibit to
periodic reports if ZGNA, ZBI or a Contributed Subsidiary were required to
file such reports pursuant to the Exchange Act ("Subsidiary Key Agreements and
Instruments") or the organizational documents of ZGNA, ZBI or any Contributed
Subsidiaries, or any arbitration award applicable to ZGNA, ZBI or a
Contributed Subsidiary, or any law, ordinance, code, standard, judgment, rule
or regulation of any court or local, federal, state or foreign regulatory
board or body or administrative agency having jurisdiction over ZGNA, ZBI or
any of the Contributed Subsidiaries or over their respective properties or
businesses.
(b) None of the Contributed Subsidiaries is in default under
or in violation of (and no event has occurred and no condition exists which,
upon notice or the passage of time (or both), would constitute a default
under) (i) the organizational documents of any Contributed Subsidiaries, (ii)
any Subsidiary Key Agreement and Instrument of any Contributed Subsidiaries,
or (iii) any order, writ, injunction or decree of any court or any Federal,
state, local or other domestic or foreign governmental department, commission,
board, bureau, agency or instrumentality, or arbitration award, except, in the
case of clause (ii), for defaults or violations which would not have a
Subsidiary Material Adverse Effect.
5.10. Reports and Financial Statements.
The financial statements attached as Section 5.10 of ZGNA
Disclosure Schedule (i) have been prepared in accordance with GAAP applied on
a consistent basis (except as may be indicated therein or in the notes thereto
and, in the case of unaudited interim financial statements, the absence of all
GAAP required footnotes and normal year-end audit adjustments), (ii) present
fairly, in all material respects, the financial position of the Contributed
Subsidiaries as at the date thereof and the results of their operations and
cash flow for the period then ended subject to normal year-end audit
adjustments and any other adjustments described therein, and (iii) are in all
material respects in accordance with the books of account and records of the
Contributed Subsidiaries except as indicated therein. The balance sheets dated
October 31, 1998 for each Contributed Subsidiary are referred to as the "CS
Balance Sheets."
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5.11. Absence of Certain Developments.
Since March 31, 1998, there has been no (i) change or event
which could reasonably be expected to have a Subsidiary Material Adverse
Effect (other than general trends or new laws, rules, or regulations
applicable to similarly situated companies), (ii) declaration, setting aside
or payment of any dividend or other distribution with respect to the capital
stock of the Contributed Subsidiaries, (iii) issuance of capital stock or
options, warrants or rights to acquire capital stock (other than the rights
granted to the Company hereunder), (iv) material loss, destruction or damage
to any property of the Contributed Subsidiaries, whether or not insured, (v)
except as a result of the new bank credit facility referred to in Section 8.7,
acceleration or prepayment of any indebtedness for borrowed money or capital
leases or the refunding of any such indebtedness, (vi) labor trouble involving
the Contributed Subsidiaries or any material change in their personnel or the
general terms and conditions of employment of key employees, (vii) waiver of
any valuable right in favor of the Contributed Subsidiaries, (viii) loan or
extension of credit to any officer or employee of ZGNA or any Contributed
Subsidiary other than advances for travel-related expenses and similar
advances to officers and employees of ZGNA or Contributed Subsidiaries in the
ordinary course of business, (ix) acquisition, material writedown or write-off
for accounting purposes, or disposition of any material assets (or any
contract or arrangement therefor), (x) redemption or repurchase of any capital
stock of any Contributed Subsidiary, or any other material transaction by the
Contributed Subsidiaries otherwise than for fair value in the ordinary course
of business, or (xi) termination of an agreement or arrangement which would be
a Subsidiary Key Agreement or Instrument if in effect on the date hereof.
5.12. Material Contracts.
Section 5.12 of ZGNA Disclosure Schedule sets forth a true
and complete list of each Subsidiary Key Agreement and Instrument (oral or
written) to which a Contributed Subsidiary is a party or its assets bound
other than Subsidiary Key Agreements and Instruments under which each
Contributed Subsidiary has no further liabilities (whether accrued, absolute,
contingent, liquidated or otherwise, whether due or to become due, whether or
not known to ZGNA or a Contributed Subsidiary) or obligations as of the date
hereof. Each Subsidiary Key Agreement and Instrument that is currently in
effect, is valid, binding and enforceable against such Contributed Subsidiary
and, to ZGNA's and Contributed Subsidiaries' best knowledge, the other parties
thereto, in accordance with its terms, and in full force and effect on the
date hereof. A true and complete copy of each Subsidiary Key Agreement has
been delivered or made available to
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the Company. There is no breach, violation or default by any Contributed
Subsidiary and no event (including, without limitation, the consummation of
the transactions contemplated herein) which, with notice or lapse of time or
both, would (i) constitute a breach, violation or default by any Contributed
Subsidiary under any Subsidiary Key Agreement or Instrument, or (ii) give rise
to any lien or right of termination, modification, cancellation, prepayment,
suspension, limitation, revocation or acceleration against any Contributed
Subsidiary under any Subsidiary Key Agreement or Instrument except for
breaches, violations or defaults that would not have a Subsidiary Material
Adverse Effect. To the best of ZGNA's and the Contributed Subsidiaries'
knowledge, no other party to any Subsidiary Key Agreement or Instrument is in
material breach of any such Subsidiary Key Agreement or Instrument, no waiver
or indulgence has been granted by any of the parties thereto and no party to
any such Subsidiary Key Agreement and Instrument has repudiated any provision
thereof. No Contributed Subsidiary is a party to, nor are any of their assets
subject to, any guaranty, "make well" agreement or other arrangement to be
responsible for the obligations of another, including any obligation to
maintain the financial condition of another person.
5.13. Absence of Undisclosed Liabilities.
None of the Contributed Subsidiaries has any debt,
obligation or liability (whether accrued, absolute, contingent, liquidated or
otherwise, whether due or to become due, whether or not known to ZGNA or a
Contributed Subsidiary) arising out of any transaction entered into at or
prior to Closing, or any act or omission at or prior to Closing, or any state
of facts existing at or prior to Closing, including Taxes with respect to or
based upon transactions or events occurring at or prior to Closing, and
including, without limitation, unfunded past service liabilities under any
pension, profit sharing or similar plan, except as disclosed in the CS Balance
Sheets, current liabilities incurred since the date of the CS Balance Sheet,
current obligations (other than as a result of breach or default) under
agreements set forth on Section 5.12 of ZGNA Disclosure Schedule, and
obligations under agreements which are not required to be set forth on such
schedule entered into in the usual and ordinary course of business, none of
which (individually or in the aggregate) could have a Subsidiary Material
Adverse Effect.
5.14. Employees.
(a) The Contributed Subsidiaries are in full compliance with
all laws regarding employment, wages, hours, equal opportunity, collective
bargaining and payment of social security and other taxes except to the extent
that noncompliance would not have a Subsidiary Material Adverse Effect. Since
-35-
January 1, 1998, no complaint of any unfair labor practice or discriminatory
employment practice against the Contributed Subsidiaries has been filed or, to
the best of ZGNA's and the Contributed Subsidiaries' knowledge, threatened to
be filed with or by the National Labor Relations Board, the Equal Employment
Opportunity Commission or any other administrative agency, local, foreign,
federal or state, that regulates labor or employment practices, nor is any
grievance filed or, to the best of ZGNA's and the Contributed Subsidiaries'
knowledge, threatened to be filed, against any Contributed Subsidiary by any
employee pursuant to any collective bargaining or other employment agreement
to which any Contributed Subsidiary is a party or is bound, except as would
not reasonably be expected to have a Subsidiary Material Adverse Effect. The
Contributed Subsidiaries are in compliance with all applicable foreign,
federal, state and local laws and regulations regarding occupational safety
and health standards except to the extent that noncompliance will not have a
Subsidiary Material Adverse Effect, and, since January 1, 1997, have received
no complaints from any foreign, federal, state or local agency or regulatory
body alleging violations of any such laws and regulations. No Contributed
Subsidiary is bound or subject to any arrangement with any labor union, and,
to ZGNA's and Contributed Subsidiaries' best knowledge no union organizing
activities are ongoing or threatened.
(b) All sums due for employee compensation and benefits and
all vacation time owing to any employees of the Contributed Subsidiaries have
been duly and adequately accrued on the accounting records of the Contributed
Subsidiaries.
(c) ZGNA and the Contributed Subsidiaries are not aware that
any of the Contributed Subsidiaries' executive officers or persons whose
principal occupation is the creation of intellectual property 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
executive officer's or person's best efforts to promote the interests of the
Contributed Subsidiaries or that would conflict with the Contributed
Subsidiaries' business as proposed to be conducted.
(d) ZGNA and the Contributed Subsidiaries are not aware that
any officer, key employee, key purchasing personnel anticipated to provide
sourcing of biomass under the Sourcing Agency Agreement or key sales personnel
anticipated to engage in sales under the Agreement Regarding Employees or that
any group of such employees, intends to terminate their employment with any
Contributed Subsidiary, nor does any Contributed Subsidiary have a present
intention to terminate the employment of any of the foregoing.
(e) Set forth on Section 5.14 of ZGNA Disclosure Schedule is
(i) a list of employees of a Contributed Subsidiary
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with an annual base compensation over $50,000, (ii) a list of all officers of
a Contributed Subsidiary and (iii) a list of all employment agreements to
which a Contributed Subsidiary is a party (copies of which have been delivered
to the Company).
5.15. Tax Matters.
There are no Taxes due and payable by the Contributed
Subsidiaries which have not been paid except those being disputed in good
faith by appropriate proceeding with appropriate reserves being made therefore
on the accounting books of the Contributed Subsidiaries. The provisions for
Taxes on the audited and unaudited balance sheets delivered by ZGNA and the
Contributed Subsidiaries to the Company will be sufficient for the payment in
all material respects of all accrued and unpaid Taxes of the Contributed
Subsidiaries, whether or not assessed or disputed in good faith as of the
respective dates of such balance sheets. The Contributed Subsidiaries have
duly filed or received extensions to filing all foreign, federal, state and
local Tax returns required to have been filed by them, and there are in effect
no waivers of applicable statutes of limitations with respect to taxes for any
year except where the failure to file such returns or the existence of waivers
of applicable statutes of limitations is not reasonably likely to have a
Subsidiary Material Adverse Effect. All such returns (including those
delivered by ZGNA to the Company) are true, complete and correct in all
material respects and have been prepared from, and are in accordance with, the
books and records of each. No Contributed Subsidiary is a party to a Tax
sharing agreement or liable for the Taxes of any other person. No Contributed
Subsidiary has filed a consent to the application of Section 341(f) of the
Code. The Contributed Subsidiaries have made all estimated income tax deposits
and all other required Tax payments or deposits and have complied for all
prior periods with the Tax withholding provisions of all applicable foreign,
federal, state and local laws applicable to them. None of the Contributed
Subsidiaries has been subject to a foreign, federal or state tax audit since
April 30, 1996.
5.16. Employee Benefit Plans.
Except as set forth on Section 5.16 of ZGNA Disclosure
Schedule, the Contributed Subsidiaries have no employee benefit plans (as
defined in Section 3(3) of ERISA) covering former and current employees of the
Contributed Subsidiaries, or under which a Contributed Subsidiary has any
obligation or liability. Section 5.16 of ZGNA Disclosure Schedule lists all
material plans, contracts, bonuses, commissions, profit-sharing, savings,
stock options, insurance, deferred compensation, or other similar fringe or
employee benefits covering former or current employees of the Contributed
Subsidiaries or under which the
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Contributed Subsidiaries have any obligation or liability. True and complete
copies of all Benefit Arrangements have been provided or made available to the
Company prior to the date hereof. The Benefit Arrangements are and have been
administered in substantial compliance with their terms and with the
requirements of applicable law. No "prohibited transaction" within the meaning
of Section 4475 of the Code or Section 406 of ERISA, has occurred with respect
to any Benefit Arrangements. All payments to current or former employees of
the Contributed Subsidiaries pursuant to the Benefit Arrangements are and have
been fully deductible under the Code.
5.17. Patents, Licenses, etc.
The Contributed Subsidiaries own, free and clear of all
encumbrances, restrictions, liens, security interests and charges, and has
good and marketable title to, or holds adequate licenses or otherwise
possesses all such rights as are necessary to use all Intellectual Property.
To the knowledge of ZGNA and ZBI, one or more of the Contributed Subsidiaries
has the right to use the names "Zuellig Botanicals" (but not "Zuellig
Botanicals Powders"), and "ZetaPharm" as a trade name or xxxx for the purposes
for which they have been used in the United States. Set forth on Section 5.17
of ZGNA Disclosure Schedule is a list of the significant marks and names used
by each Contributed Subsidiary.
None of the Contributed Subsidiaries has received notice nor
has knowledge of any conflict or alleged conflict with the rights of others
pertaining to the Intellectual Property described in this Section 5.17 where
the effect of such conflict could have a Subsidiary Material Adverse Effect.
To ZGNA's and the Contributed Subsidiaries' best knowledge, the Contributed
Subsidiaries' business, as presently conducted, and as proposed to be
conducted, does not infringe upon or violate any patent rights, copyrights,
marks, names, trade names or trade secrets of others. To ZGNA's and the
Contributed Subsidiaries' best knowledge, the Contributed Subsidiaries have
the right to use all trade secrets, processes, customer lists and other rights
incident to their respective businesses as now conducted.
To ZGNA's and the Contributed Subsidiaries' best knowledge,
no employee of the Contributed Subsidiaries has violated any employment
agreement, non-compete agreement, or proprietary information agreement which
he or she had with a previous employer or other person, or any intellectual
property policy of such employer, or is a party to or threatened by any
litigation concerning any patents, marks, trade secrets, service names, trade
names, copyrights, licenses and the like.
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5.18. Title to Tangible Assets.
The Contributed Subsidiaries have good title to their
properties and assets and good title to all their leasehold estates, in each
case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other
than or resulting from Taxes which have not yet become delinquent and minor
liens and encumbrances which do not in any case materially detract from the
value of the property subject thereto or materially impair the operations of
the Contributed Subsidiaries and which have not arisen otherwise than in the
ordinary course of business.
5.19. Insurance.
The Contributed Subsidiaries and their respective properties
are insured in such amounts, against such losses and with such insurers as are
prudent when considered in light of the nature of the properties and
businesses of the Contributed Subsidiaries and customary in light of such
Contributed Subsidiaries' exposure. No notice of any termination or threatened
termination, or denial of a material claim made since January 1, 1997, of, or
under any of such policies has been received and such policies are in full
force and effect. A summary of all such policies, including whether they are
on a "claims made" basis, is attached as Section 5.19 of ZGNA Disclosure
Schedule. None of such policies will be terminated or reduced in coverage as a
result of the transactions described herein. All such policies are in full
force and effect and all premiums with respect thereto have been paid. No
Contributed Subsidiary has failed to give any notice or present any claim
under any such insurance policy in due and timely fashion or as required by
any of such insurance policies or has not otherwise, through any act, omission
or non-disclosure, jeopardized or impaired full recovery of any claim under
such policies, and there are no claims by any Contributed Subsidiary under any
of such policies to which any insurance company is denying liability or
defending under a reservation of rights or similar clause.
5.20. Transactions with Related Parties.
None of the Contributed Subsidiaries is a party to any
agreement with any of their respective directors, officers or, to their best
knowledge stockholders holding more than 1/2% of its stock, or, to their best
knowledge, any Affiliate or family member of any of the foregoing, including
but not limited to, under which it: (i) leases any real or personal property
(either to or from such Person), (ii) licenses technology (either to or from
such Person), (iii) is obligated to purchase any tangible or intangible asset
from or sell such asset to such Person, (iv) purchases products or services
from such Person or (v) has borrowed money from or lent money to such Person.
None of the
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Contributed Subsidiaries employs as an employee or engages as a consultant any
family member of any of their respective directors or officers. There exist no
agreements among stockholders of the Contributed Subsidiaries to act in
concert with respect to their voting or holding of Contributed Subsidiary
securities.
5.21. Registration Rights.
The Contributed Subsidiaries are not under any obligation to
register any of their securities under the Securities Act.
5.22. Private Offering.
None of ZGNA, ZBI, the Contributed Subsidiaries or anyone
acting on their behalf has sold or has offered any of the Subsidiary Shares
for sale to, or solicited offers to buy from, or otherwise approached or
negotiated with respect thereto with, any prospective purchaser of the
Subsidiary Shares, other than the Company. None of ZGNA, ZBI, the
Contributed Subsidiaries or anyone acting on their behalf shall offer the
Subsidiary Shares for issue or sale to, or solicit any offer to acquire any
of the same from, anyone so as to bring the issuance and sale of the
Subsidiary Shares, or any part thereof, within the provisions of Section 5
of the Securities Act. Based in part upon the representations of the Company
set forth in Section 4, the offer and sale of the Subsidiary Shares are and
will be exempt from the registration and prospectus delivery requirements of
the Securities Act, and have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.
5.23. Investment.
(a) Each of ZGNA and ZBI is acquiring the Shares for its own
account for investment and not with a view towards the resale, transfer,
pledge or distribution thereof, nor with any present intention of distributing
the Shares, other than a pledge in favor of ZGNA's lender pursuant to the
credit agreement referred to in Section 8.7 and the delivery of a portion of
the Shares to the Escrow Agent under the Escrow Agreement.
(b) Each of ZGNA and ZBI has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of its investment in the Company as contemplated by this Agreement,
and is able to bear the economic risk of such investment for an indefinite
period of time. ZGNA and ZBI have been furnished access to such information
and documents as they have requested and have been afforded an opportunity to
ask questions of and receive answers from representatives of the Company
concerning the terms and
-40-
conditions of this Agreement and the purchase of the Shares contemplated
hereby.
(c) Each of ZGNA and ZBI is an "accredited investor" as
defined under Regulation D of the Securities Act.
(d) ZGNA and ZBI are located in California and the offer and
sale of the Shares occurred in the States of Colorado and California.
5.24. Brokerage.
Except for ZGNA's agreement with The Beacon Group Capital
Services, LLC whose fees and expenses shall be paid by ZGNA, there are no
claims for brokerage commissions or finder's fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement made by or on behalf of ZGNA, ZBI or the Contributed Subsidiaries,
and ZGNA agrees to indemnify and hold the Company harmless against any costs
or damages incurred as a result of any such claim.
5.25. Material Facts.
This Agreement, ZGNA Disclosure Schedules, and the other
agreements, documents, certificates or written statements furnished or to be
furnished to the Company through the Closing Date by or on behalf of ZGNA, ZBI
and the Contributed Subsidiaries in connection with the transactions
contemplated hereby taken as a whole, and the information provided by ZGNA and
ZBI for inclusion in the Company's Proxy Statement, do not contain any untrue
statement by ZGNA, ZBI or the Contributed Subsidiaries of a material fact or
omit to state a material fact necessary to make the statements contained
therein or herein, in light of the circumstances in which they were made, not
misleading. There is no fact which is known to ZGNA, ZBI or the Contributed
Subsidiaries and which has not been disclosed herein or otherwise by ZGNA, ZBI
or the Contributed Subsidiaries to the Company which is reasonably likely to
have a Subsidiary Material Adverse Effect.
5.26. Debt.
As of the Closing Date, the "Debt" (as defined below) of the
Contributed Subsidiaries will not exceed $22,000,000 in the aggregate. For
purposes of this Section, "Debt" means debt for borrowed money (long term, for
working capital purposes or otherwise), obligations under letters of credit
and capital lease obligations.
-41-
5.27. Financial Records.
The financial records of the Contributed Subsidiaries for
the period from April 1, 1995, up to and through the Closing Date are readily
auditable (including to allocate inter-company accounts and to reflect the
recent formation of Zuellig Botanicals Extracts) to permit compliance with SEC
reporting requirements of the Company. Such financial records are located at
Zuellig Group, N.A., Inc., 0000 Xx Xxxxxxxx Xxxxxx, Xxxx Xxxxx, XX 00000;
Xxxxxx, 000 Xxxxxx Xxxxxx Xxxx, Xxxxx, X.X. 00000; and ZetaPharm, 00 Xxxx 00xx
Xxxxxx, Xxx Xxxx, XX 00000 and Datalok Co., 00000 Xxx Xxx Xxxxxx, Xxxxxx, XX
00000.
5.28. Subsidiary Real Property
(a) Section 5.28 of ZGNA Disclosure Schedule lists all real
property owned or leased by each Contributed Subsidiary. Each Contributed
Subsidiary has title to its owned real properties and any improvements thereon
(collectively, the "Subsidiary Owned Real Properties") in each case, free and
clear of all imperfections of title and all encumbrances, except for (i) those
consisting of zoning or planning restrictions, easements, permits and other
restrictions or limitations on the use of such property or irregularities in
title thereto which, individually and in the aggregate, do not materially
impair the use of such property, (ii) warehousemen's, mechanics', carriers',
landlords', repairmen's or other similar encumbrances arising in the ordinary
course of business and securing obligations not yet due and payable, (iii)
other encumbrances which arise in the ordinary course of business and which
individually and in the aggregate do not materially impair its use of such
property or its ability to obtain financing by using such assets as
collateral, (iv) any state of facts, including, without limitation, easements,
encroachments or encumbrances, either shown by any survey or other inspection
or granted by ZGNA prior to the date hereof, of such Subsidiary Owned Real
Property which do not materially adversely interfere with the occupancy or
use, as presently used or occupied, of such Subsidiary Owned Real Property,
(v) liens for taxes and/or assessments not yet delinquent or which are being
contested in good faith through appropriate proceedings, (vi) all rights or
easements, if any, of any municipality or other public or private utility
company, to maintain telephone wires, pipes, conduits or other facilities
which enter or cross such Subsidiary Owned Real Property and (vii) any state
of facts, including without limitation, rights, easements, liens,
encroachments or encumbrances that any title report, title commitment or title
insurance policy would disclose (encumbrances referenced in clauses (i)through
(vii) collectively referred to as the "Subsidiary Permitted Encumbrances").
(b) ZGNA has delivered to the Company a true and complete
list of all of the leases and subleases to which the Contributed Subsidiaries
are a party as described on Section 5.28
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of ZGNA Disclosure Schedule (collectively, the "Subsidiary Leased Real
Properties," together with Subsidiary Owned Real Properties, the "Subsidiary
Real Properties"). The leases and subleases described on Section 5.28 of ZGNA
Disclosure Schedule (i) have not been further modified or amended and (ii) are
in full force and effect. To the knowledge of ZGNA and the Contributed
Subsidiaries, there is no default which remains uncured and would materially
adversely interfere with the occupancy or use, as presently used or occupied,
of any Subsidiary Leased Real Property. No Contributed Subsidiary is obligated
to purchase any Subsidiary Leased Real Property and no Subsidiary Leased Real
Property is required to be accounted for under GAAP as a capitalized lease.
5.29. Company Security Holdings
Neither ZGNA nor any Contributed Subsidiary holds or has
held at any time during the 270 days preceding the Closing Date any debt or
equity security of the Company (or derivative securities thereof), except for
debt or equity securities (or derivative securities thereof) purchased
pursuant to the Stock Option Agreement.
5.30. Bank Accounts; Powers of Attorney.
Section 5.30 of ZGNA Disclosure Schedule lists all bank,
money market, brokerage, savings and similar accounts and safe deposit boxes
of all Contributed Subsidiaries and all powers of attorney of any Contributed
Subsidiaries.
5.31. Corporate Minute Books.
The corporate records of the Contributed Subsidiaries are
correct and complete. True and correct copies of all minutes of meetings or
other actions by the directors, stockholders or incorporators of the
Contributed Subsidiaries for the past five years have been provided and since
their inception have previously been provided or made available to the
Company.
5.32. Sufficient Assets.
The assets and properties owned by, or leased to, the
Contributed Subsidiaries, and the Subsidiary Key Agreements and Instruments,
are sufficient for the conduct of the business and operation of the
Contributed Subsidiaries as presented conducted and as presently proposed to
be conducted.
5.33. Good Condition.
The buildings, facilities, machinery, equipment, furniture,
leasehold and other improvements, fixtures, vehicles, structures, any related
capitalized items and other tangible
-43-
property owned by or leased to the Contributed Subsidiaries (i) are to ZGNA's
and the Contributed Subsidiaries' best knowledge, in all material respects in
good operating condition and repair (normal wear and tear excepted) and, in
the case of buildings or structures located on the Subsidiary Real Properties,
free of any structural or engineering defects, and (ii) to ZGNA's and the
Contributed Subsidiaries' best knowledge, are suitable in all material
respects for their current use. ZGNA and the Contributed Subsidiaries have not
received notice of, and have no knowledge of, any pending, threatened or
contemplated condemnation proceeding or similar taking affecting the assets of
the Contributed Subsidiaries (including the Subsidiary Real Properties).
5.34. Bank Commitment.
As of the date of this Agreement, ZGNA has a bank commitment
letter from a lender, a copy of which has been delivered to the Company, to
provide the new credit facility to the Company contemplated hereby, and to
ZGNA's knowledge, such commitment has not been modified or terminated.
SECTION 6. ADDITIONAL COVENANTS OF THE PARTIES
6.1. Resale of Securities.
(a) ZGNA and ZBI will not sell or otherwise transfer the
Shares except pursuant to an effective registration under the Securities Act
and any state securities or blue sky laws or in a transaction which, in the
opinion of counsel reasonably satisfactory to the Company, qualifies as an
exempt transaction under such laws.
(b) The Shares will bear substantially the following legend
reflecting the foregoing restrictions on the transfer of such securities:
"The securities evidenced hereby have not been registered
under the Securities Act of 1933, as amended (the "Act"), or
any state securities law, and may not be sold, transferred
or otherwise disposed of except pursuant to an effective
registration under the Act or in a transaction which, in the
opinion of counsel reasonably acceptable to the Company, is
exempt from such registration."
"The securities evidenced hereby are subject to the terms of
that certain Governance Agreement, dated as of
_____________, 1999, by and among the Company, ZGNA and ZBI,
as amended from time to time. A copy of such
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Governance Agreement has been filed with the Secretary of the
Company and is available upon request."
6.2. Proxy Statement.
(a) The Company shall promptly prepare and file with the
Commission preliminary and final versions of the Proxy Statement relating to
this Agreement and the transactions contemplated hereby, and to increase size
of or adopt a new stock option plan for up to 1,000,000 shares of Common Stock
(the "Proxy Statement"). The Company shall use its best efforts to have the
Proxy Statement cleared by the Commission and mailed to its stockholders at
the earliest practicable date. The Company shall cooperate and consult with
ZGNA with respect to the Proxy Statement and any related Commission comments.
(b) The Company will furnish ZGNA with such information
concerning the Company and its Subsidiaries as is necessary in order to cause
the Proxy Statement, insofar as it relates to the Company and its
Subsidiaries, to comply with applicable law. None of the information relating
to the Company and its Subsidiaries supplied by the Company for inclusion in
the Proxy Statement will be false or misleading with respect to any material
fact or will omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Company agrees
promptly to advise ZGNA if, at any time prior to the meeting of the
stockholders of the Company referenced herein, any information provided by it
in the Proxy Statement is or becomes incorrect or incomplete in any material
respect and to provide ZGNA with the information needed to correct such
inaccuracy or omission. The Company will furnish ZGNA and the Company's
shareholders with such supplemental information as may be necessary in order
to cause the Proxy Statement, insofar as it relates to the Company and its
Subsidiaries, to comply with applicable law after the mailing thereof to the
stockholders of the Company.
(c) ZGNA will furnish the Company with such information
concerning ZGNA, ZBI and the Contributed Subsidiaries as is necessary in order
to cause the Proxy Statement, insofar as it relates to ZGNA, ZBI and the
Contributed Subsidiaries, to comply with applicable law. None of the
information relating to ZGNA, ZBI and the Contributed Subsidiaries supplied by
ZGNA for inclusion in the Proxy Statement will be false or misleading with
respect to any material fact or will omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. ZGNA
agrees promptly to advise the Company if, at any time prior to the meeting of
stockholders of the Company referenced herein, any information provided by it
in the Proxy Statement is or becomes incorrect or incomplete in
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any material respect and to provide the Company with the information needed to
correct such inaccuracy or omission. ZGNA will furnish the Company with such
supplemental information as may be necessary in order to cause the Proxy
Statement, insofar as it relates to ZGNA, ZBI and the Contributed
Subsidiaries, to comply with applicable law after the mailing thereof to the
stockholders of the Company.
6.3. Access to Information.
The Company shall (and shall cause each of its Subsidiaries
to), and ZGNA shall and ZGNA shall cause each of ZBI and the Contributed
Subsidiaries to afford to the officers, employees, accountants, counsel and
other representatives of ZGNA or the Company, as the case may be, access,
during normal business hours during the period prior to the Closing Date, to
all its properties, books, contracts, commitments and records and, during such
period, the Company shall (and shall cause each of its Subsidiaries to) and
ZGNA shall cause the Contributed Subsidiaries to furnish promptly to ZGNA and
the Company, as the case may be, (a) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of Federal securities laws and (b) all
other information concerning its business, properties and personnel as ZGNA or
the Company, as the case may be, may reasonably request.
6.4. Stockholders Meeting.
The Company shall call a meeting of its stockholders to be
held as promptly as practicable for the purpose of voting upon this Agreement
and the election of directors as contemplated by Section 7.11 hereof. The
Company will, through its Board of Directors, recommend to its stockholders
approval of this Agreement and the transactions contemplated hereby and shall
use its best efforts to hold such meeting as soon as reasonably practicable
after the date hereof; provided, however, that the Board of Directors shall
not be so obligated if it receives a written opinion from outside counsel to
the effect that it would be inconsistent with its fiduciary duties to
recommend to its stockholders approval of this Agreement and the transactions
contemplated hereby.
6.5. Execution and Delivery of Agreements.
ZGNA or its Subsidiary a party thereto shall execute and
deliver to the Company, and the Company shall execute and deliver to ZGNA, (i)
the Governance Agreement, (ii) the Sourcing Agency Agreement, (iii) the Escrow
Agreement, (iv) the Powders Option Agreement, (v) the Agreement Regarding
Employees and (vi)
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their respective tax affidavits in the form attached hereto as Exhibit K, at
or prior to the Closing.
6.6. Ordinary Course.
(a) Except as expressly contemplated by this Agreement or as
set forth on Schedule 6.6(a) and except for the possible sale of the Company's
paclitaxel business and assets, during the period from the date of this
Agreement to the Closing Date, (i) the Company shall conduct, and it shall
cause its Subsidiaries to conduct, its or their businesses in the ordinary
course and consistent with past practice, and the Company shall, and it shall
cause its Subsidiaries to, use its or their reasonable commercial efforts to
preserve intact its business organization, to keep available the services of
its officers and employees and to maintain satisfactory relationships with all
persons with whom it does business and (ii) without limiting the generality of
the foregoing, neither the Company nor any of its Subsidiaries will:
(A) amend or propose to amend its Organizational
Documents in any material respect;
(B) authorize for issuance, issue, grant, sell,
pledge, dispose of or propose to issue, grant, sell, pledge or
dispose of any shares of, or any options, warrants, commitments,
subscriptions or rights of any kind to acquire or sell any shares of,
the capital stock or other securities of the Company or any of its
Subsidiaries including, but not limited to, any securities
convertible into or exchangeable for shares of stock of any class of
the Company or any of its Subsidiaries, except for (a) the issuance
of shares pursuant to the exercise of either incentive or
non-qualified stock options, including management stock options
outstanding the date of this Agreement in accordance with their
present terms and (b) grants of options pursuant to the 1999
Incentive Plan or the Company's stock option plan for directors in
effect as of the date hereof for attendance at meetings of the Board,
on terms and in amounts consistent with past practice;
(C) split, combine or reclassify any shares of its
capital stock or declare, pay or set aside any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock, other than dividends or
distributions to the Company or a Subsidiary of the Company, or
directly or indirectly redeem, purchase or otherwise acquire or offer
to acquire any shares of its capital stock or other securities;
(D) other than in the ordinary course of business
consistent with past practice, (a) create, incur or assume any debt,
except refinancings of existing obligations on
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terms that are no less favorable to the Company or its Subsidiaries
than the existing terms; (b) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, indirectly,
contingently or otherwise) for the obligations of any Person; (c) make
any capital expenditures or make any loans, advances or capital
contributions to, or investments in, any other Person (other than to a
Company Subsidiary and customary travel, relocation or business
advances to employees); (d) acquire the stock or assets of, or merge or
consolidate with, any other Person; (e) voluntarily incur any material
liability or obligation (absolute, accrued, contingent or otherwise);
or (f) sell, transfer, mortgage, pledge or otherwise dispose of, or
encumber, or agree to sell, transfer, mortgage, pledge or otherwise
dispose of or encumber, any assets or properties, real, personal or
mixed, material to the Company and its Subsidiaries taken as a whole
other than to secure debt permitted under (a) of this clause (D); and
(E) maintain in full force and effect the insurance
described in Section 4.19 or comparable insurance.
(b) Except as expressly contemplated by this Agreement,
during the period from the date of this Agreement to the Closing Date, (i)
ZGNA shall cause the Contributed Subsidiaries to conduct their businesses in
the ordinary course and consistent with past practice, and ZGNA shall cause
the Contributed Subsidiaries to use their reasonable commercial efforts to
preserve intact their business organization, to keep available the services of
their officers and employees and to maintain satisfactory relationships with
all persons with whom they do business, (ii) ZGNA will use its reasonable
commercial efforts to maintain in place the sales force of ZBI whom will be
subject to the Agreement Regarding Employees and (iii) without limiting the
generality of the foregoing, none of the Contributed Subsidiaries will:
(A) amend or propose to amend its Organizational
Documents in any material respect;
(B) authorize for issuance, issue, grant, sell,
pledge, dispose of or propose to issue, grant, sell, pledge or dispose
of any shares of, or any options, warrants, commitments, subscriptions
or rights of any kind to acquire or sell any shares of, the capital
stock or other securities of the Contributed Subsidiaries including,
but not limited to, any securities convertible into or exchangeable
for shares of stock of any class of the Contributed Subsidiaries;
(C) split, combine or reclassify any shares of its
capital stock or declare, pay or set aside any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock,
-48-
other than dividends or distributions to the other Contributed
Subsidiaries, or directly or indirectly redeem, purchase or otherwise
acquire or offer to acquire any shares of its capital stock or other
securities;
(D) other than in the ordinary course of business
consistent with past practice, (a) create, incur or assume any debt,
except refinancings of existing obligations on terms that are no less
favorable to the Contributed Subsidiaries than the existing terms;
(b) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, indirectly, contingently or otherwise)
for the obligations of any Person; (c) make any capital expenditures
or make any loans, advances or capital contributions to, or
investments in, any other Person (other than customary travel,
relocation or business advances to employees); (d) acquire the stock
or assets of, or merge or consolidate with, any other Person; (e)
voluntarily incur any material liability or obligation (absolute,
accrued, contingent or otherwise); or (f) sell, transfer, mortgage,
pledge or otherwise dispose of, or encumber, or agree to sell,
transfer, mortgage, pledge or otherwise dispose of or encumber, any
assets or properties, real, personal or mixed, material to the
Contributed Subsidiaries taken as a whole other than to secure debt
permitted under (a) of this clause (D); and
(E) maintain in full force and effect the insurance
described in Section 5.19 or comparable insurance.
(c) Absent the prior written consent of ZGNA, during the two
year period following consummation of the Mergers, the Company agrees (i) that
it will not (x) liquidate Zuellig Botanical Extracts or (y) other than in the
ordinary course of business, transfer more than an insubstantial portion of
the assets of Zuellig Botanical Extracts to the Company or an Affiliate of the
Company; (ii) the Company shall take no action, and shall cause the
Contributed Subsidiaries to take no action, if such action would jeopardize
the characterization of the Mergers as reorganizations within the meaning of
Section 368(a) of the Code.
6.7. Further Assurances.
Upon the request of a party hereto at any time after the
Closing Date, the other party will forthwith execute and deliver such further
instruments of assignment, transfer, conveyance, endorsement, direction or
authorization and other documents as the requesting party or its counsel may
request in order to perfect title of ZGNA and the Company and their successors
and assigns to the Shares and the Subsidiary Shares, respectively, or
otherwise to effectuate the purposes of this Agreement.
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6.8. Confidentiality.
Except as may be required by law, (i) prior to the Closing,
the Company and ZGNA shall not, directly or indirectly, disclose to any person
or entity or use any information not in the public domain or generally known
in the industry, in any form, whether acquired prior to or after the Closing
Date, received from the Company or ZGNA, as the case may be, relating to the
business and operations of the Company and its Subsidiaries or ZGNA and its
Subsidiaries, as the case may be, and (ii) after the Closing, ZGNA and ZBI
shall not so disclose or use such information relating to the business of the
Company or the Contributed Subsidiaries except as permitted by other
agreements between ZGNA or its affiliates and the Company.
6.9. Standstill.
(a) From the date hereof through the Closing Date (or, if
this Agreement is terminated in accordance with its terms, for a period of 18
months from the date hereof), neither ZGNA or ZBI will, without the prior
consent of the Board:
(i) acquire any of the Voting Stock or direct or
indirect rights to acquire or sell Voting Stock of the Company other than the
Option or the shares of Common Stock issuable upon exercise of the Option;
(ii) make, or in any way participate, directly or
indirectly, in any "solicitation" of "proxies" to vote (as such terms are used
in the rules under the Exchange Act), enter into any agreement to vote, or
seek to agree with, advise or influence any person or entity with respect to
the voting of any Voting Stock of the Company (except to the extent necessary
to have its three representatives on the Board);
(iii) make any public announcement with respect to
any transaction or proposed or contemplated transaction between the Company or
any of its security holders and ZGNA or any of its Affiliates, including,
without limitation, any tender or exchange offer, merger or other business
combination or acquisition of a material portion of the assets of the Company;
(iv) disclose any intention, plan or arrangement
regarding any of the matters referred to in clauses (i), (ii) or (iii); or
(v) sell or otherwise transfer shares of Common
Stock except pursuant to a transaction approved by the Board of Directors of
the Company.
(b) For a period of five years from the Closing Date,
neither ZGNA or ZBI will, without the prior consent of the Board:
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(i) acquire more than 49% of the Voting Stock or
direct or indirect rights to acquire more than 49% of the Voting Stock of the
Company;
(ii) make, or in any way participate, directly or
indirectly, in any "solicitation" of "proxies" to vote (as such terms are used
in the rules under the Exchange Act), enter into any agreement to vote, or
seek to agree with, advise or influence any person or entity with respect to
the voting of any Voting Stock of the Company (except to the extent necessary
to have its three representatives on the Board);
(iii) make any public announcement with respect to
any transaction or proposed or contemplated transaction between the Company or
any of its security holders and ZGNA or any of its Affiliates, including,
without limitation, any tender or exchange offer, merger or other business
combination or acquisition of a material portion of the assets of the Company;
(iv) disclose any intention, plan or arrangement
regarding any of the matters referred to in clauses (i), (ii) or (iii); or
(v) except in an underwritten transaction, sell or
otherwise transfer such number of shares of Common Stock to the public which
is greater than 1% of the outstanding shares of Common Stock in any two week
period or 20% of weekly volume of the Common Stock.
(c) For a period of 18 months from the Closing Date, neither
ZGNA or ZBI will, without the prior consent of the Board, sell or otherwise
dispose of its shares of Common Stock, other than a pledge in favor of ZGNA's
lender pursuant to the credit agreement referred to in Section 8.7 and other
than transfers by ZBI to ZGNA or an entity wholly owned by ZGNA.
6.10. Ownership of Shares.
(a) In order to meet its obligations under Section 9 hereof,
ZGNA and ZBI agree to continue to own its portion of the Shares or other
Liquid Assets of approximately equivalent value to its portion of the Shares
until the later of (i) the second anniversary of the Closing Date, or (ii) in
the event the Company asserts any claims pursuant to Section 9.4(b)(i), until
the final resolution of such claims. For purposes hereof, the term "Liquid
Assets" shall mean cash, money market funds, commercial paper of a U.S. based
entity, or securities that are publicly traded on the New York Stock Exchange,
the American Stock Exchange or the Nasdaq National Market.
(b) Notwithstanding the foregoing subsection (a), after the
first anniversary of the Closing Date, ZGNA's and ZBI's obligation to hold its
portion of the
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Shares or other Liquid Assets of approximately equivalent value to its portion
of the Shares shall be reduced to 60% of the initial value of its portion of
the Shares plus an amount equal to the value of the claims made, asserted or
pending under Section 9 as of such date.
(c) In the event the Company, ZBI or ZGNA shall be required
to make an indemnification payment pursuant to Section 9, they may elect to
make such payment with the shares of Common Stock in lieu of cash. The market
price of the shares of Common Stock shall be determined by the average closing
price of a share of Common Stock for the 15 consecutive trading days preceding
the date of such payment on the principal national securities exchange on
which the shares of Common Stock are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, the average
of the reported bid and asked prices during such 15 consecutive trading days
on the Nasdaq National Market or, if the shares are not listed on the Nasdaq
National Market, in the over-the-counter market or, if the shares of Common
Stock are not publicly traded, the market price for such day shall be the fair
market value thereof determined jointly by the Company and ZGNA; provided,
however, that if such parties are unable to reach agreement within a
reasonable period of time, the market price shall be determined in good faith
by an independent investment banking firm selected jointly by the Company and
ZGNA or, if that selection cannot be made within 15 days, by an independent
investment banking firm selected by the American Arbitration Association in
accordance with its rules. All costs and expenses incurred in connection with
the determination of market price shall be borne by the party seeking to make
payment in stock.
6.11. Noncompetition.
(a) ZGNA shall not, and shall cause its parent corporation
and its Affiliates, for a period of five (5) years following the Closing Date,
for any reason whatsoever, directly or indirectly, or on behalf of or in
conjunction with any other person:
(i) engage in any business selling any products or
services in direct competition with the Company, including, but not limited
to, the Contributed Subsidiaries, in North America as conducted as of the
Closing Date;
(ii) engage in the business of acquiring biomass
also used by the Company for the purpose of retail or wholesale sales in North
America (including after processing) for use as a human nutraceutical; or
(iii) solicit any person who is an employee of the
Company, including, but not limited to the Contributed Subsidiaries, in a
managerial, sales or purchasing capacity for the purpose or with the intent of
enticing such employee away from or out of employ of the Company or its
Subsidiaries.
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(b) Notwithstanding the above, the foregoing covenant shall
not prohibit ZGNA from acquiring as an investment not more than five percent
(5%) or continuing to own no more than the percentage ZGNA owns on the date of
this Agreement of the capital stock of a competing business, provided that
ZGNA shall not control such competing business.
(c) If any provision of this Section 6.11 relating to a time
period or geographic area shall be declared by a court of competent
jurisdiction unenforceable as unreasonable, the maximum time period or
geographic area, as applicable, that such court deems reasonable and
enforceable shall thereafter be deemed applicable and this Agreement shall
automatically be considered to have been amended and revised to reflect such
determination. This Section 6.11 may be enforced by specific performance.
6.12. Resignation of Directors.
Effective as of the Closing Date, all directors of each
Contributed Subsidiary shall cease to be directors. ZGNA will use its good
faith effort to obtain the resignation of all directors of each Contributed
Subsidiary.
6.13. Subscription Right.
(a) If at any time after the date hereof, the Company
proposes to issue equity securities of any kind (the term "equity securities"
shall include for these purposes any warrants, options or other rights to
acquire equity securities and debt securities convertible into equity
securities) of the Company (other than the issuance of securities (i) to the
public in a firm commitment underwriting pursuant to a registration statement
filed under the Securities Act, (ii) pursuant to the acquisition of another
entity by the Company by merger, purchase of substantially all of the assets
or stock or other form of acquisition, (iii) pursuant to an employee,
consultant or director stock option plan, stock bonus plan, stock purchase
plan or other management equity program, or (iv) as an "equity kicker" for a
debt or leasing financing with an institutional lender), then the Company
shall:
(i) give written notice setting forth in reasonable
detail (1) the designation and all of the terms and provisions of the
securities proposed to be issued (the "Proposed Securities"),
including, where applicable, the voting powers, preferences and
relative participating, optional or other special rights, and the
qualification, limitations or restrictions thereof and interest rate
and maturity; (2) the price and other terms of the proposed sale of
such securities; (3) the amount of such securities proposed to be
issued; and (4) such other information as ZGNA may reasonably request
in order to evaluate the proposed issuance; and
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(ii) offer to issue to ZGNA upon the terms
described in subparagraph (i) above a portion of the Proposed
Securities (the "Subscription Securities") equal to a percentage
determined by dividing (x) the number of shares of Common Stock
beneficially owned (within the meaning of Rule 13d-3 under the
Exchange Act) by ZGNA, by (y) the total number of shares of Common
Stock beneficially owned (within the meaning of Rule 13d-3 under the
Exchange Act) by all holders of Common Stock, in each case,
immediately preceding the issuance of the Proposed Securities.
(b) ZGNA must exercise its right to purchase all or any
portion of the Subscription Securities hereunder within ten (10) days after
receipt of such notice from the Company. To the extent that the Company offers
two or more securities in units, ZGNA must purchase such units as a whole and
will not be given the opportunity to purchase only one of the securities
making up such unit.
(c) Upon the expiration of the offering periods described
above, the Company will be free to sell such Subscription Securities that ZGNA
has not elected to purchase during the ninety (90) days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to ZGNA. Any Subscription Securities offered or sold by the
Company after such 90 day period must be reoffered to ZGNA pursuant to this
Section 6.13.
(d) The election by ZGNA not to exercise its subscription
rights under this Section 6.13 in any one instance shall not affect its right
(other than in respect of a reduction in its percentage holdings) as to any
subsequent proposed issuance.
(e) Notwithstanding the foregoing, the rights set forth in
this Section 6.13 shall terminate (i) if this Agreement is terminated in
accordance with its terms, seven months after the date hereof or (ii) upon the
Closing Date.
(f) The exercise by ZGNA of its rights under this Section
6.13 shall be subject to compliance with applicable laws, rules and
regulations, including HSR.
6.14. Letters of Accountants.
(a) The Company shall use its reasonable best efforts to
cause to be delivered to ZGNA "comfort" letters regarding the Company of
Xxxxxx Xxxxxxxx, LLP, the Company's independent public accountants, dated and
delivered the date of the proxy statement and addressed to ZGNA, in form and
substance reasonably satisfactory to ZGNA and reasonably customary in scope
and substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by
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this Agreement consistent with procedures set forth in Exhibit 6.14 hereto.
(b) ZGNA shall use its reasonable best efforts to cause to
be delivered to the Company "comfort" letters regarding the Contributed
Subsidiaries of Deloitte & Touche LLP, ZGNA's independent public accountants,
dated and delivered the date of the proxy statement and addressed to the
Company, in form and substance reasonably satisfactory to the Company and
reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with transactions such as those
contemplated by this Agreement consistent with procedures set forth in Exhibit
6.14 hereto.
6.15. Efforts to Satisfy Conditions; Notice of Inability
to Meet Conditions.
Between the date hereof and the Closing, each party shall
make a good faith effort to obtain all third party consents required for
Closing and otherwise act to cause all closing conditions to be satisfied. If
a party believes that a condition to its obligation to close will not be
satisfied by Closing, or becomes aware of an event that causes a Company
Material Adverse Effect or a Subsidiary Material Adverse Effect, it shall
promptly notify the other party including informing it of the nature of such
company's Material Adverse Effect and steps which are being done to attempt to
correct or respond to the failure of such condition or material adverse event.
6.16. HSR.
As soon as practical after the date hereof, each of the
Company, ZGNA and, if necessary, the controlling persons of ZGNA shall make
all filings required pursuant to the HSR in connection with this Agreement.
The parties will cooperate in the preparation of all filings and responses to
all reasonable requests for additional information.
6.17. Public Announcement.
Prior to the Closing and for three months thereafter, the
timing and content of all public announcements regarding any aspect of this
Agreement or the transactions contemplated hereby shall be mutually agreed
upon in advance by the Company and ZGNA, except to the extent that legal
counsel advises a party that such announcement or other disclosure is required
to be made pursuant to applicable law or the rules of the National Association
of Securities Dealers. A party shall promptly notify the other if it has
received such advise and intends to make a public announcement that has not
been mutually agreed upon.
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6.18. Cooperation in Defense.
If prior to or within two years after the Closing, any
claim, action, investigation or governmental action is brought which questions
the validity or legality of the transactions contemplated hereunder or seeks
damages in connection therewith, the parties agree to cooperate and use
reasonable efforts to defend against such claim, action, investigation or
governmental action, and seek the removal of any injunction preventing or
restraining any transactions contemplated hereby. This provision is not a
limitation on any other obligations of the parties in this Agreement or the
Transaction Documents.
6.19. Xxxxxx Xxxxxxxx.
Both before and after the Closing, ZGNA and its Affiliates
shall use their reasonable best efforts to cause Xxxxxx Xxxxxxxx, for the
first 12 months after the Closing, to devote a significant amount of his time,
and after 12 months after the Closing, to devote substantially all of his
time, to the business of the Company. For the purposes of this Section,
"reasonable best efforts" shall mean that ZGNA and its Affiliates shall not
require Xxxxxx Xxxxxxxx to devote his time to the business of ZGNA or its
Affiliates that would be inconsistent with this Section.
6.20. Repayment of Debt.
On the Closing Date, the Company shall use a portion of the
proceeds of the credit facility referred to in Section 7.9 to cause the
Contributed Subsidiaries to repay the Debt for borrowed money of the
Contributed Subsidiaries referred to in Section 5.26.
SECTION 7. ZGNA'S CLOSING CONDITIONS
The obligation of ZGNA to consummate the Mergers on the
Closing Date, as provided in Sections 2 and 3 hereof, shall be subject to the
performance in all material respects by the Company of its agreements
theretofore to be performed hereunder and to the satisfaction, prior thereto
or concurrently therewith, of the following further conditions:
7.1. Representations and Warranties.
The representations and warranties of the Company contained
in this Agreement shall be true and correct in all material respects on and as
of the Closing Date as though such warranties and representations were made at
and as of such date, except as otherwise specifically permitted herein.
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7.2. Compliance with Agreement.
The Company shall have performed and complied in all
material respects with all agreements, covenants and conditions contained in
this Agreement which are required to be performed or complied with by the
Company prior to or on the Closing Date.
7.3. Injunction.
There shall be no effective injunction, writ, preliminary
restraining order or any order of any nature issued by a court of competent
jurisdiction or governmental body or agency of competent jurisdiction
directing that the transactions provided for herein or any of them not be
consummated as herein provided.
7.4. Stockholder Approval.
This Agreement shall have been approved and adopted by the
affirmative vote of the holders of a majority of the outstanding shares of the
Common Stock.
7.5. Consents and Approvals.
All material consents, waivers, authorizations and approvals
of any governmental or regulatory authority, domestic or foreign shall have
been duly obtained and shall be in full force and effect on the Closing Date.
7.6. NASDAQ Listing.
The Shares shall have been approved for listing on the
NASDAQ market or any other exchange the shares of Common Stock then trade.
7.7. Adverse Development.
There shall have been no developments in the business of the
Company or any of its Subsidiaries which in the reasonable opinion of ZGNA
would have a Company Material Adverse Effect.
7.8. Transaction Documents.
The Company and each of the other parties thereto shall have
executed and delivered (i) the Escrow Agreement, (ii) the Powders Option
Agreement, (iii) the Governance Agreement, (iv) the Sourcing Agency Agreement,
(v) the Registration Rights Agreement and (vi) the Agreement Regarding
Employees.
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7.9. Credit Agreements.
The Company and ZGNA shall have entered into definitive
credit agreements with their respective lenders on terms reasonably
satisfactory to ZGNA and such credit agreements shall be in full force and
effect.
7.10. HSR Act.
All required waiting periods applicable to this Agreement
and the transactions contemplated hereby under the HSR shall have been expired
or terminated.
7.11. Election of Officer and Directors.
Xx. Xxxxxx Xxxxxxxx shall have been appointed as the
President and Co-Chief Executive Officer of the Company and shall have been
elected to the Board, effective upon the Closing. Xx. Xxxx Xxxxx shall have
been elected as the Chairman of the Board and Co-Chief Executive Officer. The
Board shall have been constituted as of the Closing Date as provided in
Section 2 of the Governance Agreement.
7.12. Officer's Certificate.
ZGNA shall have received a certificate, dated the Closing
Date, signed by the Chairman of the Board of the Company, certifying that the
conditions specified in Sections 7.1 and 7.2 of this Agreement have been
fulfilled.
7.13. Counsel's Opinion.
ZGNA shall have received from the Company's counsel,
Xxxxxxxx, Xxxxx & Xxxxxxx, P.C., an opinion, dated the Closing Date,
substantially as set forth in Exhibit A hereto.
7.14. Completion of Mergers. The Certificates of Merger
shall have been filed with the Secretary of State of the respective
jurisdiction of incorporation and the Mergers shall have become effective in
accordance with the laws of the respective jurisdiction of incorporation.
7.15. Approval of Proceedings.
All proceedings to be taken in connection with the
transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to ZGNA and
its counsel, Xxxxxxx Xxxx & Xxxxxxxxx; and ZGNA shall have received copies of
all documents or other evidence which it and Xxxxxxx Xxxx & Xxxxxxxxx may
request in connection with such transactions and of all records of corporate
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proceedings in connection therewith in form and substance satisfactory to ZGNA
and Xxxxxxx Xxxx & Xxxxxxxxx.
7.16. Accountant's Letter.
ZGNA shall have received the accountant's letter referred to
in Section 6.14(a).
SECTION 8. COMPANY CLOSING CONDITIONS
The obligation of the Company to issue and deliver the
Shares and to consummate the Mergers on the Closing Date, as provided in
Sections 2 and 3 hereof, shall be subject to the performance in all material
respects by ZGNA and the Contributed Subsidiaries of their agreements
theretofore to be performed hereunder and to the satisfaction, prior thereto
or concurrently therewith, of the following further conditions:
8.1. Representations and Warranties.
The representations and warranties of ZGNA, ZBI and the
Contributed Subsidiaries contained in this Agreement shall be true and correct
and in all material respects on and as of the Closing Date as though such
warranties and representations were made at and as of such date, except as
otherwise specifically permitted herein.
8.2. Compliance with Agreement.
ZGNA and ZBI shall have performed and complied in all
material respects with, and shall have caused the Contributed Subsidiaries to
perform and comply in all material respects with, all agreements, covenants
and conditions contained in this Agreement which are required to be performed
or complied with by it prior to or on the Closing Date.
8.3. Injunction.
There shall be no effective injunction, writ, preliminary
restraining order or any order of any nature issued by a court of competent
jurisdiction or governmental body or agency of competent jurisdiction
directing that the transactions provided for herein or any of them not be
consummated as herein provided.
8.4. Stockholder Approval.
This Agreement shall have been approved by the affirmative
vote of the holders of a majority of the outstanding shares of the Common
Stock.
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8.5. Election of Officer and Directors.
Xx. Xxxxxx Xxxxxxxx shall have been appointed as the
President and Co-Chief Executive Officer of the Company and shall have been
elected to the Board, effective upon the Closing. Xx. Xxxx Xxxxx shall have
been elected as the Chairman of the Board and Co-Chief Executive Officer. The
Board shall have been constituted as of the Closing Date as provided in
Section 2 of the Governance Agreement.
8.6. Adverse Development.
There shall have been no developments in the business of the
Contributed Subsidiaries which in the reasonable opinion of the Company would
have a Subsidiary Material Adverse Effect.
8.7. Credit Agreements.
The Company and ZGNA shall have entered into definitive
credit agreements with their respective lenders on terms reasonably
satisfactory to the Company and such credit agreements shall be full force and
effect.
8.8. Consents and Approvals.
All material consents, waivers, authorizations and approvals
of any governmental or regulatory authority, domestic or foreign shall have
been duly obtained and shall be in full force and effect on the Closing Date.
8.9. HSR Act.
All required waiting periods applicable to this Agreement
and the transactions contemplated hereby under the HSR shall have been expired
or terminated.
8.10. Transaction Documents.
ZGNA or its Subsidiary and each of the other parties thereto
shall have executed and delivered (i) the Escrow Agreement, (ii) the Powders
Option Agreement, (iii) the Governance Agreement, (iv) the Sourcing Agency
Agreement, (v) the Registration Rights Agreement and (vi) the Agreement
Regarding Employees.
8.11. ZGNA's Certificates.
The Company shall have received a certificate from an
executive officer of ZGNA, dated the Closing Date, certifying that the
conditions specified in Sections 8.1 and 8.2 of this Agreement have been
fulfilled.
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8.12. Counsel's Opinion.
The Company shall have received from ZGNA's counsel, Xxxxxxx
Xxxx & Xxxxxxxxx, an opinion, dated the Closing Date, substantially as set
forth in Exhibit B hereto.
8.13. Completion of Mergers.
The Certificates of Merger shall have been filed with the
Secretary of State of the respective jurisdiction of incorporation and the
Mergers shall have become effective in accordance with the laws of the
respective jurisdiction of incorporation.
8.14 Approval of Proceedings.
All proceedings to be taken in connection with the
transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to the Company
and its counsel, Xxxxxxxx, Xxxxx & Xxxxxxx, P.C.; and the Company shall have
received copies of all documents or other evidence which it and Xxxxxxxx,
Xxxxx & Xxxxxxx, P.C. may request in connection with such transactions and of
all records of corporate proceedings in connection therewith in form and
substance satisfactory to the Company and Xxxxxxxx, Xxxxx & Xxxxxxx, P.C.
8.15. Accountant's Letter.
The Company shall have received the accountant's letter
referred to in Section 6.14(b).
8.16. Employees.
(a) Individuals responsible for at least 75% of all sales of
products of the Contributed Subsidiaries in the 90 days prior to the date of
this Agreement shall be available to work in connection with the Agreement
Regarding Employees in substantially the same role as before the execution of
this Agreement, and not more than 25% of such individuals shall have stated in
writing to ZGNA that they intend to stop working for the Surviving Corporation
in such role.
(b) Employees responsible for at least 75% of all purchases
of biomass material of the Contributed Subsidiaries in the 90 days prior to
the date of this Agreement shall be available to work for the Contributed
Subsidiaries in substantially the same role as before the execution of this
Agreement, and not more than 25% of such individuals shall have stated in
writing to ZGNA that they intend to stop working for a Contributed Subsidiary
in such role (including after the Closing)
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if the Contributed Subsidiary offers them a salary and compensation
arrangement comparable to that currently in place as of the date hereof and
Benefit Arrangements as contemplated by this Agreement.
8.17. Exclusive Distributorship Agreement.
The agreement listed under the heading "Exclusive
Distributorship Agreement" in Section 5.12 of ZGNA Disclosure Schedule shall
have been terminated without further liability to ZBI or the Contributed
Subsidiaries, including, without limitation, any restrictions on their ability
to engage in business contained therein.
SECTION 9. TERMINATION AND INDEMNIFICATION
9.1. Termination.
This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual consent of ZGNA and the Company;
(b) by ZGNA or the Company if the Closing shall not have
occurred on or before April 30, 1999, except that ZGNA and the Company shall
have the right, in their mutual discretion, to extend the time period in this
Section 9.1(b) an additional 45 days; provided that the right to terminate
this Agreement pursuant to this Section 9.1(b) shall not be available to any
party whose failure to perform any of its obligations under this Agreement
results in the failure of the Closing to be consummated by such date;
(c) by ZGNA if the Board shall have withdrawn, modified or
amended (or resolved to withdraw, modify or amend) in any respect its
recommendation that this Agreement be approved by the Company's stockholders;
or
(d) by ZGNA or the Company, if any governmental entity shall
have threatened to, or issued, an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting any of the material
transactions contemplated hereby.
9.2. Procedure and Effect of Termination.
In the event of termination of this Agreement pursuant to
Section 9.1 hereof, by one party, written notice thereof shall forthwith be
given to the other party, and, except as set forth below, this Agreement shall
terminate and be void and have no effect except for the provisions of Section
9.4 which shall
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survive such termination and the transactions contemplated hereby shall be
abandoned except for the provisions of Section 9.4 which shall survive such
termination. If this Agreement is terminated as provided herein:
(a) ZGNA and the Company will destroy or redeliver, and will
cause its respective agents (including, without limitation, attorneys and
accountants) to destroy or redeliver all documents, electronic files or other
media containing confidential information with respect to the Company or the
Contributed Subsidiaries, as the case may be, delivered in connection with
this Agreement, unless ZGNA or the Company believes in its reasonable judgment
that such destruction could give rise to any liability under applicable law or
prevent it from reasonably asserting a known claim hereunder;
(b) all information received by ZGNA or the Company with
respect to the business, operations, assets or financial condition of the
Company or the Contributed Subsidiaries, as the case may be, shall remain
subject to the confidentiality provision of Section 6.8; and
(c) except as otherwise expressly set forth herein, no party
to this Agreement shall have any liability hereunder to any other party,
except (i) for any intentional breach or misrepresentation by such party of
the terms and provisions of this Agreement and (ii) as stated in paragraphs
(a) and (b) of this Section 9.2.
9.3. Survival of Representations, Warranties and
Covenants.
All representations and warranties contained in Sections
4.6(c), 4.15, 5.6(c), 5.15 and third party claims arising out of
misrepresentation of any of the representations or warranties herein shall
survive the Closing and remain in full force and effect for a period of 24
months following the Closing Date. All representations and warranties
contained in Section 4.31 shall terminate as of the Closing. All other
representations and warranties herein or in any other Transaction Documents
shall survive the Closing and remain in full force and effect for a period of
18 months following the Closing Date. All covenants and agreements contained
herein shall survive the Closing and remain in full force and effect until
sixty (60) days after the expiration of the applicable statute of limitations
(including any extensions thereof).
9.4. Indemnification.
(a) From and after the Closing, the Company shall indemnify
and hold harmless ZGNA, ZBI and their respective
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officers, directors and Affiliates (collectively, the "ZGNA Indemnified
Parties") from and against any liabilities, costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages and
amounts paid in settlement (collectively, "Damages") arising from or in
connection with (i) any inaccuracy in any representation or the breach of any
warranty of the Company under a Transaction Document or (ii) the failure of
the Company to duly perform or observe any term, provision, covenant or
agreement to be performed or observed by the Company pursuant to a Transaction
Document.
(b) From and after the Closing, ZGNA and ZBI shall indemnify
and hold harmless the Company and its officers, directors and Affiliates
(collectively, the "Company Indemnified Parties") from and against any Damages
to the extent they are the result of (i) any inaccuracy in any representation
or the breach of any warranty of ZGNA, ZBI or a Contributed Subsidiary under a
Transaction Document or (ii) the failure of ZGNA, ZBI or a Contributed
Subsidiary to duly perform or observe any term, provision, covenant or
agreement to be performed or observed by ZGNA, ZBI or a Contributed Subsidiary
pursuant to a Transaction Document.
(c) Notwithstanding anything herein to the contrary, no
indemnification shall be available to ZGNA Indemnified Parties under Section
9.4(a)(i) hereof or to the Company Indemnified Parties under Section 9.4(b)(i)
hereof unless and until the aggregate amount of Damages that would otherwise
be subject to indemnification, exceeds $750,000 (in each case, the "Basket
Amount"), in which case the party entitled to such indemnification shall be
entitled to receive only the amounts in excess of the Basket Amount. For
purposes of clause (i) of Section 9.4(a) and 9.4(b), in determining whether
there has been a breach of any representation or warranty contained herein or
in the other Transaction Documents or the amount of any Damages resulting from
such breach, such representations and warranties shall be read without regard
to any "Company Material Adverse Effect", "Subsidiary Material Adverse Effect"
or "material" qualifier contained therein except to the extent that the term
"material" is used to define "Company Key Agreements and Instruments" and
"Subsidiary Key Agreements and Instruments."
(d) Notwithstanding anything herein to the contrary, the
maximum aggregate liability of (i) the Company to ZGNA Indemnified Parties and
(ii) ZGNA and ZBI to the Company Indemnified Parties under this Section 9.4
hereof shall not exceed $15 million.
(e) Notwithstanding anything herein to the contrary, none of
ZGNA Indemnified Parties shall be entitled to indemnification by the Company
for any Damages arising from any
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matter of which ZGNA had knowledge at or prior to Closing by reason of the
Company having delivered written notice thereto, either in a supplemented
disclosure schedule or an officer's certificate, at or prior to Closing, if
(i) the conditions to ZGNA's obligation set forth in Section 7 fail to be
satisfied at Closing by reason of the matters disclosed in such supplemented
disclosure schedule or officer's certificate and ZGNA waives its right not to
Close unless (ii) the Company made a knowing misrepresentation with respect to
such matter on the date of this Agreement; provided that clause (i) above
shall not apply in respect of any matter as to which the Company has the
explicit right set forth in Section 4 to notify ZGNA thereof at or prior to
Closing and modify the corresponding disclosures.
(f) Notwithstanding anything herein to the contrary, none of
the Company Indemnified Parties shall be entitled to indemnification by ZGNA
for any Damages arising from any matter of which the Company had knowledge at
or prior to Closing by reason of ZGNA having delivered written notice thereto,
either in a supplemented disclosure schedule or an officer's certificate, at
or prior to Closing, if (i) the conditions to the Company's obligation set
forth in Section 8 fail to be satisfied at Closing by reason of the matters
disclosed in such supplemented disclosure schedule or officer's certificate
and the Company waives its right not to Close unless (ii) ZGNA made a knowing
misrepresentation with respect to such matter on the date of this Agreement;
provided that clause (i) above shall not apply in respect of any matter as to
which ZGNA has the explicit right set forth in Section 5 to notify the Company
thereof at or prior to Closing and modify the corresponding disclosures.
(g) Any calculation of Damages for purposes of this Section
9.4 shall be (i) net of any insurance recovery made by the Indemnified Party
(whether paid directly to such Indemnified Party or assigned by the
Indemnifying Party to such Indemnified Party) and (ii) reduced to take account
of any net Tax benefit realized by the Indemnified Party arising from the
deductibility of any such Damages or Tax. Any indemnification payment
hereunder shall initially be made without regard to this paragraph and shall
be reduced to reflect any such net Tax benefit only after the Indemnified
Party has actually realized such benefit. For purposes of this Agreement, an
Indemnified Party shall be deemed to have "actually realized" a net Tax
benefit to the extent that, and at such time as, the amount of Taxes payable
by such Indemnified Party is reduced below the amount of Taxes that such
Indemnified Party would have been required to pay but for deductibility of
such Damages. The amount of any reduction hereunder shall be adjusted to
reflect any final determination (which shall include the execution of Form
870-AD or successor form) with respect to the Indemnified Party's liability
for Taxes and, if necessary, the Company or
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XXXX and ZBI, as the case may be, shall make payments to the other to reflect
such adjustment. Any indemnity payment under this Agreement shall be treated
as an adjustment to the consideration for Tax purposes, unless a final
determination (which shall include the execution of a Form 870-AD or successor
form) with respect to the Indemnified Party or any of its Affiliates causes
any such payment not to be treated as an adjustment to the consideration for
U.S. Federal income Tax purposes.
(h) No action, claim or setoff for Damages subject to
indemnification under this Section 9.4 shall be brought or made:
(i) with respect to claims for Damages resulting
from a breach of any covenant contained in this Agreement after the date on
which such covenant shall terminate pursuant to Section 9.3 hereof; and
(ii) with respect to claims for Damages resulting
from a breach of any representation or warranty, after the date on which such
representation or warranty shall terminate pursuant to Section 9.3 hereof;
provided, however, that any claim made with reasonable specificity by the
party seeking indemnification (the "Indemnified Party") to the party from
which indemnification is sought (the "Indemnifying Party") within the time
periods set forth above shall survive (and be subject to indemnification)
until it is finally and fully resolved.
(i) Upon receipt by the Indemnified Party of notice of any
action, suit, proceedings, claim, demand or assessment against such
Indemnified Party which might give rise to a claim for Damages, the
Indemnified Party shall give written notice thereof to the Indemnifying Party
indicating the nature of such claim and the basis therefor; provided, however,
that failure to give such notice shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure. A claim to indemnity hereunder may, at
the option of the Indemnified Party, be asserted as soon as Damages have been
threatened by a third party orally or in writing, regardless of whether actual
harm has been suffered or out-of-pocket expenses incurred, provided the
Indemnified Party shall reasonably determine that it may be liable or
otherwise incur such Damages. The Indemnifying Party shall have the right, at
its option, to assume the defense of, at its own expense and by its own
counsel, any such matter involving the asserted liability of the Indemnified
Party as to which the Indemnifying Party shall have acknowledged its
obligation to indemnify the Indemnified Party. If any Indemnifying Party shall
undertake to compromise or defend any such asserted liability, it
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shall promptly notify the Indemnified Party of its intention to do so, and the
Indemnified Party agrees to cooperate fully with the Indemnifying Party and
its counsel in the compromise of, or defense against, any such asserted
liability; provided, however, that the Indemnifying Party shall not settle any
such asserted liability without the written consent of the Indemnified Party
(which consent will not be unreasonably withheld); provided, further, however
that the immediately preceding clause shall not apply in the case of relief
consisting solely of money damages at least 80% of which shall be borne by the
Indemnifying Party after taking into account any limitation thereon.
Notwithstanding an election to assume the defense of such action or
proceeding, such Indemnified Party shall have the right to employ separate
counsel and to participate in the defense of such action or proceeding, and
the Indemnifying Party shall bear the reasonable fees, costs and expenses of
such separate counsel (and shall pay such fees, costs and expenses at least
quarterly), if (A) the use of counsel chosen by the Indemnifying Party to
represent such Indemnified Party would present such counsel with a conflict of
interest; (B) the defendants in, or targets of, any such action or proceeding
include both an Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have reasonably concluded that there may be legal
defenses available to it or to other Indemnified Parties which are different
from or additional to those available to the Indemnifying Party (in which case
the Indemnifying Party shall not have the right to direct the defense of such
action or proceeding on behalf of the Indemnified Party); (C) the Indemnifying
Party shall not have employed counsel reasonably satisfactory to such
Indemnified Party to represent such Indemnified Party within a reasonable time
after notice of the institution of such action or proceeding; or (D) the
Indemnifying Party shall authorize such Indemnified Party to employ separate
counsel at the Indemnifying Party's expense. In any event, the Indemnified
Party and its counsel shall cooperate with the Indemnifying Party and its
counsel and shall not assert any position in any proceeding inconsistent with
that asserted by the Indemnifying Party. All costs and expenses incurred in
connection with an Indemnified Party's cooperation shall be borne by the
Indemnifying Party. In any event, the Indemnified Party shall have the right
at its own expense to participate in the defense of such asserted liability.
(j) The sole and exclusive remedy for any breach of any
representation, warranty, covenant or agreement shall be pursuant to this
Section 9.4, except in the case of fraud. Absent fraud, under no circumstances
shall either party be liable to other for consequential or punitive damages.
(k) Each party hereby acknowledges and agrees that the other
party is not making any representation or warranty whatsoever, express or
implied, including, without limitation, in
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respect of their respective assets, liabilities and businesses, except those
representations and warranties explicitly set forth in the Transaction
Document or in any certificate contemplated hereby and delivered in connection
herewith.
9.5. Break-Up Fee.
(a) In the event that (i) upon a vote at a duly held meeting
of the stockholders of the Company or any adjournment thereof, any stockholder
approval contemplated by this Agreement shall not have been approved or (ii)
the Board shall have withdrawn, modified or amended (or resolved to withdraw,
modify or amend) in any respect its recommendation to its stockholders that
this Agreement be approved by the Company's stockholders, the Company shall
pay ZGNA all of ZGNA's reasonable out-of-pocket expenses incurred in
connection with the transactions contemplated hereby, including fees and
expenses of its counsel and financial advisors; provided, that the Company
shall not be liable for out-of-pocket expenses in excess of $500,000.
(b) If within twelve (12) months of the termination date of
this Agreement for either of the reasons set forth in 9.5(a) the Company shall
sell such number of shares of Common Stock equal to or greater than 49% of the
issued and outstanding shares of the Common Stock (calculated by using the
number of issued and outstanding shares of Common Stock as of the date hereof)
by way of sale of securities, merger, reorganization, or shall sell all or
substantially all of its assets, the Company shall pay $1,500,000 (the
"Termination Fee") to ZGNA in immediately available funds no later than two
(2) Business Days after entry into such agreement. The Company agrees that it
will not structure any transaction or agreement for the purpose of avoiding
payment of Termination Fee. The Company acknowledges that the agreements
contained in this Section 9.5 are an integral part of the transactions
contemplated in this Agreement, and that, without these agreements, ZGNA would
not enter into this Agreement; accordingly, if the Company fails to promptly
pay the amount due pursuant to this Section 9.5, and, in order to obtain such
payment, ZGNA commences a suit which results in a judgment against the Company
for the Termination Fee, the Company shall pay to ZGNA its costs and expenses
(including attorneys' fees) in connection with such suit, together with
interest on the amount of the fee at the prime rate of Citibank, N.A. on the
date such payment was required to be made. Notwithstanding the foregoing, no
Termination Fee or payment under Section 9.5(a) shall be payable if the
transactions contemplated hereunder are not consummated because (i) the
Company's Board of Directors withdraws its recommendation of this Agreement as
a result of a material breach or misrepresentation by ZGNA, (ii) the Company
or ZGNA failed to enter into a definitive credit agreement with their
respective lenders, (iii) the Company terminates this Agreement because of a
material breach (including a material breach of Section 6.9 herein) or a
material misrepresentation by
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ZGNA, (iv) approval under the HSR is not obtained (assuming the Company and
ZGNA have made appropriate HSR filings) or (v) the Company terminates this
Agreement as a result of failure to satisfy Sections 8.3 (Injunction), 8.6
(Adverse Development), 8.10 (Transaction Documents), 8.11 (ZGNA's
Certificates), 8.12 (Counsel's Opinion), 8.13 (Completion of Mergers) or 8.16
(Sales Force).
(c) Notwithstanding, in the event ZGNA shall have exercised
the Option and shall thereafter sell the shares of Common Stock received by it
upon exercise of the Option, ZGNA shall pay to the Company any fees and
expenses (including Termination Fee) received by it pursuant to this Section
to the extent the net proceeds received by it in connection with such sale
exceed the exercise price for the Option.
SECTION 10. MISCELLANEOUS
10.1. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado applicable to contracts made
and to be performed entirely within such State, except that all issues
relating to the Delaware Mergers shall be governed by and construed in
accordance with the laws of the State of Delaware and all issues relating to
the New York Merger shall be governed by and construed in accordance with the
laws of the State of New York.
10.2. Paragraph and Section Headings.
The headings of the sections and subsections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
10.3. Notices.
(a) All communications under this Agreement shall be in
writing and shall be delivered by hand, by facsimile or mailed by overnight
courier or by registered mail or certified mail, postage prepaid:
(1) if to ZGNA or ZBI, at 0000 Xx Xxxxxxxx Xxxxxx, Xxxx
Xxxxx, Xxxxxxxxxx 00000-0000 (facsimile: (000) 000-0000),
marked for attention of President, or at such other address
as ZGNA may have furnished the Company in writing (with a
copy to Xxxxxxx Xxxx & Xxxxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx
Xxxx, XX 00000-0000, Attention: Xxxxxx X. Xxxxxx, Esq.
(facsimile: 212-728-8111), or at
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such other address it may have furnished the Company in
writing), or
(2) if to the Company, at 0000 Xxxxxxx Xxxxxxxxx, Xxxxxxx,
Xxxxxxxx 00000 (facsimile: (000) 000-0000) marked for
attention of Xxxx Xxxxx, or at such other address as the
Company may have furnished ZGNA in writing (with a copy to
Xxxxxx Xxxxxxxxx, Xxxxxxxx, Xxxxx & Xxxxxxx, P.C., 0000
Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 (facsimile: (303)
449-5426) or at such other address as it may have furnished
in writing to ZGNA).
(b) Any notice so addressed shall be deemed to be given: if
delivered by hand or by facsimile, on the date of such delivery; if delivered
by courier, on the first Business Day following the date of the delivery to
the courier; and if mailed by registered or certified mail, on the third
Business Day after the date of such mailing.
10.4. Expenses and Taxes.
Subject to Section 9.5, whether or not the Closing shall
have occurred, each party shall pay its own fees and expenses incurred in
connection with the transactions contemplated hereby.
10.5. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties.
10.6. Entire Agreement; Amendment and Waiver.
(a) This Agreement and the agreements attached as Exhibits
hereto constitute the entire understandings of the parties hereto and
supersede all prior agreements or understandings with respect to the subject
matter hereof among such parties. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with)
the written consent of the Company and ZGNA. No course of dealing between the
Company and ZGNA nor any delay in exercising any rights hereunder shall
operate as a waiver of any rights of either party hereto.
(b) Subject to applicable law, by agreement of the parties,
this Agreement, the Transaction Documents and other documents entered into in
connection herewith, may be terminated, amended, or the observance of any
terms waived, after the Company's stockholder approval.
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10.7. Severability.
In the event that any part or parts of this Agreement shall
be held illegal or unenforceable by any court or administrative body of
competent jurisdiction, such determination shall not effect the remaining
provisions of this Agreement which shall remain in full force and effect.
10.8. Third Parties.
Nothing contained in this Agreement or in any instrument or
document executed by any party in connection with the transactions
contemplated hereby shall create any rights in, or be deemed to have been
executed for the benefit of, any person that is not a party hereto or thereto
or a successor or permitted assign of such a party.
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10.9. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall be
considered one and the same agreement.
XXXXXX, INC. ZUELLIG GROUP N.A., INC.
By:/s/Xxxx X. Xxxxx By:/s/Xxxxxx Xxxxxxxx
-------------------------- ------------------
Name: Xxxx X. Xxxxx Name: Xxxxxx Xxxxxxxx
Title: CEO Title: President
QQB HOLDINGS I, Inc. ZUELLIG BOTANICAL EXTRACTS, INC.
By:/s/Xxxx X. Xxxxx By:/s/Xxxxx X. Xxxxxxx
-------------------------- -------------------
Name: Xxxx X. Xxxxx Name: Xxxxx X. Xxxxxxx
Title: President Title: Secretary & Treasurer
QQB HOLDINGS II, Inc. ZETAPHARM, INC.
By:/s/Xxxx X. Xxxxx By:/s/Xxxxx X. Xxxxxxx
-------------------------- -------------------
Name: Xxxx X. Xxxxx Name: Xxxxx X. Xxxxxxx
Title: President Title: Secretary & Treasurer
QQB HOLDINGS III, Inc. XXXXXX DRUG COMPANY, INC.
By:/s/Xxxx X. Xxxxx By:/s/Xxxxx X. Xxxxxxx
-------------------------- -------------------
Name: Xxxx X. Xxxxx Name: Xxxxx X. Xxxxxxx
Title: President Title: Secretary & Treasurer
ZUELLIG BOTANICALS, INC.
By:/s/Xxxxx X. Xxxxxxx
-------------------
Name: Xxxxx X. Xxxxxxx
Title: Secretary & Treasurer
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