EXHIBIT 10.2
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AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as
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of _________, 1998 by and among QBI Acquisitions Co., Inc., a Delaware
corporation ("Newco"), Advanced Nutraceuticals, Inc., a Delaware corporation
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("ANI"), Quality Botanical Ingredients, Inc., a New Jersey corporation (the
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"Company") and Joseph Schortz, Lawrence J. Katz and the Botanical Trust, Joseph
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Schortz, trustee (each individually, a "Shareholder" and collectively, the
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"Shareholders").
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R E C I T A L S
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A. ANI owns all of the outstanding shares of capital stock of Newco.
B. The respective boards of directors of Newco and the Company have
determined that it is fair to, and in the best interests of, their respective
corporations and stockholders for the Company to be merged with and into Newco
upon the terms and subject to the conditions set forth herein (the "Merger");
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the board of directors and sole stockholder of Newco have approved and adopted
this Agreement in accordance with the Delaware General Corporation Law (the
"Delaware Law"); and the board of directors and stockholders of the Company have
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approved and adopted this Agreement in accordance with the New Jersey Business
Corporation Act (the "New Jersey Law").
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AGREEMENT
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NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS
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Section 1.1 Definitions. For all purposes of this Agreement, certain
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capitalized terms not otherwise defined herein shall have the meanings set forth
in Exhibit A attached hereto.
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ARTICLE 2
THE MERGER
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Section 2.1 Merger. Upon the terms and subject to the conditions of
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this Agreement, the Company shall be merged with and into Newco in accordance
with the applicable provisions of the Delaware Law. The Company and Newco are
herein sometimes referred to as the "Constituent Corporations." Newco shall be
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the surviving corporation following the effectiveness of the Merger (sometimes
referred to herein as the "Surviving Corporation").
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Section 2.2 Effect of Merger. The parties agree to the following
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provisions with respect to the Merger:
(a) Certificate of Incorporation and Bylaws. The
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Certificate of Incorporation of Newco, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation, from and after the Effective Time until amended in accordance with
applicable law. The Bylaws of Newco, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation from and after
the Effective Time until amended in accordance with applicable law, the
Surviving Corporation's Certificate of Incorporation and such Bylaws.
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(b) Directors and Officers. The directors and officers of Newco in
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office immediately prior to the Effective Time shall be the directors and
officers, respectively, of the Surviving Corporation, and each shall hold his or
her respective office or offices from and after the Effective Time until his or
her successor shall have been elected and shall have qualified or as otherwise
provided in the Bylaws of the Surviving Corporation.
(c) Name and Corporate Organization of Surviving Corporation. The
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name of the Surviving Corporation from and after the Effective Time shall be
"QBI Acquisition Co., Inc.," which name shall be changed after the closing to
Quality Botanical Ingredients, Inc. in accordance with applicable law. At the
Effective Time, the identity and separate corporate existence of the Company
shall cease and Newco as the surviving corporation and successor shall succeed
to the Company in the manner of and as more fully set forth in Section 259 of
the Delaware Law.
(d) Filing of Certificate of Merger and Further Assurances. If this
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Agreement is not terminated pursuant to Article 9 hereof, as soon as practicable
after all conditions to the Merger set forth in Article 6 hereof shall have
been satisfied or waived, the Constituent Corporations shall cause the
Certificate of Merger attached hereto as Annex B ("Certificate of Merger") to be
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executed and acknowledged and, as required by Delaware Law, filed with the
Secretary of State of the State of Delaware as provided in the Delaware Law, and
an executed and acknowledged counterpart of the Certificate of Merger to be
filed with the State of New Jersey as provided in the New Jersey Law. The
Merger shall become effective on the date and at the time the Certificate of
Merger is filed with the Secretary of State of the State of Delaware in
accordance with Section 103 of the Delaware Law (the "Effective Time"). If, at
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any time after the Effective Time, the Surviving Corporation shall consider or
be advised that any deeds, bills of sale, assignments or assurances or any other
acts or things are necessary, desirable or proper (i) to vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation, its right, title
or interest in, to or under any of the rights, properties or assets of the
Constituent Corporations acquired or to be acquired as a result of the Merger,
or (ii) otherwise to carry out the purposes of this Agreement, the Surviving
Corporation and its officers and directors or their designees shall be
authorized to execute and deliver, in the name and on behalf of the Constituent
Corporations, all such deeds, bills of sale, assignments and assurances and do,
in the name and on behalf of the Constituent Corporations, all such other acts
and things necessary, desirable or proper to vest, perfect or confirm its right,
title or interest in, to or under any of the rights, properties or assets of the
Constituent Corporations acquired or to be acquired as a result of the Merger
and otherwise to carry out the purposes of this Agreement.
Section 2.3 Conversion of Securities.
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(a) By virtue of the Merger and without any action on the
part of the holder thereof, at the Effective Time each share of common stock, no
par value, of the Company ("Company Common Stock"), outstanding immediately
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prior to the Effective Time shall be converted into the right to receive (i)
that amount of the Stock Merger Consideration (hereinafter defined) equal to the
total aggregate Stock Merger Consideration divided by the number of shares of
Company Common Stock outstanding and (ii) that amount of the Cash Merger
Consideration (as hereinafter defined) equal to the total aggregate Cash Merger
Consideration divided by the number of shares of Company Common Stock
outstanding; deliverable and payable to the holder thereof upon surrender of the
certificate formerly representing Company Common Stock (the "Share Certificate")
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in the manner provided in Section 2.4 hereof.
(b) "Stock Merger Consideration" shall mean that number of shares of
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common stock, par value $.001, of ANI ("ANI Common Stock") equal to $23,450,000
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divided by the initial public offering price per share of ANI Common Stock (the
"IPO Price"); provided, however, at the instruction of the Shareholders, that
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number of shares of ANI Common Stock only (and not cash) determined by dividing
$3,000,000 by the IPO Price and such additional shares required, if any, in
satisfaction of the convertible debt held by the BPI Holders shall be withheld
and issued directly to the BPI Holders (as hereinafter defined) immediately
after the Closing. "Cash Merger Consideration" shall mean an aggregate of
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$8,050,000 in cash, without interest. The Stock Merger Consideration and Cash
Merger Consideration are herein sometimes collectively referred to as the
"Merger Consideration."
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(c) By virtue of the Merger and without any action on the part of the
holder thereof, at the Effective Time each share of Company Common Stock held by
the Company as a treasury share immediately prior to the Effective Time shall be
canceled and no payment of any consideration shall be made with respect thereto.
Section 2.4 Payment of Cash for Company Common Stock; Exchange of Shares.
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(a) Each holder of a Share Certificate which immediately
prior to the Effective Time represented outstanding shares of Company Common
Stock will be entitled to receive, upon surrender to ANI of such Share
Certificate for cancellation, (i) a cash payment per share of Company Common
Stock and (ii) subject to the direction of the Shareholders in Section 2.3,
shares of ANI Common Stock, in each case in the amount calculated in accordance
with Section 2.3 hereof. Until properly surrendered, each such Share Certificate
shall be deemed for all purposes to evidence only the right to receive such cash
and shares of ANI Common Stock. No interest shall accrue or be paid on the cash
payable upon the surrender of the Share Certificates.
(b) No certificates or script representing fractional shares
of ANI Common Stock shall be issued upon the surrender for exchange of Share
Certificates, and no holders thereof shall be entitled to any voting rights,
rights to receive any dividends or distributions or other rights as a
stockholder of ANI with respect to any fractional shares of ANI Common Stock
that would otherwise be issued to such holder. In lieu of any fractional shares
of ANI Common Stock that would otherwise be issued, each holder that would have
been entitled to receive a fractional share of ANI Common Stock shall, upon
proper surrender of such holder's Share Certificates, receive a cash payment
equal to such fraction multiplied by the initial public offering price per share
of ANI Common Stock.
Section 2.5 Post-Closing Adjustment for Future Performance.
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Pursuant to the earn out due to the BPI Holders, ANI shall
establish an escrow, with a national bank or other independent escrow agent as
escrow agent, for that number of shares of ANI Common Stock equal to $3,000,000
divided by the IPO Price (the "Escrowed Shares"). The former BPI shareholders
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(the "BPI Holders") shall be entitled to receive all or a portion of such
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shares in accordance with the provisions of the earn out set forth in Section
1.4 of the Stock Purchase Agreement dated June __, 1998 by and between the
Company and the BPI Holders (the "Earn Out").
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Amounts payable to the BPI Holders pursuant to this Section
2.5 shall be paid to each BPI Holder based on such BPI Holder's pro rata share
of BPI capital stock issued and outstanding immediately prior to the acquisition
of BPI by the Company as specified on Exhibit C. The BPI Holders shall
acknowledge as a condition of delivery of the ANI Common Stock that they are
receiving the shares for their own account and not with a view to distribution
and that the shares have not been registered for sale under the Securities Act
but are being issued pursuant to an exemption therefrom and will be so legended,
and there shall exist an available exemption from registration under the
Securities Exchange Act of 1933 (the "Securities Act") for the issuance of such
shares at the date of issuance.
Section 2.6 Closing. The closing of the Merger and the other
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transactions contemplated hereby (the "Closing") shall take place at the offices
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of Paul, Hastings, Janofsky & Walker LLP, Twenty-Third Floor, 555 South Flower
Street, Los Angeles, California 90071, at 10:00 A.M. local time on the day of
closing of the initial public offering of the ANI Common Stock, or at such other
time or on such other date as shall be agreed upon among the parties upon
satisfaction or waiver of all conditions precedent to the Closing (such time and
date being referred to herein as the "Closing Date").
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Section 2.7 Actions at the Closing. At the Closing:
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(a) The Company and Shareholders shall deliver or cause to be
delivered to ANI and Newco all of the documents, certificates and instruments
required to be delivered to ANI or Newco pursuant to Section 6.2.
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(b) ANI and Newco shall deliver or cause to be delivered to the
Company and the Shareholders all of the documents, certificates and instruments
required to be delivered to the Company or the Shareholders pursuant to Section
6.3.
(c) The Company and Newco shall file the Certificate of Merger with
the Secretary of State of the State of Delaware and with the Secretary of State
of the State of New Jersey.
(d) ANI shall deliver to the Shareholders, in the number or amounts as
instructed by the Shareholders in writing, signed by all of the Shareholders,
certificates representing the shares of ANI Common Stock acquired by the
Shareholders in the Merger.
(e) ANI shall deliver to the Shareholders, in the number or amounts as
instructed by the Shareholders in writing, signed by all of the Shareholders, by
wire transfer of immediately available funds, or by certified or cashier's
check, the cash portion of the Merger Consideration.
(f) ANI shall pay the Company's $1,350,000 note payable to the BPI
Holders (the "BPI Note") and shall assume (i) the $3,000,000 convertible
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promissory note held by the BPI Holders and (ii) the Earn Out.
(g) ANI shall pay the balance of the settlement due to Triarco
pursuant to the agreement dated December 11, 1997 (the "Triarco Settlement"), in
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the approximate amount of $1,000,000.
(h) ANI shall pay the bridge loan due to Mellon Bank pursuant to the
Note dated May 12, 1998 in the approximate amount of $1,000,000.
(i) The Shareholders shall deliver or cause to be delivered to ANI or,
at its direction, an assignment of all of their interests (representing 81% of
the ownership) in each of the limited liability companies owned by Messrs.
Schortz, Katz and Nathan Belkowitz engaged in contract farming in the states of
Missouri, North Carolina and New Jersey (the "Farm LLCs"), free and clear from
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any Liens other than amounts due to QBI.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
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REGARDING THE COMPANY
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The Company and the Shareholders hereby jointly and severally represent
and warrant to, and covenant and agree with, ANI and Newco that:
Section 3.1 Organization and Good Standing; Subsidiaries. The Company
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is a corporation duly organized, validly existing and in good standing under the
laws of the State of New Jersey, with full power and authority to own and lease
its properties and to conduct its business as currently conducted. The Company
has been duly qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each jurisdiction in which the Company
owns or leases any property, or conducts any business, so as to require such
qualification, except for Hawaii (where the Company will be qualified, if
required, prior to Closing) or where the failure to obtain such qualification
would not be reasonably likely to have a material adverse effect. The Company
has no Subsidiaries except BPI and does not own or control or have any other
equity investment or other interest in, directly or indirectly, any corporation,
joint venture, limited liability company, partnership, association or other
entity. The copies or originals of the [articles] of incorporation, bylaws,
minute books and stock records of the Company previously delivered to, or made
available for inspection by, ANI are true, complete and correct.
Section 3.2 Authorization, Binding Agreement. The Company has all
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requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated
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hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Company's board of directors and the Company's stockholders in accordance with
the New Jersey Law and the certificate of incorporation and bylaws of the
Company. No other corporate proceedings on the part of the Company are necessary
to authorize this Agreement and the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes the legal, valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
other laws, now or hereafter in effect, relating to or limiting creditors'
rights generally, and (b) general principles of equity (whether considered in an
action in equity or at law).
Section 3.3 No Conflicts. The execution, delivery and performance of
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this Agreement and the consummation of the transactions contemplated hereby will
not (a) except for the required consent of Mellon Bank, conflict with or result
in a breach or violation of any term or provision of, or constitute a default
under (with or without notice or passage of time, or both), or otherwise give
any Person a basis for accelerated or increased rights or termination or
nonperformance under, any obligation, agreement or instrument to which the
Company is a party or by which the Company is bound or affected or to which any
of the property or assets of the Company is bound or affected, (b) result in the
violation of the provisions of the certificate of incorporation or bylaws of the
Company or any Legal Requirement applicable to or binding upon it, (c) result in
the creation or imposition of any Lien upon any property or asset of the Company
or (d) otherwise adversely affect the contractual or other legal rights or
privileges of the Company. Schedule 3.3 sets forth a list of all agreements
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requiring the consent of any party thereto to any of the transactions
contemplated hereby (including, without limitation, the agreements with Mellon
Bank and the mortgage holder on the 500 Metuchen Road property).
Except as set forth on Schedule 3.3, all consents,
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authorizations and approvals of any Person to or as a result of the consummation
of the transactions contemplated hereby, that are necessary or advisable in
connection with the operations and business of the Company as currently
conducted and as proposed to be conducted, or for which the failure to obtain
the same might have, individually or in the aggregate, a Material Adverse
Effect, have been lawfully and validly obtained by the Company.
Section 3.4 Capitalization. The authorized capital stock of the Company
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consists solely of 300 shares of Company Common Stock, of which 150 shares are,
and as of the Closing will be, issued and outstanding. All of the issued and
outstanding shares of Company Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable and are held by the Shareholders in
the amounts reflected in Annex A hereto. There are no existing options,
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warrants, rights, calls or commitments of any character relating to the shares
of Company Common Stock or any other capital stock or securities of the Company,
(ii) there are no outstanding securities or other instruments convertible into
or exchangeable for shares of Company Common Stock or any other capital stock or
securities of the Company and no commitments to issue such securities or
instruments, and no Person has any right of first refusal, subscription right or
similar right with respect to any shares of Company Common Stock or any other
capital stock or securities of the Company.
Section 3.5 Financial Statements.
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(a) The Company has prepared and furnished to ANI, and there are
included in Schedule 3.5 hereto, true and complete copies of (i) the unaudited
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balance sheet (the "Balance Sheet") of the Company, the Farm LLCs and BPI at
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June 30, 1998 (the "Balance Sheet Date"), and the related unaudited statements
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of income, shareholders' equity and cash flows for the six months then ended,
(ii) (a) the audited balance sheets of the Company at December 31, 1997 and
December 31, 1996, (b) the unaudited balance sheets of BPI at December 31, 1997
and December 31, 1996, [and (c) the unaudited balance sheets of the Farm LLCs at
December 31, 1997 and December 31, 1996] and the related audited (and unaudited,
with respect to unaudited balance sheets) statements of income, shareholders'
equity and cash flow for the fiscal year then ended, together with the report
thereon of independent certified public accountants as to the Company (the
financial statements described in clauses (i) and (ii) above are collectively
referred to as the "Financial Statements").
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(b) The Financial Statements present fairly the financial condition of
the Company as of the dates indicated therein and the results of operations and
cash flows of the Company for the periods specified therein, have been prepared
in conformity with GAAP (other than the financial statements of BPI at and for
the period ending December 31, 1996 and the financial statements for the Farm
LLCs, all of which are prepared on a tax basis) applied on a consistent basis
during the periods covered thereby and prior periods, have been derived from the
accounting records of the Company and represent only actual, bona fide
transactions.
Section 3.6 Property and Products.
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(a) The Company has, and immediately prior to the Closing will have,
good, valid and marketable title in fee simple to all real property and all
personal property reflected on the Balance Sheet as owned by the Company and all
real property and personal property acquired by the Company since the Balance
Sheet Date, in each case free and clear of all Liens except (i) as set forth on
Schedule 3.6(a-1), and (ii) for sales and other dispositions of inventory in the
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ordinary course of business since the Balance Sheet Date which, in the
aggregate, have not been materially different from prior periods. Schedule
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3.6(a-2) contains a list of all tangible personal property, including, without
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limitation, computer systems, hardware and software, having a cost or fair
market value in excess of $50,000 owned by the Company (other than personal
property held by the Company as lessee under an operating lease). Schedule
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3.6(a-3) contains a list of all real property leases, licenses and personal
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property leases under which the Company is the lessee or licensee. True and
complete copies of all real property leases, licenses and personal property
leases listed on Schedule 3.6(a-3) have been delivered to Purchaser heretofore,
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as well as copies of any title reports, surveys or environmental reports or
audits relating to any leased real property. For the purposes of this Section
3.6(a-3), a "lease" shall include a sublease. All personal property owned by the
Company and all personal property held by the Company pursuant to operating
leases is in good operating condition and repair, subject only to ordinary wear
and tear, and is suitable and appropriate for the use thereof made and proposed
to be made by the Company in its business and operations. The real property and
personal property described in Schedules 3.6(a-1) and 3.6(a-2) and the real
property and personal property held by the Company pursuant to the leases and
licenses described in Schedule 3.6(a-3) comprise all of the real property and
personal property used in the conduct of business of the Company. The Company
owns or leases all of the real and personal property, tangible and intangible,
necessary to conduct its business as heretofore conducted or as contemplated to
be conducted except as specifically disclosed herein.
(b) Except as set forth in Schedule 3.6(b), all of the facilities,
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buildings, plants, structures and improvements (A) are in good operating
condition and repair, and (B) are adequate and suitable for the purposes for
which they are currently and proposed to be used. There are no (i) leases,
subleases, licenses, concessions or other agreements, written or oral, granting
to any other Person the right to acquire, use or occupy any portion of, any real
property, other than the rights of Jay Ram, pursuant to the Lease Agreement
dated December 7, 1995 to buy out the lease and cause BPI to move the building
on the land which is the subject of the prepaid land lease, (ii) outstanding
options or rights of first refusal to purchase all or any portion of real
property or interest therein, other than the option to purchase the real
property at 450 Metuchen Road pursuant to the Lease Agreement dated January 14,
1997, and (iii) Persons (other than the Company) in possession of any Real
Property. Except for inventory that is excess, damaged or obsolete, for which
in the aggregate an adequate reserve has been established in the Balance Sheet
in accordance with generally accepted accounting principles, consistently
applied, the inventory reflected in the Balance Sheet and thereafter acquired
and not disposed of since such date is of good and merchantable quality, and of
a quantity and quality saleable in the ordinary course of business in accordance
with past practices.
(c) Schedule 3.6(c) includes an accurate description of all products
manufactured, marketed, sold or licensed by the Company or its predecessor(s)
since January 1, 1993 (the "Company Products"). Except as disclosed on Schedule
3.6(c), there have been no Company Products which have been recalled, withdrawn
or suspended in and/or outside of the United States (whether voluntarily or
otherwise) since January 1, 1993, nor have there been proceedings in and/or
outside of the United States pending against the Company at any time since
January 1, 1993 (whether such proceedings have since been completed or remain
pending) seeking the recall, withdrawal, suspension or seizure of any
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Company Product or seeking to enjoin the Company from engaging in any activities
pertaining to such Company Products or to affirmatively perform activities
pertaining to such Company Products prior to shipping such products. There are
no facts which exist which could reasonably be expected to furnish a basis for
the recall or withdrawal or any Company Product or the suspension of any product
registration, product license, manufacturing license, wholesale dealer's
license, export license or other governmental license, or the approval or
consent of any governmental regulatory agency with respect to any Company
Product, nor do there exist any facts which could reasonably be expected to
furnish a basis for the recall, withdrawal, suspension or seizure by any
governmental agency or court of any Company Product or which could reasonably be
expected to form the basis for the issuance of an injunction pertaining thereto
or to cause the Company to cease further distribution or marketing of any
Company Product pending further approval or authorization by any governmental
agency or to change marketing classification of any Company Product. The Company
Products have been manufactured, marketed and distributed in accordance with the
specifications under which such Company Products have normally been manufactured
and in accordance with all applicable requirements of law. Since January 1,
1993, the Company has not received or been subject to consent decrees, orders,
settlement agreements or similar matters relating in any fashion to the Company
Products or received any warning letters or other correspondence from the Food
and Drug Administration, the Federal Trade Commission or other governmental
officials or agencies concerning the Company Products or which have in any
manner asserted that the operations of the Company may not be in compliance with
applicable laws, regulations, rules or guidelines. The Company has complied in
all respects with current reporting requirements relating to the Company
Products. Except for the principal of a corporation with whom the Company has a
consulting agreement, no officer, director or employee of the Company has been
convicted of or formally charged with any offense or act of a type that would be
required to be disclosed in a registration statement pursuant to Form S-1 under
the Securities Act.
Section 3.7 Accounts Receivable. All accounts receivable of the
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Company reflected in the Balance Sheet and all accounts receivable of the
Company that have arisen since the Balance Sheet Date (except such accounts
receivable as have been collected since such dates) are valid and enforceable
claims. Such accounts receivable of the Company are not subject to any valid
defense, offset or counterclaim and are fully collectible (or, in the case of
Stryka Botanics Co., Inc., fully offsetable against valid accounts payable,
dollar for dollar) on normal terms and in the ordinary course of business,
except to the extent of the allowance for doubtful accounts reflected on the
Balance Sheet. Schedule 3.7 contains a true and complete aging of the Company's
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accounts receivable as of the Balance Sheet Date.
Section 3.8 Trademarks, Patents, Etc.
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(a) Schedule 3.8(a) contains a true and complete list of all letters
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patent, patent applications, trade names, trademarks, service marks, trademark
and service mark registrations and applications, copyrights, copyright
registrations and applications, grants of a license or right to the Company with
respect to the foregoing, both domestic and foreign, claimed by the Company or
used or proposed to be used by the Company in the conduct of its business,
whether registered or not, and the status of each (collectively herein,
"Registered Rights").
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(b) Except as described in Schedule 3.8(b), the Company owns and has the
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unrestricted right to use the Registered Rights and every trade secret, know-
how, process, discovery, development, design, technique, customer and supplier
list, promotional idea, marketing and purchasing strategy, invention, process,
confidential data, product formulation and or other information (collectively
herein, "Proprietary Information") required for, advantageous to or incident to
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the design, development, purchase, distribution, sale and use of all products
and services sold or rendered or proposed to be sold or rendered by the Company,
free and clear of any right, equity or claim of others. The Company has taken
reasonable security measures to protect the secrecy, confidentiality and value
of all Proprietary Information.
(c) Except as described in Schedule 3.8(c), (i) the Company has not
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sold, transferred, assigned, licensed or subjected to any Lien, any Registered
Right or Proprietary Information or any interest therein, and (ii) the Company
is not obligated or under any liability whatever to make any
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payments by way of royalties, fees or otherwise to any owner or licensor of, or
other claimant to, any Registered Right or Proprietary Information. None of the
Registered Rights or Proprietary Information licensed or granted to the Company
is owned by any Shareholder or any affiliate of any Shareholder and no
Registered Right or Proprietary Information has been licensed or granted to any
Shareholder or any affiliate of any Shareholder.
(d) Except that BPI has been advised that its branded product line
"Farmacopia" conflicts with the trademark "Cornacopia" and that its brand name
"Immu-Neem" conflicts with the brand name "Immunene," there is no claim or
demand of any Person pertaining to, or any Action that is pending or, to the
Company's or Shareholders' knowledge, threatened, which challenges the rights of
the Company in respect of any Registered Right or any Proprietary Information;
provided, however, the exceptions to this subsection (d), if adversely resolved,
would not have a material adverse effect.
Section 3.9 Banking and Insurance.
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(a) Schedule 3.9(a) contains a true and complete list of the names and
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locations of all financial institutions at which the Company maintains a
checking account, deposit account, securities account, safety deposit box or
other deposit or safekeeping arrangement, the numbers or other identification of
all such accounts and arrangements and the names of all persons authorized to
draw against any funds therein.
(b) Schedule 3.9(b) contains a true and complete list and brief summary
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of all insurance policies and bonds and self insurance arrangements currently in
force that cover or purport to cover risks or losses to or associated with the
Company's business, operations, premises, properties, assets, employees, agents
and directors. The insurance policies, bonds and arrangements described on
Schedule 3.9(b) (the "Policies") provide such coverage against such risk of loss
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and in such amounts as are customary for corporations of established reputation
engaged in the same or similar business and similarly situated. True and
complete copies of all such Policies have been delivered to ANI heretofore
Section 3.10 Litigation. Except as set forth on Schedule 3.10 (which
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includes a description of the Triarco settlement, a matter wherein the Company
is a plaintiff against a former agent and a $40,000 collection matter at BPI),
there is no legal action, suit, arbitration or other legal, administrative or
other governmental investigation, inquiry or proceeding pending or, to the
knowledge of the Company or its Shareholders, threatened against or affecting
the Company or any of its property, assets, business, products, franchises or
governmental approvals, before any court or governmental department, commission,
board, bureau, agency, instrumentality or arbitrator (including but not limited
to any taxing entity or authority) which, individually or in the aggregate,
could reasonably be expected to have a material adverse effect upon the Company
and its subsidiaries, taken as a whole, or to materially and adversely affect
the ability of the Company to carry out, or to prevent or make unduly
burdensome, the Merger contemplated by this Agreement. Except as set forth in
Schedule 3.10, the Company is subject to no outstanding judgments, orders,
decrees, awards, stipulations or injunctions of any governmental entity or
arbitrator against or affecting the Company or its properties, assets or
business.
Neither the Company nor, to the Shareholders' knowledge, any of its
directors, officers, agents, employees or other Person (except as heretofore
disclosed to ANI concerning a principal of a consultant to the Company)
associated with or acting on behalf of the Company has (a) used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (b) made any direct or indirect
unlawful payments to government officials or employees, or foreign government
officials or employees, from corporate funds, (c) established or maintained any
unlawful or unrecorded fund of corporate monies or other assets, (d) made any
false or fictitious entries on the books of account of the Company, or (e) made
or received any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment.
Section 3.11 Income and Other Taxes. Except as set forth on Schedule
---------------------- --------
3.11:
- ----
(a) All Tax Returns required to be filed through and including the date
hereof in connection with the operations of the Company are true, complete and
correct in all respects and have
-8-
been properly and timely filed. The Company has not requested any extension of
time within which to file any Tax Return, which Tax Return has not since been
filed. Purchaser has heretofore been furnished by the Company with true, correct
and complete copies of each Tax Return of the Company with respect to the past
three taxable years, and of all reports of, and communications from, any
Governmental Entities relating to such period.
(b) All Taxes required to be paid or withheld and deposited through and
including the date hereof in connection with the operations of the Company have
been duly and timely paid or deposited by the Company. The Company has properly
withheld or collected all amounts required by law for income Taxes and
employment Taxes relating to its employees, creditors, independent contractors
and other third parties, and for sales and use Taxes on sales, and has properly
and timely remitted such withheld or collected amounts to the appropriate
Governmental Entity. The Company has no liabilities for any Taxes for any
taxable period ending prior to or coincident with the Closing Date.
Section 3.12 Employee Benefit Matters. Schedule 3.12 contains a complete
------------------------ -------------
list of all employee benefit plans (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which
-----
are maintained or contributed to by the Company (the "Company Benefit Plans").
----------------------
The Company has heretofore provided to Purchaser (i) true and complete copies of
all Company Benefit Plans; (ii) the most recent annual actuarial evaluation, if
any, prepared for each Company Benefit Plan; (iii) the two most recent annual
reports (series 5500), if any, required under ERISA with respect to each Company
Benefit Plan, including audited financial statements; (iv) the most recent
determination letter received from the IRS, if any, for each Company Benefit
Plan, and (v) the most recent Summary Plan Description, if any, required under
ERISA with respect to each Company Benefit Plan. Except as disclosed on Schedule
--------
3.12, (i) with respect to each Company Benefit Plan that is intended to
- ----
be qualified under Section 401(a) of the Code and is maintained by the Company
for any of its employees, (x) the Company has obtained a favorable determination
letter from the IRS and nothing has happened since such letter that would
adversely affect the tax qualification of such plan and (y) such plan has been
operated in compliance with ERISA and in accordance with the provisions of, and
the rules and regulations covering, such plan except where the failure to so
comply does not individually or in the aggregate, have a Material Adverse Effect
upon the Company, (ii) with respect to each Company Benefit Plan, the Company is
not, and to the Company's knowledge no other person is, engaged in a transaction
prohibited by Section 4975 of the Code or Section 406 of ERISA which could
result in a liability to the Company which would individually or in the
aggregate, have a Material Adverse Effect upon the Company, (iii) each Company
Benefit Plan which is subject to Part III of Subtitle B of Title I of ERISA or
Section 412 of the Code has been maintained in compliance with the minimum
funding standards of ERISA and the Code, and no reportable event, within the
meaning of Section 4043 of ERISA has occurred with respect to any Company
Benefit Plan which is subject to Title IV of ERISA, other than reportable events
with respect to which notice has been waived by the Pension Benefit Guaranty
Corporation or which would not, individually or in the aggregate, have a
Material Adverse Effect upon the Company, and (iv) no benefit is provided
pursuant to a welfare benefit plan (as defined in ERISA Section 3(1)) to a
former employee of the Company other than for continuation health coverage
benefits provided under Code Section 4980B.
Section 3.13 No Undisclosed Liabilities. Except (i) to the extent set
--------------------------
forth or provided for in the Balance Sheet or the notes thereto, (ii) as set
forth on Schedule 3.13 [which discusses the possible writedown of the Farm LLCs
-------------
to net realizable value] or (iii) for non-material current liabilities incurred
since the Balance Sheet Date in the ordinary course of business, as of the date
hereof the Company has no liabilities or obligations of any kind or nature
(whether or not of a type that would be required to be disclosed in financial
statements), whether accrued, absolute, contingent or otherwise, whether due or
to become due and whether the amounts thereof are readily ascertainable or not,
or any unrealized or anticipated losses from any commitments of a contractual
nature, including but not limited to liabilities or obligations for Taxes and
Environmental Matters with respect to or based upon the facts existing, or
transactions or events occurring at or prior to the Closing.
Section 3.14 Permits, Licenses, Etc.; Regulatory Filings. The Company
-------------------------------------------
possesses, and is operating in compliance with, all franchises, licenses,
permits, certificates, authorizations, rights and
-9-
other approvals of Governmental Entities necessary to (i) occupy, maintain,
operate and use the real property as it is currently used and proposed (except
for the proposed entry by the Company into the extraction business, for which
applications for licenses and permits have not yet been made) to be used, (ii)
conduct its business as currently conducted and as proposed to be conducted, and
(iii) maintain and operate its Company Benefit Plans (collectively, the
"Permits"). Schedule 3.14 contains a true and complete list of all Permits.
- ------- -------------
Each Permit has been lawfully and validly issued, and no proceeding is pending
or, to the Shareholders' knowledge, threatened looking toward the revocation,
suspension or limitation of any Permit. The consummation of the transactions
contemplated by this Agreement will not result in the revocation, suspension or
limitation of any Permit.
The Company has made all required registrations and filings with and
submissions to all applicable Governmental Entities relating to the operations
of the Company as currently conducted and as proposed to be conducted,
including, without limitation, all such applicable Governmental Entities having
jurisdiction over any matters pertaining to conservation or protection of the
environment, the treatment, discharge, use, handling, storage or production, or
disposal of Hazardous Materials and the safety of foods, drugs and other
consumer products. All such registrations, filings and submissions were in
compliance with all Legal Requirements (including all Environmental Laws) and
other requirements when filed, no material deficiencies have been asserted by
any such applicable Governmental Entities with respect to such registrations,
filings or submissions and, to the Shareholders' knowledge, no facts or
circumstances exist which would indicate that a material deficiency may be
asserted by any such authority with respect to any such registration, filing or
submission.
Section 3.15 Material Contracts; No Defaults.
-------------------------------
(a) Schedule 3.15 contains a true and complete list and description of
-------------
all material contracts, agreements, understandings, arrangements and
commitments, written or oral ("Contracts"), of the Company by which it or its
properties, rights or assets are bound. True and complete copies of such
written Contracts and true and complete summaries of such oral Contracts have
been delivered to Purchaser heretofore. For the purposes of this subsection
(a), "material" means any contract, agreement, understanding, arrangement or
commitment that (i) involves performance by any party more than 90 days from the
date hereof, (ii) involves payments or receipts by the Company in excess of
$100,000, (iii) involves capital expenditures in excess of $25,000 or (iv)
otherwise materially affects the Company.
(b) Except as described in Schedule 3.15 (which includes the loan
-------------
agreement with Mellon Bank), each Contract described herein or elsewhere in this
Agreement, including, without limitation, Section 3.6, is, and after the Closing
-----------
on identical terms will be, legal, valid, binding, enforceable and in full force
and effect and no event or condition has occurred or become known to the Company
or any Shareholder or is alleged to have occurred that constitutes or, with
notice or the passage of time, or both, would constitute a default or a basis of
force majeure or other claim of excusable delay, termination, nonperformance or
- ----- -------
accelerated or increased rights by the Company or any other Person under any
Contract described above in this Section 3.15, or described or otherwise
disclosed pursuant to this Agreement; and
(c) No customer that represented in excess of 10% of the Company's sales
of goods or services during the twelve months ended on the Balance Sheet Date
has terminated its relationship with or adversely curtailed its purchases from
the Company or indicated (for any reason) its intention so to terminate its
relationship or curtail its purchases. No supplier from whom the Company
purchased in excess of 10% of the Company's purchases of goods or services
during the twelve months ended on the Balance Sheet Date has terminated its
relationship with or adversely curtailed its accommodations, sales or services
to the Company or indicated (for any reason) its intention to terminate such
relationship or curtail its accommodations, sales or services. The Company has
no purchases available from only a single source.
(d) No person with whom the Company has such a contract, agreement,
arrangement, commitment or other understanding is in default thereunder or has
failed to perform fully thereunder
-10-
by reason of force majeure or other claim of excusable delay, termination or
----- -------
nonperformance thereunder, the delay, termination or nonperformance of which, or
a default under which, has had or may have a material adverse effect.
Section 3.16 Absence of Certain Changes. Since December 31, 1997, except
--------------------------
as disclosed in Schedule 3.16 (which will include descriptions of the kava
-------------
purchase contracts acquired with the BPI acquisition and disclose the Mellon
refinancing and the BPI acquisition), the Company has not: (i) incurred any
debts, obligations or liabilities (absolute, accrued, contingent or otherwise),
other than current liabilities incurred in the ordinary course of business
which, individually or in the aggregate, are not material; (ii) subjected to or
permitted a Lien upon or otherwise encumbered any of its assets, tangible or
intangible; (iii) sold, transferred, licensed or leased any of its assets or
properties except in the ordinary course of business; (iv) canceled or
compromised any debt owed to or by or claim of or against it, or waived or
released any right, of material value other than in the ordinary course of
business; (v) suffered any physical damage, destruction or loss (whether or not
covered by insurance) causing or having a material adverse effect; (vi) made or
suffered any change in, or condition affecting, its condition (financial or
otherwise), properties, profitability, prospects or operations other than
changes, events or conditions in the ordinary course of business, none of which
(individually or in the aggregate) has had or may have a material adverse
effect; (vii) made any change in the accounting principles, methods, records or
practices followed by it or depreciation or amortization policies or rates
theretofore adopted; (viii) paid, or made any accrual or arrangement for payment
of, any severance or termination pay to, or entered into any employment or loan
or loan guarantee agreement with, any current or former officer, director or
employee or consultant (other than employment contracts with employees renewed
or entered into with respect to new employees in the ordinary course of business
and with the BPI Shareholders); (ix) paid, or made any accrual or arrangement
for payment of, any increase in compensation, bonuses or special compensation of
any kind to any employee other than in the ordinary course of business, or paid,
or made any accrual or arrangement for payment of, any increase in compensation,
bonuses or special compensation of any kind to any officer or director of the
Company or any consultant to the Company; or (x) entered into any agreement or
otherwise obligated itself to do any of the foregoing.
Section 3.17 Employees and Labor Matters.
---------------------------
(a) Schedule 3.17(a) contains a true and complete list of all contracts,
----------------
agreements, plans, arrangements, commitments and understandings (formal and
informal) pertaining to terms of employment, compensation, bonuses, profit
sharing, stock purchases, stock repurchases, stock options, stock appreciation
rights, commissions, incentives, loans or loan guarantees, severance pay or
benefits, use of the Company's property and related matters of the Company with
any current or former shareholder, officer, director, employee or consultant,
and true and complete copies of all such contracts, agreements, plans,
arrangements and understandings have been delivered to Purchaser heretofore.
(b) Except as set forth on Schedule 3.17(a) and except as specifically
----------------
provided herein with respect to Messrs. Schortz, Katz and a corporation of which
Belkowitz is a principal, neither ANI nor the Surviving Corporation will have
any responsibility for continuing any person in the employ (or retaining any
person as a consultant) of the Company from and after the Closing or have any
liability for any severance payments to or similar arrangements with any such
Person who shall cease to be an employee of the Company at or prior to the
Closing.
(c) There is not occurring or, to the Company's or Shareholders'
knowledge, threatened or anticipated, any strikes, slow downs, pickets, work
stoppages, grievance proceedings, union organization efforts or other concerted
action by (i) any current or former employees or other persons or (ii) any union
or other collective bargaining unit, against either the Company or its premises
or products.
Section 3.18 Affiliates. Except as disclosed on Schedule 3.18 (which
---------- -------------
will describe the supply arrangements with Herzl Markovitch), none of the
Shareholders, any officer, director or key employee of the Company or any
associate or Affiliate of the Company or any of such Persons has, directly or
-11-
indirectly, (i) an interest in any Person that (A) furnishes or sells, or
proposes to furnish or sell, services or products that are furnished or sold by
the Company or (B) purchases from or sells or furnishes to, or proposes to
purchase from or sell or furnish to, the Company any goods or services or (ii) a
beneficial interest in any contract or agreement to which the Company is a party
or by which the Company or any of the assets of the Company are bound or
affected.
Section 3.19 Compliance with Law. The Company (i) has not violated or
-------------------
conducted its business or operations in violation of, and has not used or
occupied its properties or assets in violation of, any Legal Requirement or
Licensing Requirement which would individually or in the aggregate have a
material adverse effect on the Company or its subsidiaries, (ii) has not been
alleged to be in violation of any Legal Requirement or Licensing Requirement,
and (iii) has not received any notice of any alleged violation of, or any
citation for noncompliance with, any Legal Requirement or Licensing Requirement.
Section 3.20 Brokers' Fees. No investment banker, broker, finder or
-------------
similar agent has been employed by or on behalf of the Company in connection
with this Agreement or the transactions contemplated hereby, and the Company has
not entered into any agreement or understanding of any kind with any person or
entity for the payment of any brokerage commission, finder's fee or any similar
compensation in connection with this Agreement or the transactions contemplated
hereby; provided, however, Lawrence J. Katz provides ongoing corporate
development and financial advisory services to the Company pursuant to an
agreement dated April 17, 1997 and attached hereto as part of Schedule 3.15;
and, provided further, Lawrence J. Katz will not receive any additional
commission, finder's fee or similar compensation as a result of the transaction
contemplated herein.
Section 3.21 Disclosure. No representation or warranty of the Company or
----------
any Shareholder in this Agreement and no information contained in any Schedule
or other writing delivered pursuant to this Agreement or at the Closing contains
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact required to make the statements herein or therein not
misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ANI
-------------------------------------
ANI hereby represents and warrants to, and covenants and agrees with,
the Company and the Shareholders that:
Section 4.1 Organization and Good Standing of ANI. ANI is a corporation
-------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with full power and authority to own and lease its properties
and to conduct its business as currently conducted. ANI has been duly qualified
as a foreign corporation for the transaction of business and is in good standing
under the laws of each jurisdiction in which ANI owns or leases any property, or
conducts any business, so as to require such qualification, except where the
failure to obtain such qualification would not be reasonably likely to have a
material adverse effect. The copies or originals of the certificates of
incorporation, bylaws, minute books and stock records of ANI previously
delivered to, or made available for inspection by, the Company and the
Shareholders are true, complete and correct.
Section 4.2 Organization and Good Standing of Newco. Newco is a
---------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full power and authority to own and lease its
properties and to conduct its business as currently conducted. Newco has been
duly qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each jurisdiction in which Newco owns or
leases any property, or conducts any business, so as to require such
qualification, except where the failure to obtain such qualification would not
be reasonably likely to have a material adverse effect. The copies or originals
of the certificate of incorporation, bylaws, minute books and stock records of
Newco previously delivered to, or made available for inspection by, the Company
and the Shareholders are true, complete and correct.
-12-
Section 4.3 Authorization, Binding Agreement. ANI and Newco each have
--------------------------------
all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the respective
boards of directors of ANI and Newco and the sole stockholder of Newco in
accordance with the Delaware Law and the respective certificates of
incorporation and bylaws of ANI and Newco. No other corporate proceedings on
the part of ANI or Newco are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by ANI and Newco and constitutes the legal, valid and
binding agreement of ANI and Newco, enforceable against ANI and Newco in
accordance with its terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other laws, now or
hereafter in effect, relating to or limiting creditors' rights generally, and
(b) general principles of equity (whether considered in an action in equity or
at law).
Section 4.4 No Conflicts. The execution, delivery and performance of
------------
this Agreement and the consummation of the transactions contemplated hereby will
not (a) conflict with or result in a breach or violation of any term or
provision of, or constitute a default under (with or without notice or passage
of time, or both), or otherwise give any Person a basis for accelerated or
increased rights or termination or nonperformance under, any indenture,
mortgage, deed of trust, loan or credit agreement, lease, license or other
agreement or instrument to which ANI or Newco is a party or by which ANI or
Newco is bound or affected or to which any of the property or assets of ANI or
Newco are bound or affected, (b) result in the violation of the provisions of
the [articles or] certificate of incorporation or bylaws of ANI or Newco or any
Legal Requirement applicable to or binding upon them, (c) result in the creation
or imposition of any Lien upon any property or asset of ANI or Newco or (d)
otherwise adversely affect the contractual or other legal rights or privileges
of ANI or Newco. Schedule 4.4 sets forth a list of all agreements requiring the
------------
consent of any party thereto to any of the transactions contemplated hereby.
Except as set forth on Schedule 4.4, all consents, authorizations and approvals
------------
of any Person to or as a result of the consummation of the transactions
contemplated hereby, that are necessary or advisable in connection with the
operations and business of ANI and Newco as currently conducted and as proposed
to be conducted, or for which the failure to obtain the same might have,
individually or in the aggregate, a material adverse effect, have been lawfully
and validly obtained by ANI and Newco.
Section 4.5 Capitalization. The authorized capital stock of ANI
--------------
consists solely of 30,000,000 shares of ANI Common Stock, of which [______]
shares are issued and outstanding, and 5,000,000 shares of preferred stock, of
which none are issued and outstanding. All of the issued and outstanding shares
of ANI Common Stock have been duly authorized and validly issued and are fully
paid and nonassessable. Except as set forth in Schedule 4.5, there are no
------------
existing options, warrants, right, calls or commitments of any character
relating to the shares of ANI Common Stock or any other capital stock or
securities of ANI, (ii) there are no outstanding securities or other instruments
convertible into or exchangeable for shares of ANI Common Stock or any other
capital stock or securities of ANI and no commitments to issue such securities
or instruments, and no Person has any right of first refusal, preemptive right,
subscription right or similar right with respect to any shares of ANI Common
Stock or any other capital stock or securities of ANI. The authorized capital
stock of Newco consists solely of 10,000 shares of common stock, par value $.001
per share, of which 1,000 shares are, and on the Closing Date will be, issued
and outstanding. All of the issued and outstanding shares of capital stock of
Newco are, and on the Closing Date will be, owned beneficially and of record by
ANI.
Section 4.6 Brokers' Fees. Except as set forth on Schedule 4.7, no
------------- ------------
investment banker, broker, finder or similar agent has been employed by or on
behalf of ANI or Newco in connection with this Agreement or the transactions
contemplated hereby, and neither ANI nor Newco have entered into any agreement
or understanding of any kind with any person or entity for the payment of any
brokerage commission, finder's fee or any similar compensation in connection
with this Agreement or the transactions contemplated hereby.
Section 4.7 Disclosure. No representation or warranty of ANI or Newco
----------
in this Agreement and no information contained in any Schedule or other writing
delivered pursuant to this Agreement or at
-13-
the Closing contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact required to make the statements
herein or therein not misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
------------------------------
OF THE SHAREHOLDERS
-------------------
Each Shareholder hereby represents and warrants to, and covenants and
agrees with, ANI and Newco that:
Section 5.1 Ownership of Shares. Such Shareholder owns of record and
-------------------
beneficially the number of shares of Company Common Stock [and the interest in
each of the Farm LLCs] set forth opposite his or its name on Annex A hereto, and
has, and at all times prior to and as of the Closing such Shareholder will have,
good and marketable title to such shares [or interests] free and clear of all
Liens (except those shares pledged (i) pursuant to the Triarco Settlement and
(ii) pursuant to the bridge term loan to Mellon Bank) and adverse claims.
Section 5.2 Execution and Delivery. Such Shareholder has the power and
----------------------
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform its obligations under this Agreement. This
Agreement, upon its execution and delivery by such Shareholder (assuming the due
authorization, execution and delivery hereof by the other parties hereto), will
constitute the legal, valid and binding obligation of such Shareholder,
enforceable against such Shareholder in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency and
similar laws relating to creditors' rights generally and by general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
Section 5.3 No Conflicts. The execution, delivery and performance of
------------
this Agreement by such Shareholder and the consummation by such Shareholder of
the transactions contemplated hereby will not conflict with or result in a
breach or violation of any term or provision of, or (with or without notice or
passage of time, or both) constitute a default under, any indenture, mortgage,
deed of trust, trust (constructive and other), loan agreement or other agreement
or instrument to which such Shareholder is a party or by which such Shareholder
or such Shareholder's shares are bound, or violate the provisions of any
statute, or any order, rule or regulation of any governmental body or agency or
instrumentality thereof, or any order, writ, injunction or decree of any court
or any arbitrator, having jurisdiction over such Shareholder or the property of
the such Shareholder, other than the required consent of Mellon Bank, the
satisfaction, at Closing of the Triarco Settlement, the amendment of the
Botanical Trust Agreement and the possible required consent of the mortgage
holder on 500 Metuchen Road.
Section 5.4 Restrictions on Transfer of ANI Common Stock Under
--------------------------------------------------
Securities Laws.
- ---------------
(a) Such Shareholder understands and agrees that the shares
of ANI Common Stock he will acquire in the Merger have not been registered under
the Securities Act and that, accordingly, such shares will not be fully
transferable except as permitted under various exemptions contained in the
Securities Act or upon satisfaction of the registration and prospectus delivery
requirements of the Securities Act. Such Shareholder acknowledges that he must
bear the economic risk of its investment in such shares of ANI Common Stock for
an indefinite period of time since such shares have not been registered under
the Securities Act and therefore cannot be sold unless they are subsequently
registered or an exemption from registration is available. Shareholder hereby
represents and warrants that he is an Accredited Investor as defined under Rule
501(a) of the Securities Act and is acquiring the shares of ANI Common Stock in
the Merger for investment purposes only, for his own account, and not as nominee
or agent for any other Person, and not with the view to, or for resale in
connection with, any distribution thereof within the meaning of the Securities
Act.
(c) Such Shareholder hereby agrees with ANI as follows:
-14-
(i) The certificates evidencing the shares of ANI Common Stock
it will acquire in the Merger, and each instrument or certificate issued in
transfer thereof, will bear substantially the following legend:
"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933 and have been taken for investment
purposes only and not with a view to the distribution thereof, and
such securities may not be sold or transferred unless there is an
effective registration statement under such Act covering such
securities or the issuer corporation receives an opinion of counsel
reasonably satisfactory to issuer corporation (which may be counsel
for the issuer corporation) stating that such sale or transfer is
exempt from the registration and prospectus delivery requirements of
such Act."
(ii) The certificates representing such shares of ANI Common
Stock, and each instrument or certificate issued in transfer thereof, will also
bear any legend required under any applicable state securities law.
(iii) Absent an effective registration statement under the
Securities Act, covering the disposition of the shares of ANI Common Stock which
the such Shareholder acquires in the Merger, such Shareholder will not sell,
transfer, assign, pledge, hypothecate or otherwise dispose of any or all of such
shares of ANI Common Stock without first providing ANI with an opinion of
counsel reasonably acceptable to ANI (which may be counsel for ANI) to the
effect that such sale, transfer, assignment, pledge, hypothecation or other
disposition will be exempt from the registration and the prospectus delivery
requirements of the Securities Act and the registration or qualification
requirements of any applicable state securities laws. Such Shareholder consents
to ANI's making a notation on its records or giving instructions to any transfer
agent of the ANI Common Stock in order to implement the restrictions on transfer
set forth in this subsection (c).
Section 5.5 Advice of Counsel. Each Shareholder acknowledges that
-----------------
Shareholder has obtained advice from independent counsel with respect to this
Agreement to the extent Shareholder desired to do so. Such Shareholder is not
relying on any representations, except those set forth herein, or advice from
ANI or Newco or any of their respective officers, directors, attorneys or other
representatives regarding this Agreement, its content or effect.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF MERGER
------------------------------------
Section 6.1 Conditions to Each Party's Obligations. Notwithstanding any
--------------------------------------
other provision of this Agreement, the obligations of each party hereto to
consummate the Merger and the other transactions contemplated hereby shall be
subject to the satisfaction, at or prior to the Closing Date, of the following
conditions:
(a) There shall not be instituted and pending or threatened
any Action before any Governmental Entity (i) challenging the Merger or
otherwise seeking to restrain or prohibit the consummation of the transactions
contemplated hereby, or (ii) seeking to prohibit the direct or indirect
ownership or operation by ANI or the Surviving Corporation of all or a material
portion of the business or assets of the Company, or to compel ANI, the
Surviving Corporation or the Company to dispose of or hold separate all or a
material portion of the business or assets of the Company, the Surviving
Corporation or ANI.
(b) ANI shall have had declared effective its registration
statement under the Securities Act with respect to its firm commitment
underwritten initial public offering of the ANI Common Stock, and no stop order
with respect thereto shall have been entered by the Securities and Exchange
Commission.
-15-
Section 6.2 Conditions to Obligations of ANI and Newco.
------------------------------------------
Notwithstanding any other provision of this Agreement, the obligations of ANI
and Newco to consummate the Merger and the other transactions contemplated
hereby shall be subject to the satisfaction, at or prior to the Closing Date, of
the following conditions:
(a) The representations and warranties of the Company and the
Shareholders in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same effect as if made on the
Closing Date and each of the Company and the Shareholders shall have complied
with all covenants and agreements and satisfied all conditions on the Company's
or the Shareholders' part, as applicable, to be performed or satisfied on or
prior to the Closing Date.
(b) ANI shall have received from [McLaughlin, Bennett, Gelson &
Cramer, P.C.], counsel for the Company, a written opinion dated the Closing Date
and addressed to ANI and Newco, in substantially the form attached as Annex C
-------
hereto.
(c) ANI shall have received a certificate of the President of the
Company in substantially the form attached as Annex D hereto.
-------
(d) ANI shall have received the following under cover of a certificate
of the Secretary of the Company dated the Closing Date in substantially the form
attached as Annex E hereto:
-------
(i) Copies of resolutions of (A) the board of directors of the
Company authorizing and approving the execution, delivery and performance of
this Agreement and all other documents and instruments to be delivered by the
Company pursuant hereto, and of (B) the Company's shareholders evidencing
approval of this Agreement and the transactions contemplated hereby;
(ii) A certificate of incumbency certifying the names, titles and
signatures of the officers authorized to execute the documents referred to in
subparagraph (i) above and further certifying that the [certificate] of
incorporation and bylaws of the Company delivered to ANI at the time of, or
prior to, the execution of this Agreement have been validly adopted and have not
been amended or modified; and
(iii) Such additional supporting documentation and other
information with respect to the transactions contemplated hereby as ANI or its
counsel may reasonably request.
(e) Joseph Schortz shall have entered into a three-year Employment
Agreement with ANI in substantially the form attached hereto as Annex F,
-------
providing for, among other terms, naming Mr. Schortz President of ANI at a
salary of $250,000 per year and a one-year severance payment in the event of
termination without cause.
(f) A corporation of which Nathan Belkowitz is the sole shareholder
shall have entered into a three-year Consulting Agreement with ANI to provide
Mr. Belkowitz's services in substantially the form attached hereto as Annex G,
-------
providing for, among other terms, annual compensation of $250,000 and a one-year
severance payment in the event of termination of the contract without cause.
(g) Lawrence J. Katz shall have entered into a two-year Consulting
Agreement with ANI in substantially the form attached hereto as Annex H,
-------
providing for, among other terms, annual compensation of $110,000 and a one-year
severance payment in the event of termination without cause.
(h) Joseph Schortz, Nathan Belkowitz and Lawrence J. Katz shall have
each entered into a Non-Competition Agreement with ANI which shall provide for a
broad form of non-competition with the Company and ANI for a period of three
years after closing, but in no event less than one year after the termination of
employment or consulting (whether directly or indirectly) with the Company
and/or ANI, in substantially the form attached hereto as Annex I.
-------
-16-
(i) The Shareholders and ANI shall have entered into a Registration
Rights Agreement in substantially the form attached hereto as Annex J.
-------
(j) ANI shall be satisfied, in its sole discretion, with the results
of its due diligence investigation of the Company.
(k) ANI shall have received reasonable assurances from those key
employees, if any, of the Company that may be identified by ANI in its
discretion that they will remain in the employ of the Surviving Corporation for
a reasonable period of time after the consummation of the transactions
contemplated hereby.
(l) All authorizations, consents, waivers and approvals by or from
third parties required for the consummation of the transactions contemplated
hereby shall have been obtained and all Liens on the assets and properties of
the Company shall have been released or terminated.
(m) No act, event or condition shall have occurred after the date
hereof which ANI determines has had or could reasonably be expected to have a
material adverse effect on the business, financial condition, properties,
profitability, prospects or operations of the Company.
(n) All corporate and other proceedings and actions taken in
connection with the transactions contemplated hereby and all certificates,
opinions, agreements, instruments, releases and documents referenced herein or
incident to the transactions contemplated hereby shall be in form and substance
reasonably satisfactory to ANI and its counsel.
(o) The Shareholders shall have repaid the Company for any shareholder
loans pursuant to Section 8.1(e), for any expenses pursuant to Section 8.4
-----------
hereof, shall have assigned their interest in the Farm LLCs as provided in
Section 2.7(i).
- --------------
(p) The acquisition of Botanical Products International, Inc. shall
have been consummated on the terms set forth in the Acquisition Agreement dated
June __, 1998.
(q) Triarco and Mellon Bank (as to the bridge note) shall have
acknowledged full payment and shall have released any rights or security
interests that either may have in the Company Common Stock or assets (but in the
case of Mellon Bank, as to the bridge note only, as to the assets of the
Company).
(r) (i) The shareholders agreement dated January 1, 1997 between the
Shareholders shall have been terminated and (ii) the Shareholders shall have
waived their preemptive rights contained in the Certificate of Incorporation.
(s) The convertible promissory note in the amount of $3,000,000 to the
BPI Holders, due on December 31, 1999, shall have been surrendered for
cancellation subject only to the issuance of the ANI Common Stock as set forth
in Section 2.3 hereof.
-----------
(t) ANI shall have theretofore received a true and complete list of
(a) the names and addresses of (i) customers that represented in excess of 10%
of the Company's sales of goods and services during the 12 months ended on
September 30, 1998, and (ii) suppliers from whom the Company purchased in excess
of 10% of the Company's purchase of goods and services during the 12 months
ended on September 30, 1998, and (b) all licenses of or rights to Proprietary
Information granted to the Company by others or by others to the Company with a
description thereof (including the term, payment for and scope).
(u) The Development Agreement dated April 17, 1997 between the Company
and Lawrence J. Katz shall have been terminated without liability or payment.
Section 6.3 Conditions to Obligations of the Company and the
------------------------------------------------
Shareholders. Notwithstanding any other provision of this Agreement, the
- ------------
obligations of the Company and the Shareholders to
-17-
consummate the Merger and the other transactions contemplated hereby shall be
subject to the satisfaction, at or prior to the Closing Date, of the following
conditions:
(a) The representations and warranties of ANI and Newco in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing Date, and ANI and
Newco shall have complied with all covenants and agreements and satisfied all
conditions on their part to be performed or satisfied on or prior to the Closing
Date.
(b) The Company shall have received from Paul, Hastings, Janofsky &
Walker LLP, counsel for ANI and Newco, a written opinion dated the Closing Date
and addressed to the Company and the Shareholders, in substantially the form
attached as Annex K hereto.
-------
(c) The Company shall have received the following under cover of a
certificate of the Secretary of ANI dated the Closing Date in substantially the
form attached as Annex L hereto:
-------
(i) Copies of resolutions of the board of directors of ANI
authorizing and approving the execution, delivery and performance of this
Agreement and all other documents and instruments to be delivered by ANI
pursuant hereto and thereto;
(ii) A certificate of incumbency certifying the names, titles and
signatures of the officers authorized to execute the documents referred to in
subparagraph (i) above and further certifying that the certificate of
incorporation and bylaws of ANI delivered to the Company at the time of, or
prior to, the execution of this Agreement have been validly adopted and have not
been amended or modified; and
(iii) Such additional supporting documentation and other
information with respect to the transactions contemplated hereby as the Company
or its counsel may reasonably request.
(d) The Company shall have received a certificate of the President of
ANI in substantially the form attached as Annex M hereto.
-------
(e) The Company shall have received the following under cover of a
certificate of the Secretary of Newco dated the Closing Date in substantially
the form attached as Annex N hereto:
-------
(i) Copies of resolutions of (A) the board of directors of Newco
authorizing and approving the execution, delivery and performance of this
Agreement and all other documents and instruments to be delivered by Newco
pursuant hereto and thereto, and (B) the sole stockholder of Newco approving
this Agreement and the Merger;
(ii) A certificate of incumbency certifying the names, titles and
signatures of the officers authorized to execute the documents referred to in
subparagraph (i) above and further certifying that the certificate of
incorporation and bylaws of Newco delivered to the Company at the time of, or
prior to, the execution of this Agreement have been validly adopted and have not
been amended or modified; and
(iii) Such additional supporting documentation and other
information with respect to the transactions contemplated hereby as the Company
or its counsel may reasonably request.
(f) The Company shall have received a certificate of the President of
Newco in substantially the form attached as Annex O hereto.
-------
(g) ANI shall have approved and implemented a stock option plan under
which the key employees, consultants or advisors of the Company will be eligible
to participate as of the Closing, and Joseph Schortz shall have been granted
thereunder an option for 200,000 shares vesting over five years at an exercise
price equal to the IPO Price.
-18-
(h) Joseph Schortz and an additional non-affiliated individual
designated by the Shareholders shall have been elected to the board of directors
of ANI.
(i) ANI or Newco shall have assumed all existing contracts with the
management, employees, consultants and advisors of the Company and the BPI Note
shall have been paid at Closing.
(j) QBI shall have entered into a lease with MRA Associates, LLC,
guaranteed by ANI, for a ten-year term and two five-year renewal options which
will also provide an option for QBI or ANI to purchase the properties at fair
market value, in substantially the form attached hereto as Annex P. Initial
-------
annual rent will be $212,000 and the lease will contain a 3% annual cost of
living increase adjustment.
(k) No act, event or condition shall have occurred after the date
hereof which the Shareholders or the Company determines has had or could
reasonably be expected to have a material adverse effect on the business,
financial condition, properties, profitability, prospects or operations of ANI.
(l) All corporate and other proceedings and actions taken in
connection with the transactions contemplated hereby and all certificates,
opinions, agreements, instruments, releases and documents referenced herein or
incident to the transactions contemplated hereby shall be in form and substance
reasonably satisfactory to the Company and its counsel.
(m) ANI shall have included in the use of proceeds section of the
registration statement for the initial public offering of its Common Stock, a
contribution of capital or inter-company loan to the Surviving Corporation of up
to $6,000,000 to the extent required by the 1998/1999 business plan of the
Company as heretofore provided to ANI.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CLOSING
-----------------------------------
During the period commencing on the date hereof and continuing through
the Closing Date, the Company and the Shareholders covenant and agree (except as
expressly contemplated by this Agreement or to the extent that ANI shall
otherwise expressly consent in writing, which consent shall not be unreasonably
withheld) that:
Section 7.1 Qualification. The Company shall maintain all
-------------
qualifications to transact business and remain in good standing in the foreign
jurisdictions in which the Company owns or leases any property, or conducts any
business, so as to require such qualification, except where the failure to
maintain such qualification would not be reasonably likely to have a material
adverse effect.
Section 7.2 Ordinary Course. The Company shall conduct its business in,
---------------
and only in, the ordinary course and shall preserve intact its current business
organizations, keep available the services of its current officers, employees
and consultants and preserve its relationships with customers, suppliers and
others having business dealings with it to the end that its goodwill and going
business value shall be unimpaired at the Closing Date. The Company shall
maintain its properties and assets in good condition and repair.
Section 7.3 Organic Changes. The Company shall not (a) amend its
---------------
certificate of incorporation or bylaws, (b) acquire by merging or consolidating
with, or agreeing to merge or consolidate with, or purchase substantially all of
the stock or assets of, or otherwise acquire any business or any corporation,
partnership, association or other business organization or division thereof
except for the acquisition of BPI, (c) enter into any partnership or joint
venture, (d) declare, set aside, make or pay any dividend or other distribution
in respect of its capital stock or purchase or redeem, directly or indirectly,
any shares of its capital stock, (e) issue or sell any shares of its capital
stock of any class or any options, warrants,
-19-
conversion or other rights to purchase any such shares or any securities
convertible into or exchangeable for such shares, or (f) liquidate or dissolve
or obligate itself to do.
Section 7.4 Indebtedness. The Company shall not incur any Indebtedness,
------------
sell any debt securities or lend money to or guarantee the Indebtedness of any
Person. The Company shall not restructure or refinance its existing
Indebtedness.
Section 7.5 Accounting. The Company shall not make any change in the
----------
accounting principles, methods, records or practices followed by it or
depreciation or amortization policies or rates theretofore adopted by it. The
Company shall maintain its books, records and accounts in accordance with GAAP.
Section 7.6 Compliance with Legal Requirements. The Company shall comply
----------------------------------
promptly with all requirements that applicable law may impose upon it and its
operations and with respect to the transactions contemplated by this Agreement,
and shall cooperate promptly with, and furnish information to, ANI in connection
with any such requirements imposed upon ANI, or upon any of its affiliates, in
connection therewith or herewith, including, without limitation, all information
reasonably required by ANI to prepare its registration statement with respect to
its initial public offering.
Section 7.7 Disposition of Assets. The Company shall not sell, transfer,
---------------------
license, lease or otherwise dispose of, or suffer or cause the encumbrance by
any Lien upon any of, its properties or assets, tangible or intangible, or any
interest therein, except in the ordinary course of business; provided, however,
the Company shall pay the accrued obligations due to Lawrence J. Katz in an
amount not to exceed $____________ on the following basis: (i) 30% prior to or
at the closing; and (ii) 70% in twenty four (24) equal monthly installments,
without interest, commencing 31 days after the date of closing.
Section 7.8 Compensation. The Company shall not (a) adopt or amend in
------------
any material respect any collective bargaining, bonus, profit-sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other plan, agreement, trust, fund or arrangement for the benefit
of employees (whether or not legally binding) other than to comply with any
Legal Requirement or (b) pay, or make any accrual or arrangement for payment of,
any increase in compensation, bonuses or special compensation of any kind, or
any severance or termination pay to, or enter into any employment or loan or
loan guarantee agreement with, any current or former officer, director, employee
or consultant of the Company.
Section 7.9 Modification or Breach of Agreements; New Agreements. The
----------------------------------------------------
Company shall not terminate or modify, or commit or cause or suffer to be
committed any act that will result in breach or violation of any term of, or
(with or without notice or passage of time, or both) constitute a default under
or otherwise give any person a basis for nonperformance under, any indenture,
mortgage, deed of trust, loan or credit agreement, lease, license or other
agreement, instrument, arrangement or understanding, written or oral, disclosed
in this Agreement or the Schedules hereto. The Company shall refrain from
becoming a party to any contract or commitment other than in the ordinary course
of business. The Company shall meet all of its contractual obligations in
accordance with their respective terms.
Section 7.10 Capital Expenditures. Except for capital expenditures or
--------------------
commitments necessary to maintain its properties and assets in good condition
and repair (the amount of which shall not exceed the greater of $7,500 per month
or $25,000 in the aggregate), the Company shall not purchase or enter into any
contract to purchase any capital assets.
Section 7.11 Maintain Insurance. The Company shall maintain its Policies
------------------
in full force and effect and shall not do, permit or willingly allow to be done
any act by which any of the Policies may be suspended, impaired or canceled.
Section 7.12 Discharge. The Company shall not cancel, compromise, release
---------
or discharge any claim of the Company upon or against any person or waive any
right of the Company of material value, and not discharge any Lien upon any
asset of the Company or compromise any debt or other obligation
-20-
of the Company to any person other than Liens, debts or obligations with respect
to current liabilities of the Company.
Section 7.13 Actions. The Company shall not institute, settle or agree
-------
to settle any Action before any governmental entity.
Section 7.14 Permits. The Company shall maintain in full force and
-------
effect, and comply with, all Permits.
Section 7.15 Tax Assessments and Audits. The Company shall furnish
--------------------------
promptly to ANI a copy of all notices of proposed assessment or similar notices
or reports that are received from any taxing authority and which relate to the
Company's operations for periods ending on or prior to the Closing Date. The
Shareholders shall cause the Company to promptly inform ANI, and permit the
participation in by ANI at its expense, of any investigation, audit or other
proceeding by a Governmental Entity in connection with any Taxes, assessment,
governmental charge or duty and shall not consent to any settlement or final
determination in any proceeding without the prior written consent of ANI, which
shall not be unreasonably withheld.
ARTICLE 8
ADDITIONAL COVENANTS
--------------------
Section 8.1 Covenants of the Company and the Shareholders. During the
---------------------------------------------
period commencing on the date hereof and continuing through the Closing Date,
each of the Company and the Shareholders agrees to:
(a) comply promptly with all requirements that applicable
Legal Requirements may impose upon it with respect to the transactions
contemplated by this Agreement, and shall cooperate promptly with, and furnish
information to, ANI in connection with any such requirements imposed upon ANI or
upon any of its affiliates in connection therewith or herewith, including,
without limitation, all information reasonably required by ANI to prepare its
registration statement with respect to its initial public offering;
(b) use its reasonable commercial efforts to obtain (and to
cooperate with ANI in obtaining) any consent, authorization or approval of, or
exemption by, any Person required to be obtained or made by the Company or the
Shareholders, as applicable, in connection with the transactions contemplated by
this Agreement;
(c) use its reasonable commercial efforts to bring about the
satisfaction of the conditions precedent to Closing set forth in Sections 6.1
and 6.2 of this Agreement, including, but not limited to, providing to ANI the
lists required by Section 6.2(t);
(d) promptly orally advise ANI and, within three business
days thereafter, advise ANI in writing of any change in the Company's business
or condition that has had or may have a material adverse effect; and
(e) at or prior to the Closing, the Shareholders will repay
to the Company any shareholders loans payable, other than the loan to Joseph
Schortz in the approximate amount of $80,000, thereafter loaned by Joseph
Schortz to a co-defendant in the Triarco lawsuit, which shall be written off by
the Company prior to Closing.
Section 8.2 Covenants of ANI. During the period commencing on the date
----------------
hereof and continuing through the Closing Date, ANI agrees to:
(a) comply promptly with all requirements that applicable
Legal Requirements may impose upon it with respect to the transactions
contemplated by this Agreement, and shall cooperate promptly with, and furnish
information to, the Company and the Shareholders in connection
-21-
with any such requirements imposed upon the Shareholders or the Company or upon
any of the Affiliates of the Company in connection therewith or herewith;
(b) use its reasonable commercial efforts to obtain any
consent, authorization or approval of, or exemption by, any Person required to
be obtained or made by ANI in connection with the transactions contemplated by
this Agreement;
(c) use its reasonable commercial efforts to have the
Shareholders released from any Guarantees set forth on Schedule 8.2 hereto.
------------
If ANI cannot obtain any such release within 90 days after the Closing Date, it
will indemnify, from and after the Closing Date, the Shareholders from any
liability on the related guarantees;
(d) use its reasonable commercial efforts to bring about the
satisfaction of the conditions precedent to Closing set forth in Sections 6.1,
6.2(q) and (s) and 6.3 of this Agreement; and
(e) assume immediately prior to Closing (i) the convertible
debt held by the BPI Holders and (ii) the Earnout.
Section 8.3 Access and Information.
----------------------
(a) Between the date hereof and the Closing Date, (i) the
Company will, upon reasonable notice of at least 48 hours, permit, and will
cause its officers, directors, key employees and advisors to permit, ANI and its
representatives and agents reasonable access to the Company's books and records,
facilities, key personnel, customers, suppliers, independent accountants and
attorneys, as requested by ANI; (ii) ANI will use its reasonable best efforts to
provide the Shareholders and the Company and their respective representatives
and agents reasonable access to the books and records, facilities, key
personnel, customers, suppliers, independent accountants and attorneys of other
companies to be acquired by ANI in conjunction with the acquisition of the
Company, as reasonably requested by the Company (subject to the execution of
appropriate confidentiality agreements and with the understanding that there
will be no access to product formulations or other sensitive trade secret
information); and (iii) the Company shall provide to ANI, promptly upon
completion, an unaudited balance sheet and the related statements of income or
operations, cash flows and stockholder's equity of each of (a) the Company, [(b)
the Farm LLCs,] and (c) BPI for each month-end and period from and after
December 31, 1997 [except for the Farm LLCs, which may be provided quarterly].
(b) The Confidentiality Agreement dated April 6, 1998 (the
"Confidentiality Agreement") entered into among the Company, the Shareholders
- --------------------------
and ANI shall survive the execution and delivery of this Agreement.
Section 8.4 Expenses. Except as otherwise specifically provided herein,
--------
each party to this Agreement shall bear its own direct and indirect expenses
incurred in connection with the negotiation and preparation of this Agreement
and the consummation and performance of the transactions contemplated hereby,
including, without limitation, all legal fees and fees of any brokers, finders
or similar agents; provided, however, that the Company may advance such
-------- -------
expenses on behalf of the Shareholders which such advances the Shareholders
shall repay to the Company at, or prior to, the Closing; provided, further, that
-------- -------
the fees of independent auditors to audit the Company's financial statements
shall be paid by ANI; and provided, further, that expenses incurred by the
-------- -------
Shareholders in connection with activities specifically requested by ANI in
pursuing and consummating its initial public offering shall be reimbursed by
ANI.
Section 8.5 Certain Notifications. At all times from the date hereof
---------------------
to the Closing Date, each party shall promptly notify the others in writing of
the occurrence of any event that will or may (i) render any statement,
representation or warranty of such party in this Agreement (including the
Schedules hereto) inaccurate or incomplete in any material respect or (ii)
constitute or result in the breach by such party of, or a failure to comply
with, any agreement or covenant in this Agreement applicable to such party or
(iii) result in the failure by such party to satisfy any of the conditions
specified in Article 6 hereof.
---------
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Section 8.6 Publicity; Employee Communications. At all times prior to
----------------------------------
the Closing Date, each party shall obtain the consent of all other parties
hereto prior to issuing, or permitting any of its directors, officers, employees
or agents to issue, any press release or other information to the press,
employees of the Company or any third party with respect to this Agreement or
the transactions contemplated hereby; provided, however, that no party shall be
-------- -------
prohibited from supplying any information to any of is representatives, agents,
attorneys, advisors, financing sources and others to the extent necessary to
complete the transactions contemplated hereby. Nothing contained in this
Agreement shall prevent any party to this Agreement at any time from furnishing
any required information to any Governmental Entity or authority pursuant to a
Legal Requirement or from complying with its legal or contractual obligations.
Section 8.7 Further Assurances. Subject to the terms and conditions
------------------
of this Agreement, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable Legal
Requirements, to consummate and make effective the transactions contemplated by
this Agreement. If at any time after the Closing any further action is necessary
or desirable to carry out the purposes of this Agreement, the Shareholders, the
Company, ANI or Newco, as the case may be, shall take or cause to be taken all
such necessary or convenient action and execute, and deliver and file, or cause
to be executed, delivered and filed, all necessary or convenient documentation.
Section 8.8 Competing Offers; Merger or Liquidation. The Company and
---------------------------------------
the Shareholders agree that they will not, and the Shareholders will cause the
Company not to, directly or indirectly, through any officer, director, agent or
otherwise, solicit, initiate, encourage or conduct discussions with, or accept
or consider the submissions of bids, offers or proposals by, any Person with
respect to an acquisition of the Company or its assets or capital stock or a
Merger or similar transaction, and the Company and the Shareholders will not,
and the Shareholders will not permit the Company to, engage any broker,
financial adviser or consultant with an incentive to initiate or encourage
proposals or offers from other parties. Furthermore, the Company and the
Shareholders shall not, and the Shareholders shall not permit the Company to,
directly or indirectly, through any officer, director, agent or otherwise,
engage in negotiations concerning any such transaction with, or provide
information to, any Person other than Buyer and its principal shareholder, and
their respective representatives, with a view to engaging, or preparing to
engage, that Person with respect to any matters referenced in this Section. The
Shareholders shall ensure that the Company shall not commence any proceeding to
merge, consolidate or liquidate or dissolve or obligate itself to do so.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 9.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Closing:
(a) by mutual consent of all of the parties hereto;
(b) by the Company or the Shareholders, on the one hand, or by
Buyer, on the other hand, by written notice to the other party or parties hereto
if the Merger shall not have been consummated on or before November 15, 1998 (or
such later date as Buyer, the Company and the controlling Shareholders may
agree), provided that in the case of a termination under this clause (b), the
party or parties terminating this Agreement shall not then be in material breach
of any of its or their obligations under this Agreement;
(c) by Buyer if (i) there has been a material misrepresentation,
breach of warranty or breach of covenant by the Company or the Shareholders
under this Agreement or (ii) any of the conditions precedent to Closing set
forth in Sections 6.1 and 6.3 have not been met on the Closing Date, and, in
each case, Buyer is not then in material default of its obligations hereunder;
or
-23-
(d) by the Company or the Shareholders if (i) there has been a
material misrepresentation, breach of warranty or breach of covenant by Buyer
under this Agreement or (ii) any of the conditions precedent to Closing set
forth in Sections 6.1 and 6.2 have not been met on the Closing Date, and, in
each case, neither the Company nor the Shareholders are then in material default
of their obligations hereunder.
Section 9.2 Effect of Termination. In the case of any termination of
---------------------
this Agreement, the provisions of Sections 8.3(b) and 8.4 shall remain in full
force and effect. Upon termination of this Agreement as provided in Section
9.1(a) or (b), this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of any party hereto or their respective
directors, officers, employees, agents or other representatives. In the event
of termination of this Agreement as provided in Section 9.1(c) or (d) hereof,
such termination shall be without prejudice to any rights that the terminating
party or parties may have against the breaching party or parties or any other
Person under the terms of this Agreement or otherwise.
Section 9.3 Amendment and Waiver. This Agreement may be amended only
--------------------
by a written instrument executed by each of the parties hereto. Any term or
provision of this Agreement may be waived in writing at any time by the party or
parties entitled to the benefits thereof. No failure to exercise and no delay
in exercising any right, power or privilege shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege
preclude the exercise of any other right, power or privilege. No waiver of any
breach of any covenant or agreement hereunder shall be deemed a waiver of any
preceding or subsequent breach of the same or any other covenant or agreement.
The rights and remedies of each party under this Agreement are in addition to
all other rights and remedies, at law or in equity, that such party may have
against the other parties.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
------------------------------------------
Section 10.1 Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of the parties hereto contained in this Agreement
or in any writing delivered pursuant hereto or at the Closing shall survive the
execution and delivery of this Agreement and the Closing and the consummation of
the transactions contemplated hereby (and any examination or investigation by or
on behalf of any party hereto) until the date 18 months after the Closing Date
(except for claims in respect thereof pending at such time, which shall survive
until finally resolved or settled); provided, however, that the representations
-------- -------
and warranties contained in Sections 3.1, 3.2, 3.3, 3.11, 3.13 (in so far as it
applies to Environmental Matters), 5.1, 5.2, 5.3 and 5.4 shall survive until the
expiration of the applicable statute of limitations; and, provided further, as
to those representations and warranties made herein as to BPI shall expire on
the date set forth for the expiration of representations and warranties in the
BPI Stock Purchase Agreement. No Action may be commenced with respect to any
representation, warranty, covenant or agreement in this Agreement, or in any
writing delivered pursuant hereto, unless by written notice, setting forth in
reasonable detail the claimed breach thereof, shall be delivered pursuant to
Section 11.1 to the party or parties against whom liability for the claimed
breach is charged on or before the termination of the survival period specified
in Section 10.1 for such representation, warranty, covenant or agreement.
ARTICLE 11
GENERAL PROVISIONS
------------------
Section 11.1 Notices. All notices and other communications under or
-------
in connection with this Agreement shall be in writing and shall be deemed given
(a) if delivered personally, upon delivery, (b) if delivered by registered or
certified mail (return receipt requested), upon the earlier of actual delivery
or three days after being mailed, or (c) if given by telecopy, upon confirmation
of transmission by telecopy, in each case to the parties at the following
addresses:
(a) If to Buyer or Newco, addressed to:
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Advanced Nutraceuticals, Inc.
2715 Bissonnett, Suite 305
Houston, Texas 77005
Telecopy: (713) 874-1443
Attention: Mr. Barry Loder
With a copy to:
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street, 23rd Floor
Los Angeles, California 90071
Telecopy: (213) 627-0705
Attention: David L. Gersh, Esq.
(b) If to the Company, addressed to:
Quality Botanical Ingredients, Inc.
500 Metuchen Road
South Plainfield, New Jersey 07080
Telecopy: (908) 561-9682
Attention: Mr. Joseph Schortz, President
With a copy to:
McLaughlin Bennett Gelson & Cramer, P.C.
1305 Campus Parkway
Neptune, New Jersey 07753
Telecopy: (732) 919-1240
Attention: John F. Gelson, Esq.
(c) If to the Shareholders,
addressed to:
Joseph Schortz
c/o Quality Botanical Ingredients, Inc.
500 Metuchen Road
South Plainfield, New Jersey 07080
Telecopy: (908) 561-9682
With a copy to:
McLaughlin Bennett Gelson & Cramer, P.C.
1305 Campus Parkway
Neptune, New Jersey 07753
Telecopy: (732) 919-1240
Attention: John F. Gelson, Esq.
Lawrence J. Katz
11 Minute Man Court
Basking Ridge, New Jersey 07921
The Botanical Trust, Joseph Schortz, Trustee
c/o Quality Botanical Ingredients, Inc.
500 Metuchen Road
South Plainfield, New Jersey 07080
Telecopy: (908) 561-9682
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With a copy to:
McLaughlin Bennett Gelson & Cramer, P.C.
1305 Campus Parkway
Neptune, New Jersey 07753
Telecopy: (732) 919-1240
Attention: John F. Gelson, Esq.
Section 11.2 Severability. If any term or provision of this Agreement
------------
or the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable such term or
provision in any other jurisdiction, the remaining terms and provisions of this
Agreement or the application of such terms and provisions to circumstances other
than those as to which it is held invalid or enforceable.
Section 11.3 Entire Agreement. This Agreement, including the
----------------
exhibits, annexes and schedules attached hereto and other documents referred to
herein, and the Confidentiality Agreement, contain the entire understanding of
the parties hereto in respect of their subject matter and supersede all prior
and contemporaneous agreements and understandings, oral and written, among the
parties with respect to such subject matter.
Section 11.4 Miscellaneous. This Agreement shall be binding upon and
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inure to the benefit of each of the parties hereto and their respective
successors, heirs and assigns; provided, however, that no party may assign
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either this Agreement or any of its rights, interests or obligations hereunder
in whole or in part without the prior written consent of the other parties
hereto (other than to the Surviving Corporation as a result of the Merger), and
any such transfer or assignment without said consent shall be void, ab initio.
---------
Subject to the immediately preceding sentence, this Agreement is not intended to
benefit, and shall not run to the benefit of or be enforceable by, any other
person or entity other than the parties hereto and their permitted successors
and assigns. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all such counterparts together shall
constitute one and the same Agreement. The exhibits, schedules and annexes to
this Agreement are incorporated herein and, by this reference, made a part
hereof as if fully set forth at length herein. The article, section and
subsection headings used herein are inserted for reference purposes only and
shall not in any way affect the meaning or interpretation of this Agreement. As
used in this Agreement, the masculine, feminine or neuter gender, and the
singular or plural, shall be deemed to include the others whenever and wherever
the context so requires. For the purposes of this Agreement, unless the context
clearly requires, "or" is not exclusive. Each party hereto hereby knowingly,
voluntarily and intentionally waives any right it may have to a jury trial in
any legal proceeding which may be hereafter instituted by any party hereto to
assert a claim arising out of or relating to this Agreement or any other
agreement, instrument or document contemplated hereby or thereby. If any legal
action or other proceeding is brought by any party pursuant to this Agreement,
the prevailing party shall be entitled to recover its costs and expenses,
including reasonable attorneys' fees.
Section 11.5 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws (and not the law of conflicts) of
the State of Delaware.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
ADVANCED NUTRACEUTICALS, INC.
By:__________________________________
An Authorized Officer
NEWCO
By:__________________________________
An Authorized Officer
QUALITY BOTANICAL INGREDIENTS, INC.
By:__________________________________
An Authorized Officer
_____________________________________
JOSEPH SCHORTZ
_____________________________________
LAWRENCE J. KATZ
THE BOTANICAL TRUST
By:__________________________________
Joseph Schortz, Trustee
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