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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
EAST WEST HERBS (USA) LTD.
AND
PARACELSIAN, INC.
DATED AS OF JUNE 28, 2002
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "AGREEMENT"), dated as of June 28,
2002, is entered into by and between East West Herbs (USA) Ltd., a Delaware
corporation ("SELLER"), and Paracelsian, Inc., a Delaware corporation
("PURCHASER").
WITNESSETH:
WHEREAS, Seller is engaged in the business of marketing, selling and
distributing (a) herbs (including without limitation "The Three Treasures" and
"Women's Treasure" lines of herbs manufactured by East West Natural Health,
Ltd., a corporation organized and existing under the laws of England), (b)
acupuncture supplies, (c) marketing newsletters (including without limitation
"Three Treasures NewsLetter" and "East West Herbs Update"), and (d) textbooks
and educational services (including without limitation seminars and free
phone-based technical support), to health practitioners and distribution
companies throughout North America (the "BUSINESS"); and
WHEREAS, Purchaser, East West Herbs Limited, a corporation organized
and existing under the laws of England with a registered office of 4 Charter
House Square, London, England EC1M 6EN and registered number 2241037 ("PARENT"),
and Robert Eric Miller, an individual residing at Old Clock Cottage, Swerford,
Oxon, OX7 4BQ, England ("MILLER"), are parties to that certain Workout Agreement
dated May 7, 1999 and Parent and Purchaser are parties to that certain 1996
Secured Loan Agreement referred to in said Workout Agreement (collectively, the
"LOAN AGREEMENT"), pursuant to which Parent is obligated to pay to Purchaser a
remaining balance of approximately $383,450, plus interest, all as more fully
set forth in the Loan Agreement, and Miller is a guarantor of such obligations
of Parent; and
WHEREAS, the status and collectibility of the Loan Agreement is
uncertain; and
WHEREAS, Seller is a wholly-owned subsidiary of Parent; and
WHEREAS, until recently, Miller was a principal of Parent; and
WHEREAS, Seller and Parent desire to restructure Parent's remaining
obligations under the Loan Agreement by causing (a) Seller to sell to Purchaser
certain of Seller's assets and properties, and (b) Miller to execute and deliver
to Purchaser a promissory note in substantially the form attached hereto as
EXHIBIT A (the "NOTE"), in consideration for Purchaser agreeing to (x) assign to
Seller its entire interest in the Loan Agreement, and (y) release Miller from
his obligations under the Loan Agreement, all as more fully set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
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1. PURCHASE AND SALE OF ASSETS.
Upon the terms and conditions set forth herein, effective at the
Closing, Seller hereby sells, conveys, transfers, assigns and delivers to
Purchaser or its assignee, and, effective at the Closing, Purchaser or its
assignee hereby purchases and accepts, Seller's entire right, title and interest
in and to the following assets and properties of the Business (the "PURCHASED
ASSETS"), free and clear of any and all liens, claims, charges, security
interests, litigation and encumbrances of any kind or nature (collectively,
"LIENS"), except for such Liens as are listed on SCHEDULE 1:
(a) The Distribution Agreement, effective as of March 23, 2001, by and
between Seller and East West Natural Health Ltd. and all similar licenses,
franchises and distribution agreements (the "ASSUMED CONTRACTS");
(b) All items of inventory (including without limitation all raw materials,
works in process and finished products) owned or held by Seller, wherever the
same may be located;
(c) All equipment, furniture, fixtures, machinery, vehicles and other
tangible personal property owned or held by Seller;
(d) All accounts, accounts receivable, rights to payment and rebates
receivable of Seller;
(e) All credits, claims for refund and security or other deposits made by
Seller to any other person and prepaid expenses, deferred charges and advance
payments arising from or in connection with, or related to, the Purchased
Assets;
(f) All general intangibles and intangible property of Seller, including
without limitation all intellectual property rights of Seller and all goodwill
associated with the Business;
(g) All rights under confidentiality, nondisclosure and similar agreements
that benefit Seller; and
(h) All books and records relating to the foregoing (including without
limitation all customers lists and customer information).
2. ASSUMED LIABILITIES.
Effective upon completion of the Closing, Purchaser hereby assumes and,
for those liabilities not immediately payable, shall be responsible for those
liabilities of Seller listed on SCHEDULE 2, and no other obligations or
liabilities of Seller (collectively, the "ASSUMED LIABILITIES"). From and for a
period of 30 days after the Closing, Seller shall cooperate and assist Purchaser
with Purchaser's effort to obtain a replacement loan, line of credit or other
credit facility with respect to the assumed credit card liabilities of Seller
and its employees and affiliates identified in Item 2 of SCHEDULE 2.
Notwithstanding anything to the contrary set forth in this Agreement or
otherwise, Purchaser shall not assume or be responsible for any other
obligations or Liabilities (as defined in Section 5(f)) of Seller or any
obligations or Liabilities of Parent or Miller, including without limitation,
any Liabilities relating to employees, consultants or independent contractors of
Seller or employee benefits (collectively, the "EXCLUDED LIABILITIES").
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3. ASSIGNMENT OF LOAN AGREEMENT.
Upon the terms and conditions set forth herein, in consideration of the
sale of the Purchased Assets, Purchaser shall assign to Seller, and Seller shall
accept from Purchaser, effective at the Closing, Purchaser's entire right, title
and interest in and to the Loan Agreement.
4. RELEASE OF INDEBTEDNESS.
In consideration of the purchase and sale of the Purchased Assets,
effective upon completion of the Closing, (a) Purchaser hereby irrevocably and
unconditionally releases and discharges Miller from his obligations under the
Loan Agreement, and (b) Seller and, at the direction of the Seller, Miller each
hereby irrevocably and unconditionally releases Purchaser, its affiliates and
their respective heirs, successors and assigns from any Liability, whether
absolute or contingent, at law or in equity (including, without limitation, any
Liability relating to an Assumed Contract or to which Purchaser might be deemed
to be subject by operation of Law (as defined in Section 5(c)); PROVIDED,
HOWEVER, that the foregoing release shall not be deemed to apply to any of the
Assumed Liabilities or any of party's rights, or any of the obligations of any
party, under or in connection with this Agreement or the Note.
5. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller hereby represents and warrants to Purchaser that as of the date
hereof and as of the Closing Date:
(a) Seller is a corporation, validly existing and in good standing
under the laws of Delaware and has the requisite corporate power and authority
to own, operate or lease the properties and assets now owned, operated or leased
by it and to carry on its business as presently conducted. Seller is a
wholly-owned subsidiary of Parent.
(b) Seller has the requisite power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. The execution
and delivery by Seller of this Agreement has been duly authorized by all
necessary corporate action on the part of Seller. The execution and delivery of
this Agreement and the performance by Seller of its obligations hereunder, and
the consummation by Seller of the transactions contemplated hereby, have been
duly authorized by the Board of Directors and sole shareholder of Seller and no
other corporate or other action on the part of Seller is necessary to authorize
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby. This Agreement has been validly executed and
delivered by Seller and constitutes a legal, valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms.
(c) The execution and delivery by Seller of this Agreement and the
performance by Seller of the transactions contemplated hereby will not (i)
conflict with or violate any provision of the certificate of incorporation or
by-laws of Seller or of any law, rule or regulation (whether federal, state,
local, foreign or supranational) (collectively, "LAWS") applicable to Seller,
the Purchased Assets or the Business, (ii) result in any violation of, or
constitute (with or without notice or lapse of time or both) a default under,
or, as applicable, give rise to the creation of any Lien, upon any of the
Purchased Assets or the Business or to a third-party right of termination,
cancellation or acceleration of any obligation or to a loss of a benefit under
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any of the terms, conditions or provisions of any Assumed Contract, or (iii)
violate any Law, order or decree applicable to or binding on Seller or any of
the Purchased Assets.
(d) No consent, approval, authorization, license, order or permit
of, or declaration, filing or registration with, or notification to, any
national, state, local, foreign or international governmental authority
(including without limitation any custodian, receiver, trustee or other similar
official appointed to take control of the assets or properties of Parent) is
required to be made or obtained in connection with the execution, delivery and
performance of this Agreement or the Note or the consummation of the
transactions contemplated hereby or thereby, except for those consents,
approvals and notifications which have already been acquired or made and except
for approval of the liquidator of Parent. No consent or approval of, or
notification to, any person or entity is required to be made or obtained in
order for Seller to transfer the Assumed Contracts to Purchaser, or for Seller
to perform its other obligations hereunder, except for those consents, approvals
and notifications which have already been acquired or made.
(e) Seller has good and marketable title to the Purchased Assets,
free and clear of all Liens of any kind or nature, except for such Liens as are
listed on SCHEDULE 1. The Purchased Assets are useable in the conduct of the
Business and are sufficient for the continued conduct of the Business after the
date hereof in substantially the same manner as conducted prior to the date
hereof.
(f) Other than the Assumed Liabilities, a list of which is attached
hereto as SCHEDULE 2, and liabilities for unpaid taxes and trade payables in an
aggregate amount not to exceed US $2,500, a list of which is attached hereto as
SCHEDULE 5(F), Seller has no other liabilities of any kind or nature, including
without limitation any actions, causes of action, obligations, judgments, suits,
debts, attorneys' fees, costs, sums of money, accounts, options, reckonings,
bonds, bills, specialties, covenants, contracts, controversies, agreements,
promises, variances, trespasses, losses, claims, damages, liabilities, expenses,
obligations, extents, executions, claims and demands, in law or in equity,
whether known or unknown, and whether absolute, contingent or otherwise
(collectively, "LIABILITIES"). Such Liabilities do not exceed Seller's cash
reserves.
(g) There are no claims, demands, actions, proceedings or appeals,
whether civil or criminal, administrative or otherwise, by or relating to
Seller, any of the Purchased Assets, the Business or the ability of Seller to
perform any of its obligations contemplated by this Agreement that are pending
or, to the knowledge of Seller, threatened. Seller is not in default with
respect to any governmental order or decree.
(h) Seller has not received any written notice to the effect that,
with respect to the operation of the Business or the ownership of the Purchased
Assets, (i) Seller is not currently in compliance with any applicable Laws, or
(ii) any currently existing circumstances are likely to result in a failure of
Seller to comply with, or a violation by Seller of, any applicable Laws
(including without limitation environmental and food and drug laws). To the
knowledge of Seller, the Business is in compliance with all applicable Laws.
Neither Seller nor any of its employees or agents is obligated to hold any
licenses or other governmental approvals with respect to the operation of the
Business or the use or ownership of the Purchased Assets, except that Seller has
been obligated to obtain a business license from the City of Emeryville.
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(i) SCHEDULE 5(I) hereto sets forth a list of all of the Assumed
Contracts. The Assumed Contracts are valid and enforceable against Seller in
accordance with their terms. Neither Seller nor, to the knowledge of Seller, any
other party thereto is in default in the performance, observance or fulfillment
of any obligation under any Assumed Contract and, to the knowledge of Seller, no
event has occurred that, with or without the giving of notice or lapse of time
or both or the occurrence of any event, condition or circumstance, would
constitute a default thereunder. Seller has not given or incurred any guarantee,
indemnity, bond, indebtedness, letter of comfort or encumbrance or other similar
obligation which relates to debts or other Liabilities, whether actual or
contingent.
(j) Seller does not own any real property. The Lease pursuant to
which Seller leases its office, warehouse and other properties at 1440 62nd
Street, Emeryville, California 94608-2036 (the "LEASED PROPERTY") is in full
force and effect and is valid, binding and enforceable in accordance with its
terms. Seller is in compliance with all covenants, commitments and obligations
on its part to be performed or observed under the Lease and, to the knowledge of
Seller, no other party to the Lease is not in compliance in all respects with
all of its commitments and obligations. Seller has not received any written
notice of a default by Seller (that has not been cured) under the Lease, and, to
the knowledge of Seller, no event or condition has happened or presently exists
which constitutes a default or, after notice or lapse of time or both, would
constitute a default under the Lease on the part of Seller or on the part of any
other party. Seller has not subleased, assigned, mortgaged, pledged or otherwise
encumbered its interest under the Lease or entered into any license, sublease or
occupancy agreement with respect to the Leased Property.
(k) SCHEDULE 5(K) hereto contains a table showing a complete list of
all of Seller's employees, their job titles, approximate length of service,
compensation level and bonus schemes.
(l) Seller has duly filed with the appropriate tax authorities all
tax returns required to be filed by Seller, and all such tax returns are true
and accurate. Seller has paid in full all taxes that are due and payable by
Seller. There is no audit or other matter in controversy with respect to any
taxes due and owing by Seller, and there is no tax deficiency or claim assessed
or, to the knowledge of Seller, threatened in writing against Seller. Seller has
withheld all taxes required to have been withheld and paid by it in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party, and such withheld taxes have been paid to the
proper governmental authority. No claim has been made in writing by any
authority in a jurisdiction where Seller does not file tax returns that Seller
is or may be subject to taxation by that jurisdiction. The unpaid taxes of
Seller do not exceed the reserve set forth on Seller's financial statements and
do not exceed such reserve as adjusted for the passage of time through the date
hereof in accordance with Seller's past custom and practice in filing its tax
returns (for this purpose treating the date hereof as the close of the taxable
year).
(m) SCHEDULE 5(M) hereto sets forth a complete and accurate list of
the names of Seller's fifty largest customers for the twelve-month period ending
on December 31, 2001, in each case showing the approximate aggregate total sales
by Seller to each such customer during such period. None of the customers
identified on SCHEDULE 5(M) hereto have notified Seller that they intend to
terminate their relationship with Seller.
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(n) No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Seller or any of its affiliates for which Purchaser or any of its
affiliates will have any Liability.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
(a) Purchaser is a corporation, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power and authority to own, operate or lease the properties and assets now
owned, operated or leased by it and to carry on its business as currently
conducted.
(b) Purchaser has the requisite corporate power and authority to
execute and to deliver this Agreement and to perform its obligations hereunder.
The execution and delivery by Purchaser of this Agreement has been duly
authorized by all necessary corporate action on the part of Purchaser. The
execution and delivery of this Agreement and the performance by Purchaser of its
obligations hereunder, and the consummation by Purchaser of the transactions
contemplated hereby, have been duly authorized by Purchaser's Board of Directors
and no other corporate or other action on the part of Purchaser is necessary to
authorize the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby. This Agreement has been validly executed
and delivered by Purchaser and constitutes a valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms.
(c) The execution and delivery by Purchaser of this Agreement and
the performance by Purchaser of the transactions contemplated hereby will not
(i) conflict with or violate any provision of the certificate of incorporation
or by-laws of Purchaser, or (iii) violate any law, order or decree applicable to
or binding on Purchaser.
(d) No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Purchaser or any of its affiliates for which Seller will have any
liability.
7. PUBLICITY.
The parties hereto shall consult with each other and shall use
reasonable commercial efforts to mutually agree upon the content and timing of
any press release or other public statements with respect to the transactions
contemplated by this Agreement and shall not issue any such press release or
make any such public statement prior thereto.
8. CONFIDENTIALITY.
All information with respect to Seller, the Purchased Assets and the
Business shall be kept in confidence by Seller and its representatives and shall
not be used in any manner by Seller or its representatives except in connection
with its performance or its preparation to perform under this Agreement;
PROVIDED, HOWEVER, that Seller may disclose such information to its legal and
financial advisors so long as such persons agree to maintain the confidentiality
of such information in accordance with this Section 8.
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9. NON-SOLICITATION.
Between the date of this Agreement and the second anniversary of the
date hereof, Seller shall not, directly or indirectly, hire, employ or engage,
or solicit for hiring, employment or engagement any employees of Seller who are
offered employment by Purchaser or cause or seek to cause any such employee to
leave the employ of Purchaser. Notwithstanding anything to the contrary in this
Section 9, after the six-month anniversary of the Closing Date (as defined in
Section 14), Seller may hire, employ or engage Ms. Laura Dalrymple, subject only
to any confidentiality or other restrictions in favor of Purchaser to which she
is then bound.
10. NON-COMPETITION.
Between the date of this Agreement and the second anniversary of the
date hereof, Seller shall not, directly or indirectly, engage in the marketing,
selling or distributing, at wholesale, of any products or services presently
marketed, sold or distributed by Seller, in the United States of America or
Canada.
11. TRANSITIONAL SERVICES.
Between the date of this Agreement and the six-month anniversary of the
date hereof, Seller shall (a) provide Purchaser and its representatives and
agents full access to, and use of, the Leased Property during normal business
hours (8:00 am until 6:30 pm) and, with Seller's prior consent, outside of
normal business hours; PROVIDED that during such six-month period Purchaser
shall reimburse Seller, on a monthly basis in advance, for the rent of $1,392
per month owing by Seller to the owner of the Leased Property pursuant to the
lease thereof; and PROVIDED FURTHER that, in the event Seller's post-Closing
employment with Purchaser is terminated for any reason, notwithstanding the
foregoing, Seller shall have no obligation to provide such access for more than
30 days following the date of such termination (although Purchaser's obligation
to reimburse Seller for rent, as described above, shall continue until the end
of such six-month period), (b) at no additional charge, permit Purchaser to
store the Purchased Assets at the Leased Property in substantially the same
manner as the Purchased Assets are presently stored, (c) at no charge, provide
Purchaser and its representatives and agents with reasonable assistance with
respect to identifying, packaging and removing the Purchased Assets from the
Leased Property, and (d) promptly remit to Purchaser on a weekly basis any
payments received by Seller that are attributable to the Purchased Assets.
12. CHANGE OF NAME.
Seller shall, promptly following the date hereof but in no event later
than the fifth business day following the date hereof, amend its certificate of
incorporation to change its name so that there will be no conflict with
Purchaser's using the name "East West Herbs".
13. BULK SALES ACT.
As promptly as practicable after the date hereof, and in any event
within 30 days, Seller shall comply with the provisions of the Uniform
Commercial Code - Bulk Sales Act as presently in effect in California. Seller
shall prepare all documents and notices required to be provided by Seller or
Purchaser in connection therewith and provide all information required in
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connection therewith, and shall take such action as may be necessary or
appropriate or requested by Purchaser to ensure that Seller and Purchaser shall
have complied therewith.
14. CLOSING; CONDITIONS.
Subject to compliance by Seller with this Agreement, including, without
limitation, Section 13 hereof, the sale and purchase of the Purchased Assets
shall take place at a closing (the "CLOSING") at the offices of Nixon Peabody
LLP, 437 Madison Avenue, New York, New York 10021 at 10:00 a.m. on July 31, 2002
or at such other time or on such other date or at such other place as Purchaser
and Seller may agree upon in writing (the date on which the Closing takes place
being the "CLOSING DATE"). The obligations of Purchaser under this Agreement to
consummate the transactions contemplated hereby shall be subject to (i) the
execution and delivery by Miller to Purchaser of a promissory note in
substantially the form attached hereto as EXHIBIT A, (ii) the delivery to
Purchaser of a release duly executed and delivered by Andrew Miller (as
President of Seller) of all Liabilities of Seller or any of its affiliates, and
(iii) the delivery to Purchaser of other agreements, certificates and
instruments as may be reasonably requested by Purchaser, any or all of which
conditions may be waived in writing by Purchaser in its sole discretion.
15. SURVIVAL.
The several representations and warranties of the parties contained in
this Agreement shall survive the closing of the transactions contemplated hereby
and shall remain in full force and effect thereafter for a period of two years
from the date hereof.
16. INDEMNIFICATION.
(a) Seller hereby agrees following the date hereof to indemnify,
defend and hold Purchaser and its officers, directors, agents and affiliates
harmless from and in respect of any and all costs, losses, Liabilities,
obligations, damages, claims, settlements and expenses (including reasonable
fees and expenses of attorneys, accountants and experts incurred in the defense
or settlement of any of the foregoing and costs of enforcing the indemnity
provided for herein) suffered or incurred by them ("LOSSES") that arise out of
or due to (i) any breach of any representation or warranty made by Seller in or
pursuant to this Agreement or any other document referred to herein, in each
case as of the date made or deemed to be made or required to be true, (ii) any
breach by Seller of its covenants or agreements set forth in this Agreement, or
(iii) any Excluded Liabilities.
(b) Purchaser hereby agrees following the date hereof to indemnify,
defend and hold Seller and its officers, directors, agents and affiliates
harmless from and in respect of any and all Losses that they may incur after the
Closing Date arising out of or due to (i) any breach of any representation or
warranty made by Purchaser in or pursuant to this Agreement, as of the date made
or deemed to be made or required to be true, or (ii) any breach by Purchaser of
any of its covenants or agreements set forth in this Agreement.
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17. EXPENSES.
Each of the parties shall bear all of costs and expenses incurred by it
in connection with this Agreement, the Note or the transactions contemplated
hereby or thereby except that Purchaser shall bear and be liable for all
expenses associated with compliance with Section 13 hereof and all transfer,
stamp, ad valorem or other taxes associated with the sale and purchase of the
Purchased Assets.
18. ASSIGNMENT.
This Agreement may not be assigned by operation of law or otherwise by
Seller.
19. FURTHER ASSURANCES.
Seller shall take such action, sign such documents and instruments,
obtain such consents and approvals and make such filings as may be necessary or
appropriate or as requested by Purchaser in order for Seller to perform its
obligations hereunder or to effectively convey the Purchased Assets free and
clear of all Liens.
20. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with
the substantive laws of the State of New York or the State of California, as
determined by venue, without reference to choice of law principles, and shall
not be subject to the United Nations Convention on the International Sale of
Goods or any similar law or treaty. The exclusive venue for the adjudication of
any dispute or proceeding arising out of this Agreement, the Note or the
performance hereof and thereof, if prosecuted primarily by Purchaser, shall be
the courts located in Ithaca, New York, and the parties hereto each consent and
submit to the jurisdiction of any court located in Ithaca, New York or any
federal court located in the Northern District of New York, and, if prosecuted
primarily by Seller, shall be the courts located in Oakland, California, and the
parties hereto each consent and submit to the jurisdiction of any court located
in Oakland, California or any federal court located in the Northern District of
California.
21. COUNTERPARTS; FACSIMILE SIGNATURES.
This Agreement may be executed in one or more counterparts, and by
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement. Execution of this Agreement may be made
by facsimile signature which, for all purposes, shall be deemed to be an
original signature.
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IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be executed as of the date first above written.
EAST WEST HERBS (USA) LTD.
By: /S/ ANDREW MILLER
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Name: Andrew Miller
Title: President
PARACELSIAN, INC.
By: /S/ NORIYOSHI INOUE
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Name: Noriyoshi Inoue
Title: President
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