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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
HAUSER, INC.
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(Name of Issuer)
Common Stock. $.001 par value per share
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(Title of Class of Securities)
419141403
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(CUSIP Number of Class of Securities)
Volker Wypyszyk
2550 El Presidio Street
Long Beach, CA 90810
(310) 637-9566
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
Copies to:
Harvey L. Sperry
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
(212) 728-8000
June 11, 1999
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(Date of Event which Requires
Filing of this Schedule)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or
240.13d-1(g), check the following box: / /
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SCHEDULE 13D
CUSIP No. 419141403
1 NAME OF REPORT PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Zuellig Group N.A., Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF 0
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 2,515,349
REPORTING
PERSON WITH 9 SOLE DISPOSITIVE POWER
0
10 SHARED DISPOSITIVE POWER
2,515,349
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
2,515,349
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.5%
14 TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
2
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SCHEDULE 13D
CUSIP No. 419141403
1 NAME OF REPORT PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Zuellig Botanicals, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF 0
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 1,383,442
REPORTING
PERSON WITH 9 SOLE DISPOSITIVE POWER
0
10 SHARED DISPOSITIVE POWER
1,383,442
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
1,383,442
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
26.7%
14 TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
3
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SCHEDULE 13D
CUSIP No. 419141403
1 NAME OF REPORT PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
ZATPACK INC.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
British Virgin Islands
7 SOLE VOTING POWER
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 2,515,349
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH
10 SHARED DISPOSITIVE POWER
2,515,349
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
2,515,349
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.5%
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
4
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This Schedule 13D is being filed on behalf of Zatpack Inc. ("Zatpack"),
an international business company organized under the laws of the British Virgin
Islands, Zuellig Group N.A., Inc. ("ZGNA"), a Delaware corporation and a wholly
owned subsidiary of Zatpack, and Zuellig Botanicals, Inc. ("ZBI"), a Delaware
corporation and a wholly owned subsidiary of ZGNA (Zatpack, ZGNA and ZBI are
collectively referred to as the "Reporting Persons"), relating to the common
stock, par value $.001 per share ("Common Stock"), of Hauser, Inc. (the
"Issuer").
Item 1. Security and Issuer.
This statement on Schedule 13D relates to the Common Stock of the
Issuer, and is being filed pursuant to Rule 13d-1 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The address of the
principal executive offices of the Issuer is 5555 Airport Boulevard, Boulder
CO 80301.
Item 2. Identity and Background.
(a), (b), (c) and (f) Exhibits A, B, and C attached hereto and
incorporated by reference herein in their entirety, set forth the name,
citizenship, residence or business address, and certain employment information
of each of the executive officers (where applicable) and directors of the
Reporting Persons.
(d) During the last five years, none of the Reporting Persons has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the last five years, none of the Reporting Persons has been
a party to any civil proceeding of a judicial or administrative body of
competent jurisdiction resulting in a
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judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The 2,515,349 shares of Common Stock beneficially owned by the
Reporting Persons (the "Acquired Shares") were acquired by the Reporting
Persons at the effective time of the merger (the "Merger") of three newly
created, wholly-owned subsidiaries of the Issuer with and into each of Zuellig
Botanical Extracts, Inc. ("ZBE"), a wholly owned subsidiary of ZBI, ZetaPharm,
Inc. ("ZetaPharm"), a wholly owned subsidiary of ZGNA and Wilcox Drug Company,
Inc. ("Wilcox"), a wholly owned subsidiary of ZGNA, Inc. (ZBE, ZetaPharm and
Wilcox are collectively referred to as the "Contributed Subsidiaries"). Prior
to the acquisition of the Issuer's stock described herein, no Reporting Person
owned shares of Common Stock.
Item 4. Purpose of Transaction.
The Reporting Parties acquired the Acquired Shares in exchange for
shares of the Contributed Subsidiaries owned by ZGNA and ZBI upon the
consummation of the Merger on June 11, 1999 (the "Closing Date"), pursuant to
the terms of an Agreement and Plan of Merger (the "Merger Agreement") by and
among the Issuer, ZGNA, ZBI and certain other parties, dated as of December 8,
1998, as amended. The Merger Agreement and the amendment thereto are attached
hereto as Exhibits E and F respectively and are incorporated herein by
reference. Any description herein of the
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Merger Agreement, as amended, is qualified in its entirety by reference thereto.
On the Closing Date, the Issuer, ZGNA and ZBI entered into a
Governance Agreement (the "Governance Agreement") pursuant to which, among
other things, the Issuers' Board of Directors (the "Board") increased the size
of the Board to nine directors, three of whom have been appointed by the
Issuer, three of whom have been appointed by ZGNA, and three of whom are
independent directors which have been appointed by the Issuer and ZGNA. The
Governance Agreement is attached hereto as Exhibit G and is incorporated
herein by reference. Any description herein of the Governance Agreement is
qualified in its entirety by reference thereto.
In connection with the Merger Agreement, the Issuer, ZGNA and ZBI
entered into a Registration Rights Agreement (the "Registration Rights
Agreement") which provides ZGNA, ZBI and their transferees certain demand and
piggyback registration rights in connection with the Common Stock. Subject to
certain limitations, the holders of the registration rights have the right to
request two demand registrations, provided the anticipated aggregate public
offering price for the shares to be sold pursuant to such request exceeds
$10,000,000. In addition, the holders have unlimited piggyback rights.
With certain limited exceptions, the Issuer bears all expenses of
registration, qualification, or compliance and ZGNA and ZBI or their
transferees bear all selling expenses, including
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underwriting discounts, selling commissions and all fees and disbursements of
counsel of such holders.
The Registration Rights Agreement provides for the Issuer's
indemnification of the holders of the registration rights, including
indemnification for violations of the Securities Act.
The Issuer is not obligated to effect a registration of securities
under the Registration Rights Agreement if in the opinion of counsel to the
Issuer, all of the Registrable Securities (as defined in the Registration Rights
Agreement) a holder desires to sell may be sold in any 90-day period pursuant to
Rule 144 issued under the Securities Act (without giving effect to Rule 144(k)).
The Registration Rights Agreement is attached hereto as Exhibit H and is
incorporated herein by reference. Any description herein of the Registration
Rights Agreement is qualified in its entirety by reference thereto.
Certain shares of the Acquired Shares otherwise issuable to ZGNA and
ZBI have been placed in escrow (the "Escrow Shares") pursuant to an Escrow
Agreement entered into between the Issuer, ZGNA, ZBI and American Securities
Transfer & Trust, Inc., as escrow agent (the "Escrow Agreement"). If the
Issuer sells all or substantially all of its paclitaxel business for an amount
in excess of $3,000,000 by October 31, 1999, certain of the Escrow Shares will
be returned to the Issuer to be canceled. The exact number of Escrow Shares to
be returned will equal the net proceeds received by the Issuer in excess of
$3,000,000 divided by $14.00 (on a split adjusted basis). The Escrow Agreement
is attached hereto as Exhibit I and is incorporated herein by
8
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reference. Any description herein of the Escrow Agreement is qualified in its
entirety by reference thereto.
In order for ZBI to obtain financing to meet its post merger
operating needs, both ZBI and ZGNA have pledged all of the Acquired Shares
(including the Escrow Shares) and the Registration Rights Agreement to its
bank pursuant to pledge agreements (the "Pledge Agreements"). The shares
pledged secure all the present and future indebtedness of ZBI to the bank and
all of ZBI's obligations under the Pledge Agreements. Pursuant to the Pledge
Agreements both ZGNA and ZBI have pledged to the bank all stock rights and
rights to dividends of the Acquired Shares. The Pledge Agreements are attached
hereto as Exhibit J and are incorporated herein by reference. Any description
herein of the Pledge Agreements is qualified in its entirety by reference
thereto.
The Reporting Persons acquired the Acquired Shares with the intention
of combining their businesses with those of the Issuer. The Reporting Persons
intend to have a substantial role in the management of the Issuer on an
ongoing basis.
Except as noted in this Schedule 13D and the Exhibits hereto, as of
the date of this Schedule, the Reporting Persons presently have no specific
plan or proposal that would result in (a) the acquisition by any person of
additional securities of the Issuer, or the disposition of securities of the
Issuer; (b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its
subsidiaries; (c) a sale or transfer of a material amount of
9
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assets of the Issuer or any of its subsidiaries; (d) any change in the present
board of directors or management of the Issuer, including any plans or proposals
to change the number or term of directors or to fill any existing vacancies on
the board; (e) any material change in the present capitalization or dividend
policy of the Issuer; (f) any other material change in the Company's business or
corporate structure; (g) any change in the Issuer's charter, bylaws or
instruments corresponding thereto or other actions which may impede the
acquisition of control of the Issuer by any person; (h) causing a class of
securities of the Issuer to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; (i) a class of equity securities of
the Issuer becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Act; or (j) any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
On June 11, 1999 the shareholders of the Issuer approved a reverse
stock split whereby the Issuer has issued one new share of Common Stock in
exchange for four shares of then outstanding Common Stock. The effective date
of the reverse stock split was June 14, 1999. The share amounts reflected in
this Schedule 13D reflect the reverse stock split.
(a) The Reporting Persons beneficially own an aggregate of 2,515,349
shares of Common Stock, representing approximately 48.5% of the total Common
Stock outstanding. This percentage is calculated on the basis of 5,183,785
shares of Common Stock
10
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outstanding as of June 15, 1999, as reported to the Reporting Persons by the
Issuer.
ZBI is the direct and beneficial owner of a total of 1,383,442 shares
of Common Stock, representing approximately 26.7%, of the total number of
shares of Common Stock outstanding.
ZGNA directly owns 1,131,907 shares of Common Stock, representing
approximately 21.8% of the outstanding Common Stock. By reason of the control
ZGNA exercises over ZBI, its wholly owned subsidiary, it may be deemed under
Rule 13d-3 of the Exchange Act to own beneficially all of the shares owned by
ZBI. By reason of the control Zatpack exercises over ZGNA, its wholly owned
subsidiary, it may be deemed under Rule 13d-3 to own beneficially all of the
shares owned by ZGNA and ZBI. Therefore, Zatpack and ZGNA are each the
beneficial owner of a total of 2,515,349 shares of Common Stock, representing
approximately 48.5% of the total number of shares of Common Stock outstanding.
(b) The reporting Entities together share the power to vote or to
direct the vote, and to dispose or to direct the disposition of, the shares of
Common Stock held by ZBI. Zatpack and ZGNA together share the power to vote or
to direct the vote, and to dispose or to direct the disposition of, the shares
of Common Stock held by ZGNA.
(c) Except for the acquisition of the Acquired Shares upon the
effectiveness of the Merger on June 11, 1999, there have not been any
transactions in the Common Stock within the past 60 days by the Reporting
Persons.
11
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(d) Except as described above, no other person has the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, the Acquired Shares.
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships With Respect to Securities of the Issuer.
Pursuant to Rule 13d-1(k) under the Exchange Act, the Reporting
Persons have entered into an agreement with respect to the joint filing of
this statement, and any amendment or amendments hereto, which is being filed
as Exhibit D to this Schedule 13D and is incorporated herein by reference.
Except as referred to above and in Item 4, there are no contracts,
arrangements, understandings or relationships among the persons named in Item
2 or between such persons and any other person with respect to any securities
of the Issuer.
Item 7. Material to be Filed as Exhibits.
Exhibit A: Information relating to Directors and Officers of Zuellig
Group N.A., Inc.;
Exhibit B: Information relating to Directors and Officers of Zuellig
Botanicals, Inc.;
Exhibit C: Information relating to Directors of Zatpack Inc.;
Exhibit D: Joint Filing Agreement, dated as of June 18, 1999, by and
among the Reporting Persons;
Exhibit E: Agreement and Plan of Merger, dated as of December 8, 1998,
by and among the Issuer, ZGNA, ZBI and certain other parties;
12
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Exhibit F: Amendment No. 1 to the Agreement and Plan of Merger, dated
as of February 11, 1999, by and among the Issuer, ZGNA, ZBI and certain other
parties;
Exhibit G: Governance Agreement, dated June 11, 1999, by and among the
Issuer, ZGNA and ZBI;
Exhibit H: Registration Rights Agreement, dated December 8, 1998, by
and among the Issuer, ZGNA, and ZBI;
Exhibit I: Escrow Agreement, dated June 11, 1999, by and among the
Issuer, ZGNA, ZBI and certain other parties;
Exhibit J: Pledge Agreements, dated June 11, 1999, by ZGNA and ZBI;
Exhibit K: Powers of Attorney executed in connection with the filings
under the Securities Exchange Act of 1934.
13
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SIGNATURES
After reasonable inquiry and to the best of our knowledge and
belief, the undersigned certify that the information set forth in this
statement is true, complete and correct.
Dated: June 18, 1999 Zatpack, Inc.
By: /s/ Harvey L. Sperry
-----------------------
Harvey L. Sperry
Attorney-in-Fact
Zuellig Group N.A., Inc.
By: /s/ Harvey L. Sperry
-----------------------
Harvey L. Sperry
Attorney-in-Fact
Zuellig Botanicals, Inc.
By: /s/ Harvey L. Sperry
-----------------------
Harvey L. Sperry
Attorney-in-Fact
14
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Exhibit A
Set forth below is the name, citizenship, address, position and present
principal occupation of each of the directors and executive officers of
Zuellig Group N.A., Inc.
Reporting Persons
<TABLE>
<CAPTION>
Residence
or Business Position Present
Name Citizenship Address with the Issuer Occupation
- ---- ----------- ------- --------------- ----------
<S> <C> <C> <C> <C>
Peter Zuellig Switzerland The Zuellig Group Director CEO
910-914 Jardine House
1 Connaught Place
Central
Hong Kong
Harvey L. Sperry United States Willkie Farr & Gallagher Director Attorney
787 Seventh Avenue
New York, NY 10023
Volker Wypyszyk United States 2550 El Presidio Street CO-CEO President-ZGNA
Long Beach, CA 90810 Director
Ralph Heimann United States 2550 El Presidio Street CFO President-ZBI
Long Beach, CA 90810
</TABLE>
E-1
<PAGE>
Exhibit B
Set forth below is the name, citizenship, address, position and present
principal occupation of each of the directors and executive officers of
Zuellig Botanicals, Inc.
Reporting Persons
<TABLE>
<CAPTION>
Residence
or Business Position Present
Name Citizenship Address with the Issuer Occupation
- ---- ----------- ------- --------------- ----------
<S> <C> <C> <C> <C>
Harvey L. Sperry United States Willkie Farr & Gallagher Director Attorney
787 Seventh Avenue
New York, NY 10023
Volker Wypyszyk United States 2550 El Presidio Street CO-CEO President-ZGNA
Long Beach, CA 90810 Director
Ralph Heimann United States 2550 El Presidio Street CFO President-ZBI
Long Beach, CA 90810
Terry L. Feit United States 2550 El Presidio Street N/A Assistant Secretary/
Long Beach, CA 90810 Controller-ZBI
</TABLE>
E-2
<PAGE>
Exhibit C
Set forth below is the name, citizenship, address, position and present
principal occupation of each of the directors of Zatpack.
Reporting Persons
<TABLE>
<CAPTION>
Residence
or Business Position Present
Name Citizenship Address with the Issuer Occupation
- ---- ----------- ------- --------------- ----------
<S> <C> <C> <C> <C>
Peter Zuellig Switzerland The Zuellig Group Director CEO
910-914 Jardine House
1 Connaught Place
Central
Hong Kong
Harvey L. Sperry United States Willkie Farr & Gallagher Director Attorney
787 Seventh Avenue
New York, NY 10023
David Zuellig Switzerland The Zuellig Group None Managing Director
910-914 Jardine House
1 Connaught Place
Central
Hong Kong
Daniel Zuellig Switzerland The Zuellig Group None CEO
910-914 Jardine House
1 Connaught Place
Central
Hong Kong
Thomas Zuellig Switzerland The Zuellig Group None CFO
910-914 Jardine House
1 Connaught Place
Central
Hong Kong
</TABLE>
E-3
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Exhibit D
Joint Filing Agreement
The undersigned hereby agree that the statement on Schedule 13D with
respect to the shares of common stock, $.001 par value, of Hauser, Inc. is,
and any amendment thereto signed by each of the undersigned shall be, filed on
behalf of each undersigned pursuant to and in accordance with the provisions
of 13d-1(k) under the Securities Exchange Act of 1934, as amended.
Dated: June 18, 1999
ZUELLIG GROUP N.A., INC.
By:/s/ Harvey L. Sperry
-----------------------
Harvey L. Sperry
Attorney-in-Fact
ZUELLIG BOTANICALS, INC.
By:/s/ Harvey L. Sperry
-----------------------
Harvey L. Sperry
Attorney-in-Fact
ZATPACK INC.
By:/s/ Harvey L. Sperry
-----------------------
Harvey L. Sperry
Attorney-in-Fact
E-4
<PAGE>
Exhibit E
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AGREEMENT AND PLAN OF MERGER
by and among
ZUELLIG GROUP N.A., INC.
HAUSER, INC.
AND CERTAIN OTHER PARTIES
dated
as of
December 8, 1998
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<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS.......................................................2
SECTION 2. THE MERGER........................................................7
2.1. The Mergers.........................................................7
2.2. The Closing.........................................................8
2.3. Effective Time......................................................8
2.4. Effect of the Merger................................................8
SECTION 3. EFFECT OF THE MERGER ON THE CAPITAL STOCK; MERGER
CONSIDERATION; EXCHANGE OF CERTIFICATES...........................9
3.1. Effect on Capital Stock; Merger Consideration.......................9
3.2. Certificate of Incorporation of Surviving Corporations..............9
3.3. By-laws of the Surviving Corporations...............................9
3.4. Directors and Officers..............................................9
3.5. Tax Treatment........................................................9
3.6. Accounting Treatment................................................10
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................10
4.1. Corporate Organization..............................................10
4.2. Subsidiaries........................................................11
4.3. Capitalization......................................................11
4.4. Corporate Proceedings, etc..........................................12
4.5. Consents and Approvals..............................................13
4.6. Compliance with Law.................................................13
4.7. Litigation..........................................................15
4.8. Change in Ownership.................................................15
4.9. Absence of Defaults, Conflicts, etc.................................16
4.10. Reports and Financial Statements...................................16
4.11. Absence of Certain Developments....................................17
4.12. Material Contracts.................................................18
4.13. Absence of undisclosed Liabilities.................................19
4.14. Employees..........................................................19
4.15. Tax Matters........................................................20
4.16. Employee Benefit Plans............................................21
4.17. Patents, Licenses, etc............................................22
4.18. Title to Tangible Assets...........................................22
4.19. Insurance..........................................................23
4.20. Transactions with Related Parties..................................23
4.21. Registration Rights................................................23
4.22. Private Offering...................................................24
4.23. Investment.........................................................24
4.24. Brokerage..........................................................25
4.25. Takeover Statute...................................................25
4.26. Material Facts.....................................................25
4.27. Debt...............................................................25
(i)
<PAGE>
4.28. Company Real Property..............................................26
4.29. Corporate Minute Books.............................................27
4.30. Good Condition.....................................................27
4.31. Manufacturing Capacity.............................................27
SECTION 5. REPRESENTATIONS AND WARRANTIES OF ZGNA..........................27
5.1. Corporate Organization..............................................27
5.2. Contributed Subsidiaries............................................28
5.3. Capitalization......................................................28
5.4. Corporate Proceedings, etc..........................................29
5.5. Consents and Approvals..............................................30
5.6. Compliance with Law.................................................30
5.7. Litigation..........................................................32
5.8. Change in Ownership.................................................32
5.9. Absence of Defaults, Conflicts, etc.................................32
5.10. Reports and Financial Statements...................................33
5.11. Absence of Certain Developments....................................34
5.12. Material Contracts.................................................34
5.13. Absence of undisclosed Liabilities.................................35
5.14. Employees..........................................................35
5.15. Tax Matters........................................................37
5.16. Employee Benefit Plans............................................37
5.17. Patents, Licenses, etc............................................38
5.18. Title to Tangible Assets...........................................39
5.19. Insurance..........................................................39
5.20. Transactions with Related Parties..................................39
5.21. Registration Rights................................................40
5.22. Private Offering...................................................40
5.23. Investment.........................................................40
5.24. Brokerage..........................................................41
5.25. Material Facts.....................................................41
5.26. Debt...............................................................41
5.27. Financial Records..................................................42
5.28. Subsidiary Real Property...........................................42
5.29. Company Security Holdings..........................................43
5.30. Bank Accounts; Powers of Attorney..................................43
5.31. Corporate Minute Books.............................................43
5.32. Sufficient Assets..................................................43
5.33. Good Condition.....................................................43
5.34. Bank Commitment....................................................44
SECTION 6. ADDITIONAL COVENANTS OF THE PARTIES.............................44
6.1. Resale of Securities................................................44
6.2. Proxy Statement.....................................................45
6.3. Access to Information...............................................46
6.4. Stockholders Meeting................................................46
6.5. Execution and Delivery of Agreements................................46
6.6. Ordinary Course.....................................................47
6.7. Further Assurances..................................................49
6.8. Confidentiality.....................................................50
6.9. Standstill..........................................................50
6.10. Ownership of Shares................................................51
6.11. Noncompetition.....................................................52
6.12. Resignation of Directors...........................................53
(ii)
<PAGE>
6.13. Subscription Right.................................................53
6.14. Letters of Accountants.............................................54
6.15. Efforts to Satisfy Conditions; Notice of Inability to Meet
Conditions.........................................................55
6.16. HSR................................................................55
6.17. Public Announcement................................................55
6.18. Cooperation in Defense.............................................56
6.19. Volker Wypyszyk....................................................56
6.20. Repayment of Debt..................................................56
SECTION 7. ZGNA'S CLOSING CONDITIONS.......................................56
7.1. Representations and Warranties......................................56
7.2. Compliance with Agreement...........................................57
7.3. Injunction..........................................................57
7.4. Stockholder Approval................................................57
7.5. Consents and Approvals..............................................57
7.6. NASDAQ Listing......................................................57
7.7. Adverse Development.................................................57
7.8. Transaction Documents...............................................57
7.9. Credit Agreements...................................................58
7.10. HSR Act............................................................58
7.11. Election of Officer and Directors..................................58
7.12. Officer's Certificate..............................................58
7.13. Counsel's Opinion..................................................58
7.15. Approval of Proceedings............................................58
7.16. Accountant's Letter................................................59
SECTION 8. COMPANY CLOSING CONDITIONS......................................59
8.1. Representations and Warranties......................................59
8.2. Compliance with Agreement...........................................59
8.3. Injunction..........................................................59
8.4. Stockholder Approval................................................59
8.5. Election of Officer and Directors...................................60
8.6. Adverse Development.................................................60
8.7. Credit Agreements...................................................60
8.8. Consents and Approvals..............................................60
8.9. HSR Act.............................................................60
8.10. Transaction Documents..............................................60
8.11. ZGNA's Certificates................................................60
8.12. Counsel's Opinion..................................................61
8.13. Completion of Mergers..............................................61
8.14. Approval of Proceedings............................................61
8.15. Accountant's Letter................................................61
8.16. Employees..........................................................61
8.17. Exclusive Distributorship Agreement................................62
SECTION 9. TERMINATION AND INDEMNIFICATION.................................62
9.1. Termination.........................................................62
9.2. Procedure and Effect of Termination.................................62
9.3. Survival of Representations, Warranties and Covenants...............63
9.4. Indemnification.....................................................63
9.5. Break-Up Fee........................................................68
(iii)
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SECTION 10. MISCELLANEOUS..................................................69
10.1. Governing Law......................................................69
10.2. Paragraph and Section Headings.....................................69
10.3. Notices............................................................69
10.4. Expenses and Taxes.................................................70
10.5. Successors and Assigns.............................................70
10.6. Entire Agreement; Amendment and Waiver.............................70
10.7. Severability.......................................................71
10.8. Third Parties......................................................71
10.9. Counterparts.......................................................72
(iv)
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
as of December 8, 1998, is by and among Hauser, Inc., a Colorado corporation
(the "Company"), QQB Holdings I, Inc., a Delaware corporation and a wholly
owned subsidiary of the Company ("Merger Sub 1"), QQB Holdings II, Inc., a New
York corporation and a wholly owned subsidiary of the Company ("Merger Sub
2"), QQB Holdings III, Inc., a Delaware corporation and a wholly owned
subsidiary of the Company ("Merger Sub 3"), Zuellig Group N.A., Inc., a
Delaware corporation ("ZGNA"), Zuellig Botanicals, Inc., a Delaware
corporation and a wholly owned subsidiary of ZGNA ("ZBI"), Zuellig Botanical
Extracts, Inc., a Delaware corporation and a wholly owned subsidiary of ZBI
("Zuellig Botanical Extracts"), ZetaPharm, Inc., a New York corporation and a
wholly owned subsidiary of ZGNA ("ZetaPharm"), and Wilcox Drug Company, Inc.,
a Delaware corporation and a wholly owned subsidiary of ZGNA ("Wilcox").
R E C I T A L S :
WHEREAS, ZGNA owns, directly or indirectly, all of the
issued and outstanding capital stock (the "Subsidiary Shares") of Zuellig
Botanical Extracts, ZetaPharm and Wilcox (collectively, the "Contributed
Subsidiaries");
WHEREAS, ZGNA and ZBI desire to assign, transfer and convey
the Subsidiary Shares to the Company solely in exchange for the Shares (as
herein defined), and the Company desires to issue and exchange the Shares to
ZGNA and ZBI solely in exchange for the Subsidiary Shares, all in accordance
with and subject to the terms and conditions of this Agreement;
WHEREAS, the acquisition of the Subsidiary Shares is to be
effected by a merger of Merger Sub 1 with and into Zuellig Botanical Extracts,
a merger of Merger Sub 2 with and into ZetaPharm and a merger of Merger Sub 3
with and into Wilcox (collectively, the "Mergers"); and
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Company and ZGNA are executing and delivering an Inventory
Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual representations, warranties, covenants and agreements herein
contained, the parties hereby agree as follows:
<PAGE>
SECTION 1. DEFINITIONS
The terms defined in this Section 1, whenever used herein,
shall have the following meanings for all purposes of this Agreement.
"Affiliate" means any Person or entity, directly or
indirectly, controlling, controlled by or under common control with such
Person or entity.
"Agreement" shall have the meaning set forth in the preamble
hereto.
"Agreement Regarding Employees" shall mean the agreement
regarding employees, dated as of the Closing Date, by and between the Company
and ZBI, substantially in the form of Exhibit C.
"Approvals" shall have the meaning set forth in Section
4.6(b).
"Basket Amount" shall have the meaning set forth in Section
9.4(c).
"Benefit Arrangement" shall have the meaning set forth in
Section 4.16.
"Board" shall mean the board of directors of the Company.
"Business Day" shall mean a day other than a Saturday,
Sunday or other day on which banks in the State of New York are not required
or authorized to close.
"BCL" shall mean the New York Business Corporation Law.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq.
"Certificates of Merger" shall have the meaning set forth in
Section 2.3.
"Closing" shall have the meaning set forth in Section 2.2(a).
"Closing Date" shall have the meaning set forth in Section
2.2(a).
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"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commission" shall mean the Securities and Exchange
Commission.
"Commitment" shall have the meaning set forth in Section 4.8.
"Common Stock" shall mean the common stock, par value $0.001
per share, of the Company.
"Company" shall have the meaning set forth in the preamble
hereto.
"Company Indemnified Parties" shall have the meaning set forth
in Section 9.4(b).
"Company Key Agreements and Instruments" shall have the
meaning set forth in Section 4.9(a).
"Company Leased Real Properties" shall have the meaning set
forth in Section 4.28(b).
"Company Material Adverse Effect" shall have the meaning set
forth in Section 4.1(c).
"Company Owned Real Properties" shall have the meaning set
forth in Section 4.28(a).
"Company Permitted Encumbrances" shall have the meaning set
forth in Section 4.28(a).
"Company Real Properties" shall have the meaning set forth in
Section 4.28(b).
"Company SEC Reports" shall have the meaning set forth in
Section 4.10.
"Contributed Subsidiaries" shall have the meaning set forth in
the recitals hereto.
"CS Balance Sheets" shall have the meaning set forth in
Section 5.10.
"Damages" shall have the meaning set forth in Section 9.4(a).
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<PAGE>
"Delaware Mergers" shall have the meaning set forth in
Section 2.1.
"DGCL" shall have the meaning set forth in Section 2.1.
"Effective Time" shall have the meaning set forth in Section
2.3.
"Environmental Laws" shall have the meaning set forth in
Section 4.6(c).
"Environmental Permits" shall have the meaning set forth in
Section 4.6(c).
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974.
"Escrow Agreement" shall mean the escrow agreement, dated as
of the Closing Date by and among the Company, ZGNA, ZBI and the Escrow Agent,
as defined therein, substantially in the form of Exhibit D.
"Exchange Act" shall mean the Securities Exchange Act of
1934, an amended.
"GAAP" shall have the meaning set forth in Section 4.10.
"Governance Agreement" shall mean the governance agreement,
dated as of the Closing Date, by and among the Company and ZGNA, substantially
in the form of Exhibit E.
"Hazardous Materials" shall have the meaning set forth in
Section 4.6(c).
"HSR" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" shall have the meaning set forth in
Section 9.4(h).
"Indemnifying Party" shall have the meaning set forth in
Section 9.4(h).
"Intellectual Property" shall have the meaning set forth in
Section 4.17.
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<PAGE>
"Inventory Purchase Agreement" shall mean the inventory
purchase agreement between the Company and ZGNA, substantially as set forth as
Exhibit F hereto.
"Merger Subs" shall mean Merger Sub 1, Merger Sub 2 and
Merger Sub 3.
"Merger Sub 1" shall have the meaning set forth in the
preamble hereto.
"Merger Sub 2" shall have the meaning set forth in the
preamble hereto.
"Merger Sub 3" shall have the meaning set forth in the
preamble hereto.
"Merger Subs Organizational Documents" shall have the
meaning set forth in Section 4.1(a).
"Mergers" shall have the meaning set forth in the recitals
hereto.
"New York Merger" shall have the meaning set forth in Section
2.1.
"Option" shall mean the option to acquire 2,000,000 shares of
Common Stock granted to ZGNA on the date hereof.
"Person" shall mean an individual, partnership, joint-stock
company, corporation, limited liability company, trust or unincorporated
organization, or a government, agency, regulatory authority or political
subdivision thereof.
"Powders Option Agreement" shall mean the agreement between
the Company and ZBI pursuant to which ZBI will grant the Company an option to
acquire the powders business of ZBI, substantially in the form set forth as
Exhibit G hereto.
"Preferred Stock" shall have the meaning set forth in Section
4.3(a).
"Proceeding" shall have the meaning set forth in Section 4.7.
"Proposed Securities" shall have the meaning set forth in
Section 6.13(a).
"Proxy Statement" shall have the meaning set forth in Section
6.2(a).
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<PAGE>
"Registration Rights Agreement" shall mean the registration
rights agreement, dated as of the date hereof, by and between the Company, ZBI
and ZGNA, substantially in the form set forth as Exhibit H hereto.
"Securities Act" shall mean the Securities Act of 1933, an
amended.
"Shares" shall mean such number of shares of Common Stock
obtained by multiplying (x) 0.49 times (y) the quotient obtained by dividing
the number of shares of Common Stock issued and outstanding immediately prior
to Closing by 0.51.
"Sourcing Agency Agreement" means the sourcing agency
agreement by and between the Company and Zuellig Botanicals, Inc.,
substantially in the form set forth as Exhibit I hereto.
"Stock Option Agreement" shall mean the agreement between
the Company and ZGNA pursuant to which the Company will grant ZGNA the Option,
substantially in the form set forth as Exhibit J hereto.
"Subscription Securities" shall have the meaning set forth in
Section 6.13(a).
"Subsidiary" shall mean a corporation of which a Person
owns, directly or indirectly, more than 50% of the Voting Stock.
"Subsidiary Key Agreements and Instruments" shall have the
meaning set forth in Section 5.9.
"Subsidiary Leased Real Properties" shall have the meaning
set forth in Section 5.28(b).
"Subsidiary Material Adverse Effect" shall have the meaning
set forth in Section 5.1(c).
"Subsidiary Owned Real Properties" shall have the meaning
set forth in Section 5.28(a).
"Subsidiary Permitted Encumbrances" shall have the meaning set
forth in Section 5.28(a).
"Subsidiary Real Properties" shall have the meaning set forth
in Section 5.28(b).
"Subsidiary Shares" shall have the meaning set forth in the
recitals hereto.
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<PAGE>
"Surviving Corporations" shall have the meaning set forth in
Section 2.1.
"Surviving Corporations Common Stock" shall have the meaning
set forth in Section 3.1(b).
"Takeover Statute" shall mean any corporate takeover
provision under laws of the State of Colorado or any other state or federal
"fair price", "moratorium", "control share acquisition" or other similar
antitakeover statute or regulation.
"Taxes" shall mean all U.S. Federal, state, local or foreign
and other taxes, assessments, workers compensation contributions, duties,
withholdings, FICA and similar charges of any kind imposed by any taxing
authority, including interest, penalties and additions thereto.
"Termination Fee" shall have the meaning set forth in Section
9.5.
"Transaction Documents" shall mean this Agreement, the
Governance Agreement, the Escrow Agreement, the Stock Option Agreement, the
Sourcing Agency Agreement, the Agreement Regarding Employees, the Registration
Rights Agreement and the Powders Option Agreement.
"Voting Stock" shall mean securities of any class or classes
of a corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
"Wilcox" shall have the meaning set forth in the recitals
hereto.
"ZBI" shall have the meaning set forth in the preamble hereto.
"ZetaPharm" shall have the meaning set forth in the recitals
hereto.
"Zuellig Botanical Extracts" shall have the meaning set forth
in the recitals hereto.
"ZGNA" shall have the meaning set forth in the preamble
hereto.
"ZGNA Indemnified Parties" shall have the meaning set forth in
Section 9.4(a).
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<PAGE>
SECTION 2. THE MERGER
2.1. The Mergers. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), at the Effective Time,
Merger Sub 1 shall be merged with and into Zuellig Botanicals Extracts and
Merger Sub 3 shall be merged with and into Wilcox (the "Delaware Mergers").
Upon the terms and subject to the conditions set forth in this Agreement, and
in accordance with the BCL, at the Effective Time, Merger Sub 2 shall be
merged with and into ZetaPharm (the "New York Merger"). Following the
Effective Time, the separate corporate existence of the Merger Subs shall
cease and Zuellig Botanicals Extracts, ZetaPharm and Wilcox shall each
continue as the surviving corporation (the "Surviving Corporations") as a
corporation incorporated under the laws of the State of Delaware, in the case
of Zuellig Botanicals Extracts and Wilcox, and as a corporation under the laws
of the State of New York, in the case of ZetaPharm, and shall succeed to and
assume all the rights and obligations of the Merger Sub that merged into them
in accordance with the DGCL and the BCL, as the case may be.
2.2. The Closing. The closing of the Mergers (the
"Closing") will take place at 10:00 a.m., New York City Time, on a date to be
specified by the parties (the "Closing Date"), which shall be no later than
the second business day after the satisfaction or waiver of the conditions set
forth in Sections 6 and 7, at the offices of Willkie Farr & Gallagher, 787
Seventh Avenue, New York, New York, unless another date or place is agreed to
in writing by the parties hereto. On the Closing Date, the Company shall
issue, sell and deliver to (i) ZGNA, as the stockholder of ZetaPharm and
Wilcox, a certificate representing the number of shares of Common Stock equal
to 45% multiplied by the Shares, duly registered in ZGNA's name and (ii) ZBI,
as the stockholder of Zuellig Botanical Extracts, a certificate representing
the number of shares of Common Stock equal to 55% multiplied by the Shares,
duly registered in ZBI's name.
2.3. Effective Time. Subject to the provisions of this
Agreement, the Contributed Subsidiaries and the Merger Subs shall file
Certificates of Merger (the "Certificates of Merger") executed in accordance
with the relevant provisions of the DGCL and the BCL and shall make all other
filings or recordings required under the DGCL and the BCL to effect the
Mergers as soon as practicable on or after the Closing Date. Each of the
Mergers shall become effective at such time as the Certificate of Merger in
respect of such Merger is duly filed with the Secretary of State of the State
of Delaware in the case of the Delaware Mergers, and the Secretary of State of
the State of New York in the case of the New York Merger, or at such later
time as may be specified in the relevant Certificate of Merger (the "Effective
Time"). The parties intend that all of the Mergers will become effective
simultaneously.
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2.4. Effect of the Mergers. Each Merger shall have the
effects set forth in the DGCL or the BCL, as the case may be. Without limiting
the generality of the foregoing, and subject thereto and any other applicable
laws, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Contributed Subsidiaries and the Merger Subs shall vest
in the Surviving Corporations, and all debts, liabilities, restrictions,
disabilities and duties of the Contributed Subsidiaries and the Merger Subs
shall become the debts, liabilities, restrictions, disabilities and duties of
the Surviving Corporation.
SECTION 3. EFFECT OF THE MERGER ON THE CAPITAL STOCK; MERGER
CONSIDERATION; EXCHANGE OF CERTIFICATES
3.1. Effect on Capital Stock; Merger Consideration. As of
the Effective Time, by virtue of the Mergers and without any action on the
part of any shareholder of the Contributed Subsidiaries:
(a) The shares of capital stock of each Contributed
Subsidiary issued and outstanding immediately before the Effective Time shall
be canceled and extinguished and be converted into the right to receive the
Shares.
(b) The shares of common stock of each Merger Sub
outstanding immediately prior to the Merger shall be converted into one share
of the common stock of the Surviving Corporation (the "Surviving Corporation
Common Stock"), which one share of the Surviving Corporation Common Stock
shall constitute all of the issued and outstanding capital stock of the
Surviving Corporation and shall be owned by the Company.
(c) At the Effective Time, the stock transfer books of the
Contributed Subsidiaries shall be closed and no transfer of shares shall be
made thereafter.
3.2. Certificate of Incorporation of Surviving
Corporations. The Certificate of Incorporation of each Contributed Subsidiary
in effect immediately prior to the Effective Time shall become the Certificate
of Incorporation of the respective Surviving Corporation from and after the
Effective Time and until thereafter amended as provided by law.
3.3. Bylaws of the Surviving Corporations. The Bylaws of
each Contributed Subsidiary in effect immediately prior to the Effective Time
shall be the Bylaws of the respective Surviving Corporation from and after the
Effective Time and until thereafter amended as provided by law.
3.4. Directors and Officers. The directors and officers of
the Surviving Corporation shall be such persons as mutually agreed by the
Company and ZGNA immediately prior to the Effective Time.
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<PAGE>
3.5. Tax Treatment.
The Company and ZGNA intend to treat the transactions
contemplated by this Agreement to qualify for federal income tax purposes as a
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
Neither the Company nor ZGNA shall file or caused to be filed any tax returns
which is inconsistent with this tax treatment.
3.6. Accounting Treatment.
The parties acknowledge that the transactions contemplated
hereunder will not be accounted for as a pooling of interest.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to ZGNA as of the date
hereof that except as expressly set forth in the corresponding numbered
section in that certain Company Disclosure Schedule of even date herewith by
and between the Company and ZGNA:
4.1. Corporate Organization.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado. The
Articles of Incorporation and Bylaws of the Company and the Certificates of
Incorporation of the Merger Subs, each as amended through the date hereof
(collectively, the "Merger Subs Organizational Documents"), and which have
been delivered to ZGNA, are true and correct as of the date hereof. Merger Sub
I and Merger Sub III are corporations duly organized, validly existing and in
good standing under the laws of the State of Delaware and Merger Sub II is a
corporation duly organized, validly existing and in good standing under the
laws of New York.
(b) The Company has all requisite power and authority and
has all necessary approvals, licenses, permits and authorization to own its
properties and to carry on its business as now conducted. The Company has all
requisite power and authority to execute and deliver the Transaction Documents
and to perform its obligations hereunder and thereunder. The Merger Subs have
been organized for purposes of the Mergers and, except for transactions
related to their formation, have conducted no business. Each Merger Sub has
all requisite power and authority to execute and deliver this Agreement, to
consummate the Mergers and otherwise to perform its obligations hereunder.
(c) The Company has filed all necessary documents to qualify
to do business as a foreign corporation in, and the
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Company is in good standing under the laws of each jurisdiction in which the
conduct of the Company's business or the nature of the property owned requires
such qualification, except where the failure to so qualify would not have a
material adverse effect on the business, properties, prospects, profits or
condition (financial or otherwise) of the Company and its Subsidiaries taken
as a whole (a "Company Material Adverse Effect").
4.2. Subsidiaries.
Except as set forth on Section 4.2 of the Company Disclosure
Schedule, the Company has no Subsidiaries. Each Subsidiary listed on Section
4.2 of the Company Disclosure Schedule has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has all requisite corporate power and authority to own
its properties and assets and to conduct its business and is duly registered,
qualified and authorized to transact business and is in good standing in each
jurisdiction in which the conduct of its business or the nature of its
properties requires such registration, qualification or authorization, except
where the failure to be so registered, qualified or authorized would not have
a Company Material Adverse Effect. A list of each jurisdiction in which the
Company is qualified to do business is set forth in Section 4.2 of Company
Disclosure Schedule. All of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable, and is owned of record and beneficially, directly or
indirectly, by the Company free and clear of any mortgage, pledge, lien,
charge, security interest, claim or other legal or equitable encumbrance,
limitation or restriction other than the lien of The First National Bank of
Boston ("BankBoston") pursuant to its Security Agreement, dated April 9, 1997,
between the Company and BankBoston. There are no outstanding options,
warrants, agreements, conversion rights, preemptive rights or other rights to
subscribe for, purchase or otherwise acquire any issued or unissued shares of
capital stock of any Subsidiary.
4.3. Capitalization.
(a) On the date hereof, the authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock and 800,000 shares of
preferred stock, par value $1.00 per share (the "Preferred Stock"). On the
date hereof, the issued and outstanding shares of capital stock of the Company
consists of 10,468,163 shares of Common Stock and no shares of Preferred
Stock. The Company has 201,000 shares of treasury stock. As of the date
hereof, there are no bonds, debentures, notes or other evidences of
indebtedness having the right to vote on any matters on which the Company's
stockholders may vote issued or outstanding.
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(b) All the outstanding shares of capital stock of the
Company have been duly and validly issued and are fully paid and
non-assessable, and were issued in accordance with the registration or
qualification requirements of the Securities Act and any relevant state
securities laws or pursuant to valid exemptions therefrom. Upon issuance, sale
and delivery as contemplated by this Agreement, the Shares will be duly
authorized and validly issued obligations of the Company, free and clear of
any and all security interests, pledges, liens, charges, claims, options,
rights, restrictions on transfer, preemptive rights, proxies and voting or
other agreements, or other encumbrances of any nature whatsoever, except for
those provided for in the Transaction Documents and other than restrictions on
transfer imposed by federal or state securities laws.
(c) Except for the conversion and exchange rights which
attach to the warrants, options and convertible securities which are listed on
Section 4.3 of the Company Disclosure Schedule, there are no shares of Common
Stock or any other equity security of the Company issuable upon conversion,
exchange or exercise of any security of the Company or any Subsidiary of the
Company nor are there any rights, options, calls or warrants outstanding or
other agreements to acquire shares of Common Stock nor is the Company
contractually obligated to purchase, redeem or otherwise acquire any of its
outstanding shares. No stockholder of the Company is entitled to any
preemptive or similar rights to subscribe for shares of capital stock of the
Company.
4.4. Corporate Proceedings, etc.
(a) The Company has authorized the execution, delivery,
and performance of the Transaction Documents and each of the transactions and
agreements contemplated hereby and thereby. No other corporate action (other
than stockholder approval of the issuance of the Shares hereunder) is
necessary to authorize such execution, delivery and performance of the
Transaction Documents, and upon such execution and delivery by the parties
thereto each of the Transaction Documents shall constitute the valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights and general principles of
equity. The Company has authorized the issuance and delivery of the Shares in
accordance with this Agreement.
(b) Each Merger Sub has authorized the execution,
delivery, and performance of this Agreement and each of the transactions
contemplated hereby. No other corporate action of a Merger Sub (including
stockholder approval) is necessary to authorize such execution, delivery and
performance of this
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Agreement, and upon such execution and delivery by the parties thereto this
Agreement shall constitute the valid and binding obligation of each Merger
Sub, enforceable against such Merger Sub in accordance with its terms, except
that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and general principles of equity.
4.5. Consents and Approvals.
(a) The execution and delivery by the Company of the
Transaction Documents, the issuance of the Shares, the performance by the
Company of its obligations hereunder and thereunder and the consummation by
the Company of the transactions contemplated hereby and thereby do not require
the Company or any of its Subsidiaries to obtain any consent, approval,
clearance or action of, or make any filing, submission or registration with,
or give any notice to, any Person or judicial authority.
(b) Except for possible submission under the HSR, the
execution and delivery by the Merger Subs of this Agreement, the performance
by the Merger Subs of their respective obligations hereunder and the
consummation by the Merger Subs of the transactions contemplated hereby do not
require the Merger Subs to obtain any consent, approval, clearance or action
of, or make any filing, submission or registration with, or give any notice
to, any Person or judicial authority.
4.6. Compliance with Law.
(a) The Company and each of its Subsidiaries are in
compliance in all material respects with, and are not in violation or default
in any material respect under, all foreign, federal, state and local laws,
ordinances, government rules and regulations applicable to their business
operations, properties, or assets, including without limitation laws or
regulations relating to: the Food and Drug Administration; the Foreign Corrupt
Practices Act; the environment; occupational health and safety; employer
benefits; ERISA plans; wages; work place safety; equal employment opportunity
and race; and religious, sex and age discrimination. No material expenditures
are or will be required in order to cause the current operations or properties
of the Company or any of its Subsidiaries to comply with any applicable laws,
ordinances, governmental rules or regulations in effect at the time of the
Closing.
(b) The Company and each of its Subsidiaries have all
licenses, permits, franchises or other governmental authorizations
("Approvals") necessary to the ownership of their property and to the
operation of their respective businesses, which if violated or not obtained
could reasonably be expected to
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have a Company Material Adverse Effect. Neither the Company nor any Subsidiary
has finally been denied any application for any such Approvals necessary for
their property or for the operation of their business. There is no action
pending, or to the best knowledge of the Company or any of its Subsidiaries,
threatened or recommended by appropriate local, state, federal or foreign
agencies having jurisdiction thereof, to revoke, withdraw, or suspend any such
Approvals, or which would have a material adverse effect on such Approvals.
(c) Notwithstanding anything to the contrary contained in
this Agreement and in addition to the other representations and warranties
contained herein: (i) the Company and its operations are in material
compliance with all applicable laws, regulations and other requirements of
governmental or regulatory authorities or duties under the common law relating
to toxic or hazardous substances, wastes, pollution or to the protection of
health, safety or the environment (collectively, "Environmental Laws") and
have obtained and maintained in effect all licenses, permits and other
authorizations or registrations (collectively "Environmental Permits")
required under all Environmental Laws and are in material compliance with all
such Environmental Permits; (ii) the Company has not performed or suffered any
act which could give rise to, or has otherwise incurred, liability to any
Person (governmental or not) under CERCLA, or any other Environmental Laws,
nor has the Company received notice of any such liability or any claim
therefor or submitted notice pursuant to Section 103 of CERCLA to any
governmental agency with respect to any of its assets; (iii) no hazardous
substance, hazardous waste, contaminant, pollutant or toxic substance (as such
terms are defined in any applicable Environmental Law and collectively
referred to herein as "Hazardous Materials") has been released, placed, dumped
or otherwise come to be located on, at, beneath or near any of the assets or
properties owned or leased by the Company or any surface waters or
groundwaters thereon or thereunder in violation of any Environmental Laws or
that could subject the Company to liability under any Environmental Laws
(provided, however, that as to actions of Persons other than the Company and
its Subsidiaries or their predecessors this item (iii) is only to the best
knowledge of the Company); (iv) the Company does not own or operate, and has
never owned or operated, aboveground or underground storage tanks used for
storing petroleum products and which are subject to underground storage tank
removal or clean-up requirements in effect on the date hereof; (v) with
respect to any or all of the real properties leased by the Company, to the
Company's best knowledge (A) there are no asbestos-containing materials, urea
formaldehyde insulation, polychlorinated biphenyls or lead-based paints
present at any such properties, and (B) there are no wetlands as defined under
any Environmental Law located on any such properties; (vi) to the Company's
best knowledge none of the real
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properties leased by the Company (A) has been used or is now used for the
generation, transportation, storage, handling, treatment or disposal of any
Hazardous Materials (other than de minimis quantities of Hazardous Materials
used in the normal course of the Company's business in material compliance
with all applicable Environmental Laws), or (B) is identified on a federal,
state or local listing of sites which require or might require environmental
cleanup; (vii) to the best of the Company's knowledge, no condition exists on
any of the real properties leased by the Company that upon the failure to act,
the passage of time or the giving of notice would give rise to liability under
any Environmental Law; (viii) to the best of the Company's knowledge, there
are no ongoing investigations or negotiations, pending or threatened
administrative, judicial or regulatory proceedings, or consent decrees or
other agreements in effect that relate to environmental conditions in, on,
under, about or related to the Company, its operations or the real properties
leased by the Company; and (ix) neither the Company nor its operations is
subject to reporting requirements under the federal Emergency Planning and
Community Right-to-Know Act, 42 U.S.C. ss. 11001 et seq., or analogous state
statutes and related regulations.
4.7. Litigation.
Except as disclosed in the Company SEC Reports, there is no
legal action, suit, arbitration or other legal, administrative or other
governmental investigation, inquiry or proceeding (whether federal, state,
local or foreign) (collectively "Proceeding") pending or, to the best of the
Company's knowledge, threatened against or affecting (i) the Company or any
Subsidiary or any of their respective properties, assets or businesses, except
for Proceedings that could not reasonably be expected to have a Company
Material Adverse Effect; or (ii) the transaction contemplated hereby. To the
best knowledge of the Company, the Company is not aware of any fact which
might result in or form the basis for any such Proceeding. Neither the Company
nor any Subsidiary is subject to any order, writ, judgment, injunction,
decree, determination or award of any court or of any governmental agency or
instrumentality (whether federal, state, local or foreign) which could
reasonably be expected to have a Company Material Adverse Effect.
4.8. Change in Ownership.
Neither the acquisition of the Shares by ZGNA nor the
consummation of the transactions contemplated by this Agreement will result in
(i) to the knowledge of the Company, any material adverse change in the
business operations of the Company or any of its Subsidiaries, (ii) the
acceleration of the vesting of any outstanding option, warrant, call,
commitment, agreement,
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conversion right, preemptive right or other right to subscribe for, purchase
or otherwise acquire any of the shares of the capital stock of the Company or
any of its Subsidiaries, or debt securities of the Company or any of its
Subsidiaries (collectively "Commitments", and each individually a
"Commitment"), (iii) any obligation of the Company to grant, extend or enter
into any Commitment, or (iv) any right in favor of any Person to terminate or
cancel any Company Key Agreement or Instrument.
4.9. Absence of Defaults, Conflicts, etc.
(a) The execution and delivery of the Transaction Documents
and the issuance, exchange and delivery by the Company of any of the Shares do
not, and the fulfillment of the terms hereof and thereof by the Company will
not, result in a breach of any of the terms, conditions or provisions of, or
constitute a default under, or result in the modification of, or permit the
acceleration of rights under or termination of, any agreement, contract,
commitment, understanding, arrangement, restriction, indenture, mortgage, deed
of trust, credit agreement, note or other evidence of indebtedness, of the
Company or any of its Subsidiaries (i) involving $100,000 or more, (ii) the
termination of which is reasonably likely to have a Company Material Adverse
Effect or (iii) which is required to be filed as an exhibit to periodic
reports filed by the Company pursuant to the Exchange Act ("Company Key
Agreements and Instruments"), or the Organizational Documents, or any
arbitration award applicable to the Company or any of its Subsidiaries, or any
law, ordinance, code, standard, judgment, rule or regulation of any court or
local, federal, state or foreign regulatory board or body or administrative
agency having jurisdiction over the Company or any of its Subsidiaries or over
their respective properties or businesses.
(b) Neither any of the Company nor any of its Subsidiaries
is in default under or in violation of (and no event has occurred and no
condition exists which, upon notice or the passage of time (or both), would
constitute a default under) (i) the Organizational Documents, (ii) any Company
Key Agreement and Instrument, or (iii) any order, writ, injunction or decree
of any court or any Federal, state, local or other domestic or foreign
governmental department, commission, board, bureau, agency or instrumentality
or arbitration award, except, in the case of clause (ii), for defaults or
violations which would not have a Company Material Adverse Effect.
4.10. Reports and Financial Statements.
The Company has furnished ZGNA with true and complete copies
of the Company's (i) Annual Reports on Form 10-K for the fiscal years ended
April 30, 1997 and April 30, 1998, as filed with the Commission, (ii)
Quarterly Report on Form 10-Q for the quarter ended July 31, 1998, as filed
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with the Commission, (iii) proxy statements related to all meetings of its
stockholders (whether annual or special) held since May 1, 1996, and (iv) all
other reports filed with or registration statements declared effective by the
Commission since May 1, 1996, except registration statements on Form S-8
relating to employee benefit plans, which are all the documents (other than
preliminary material) that the Company was required to file with the
Commission since that date (clauses (i) through (iv) being referred to herein
collectively as the "Company SEC Reports"). As of their respective dates, the
Company SEC Reports were duly filed and complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the Commission thereunder applicable to
such Company SEC Reports. As of their respective dates, the Company SEC
Reports did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
interim financial statements of the Company included in the Company SEC
Reports comply as to form in all material respects with applicable accounting
requirements of the Securities Act and with the published rules and
regulations of the Commission with respect thereto. The financial statements
included in the Company SEC Reports (i) have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent
basis (except as may be indicated therein or in the notes thereto and, in the
case of unaudited interim financial statements, the absence of all GAAP
required footnotes and normal year-end audit adjustments), (ii) present
fairly, in all material respects, the financial position of the Company and
its Subsidiaries as at the dates thereof and the results of their operations
and cash flow for the periods then ended subject, in the case of the unaudited
interim financial statements, to normal year-end audit adjustments and any
other adjustments described therein and the fact that certain information and
notes have been condensed or omitted in accordance with the Exchange Act and
the rules promulgated thereunder, and (iii) are in all material respects in
accordance with the books of account and records of the Company except as
indicated therein.
4.11. Absence of Certain Developments.
Except as disclosed in the Company SEC Reports, since April
30, 1998, there has been no (i) change or event which could reasonably be
expected to have a Company Material Adverse Effect (other than general trends
or new laws, rules, or regulations applicable to similarly situated
companies), (ii) declaration, setting aside or payment of any dividend or
other distribution
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with respect to the capital stock of the Company, (iii) issuance of capital
stock (other than pursuant to the exercise of options, warrants or convertible
securities outstanding on the date hereof) or options, warrants or rights to
acquire capital stock (other than the rights granted to ZGNA hereunder or to
directors for attending meetings and serving as directors in accordance with
the historical arrangement), (iv) material loss, destruction or damage to any
property of the Company or any Subsidiary, whether or not insured, (v) except
as a result of the new bank credit facility contemplated herein, acceleration
or prepayment of any indebtedness for borrowed money or capital leases or the
refunding of any such indebtedness, (vi) labor trouble involving the Company
or any Subsidiary or any material change in their personnel or the general
terms and conditions of employment of key employees, (vii) waiver of any
valuable right in favor of the Company or any Subsidiary, (viii) loan or
extension of credit to any officer or employee of the Company or any
Subsidiary other than advances for travel-related expenses and similar
advances to officers and employees of the Company in the ordinary course of
business, (ix) acquisition, material writedown or write-off for accounting
purposes or disposition of any material assets (or any contract or arrangement
therefor) other than a possible sale or writedown of the paclitaxel business
and assets, (x) redemption or repurchase of any capital stock of the Company,
or any other material transaction by the Company or any Subsidiary otherwise
than for fair value in the ordinary course of business or (xi) termination of
an agreement or arrangement which would be a Company Key Agreement or
Instrument if in effect on the date hereof.
4.12. Material Contracts.
Section 4.12 of the Company Disclosure Schedule sets forth a
true and complete list of each Company Key Agreement and Instrument (oral or
written) to which the Company or its Subsidiary is a party of its assets bound
other than Company Key Agreements and Instruments (i) filed as an exhibit to a
Company SEC Report and (ii) under which the Company has no further liabilities
(whether accrued, absolute, contingent, liquidated or otherwise, whether due
or to become due, whether or not known to the Company) or obligations as of
the date hereof. Each Company Key Agreement and Instrument that is currently
in effect, is valid, binding and enforceable against the Company or such
Subsidiary and, to the Company's best knowledge, the other parties thereto, in
accordance with its terms, and in full force and effect on the date hereof. A
true and complete copy of each Key Agreement and Instrument of the Company has
been delivered or made available to ZGNA. There is no breach, violation or
default by the Company and no event (including, without limitation, the
consummation of the transactions contemplated herein) which, with notice or
lapse of time or both, would (i) constitute a breach,
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<PAGE>
violation or default by the Company under any Company Key Agreement or
Instrument, or (ii) give rise to any lien or right of termination,
modification, cancellation, prepayment, suspension, limitation, revocation or
acceleration against the Company under any Company Key Agreement or Instrument
except for breaches, violations or defaults that would not have a Company
Material Adverse Effect. To the best of the Company's knowledge, no other
party to any Company Key Agreement or Instrument is in material breach of any
such Company Key Agreement or Instrument, no waiver or indulgence has been
granted by any of the parties thereto and no party to any such Company Key
Agreement and Instrument has repudiated any provision thereof. The Company is
not a party to, nor are any of its assets subject to, any guaranty, "make
well" agreement or other arrangement to be responsible for the obligations of
another, including any obligation to maintain the financial condition of
another person.
4.13. Absence of Undisclosed Liabilities.
Neither the Company nor any of its Subsidiaries has any
debt, obligation or liability (whether accrued, absolute, contingent,
liquidated or otherwise, whether due or to become due, whether or not known to
the Company) arising out of any transaction entered into at or prior to
Closing, or any act or omission at or prior to Closing, or any state of facts
existing at or prior to Closing, including Taxes with respect to or based upon
transactions or events occurring at or prior to Closing, and including,
without limitation, unfunded past service liabilities under any pension,
profit sharing or similar plan, except liabilities disclosed in the Company
SEC Reports, current liabilities incurred since April 30, 1998, current
obligations (other than as a result of breach or default) under agreements set
forth on Section 4.12 of the Company Disclosure Schedule, and obligations
under agreements which are not required to be set forth on such schedule
entered into in the usual and ordinary course of business, none of which
(individually or in the aggregate) could have a Company Material Adverse
Effect.
4.14. Employees.
(a) The Company and its Subsidiaries are in full compliance
with all laws regarding employment, wages, hours, equal opportunity,
collective bargaining and payment of social security and other taxes except to
the extent that noncompliance would not have a Company Material Adverse
Effect. Since January 1, 1997, no complaint of any unfair labor practice or
discriminatory employment practice against the Company or any Subsidiary has
been filed or, to the best of the Company's knowledge, threatened to be filed
with or by the National Labor Relations Board, the Equal Employment
Opportunity Commission or any other administrative agency, local, foreign,
federal or
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<PAGE>
state, that regulates labor or employment practices, nor is any grievance
filed or, to the best of the Company's knowledge, threatened to be filed,
against the Company or any Subsidiary by any employee pursuant to any
collective bargaining or other employment agreement to which the Company or
any Subsidiary is a party or is bound, except as would not reasonably be
expected to have a Company Material Adverse Effect. The Company and its
Subsidiaries are in compliance with all applicable foreign, federal, state and
local laws and regulations regarding occupational safety and health standards
except to the extent that noncompliance will not have a Company Material
Adverse Effect, and, since April 30, 1996, have received no complaints from
any foreign, federal, state or local agency or regulatory body alleging
violations of any such laws and regulations. The Company is not bound or
subject to any arrangement with any labor union, and, to the Company's best
knowledge no union organizing activities are ongoing or threatened.
(b) All sums due for employee compensation and benefits and
all vacation time owing to any employees of the Company or any of its
Subsidiaries have been duly and adequately accrued on the accounting records
of the Company and its Subsidiaries.
(c) The Company is not aware that any of its executive
officers or persons whose principal occupation is the creation of intellectual
property is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere
with the use of such executive officer's or person's best efforts to promote
the interests of the Company or that would conflict with the Company's
business as proposed to be conducted.
(d) The Company is not aware that any officer or key
employee, or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing.
(e) Set forth on Section 4.14 of Company Disclosure Schedule
is (i) a list of employees of the Company with an annual base compensation
over $50,000, (ii) a list of all officers of the Company and (iii) a list of
all employment agreements to which the Company is a party (copies of which
have been delivered to ZGNA).
4.15. Tax Matters.
There are no Taxes due and payable by the Company or any of
its Subsidiaries which have not been paid except those being disputed in good
faith by appropriate proceeding with appropriate reserves being made therefore
on the accounting books
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of the Company. The provisions for Taxes on the audited and unaudited balance
sheets delivered by the Company to ZGNA will be sufficient for the payment in
all material respects of all accrued and unpaid Taxes of the Company and its
Subsidiaries, whether or not assessed or disputed in good faith as of the
respective dates of such balance sheets. The Company and its Subsidiaries have
duly filed or received extensions to filing all foreign, federal, state and
local tax returns required to have been filed by them, and there are in effect
no waivers of applicable statutes of limitations with respect to taxes for any
year except where the failure to file such returns or the existence of waivers
of applicable statutes of limitations is not reasonably likely to have a
Company Material Adverse Effect. All such returns (including those delivered
by the Company to ZGNA) are true, complete and correct in all material
respects and have been prepared from, and are in accordance with, the books
and records of the Company and its Subsidiaries. Neither the Company nor its
Subsidiaries is a party to a Tax sharing agreement or liable for the Taxes of
any other person. Neither the Company nor its Subsidiaries have filed a
consent to the application of Section 341(f) of the Code. The Company and its
Subsidiaries have made all estimated income tax deposits and all other
required Tax payments or deposits and have complied for all prior periods with
the Tax withholding provisions of all applicable foreign, federal, state and
local laws applicable to them. Neither the Company nor any of its Subsidiaries
has been subject to a foreign, federal or state tax audit since April 30,
1996.
4.16. Employee Benefit Plans.
The Company and its Subsidiaries have no employee benefit
plans (as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974) covering former and current employees of the Company or any of
its Subsidiaries, or under which the Company or any of its Subsidiaries has
any obligation or liability. Section 4.16 of the Company Disclosure Schedule
lists all material plans, contracts, bonuses, commissions, profit-sharing,
savings, stock options, insurance, deferred compensation, or other similar
fringe or employee benefits covering former or current employees of the
Company or any of its Subsidiaries or under which the Company or any of its
Subsidiaries has any obligation or liability (each, a "Benefit Arrangement").
True and complete copies of all Benefit Arrangements have been provided or
made available to ZGNA prior to the date hereof. The Benefit Arrangements are
and have been administered in substantial compliance with their terms and with
the requirements of applicable law. No "prohibited transaction" within the
meaning of Section 4475 of the Code or Section 406 of ERISA, has occurred with
respect to any Benefit Arrangements. All payments to current or former
employees of the Company or
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any of its Subsidiaries pursuant to the Benefit Arrangements are and have been
fully deductible under the Code.
4.17. Patents, Licenses, etc.
The Company or one of its Subsidiaries owns, free and clear
of all encumbrances, restrictions, liens, security interests and charges, and
has good and marketable title to, or holds adequate licenses or otherwise
possesses all such rights as are necessary to use all patents (and
applications therefor), patent disclosures, marks, trade names, copyrights
(and applications therefor), inventions, discoveries, processes, know-how,
scientific, technical, engineering and marketing data, formulae and techniques
used or proposed to be used, in or necessary for the conduct of its business
as now conducted (collectively, "Intellectual Property").
Neither the Company nor any of its Subsidiaries has received
notice nor has knowledge of any conflict or alleged conflict with the rights
of others pertaining to the Intellectual Property described in this Section
4.17 where the effect of such conflict could have a Company Material Adverse
Effect. To the Company's best knowledge, the Company's business, as presently
conducted, and as proposed to be conducted, does not infringe upon or violate
any patent rights, copyrights, marks, names, trade names or trade secrets of
others. To the Company's best knowledge, the Company and its Subsidiaries have
the right to use all trade secrets, processes, customer lists and other rights
incident to their respective businesses as now conducted.
To the Company's best knowledge, no employee of the Company
or any of its Subsidiaries has violated any employment agreement, non-compete
agreement or proprietary information agreement which he or she had with a
previous employer or other person, or any intellectual property policy of such
employer, or is a party to or threatened by any litigation concerning any
patents, marks, trade secrets, service names, trade names, copyrights,
licenses and the like.
4.18. Title to Tangible Assets.
The Company and its Subsidiaries have good title to their
properties and assets and good title to all their leasehold estates, in each
case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other
than or resulting from Taxes which have not yet become delinquent and minor
liens and encumbrances which do not in any case materially detract from the
value of the property subject thereto or materially impair the operations of
the Company and its Subsidiaries and which have not arisen otherwise than in
the ordinary course of business.
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4.19. Insurance.
The Company and its Subsidiaries and their respective
properties are insured in such amounts, against such losses and with such
insurers as are prudent when considered in light of the nature of the
properties and businesses of the Company and its Subsidiaries and customary in
light of the Company's exposure. No notice of any termination, threatened
termination, or denial of a material claim made since January 1, 1997, of, or
under any of such policies has been received and such policies are in full
force and effect. A summary of all such policies, including whether they are
on a "claims made" basis, is attached as Section 4.19 of the Company
Disclosure Schedule. None of such policies will be terminated or reduced in
coverage as a result of the transactions described herein. All such policies
are in full force and effect and all premiums with respect thereto have been
paid. The Company has not failed to give any notice or present any claim under
any such insurance policy in due and timely fashion or as required by any of
such insurance policies or has not otherwise, through any act, omission or
non-disclosure, jeopardized or impaired full recovery of any claim under such
policies, and there are no claims by the Company under any of such policies to
which any insurance company is denying liability or defending under a
reservation of rights or similar clause.
4.20. Transactions with Related Parties.
Neither the Company nor any Subsidiary is a party to any
agreement with any of the Company's directors, officers or, to their best
knowledge stockholders holding more than 1/2% of the Company's stock, or, to
their best knowledge, any Affiliate or family member of any of the foregoing,
including but not limited to, under which it: (i) leases any real or personal
property (either to or from such Person), (ii) licenses technology (either to
or from such Person), (iii) is obligated to purchase any tangible or
intangible asset from or sell such asset to such Person, (iv) purchases
products or services from such Person or (v) has borrowed money from or lent
money to such Person. Neither the Company nor any Subsidiary employs as an
employee or engages as a consultant any family member of any of the Company's
directors or officers. To the best knowledge of the Company and except for the
Transaction Documents, there exist no agreements among stockholders of the
Company to act in concert with respect to their voting or holding of Company
securities.
4.21. Registration Rights.
Except as provided in the Registration Rights Agreement
executed on the date hereof between ZGNA and the Company, and except as
pursuant to its stock option plans, the Company is not
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under any obligation to register any of its securities under the Securities
Act.
4.22. Private Offering.
Neither the Company nor anyone acting on its behalf has
sold or has offered any of the Shares for sale to, or solicited offers to buy
from, or otherwise approached or negotiated with respect thereto with, any
prospective purchaser of the Shares, other than ZGNA and ZBI. Neither the
Company nor anyone acting on its behalf shall offer the Shares for issue or
sale to, or solicit any offer to acquire any of the same from, anyone so as to
bring the issuance and sale of the Shares, or any part thereof, within the
provisions of Section 5 of the Securities Act. Based in part upon the
representations of ZGNA and ZBI set forth in Section 5, the offer, issuance
and sale of the Shares are and will be exempt from the registration and
prospectus delivery requirements of the Securities Act, and have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
4.23. Investment.
(a) The Company is acquiring the Subsidiary Shares for its
own account for investment and not with a view towards the resale, transfer,
pledge or distribution thereof, nor with any present intention of distributing
the Subsidiary Shares other than a pledge in favor of the Company's lender
pursuant to the credit agreement referred to in Section 7.9.
(b) The Company has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of its investment in the Contributed Subsidiaries as contemplated by
this Agreement, and is able to bear the economic risk of such investment for
an indefinite period of time. The Company has been furnished access to such
information and documents as it has requested and has been afforded an
opportunity to ask questions of and receive answers from representatives of
ZGNA and the Contributed Subsidiaries concerning the terms and conditions of
this Agreement and the Mergers contemplated hereby.
(c) The Company is an "accredited investor" as defined under
Regulation D of the Securities Act.
(d) The Company is located in Colorado and the offer and
sale of the Shares occurred in the States of Colorado and California.
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4.24. Brokerage.
Except for the Company's agreement with Adams, Harkness &
Hill, Inc. whose fees and expenses shall be paid by the Company, there are no
claims for brokerage commissions or finder's fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement made by or on behalf of the Company, and the Company agrees to
indemnify and hold ZGNA harmless against any costs or damages incurred as a
result of any such claim.
4.25. Takeover Statute.
ZGNA is not, as a result of its execution and delivery of
this Agreement, the performance of its obligations hereunder or the
acquisition of any Shares, prohibited from entering into a business
combination with the Company or any Subsidiary pursuant to the Business
Corporation Act of the State of Colorado. To the best knowledge of the
Company, no other Takeover Statute is applicable to the transactions
contemplated hereby.
4.26. Material Facts.
This Agreement, the Company Disclosure Schedules, and the
other agreements, documents, certificates or written statements furnished or
to be furnished to ZGNA through the Closing Date by or on behalf of the
Company in connection with the transactions contemplated hereby taken as a
whole, do not contain any untrue statement by the Company of a material fact
or omit to state a material fact necessary to make the statements contained
therein or herein, in light of the circumstances in which they were made, not
misleading. There is no fact which is known to the Company and which has not
been disclosed herein or otherwise by the Company to ZGNA which is reasonably
likely to have a Company Material Adverse Effect. Projections and forecasts
prepared by or on behalf of the Company and delivered to ZGNA have been
prepared in good faith and on a basis believed by the Company's management to
be reasonable, but are not guarantees of performance.
4.27. Debt.
As of the Closing Date, the "Debt" (as defined below) of the
Company will not exceed $10,000,000. For purposes of this Section, "Debt"
means debt for borrowed money (long term, for working capital purposes or
otherwise), obligations under letters of credit and capital lease obligations.
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4.28. Company Real Property.
(a) Section 4.28 of Company's Disclosure Schedule lists all
real property owned or leased by the Company and its Subsidiaries. The Company
and its Subsidiaries have title to its owned real properties (collectively,
the "Company Owned Real Properties") in each case, free and clear of all
imperfections of title and all encumbrances, except for (i) those consisting
of zoning or planning restrictions, easements, permits and other restrictions
or limitations on the use of such property or irregularities in title thereto
which, individually and in the aggregate, do not materially impair the use of
such property, (ii) warehousemen's, mechanics', carriers', landlords',
repairmen's or other similar encumbrances arising in the ordinary course of
business and securing obligations not yet due and payable, (iii) other
encumbrances which arise in the ordinary course of business and which
individually and in the aggregate do not materially impair its use of such
property or its ability to obtain financing by using such assets as
collateral, (iv) any state of facts, including, without limitation, easements,
encroachments or encumbrances, either shown by any survey or other inspection
or granted by the Company prior to the date hereof, of such Company Owned Real
Property which do not materially adversely interfere with the occupancy or
use, as presently used or occupied, of such Company Owned Real Property, (v)
liens for taxes and/or assessments not yet delinquent or which are being
contested in good faith through appropriate proceedings, (vi) all rights or
easements, if any, of any municipality or other public or private utility
company, to maintain telephone wires, pipes, conduits or other facilities
which enter or cross such Company Owned Real Property and (vii) any state of
facts, including without limitation, rights, easements, liens, encroachments
or encumbrances that any title report, title commitment or title insurance
policy would disclose (encumbrances referenced in clauses (i) through (vii)
collectively referred to as the "Company Permitted Encumbrances").
(b) The Company has delivered to ZGNA a true and complete
list of all of the leases and subleases to which the Company is a party as
described on Section 4.28 of Company's Disclosure Schedule (collectively, the
"Company Leased Real Properties," together with Company Owned Real Properties,
the "Company Real Properties"). The leases and subleases described on Section
4.28 of the Company Disclosure Schedule (i) have not been further modified or
amended and (ii) are in full force and effect. To the knowledge of the
Company, there is no default which remains uncured and would materially
adversely interfere with the occupancy or use, as presently used or occupied,
of any Company Leased Real Property. The Company is not obligated to purchase
any Company Leased Real Property and no Company Leased Real Property is
required to be accounted for under GAAP as a capitalized lease.
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4.29. Corporate Minute Books.
The corporate records of the Company are correct and
complete. True and correct copies of all minutes of meetings or other actions
by the directors, stockholders or incorporators of the Company for the past
five years have been provided and since its inception have previously been
provided or made available to ZGNA.
4.30. Good Condition.
The buildings, facilities, machinery, equipment, furniture,
leasehold and other improvements, fixtures, vehicles, structures, any related
capitalized items and other tangible property owned by or leased to the
Company (i) are to the Company's best knowledge, in all material respects in
good operating condition and repair (normal wear and tear excepted) and, in
the case of buildings or structures located on the Company Real Properties,
free of any structural or engineering defects, and (ii) to the Company's best
knowledge, are suitable in all material respects for their current use. The
Company has not received notice of, and has no knowledge of, any pending,
threatened or contemplated condemnation proceeding or similar taking affecting
the assets of the Company (including the Company Real Properties).
4.31. Manufacturing Capacity.
The Company currently (i) has, except for drying capacity
which it may outsource, the manufacturing capacity to manufacture 500 tons of
nutraceutical extracts per year and (ii) has or can readily hire manufacturing
and support personnel reasonably necessary to support such manufacturing
capacity.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF ZGNA
ZGNA and ZBI represent and warrant to the Company as of the
date hereof that except (i) as expressly set forth in the corresponding
numbered section in that certain ZGNA Disclosure Schedule of even date
herewith by and between the Company and ZGNA, and, (ii) as to the Transaction
Documents, the representations and warranties of ZGNA and ZBI are only to the
extent that ZGNA, ZBI or a Contributed Subsidiary is a party to such
Transaction Documents:
5.1. Corporate Organization.
(a) Each of ZGNA and ZBI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
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(b) Each of ZGNA and ZBI has all requisite power and
authority to execute and deliver the Transaction Documents and to perform its
obligations hereunder and thereunder.
(c) Each of ZGNA and ZBI has filed all necessary documents
to qualify to do business as a foreign corporation in, and each of ZGNA and
ZBI is in good standing under the laws of each jurisdiction in which the
conduct of its business or the nature of its property owned requires such
qualification, except where the failure to so qualify would not have a
material adverse effect on the business, properties, prospects, profits or
condition (financial or otherwise) of the Contributed Subsidiaries taken as a
whole (a "Subsidiary Material Adverse Effect").
5.2. Contributed Subsidiaries.
Each Contributed Subsidiary has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power and
authority to own its properties and assets and to conduct its business and is
duly registered, qualified and authorized to transact business and is in good
standing in each jurisdiction in which the conduct of its business or the
nature of its properties requires such registration, qualification or
authorization, except where the failure to be so registered, qualified or
authorized would not have a Subsidiary Material Adverse Effect. A list of each
jurisdiction in which a Contributed Subsidiary is qualified to do business is
set forth in Section 5.2 of ZGNA Disclosure Schedule. All of the issued and
outstanding capital stock of each Contributed Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable, and is owned
of record and beneficially, directly or indirectly, by ZGNA or ZBI free and
clear of any mortgage, pledge, lien, charge, security interest, claim or other
legal or equitable encumbrance, limitation or restriction. There are no
outstanding options, warrants, agreements, conversion rights, preemptive
rights or other rights to subscribe for, purchase or otherwise acquire any
issued or unissued shares of capital stock of any Contributed Subsidiary. No
Contributed Subsidiary has a Subsidiary or interest in a general partnership
or any interest in excess of 5% of the equity interest of any other entity.
5.3. Capitalization.
(a) On the date hereof and as of the Closing, the authorized
capital stock of (i) Zuellig Botanical Extracts consists of 100 shares of
common stock, par value $0.01 per share, (ii) ZetaPharm consists of 1,000
shares of common stock, par value $1.00 per share, and 10 shares of cumulative
preferred stock, par value $200,000 per share, and (iii) Wilcox consists of
1,000 shares of common stock, par value $1.00 per share. On the
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date hereof, the issued and outstanding shares of capital stock of (i) Zuellig
Botanical Extracts consists of 100 shares of its common stock, (ii) ZetaPharm
consists of 960 shares of its common stock and 10 shares of its cumulative
preferred stock and (iii) Wilcox consists of 80 shares of its common stock.
There are no bonds, debentures, notes, other evidences of indebtedness, or any
person other than ZGNA as a stockholder of ZetaPharm and Wilcox, or any person
other than ZBI as a stockholder of Zuellig Botanical Extracts, having the
right to vote on any matters on which the Contributed Subsidiaries'
stockholders may vote issued or outstanding. No Contributed Subsidiary has any
accrued but unpaid dividends.
(b) There are no shares of any equity or voting security of
the Contributed Subsidiaries issuable upon conversion, exchange or exercise of
any security of the Contributed Subsidiaries nor are there any rights,
options, calls or warrants outstanding or other agreements to acquire any
equity or voting security of any Contributed Subsidiaries nor is any
Contributed Subsidiary contractually obligated to purchase, redeem or
otherwise acquire any of its outstanding shares. No stockholder of any
Contributed Subsidiary is entitled to any preemptive or similar rights to
subscribe for shares of capital stock of the Contributed Subsidiaries.
5.4. Corporate Proceedings, etc.
(a) Each of ZGNA and ZBI has authorized the execution,
delivery, and performance of the Transaction Documents and each of the
transactions and agreements contemplated hereby and thereby. No other
corporate action (including stockholder approval) is necessary to authorize
such execution, delivery and performance of the Transaction Documents, and
upon such execution and delivery by the parties thereto each of the
Transaction Documents shall constitute the valid and binding obligation of
ZGNA and ZBI, enforceable against ZGNA and ZBI in accordance with its terms,
except that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and general principles of equity. Each of ZGNA
and ZBI has authorized the Mergers in accordance with this Agreement.
(b) The Contributed Subsidiaries have authorized the
execution, delivery, and performance of this Agreement and each of the
transactions contemplated hereby. No other corporate action (including
stockholder approval) is necessary to authorize such execution, delivery and
performance of this Agreement, and upon such execution and delivery by the
parties thereto this Agreement shall constitute the valid and binding
obligation of the Contributed Subsidiaries, enforceable against them in
accordance with its terms, except that such enforcement
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may be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and
general principles of equity. The Contributed Subsidiaries have authorized the
Mergers in accordance with this Agreement.
5.5. Consents and Approvals.
Except for submissions under the HSR, the execution and
delivery by ZGNA or ZBI of the Transaction Documents, the performance by ZGNA,
ZBI and the Contributed Subsidiaries of their obligations hereunder and
thereunder and the consummation by ZGNA, ZBI and the Contributed Subsidiaries
of the transactions contemplated hereby and thereby do not require ZGNA, ZBI
or any Contributed Subsidiaries to obtain any consent, approval, clearance or
action of, or make any filing, submission or registration with, or give any
notice to, any Person or judicial authority.
5.6. Compliance with Law.
(a) Each of the Contributed Subsidiaries is in compliance in
all material respects with, and is not in violation or default in any material
respect under, all foreign, federal, state and local laws, ordinances,
government rules and regulations applicable to its business operations,
properties, or assets, including without limitation laws or regulations
relating to: the Food and Drug Administration; the environment; the Foreign
Corrupt Practices Act; occupational health and safety; employer benefits;
ERISA plans; wages; work place safety; equal employment opportunity and race;
and religious, sex and age discrimination. No material expenditures are or
will be required in order to cause the current operations or properties of the
Contributed Subsidiaries to comply with any applicable laws, ordinances,
governmental rules or regulations in effect at the time of the Closing.
(b) Each of the Contributed Subsidiaries has all Approvals
necessary to the ownership of its property and to the operation of its
respective businesses, which if violated or not obtained could reasonably be
expected to have a Subsidiary Material Adverse Effect. None of the Contributed
Subsidiaries has finally been denied any application for any such Approvals
necessary for its property or for the operation of its business. There is no
action pending, or to the best knowledge of ZGNA or any of the Contributed
Subsidiaries, threatened or recommended by appropriate local, state, federal,
or foreign agencies having jurisdiction thereof, to revoke, withdraw, or
suspend any such Approvals, or which would have a material adverse effect on
such Approvals.
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(c) Notwithstanding anything to the contrary contained in
this Agreement and in addition to the other representations and warranties
contained herein: (i) the Contributed Subsidiaries and their respective
operations are in material compliance with all Environmental Laws and have
obtained and maintained in effect all Environmental Permits required under all
Environmental Laws and are in material compliance with all such Environmental
Permits; (ii) the Contributed Subsidiaries have not performed or suffered any
act which could give rise to, or have otherwise incurred, liability to any
Person (governmental or not) under CERCLA, or any other Environmental Laws,
nor have the Contributed Subsidiaries received notice of any such liability or
any claim therefor or submitted notice pursuant to Section 103 of CERCLA to
any governmental agency with respect to any of their assets; (iii) no
hazardous substance, hazardous waste, contaminant, pollutant or toxic
substance (as such terms are defined in any applicable Environmental Law) has
been released, placed, dumped or otherwise come to be located on, at, beneath
or near any of the assets or properties owned or leased by the Contributed
Subsidiaries or any surface waters or groundwaters thereon or thereunder in
violation of any Environmental Laws or that could subject the Contributed
Subsidiaries to liability under any Environmental Laws (provided, however,
that as to actions of Persons other than the Contributed Subsidiaries or their
predecessors, this item (iii) is only to the best knowledge of the Contributed
Subsidiaries); (iv) the Contributed Subsidiaries do not own or operate, and
have never owned or operated, aboveground or underground storage tanks used
for storing petroleum products and which are subject to underground storage
tank removal or clean-up requirements in effect on the date hereof; (v) with
respect to any or all of the real properties leased by the Contributed
Subsidiaries, to the best knowledge of the Contributed Subsidiary (A) there
are no asbestos-containing materials, urea formaldehyde insulation,
polychlorinated biphenyls or lead-based paints present at any such properties,
and (B) there are no wetlands as defined under any Environmental Law located
on any such properties; (vi) to the best knowledge of the Contributed
Subsidiaries none of the real properties leased by the Contributed
Subsidiaries (A) has been used or is now used for the generation,
transportation, storage, handling, treatment or disposal of any Hazardous
Materials (other than de minimis quantities of Hazardous Materials used in the
normal course of the Contributed Subsidiaries' business in material compliance
with all applicable Environmental Laws), or (B) is identified on a federal,
state or local listing of sites which require or might require environmental
cleanup; (vii) to the best of ZGNA's and Contributed Subsidiaries' knowledge,
no condition exists on any of the real properties leased by the Contributed
Subsidiaries that upon the failure to act, the passage of time or the giving
of notice would give rise to
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liability under any Environmental Law; (viii) to the best of ZGNA's and
Contributed Subsidiaries' knowledge, there are no ongoing investigations or
negotiations, pending or threatened administrative, judicial or regulatory
proceedings, or consent decrees or other agreements in effect that relate to
environmental conditions in, on, under, about or related to the Contributed
Subsidiaries, their respective operations or the real properties leased by the
Contributed Subsidiaries; and (ix) none of the Contributed Subsidiaries or
their respective operations is subject to reporting requirements under the
federal Emergency Planning and Community Right-to-Know Act, 42 U.S.C. ss.
11001 et seq., or analogous state statutes and related regulations.
5.7. Litigation.
There is no Proceeding (whether federal, state, local or
foreign) pending or, to the best of ZGNA's and the Contributed Subsidiaries'
knowledge, threatened against or affecting (i) any Contributed Subsidiary or
any of their respective properties, assets or businesses, except for
Proceedings that could not reasonably be expected to have a Subsidiary
Material Adverse Effect; or (ii) the transactions contemplated hereby. To the
best knowledge of ZGNA and the Contributed Subsidiaries, none of ZGNA or
Contributed Subsidiaries is aware of any fact which might result in or form
the basis for any such Proceeding. None of the Contributed Subsidiaries is
subject to any order, writ, judgment, injunction, decree, determination or
award of any court or of any governmental agency or instrumentality (whether
federal, state, local or foreign) which could reasonably be expected to have a
Subsidiary Material Adverse Effect.
5.8. Change in Ownership.
The consummation of the transactions contemplated by this
Agreement will not result in (i) to the knowledge of ZGNA and the Contributed
Subsidiaries, any material adverse change in the business operations of a
Contributed Subsidiary, (ii) the acceleration of the vesting of any
outstanding option, warrant, call, commitment, agreement, conversion right,
preemptive right or other right to subscribe for, purchase or otherwise
acquire any of the shares of the capital stock of the Contributed
Subsidiaries, or debt securities of the Contributed Subsidiaries, (iii) any
obligation of the Contributed Subsidiaries to grant, extend or enter into any
Commitment, or (iv) any right in favor of any Person to terminate or cancel
any Subsidiary Key Agreement or Instrument.
5.9. Absence of Defaults, Conflicts, etc.
(a) The execution and delivery of the Transaction Documents
do not, and the fulfillment of the terms hereof and
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thereof by ZGNA, ZBI or any Contributed Subsidiary will not, result in a
breach of any of the terms, conditions or provisions of, or constitute a
default under, or result in the modification of, or permit the acceleration of
rights under or termination of any agreement, contract, commitment,
understanding, arrangement, restriction, indenture, mortgage, deed of trust,
credit agreement, note or other evidence of indebtedness, of ZGNA, ZBI or any
of the Contributed Subsidiaries (i) involving $100,000 or more, (ii) the
termination of which is reasonably likely to have a Subsidiary Material
Adverse Effect or (iii) which is required to be filed as an exhibit to
periodic reports if ZGNA, ZBI or a Contributed Subsidiary were required to
file such reports pursuant to the Exchange Act ("Subsidiary Key Agreements and
Instruments") or the organizational documents of ZGNA, ZBI or any Contributed
Subsidiaries, or any arbitration award applicable to ZGNA, ZBI or a
Contributed Subsidiary, or any law, ordinance, code, standard, judgment, rule
or regulation of any court or local, federal, state or foreign regulatory
board or body or administrative agency having jurisdiction over ZGNA, ZBI or
any of the Contributed Subsidiaries or over their respective properties or
businesses.
(b) None of the Contributed Subsidiaries is in default under
or in violation of (and no event has occurred and no condition exists which,
upon notice or the passage of time (or both), would constitute a default
under) (i) the organizational documents of any Contributed Subsidiaries, (ii)
any Subsidiary Key Agreement and Instrument of any Contributed Subsidiaries,
or (iii) any order, writ, injunction or decree of any court or any Federal,
state, local or other domestic or foreign governmental department, commission,
board, bureau, agency or instrumentality, or arbitration award, except, in the
case of clause (ii), for defaults or violations which would not have a
Subsidiary Material Adverse Effect.
5.10. Reports and Financial Statements.
The financial statements attached as Section 5.10 of ZGNA
Disclosure Schedule (i) have been prepared in accordance with GAAP applied on
a consistent basis (except as may be indicated therein or in the notes thereto
and, in the case of unaudited interim financial statements, the absence of all
GAAP required footnotes and normal year-end audit adjustments), (ii) present
fairly, in all material respects, the financial position of the Contributed
Subsidiaries as at the date thereof and the results of their operations and
cash flow for the period then ended subject to normal year-end audit
adjustments and any other adjustments described therein, and (iii) are in all
material respects in accordance with the books of account and records of the
Contributed Subsidiaries except as indicated therein. The balance sheets dated
October 31, 1998 for each Contributed Subsidiary are referred to as the "CS
Balance Sheets."
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5.11. Absence of Certain Developments.
Since March 31, 1998, there has been no (i) change or event
which could reasonably be expected to have a Subsidiary Material Adverse
Effect (other than general trends or new laws, rules, or regulations
applicable to similarly situated companies), (ii) declaration, setting aside
or payment of any dividend or other distribution with respect to the capital
stock of the Contributed Subsidiaries, (iii) issuance of capital stock or
options, warrants or rights to acquire capital stock (other than the rights
granted to the Company hereunder), (iv) material loss, destruction or damage
to any property of the Contributed Subsidiaries, whether or not insured, (v)
except as a result of the new bank credit facility referred to in Section 8.7,
acceleration or prepayment of any indebtedness for borrowed money or capital
leases or the refunding of any such indebtedness, (vi) labor trouble involving
the Contributed Subsidiaries or any material change in their personnel or the
general terms and conditions of employment of key employees, (vii) waiver of
any valuable right in favor of the Contributed Subsidiaries, (viii) loan or
extension of credit to any officer or employee of ZGNA or any Contributed
Subsidiary other than advances for travel-related expenses and similar
advances to officers and employees of ZGNA or Contributed Subsidiaries in the
ordinary course of business, (ix) acquisition, material writedown or write-off
for accounting purposes, or disposition of any material assets (or any
contract or arrangement therefor), (x) redemption or repurchase of any capital
stock of any Contributed Subsidiary, or any other material transaction by the
Contributed Subsidiaries otherwise than for fair value in the ordinary course
of business, or (xi) termination of an agreement or arrangement which would be
a Subsidiary Key Agreement or Instrument if in effect on the date hereof.
5.12. Material Contracts.
Section 5.12 of ZGNA Disclosure Schedule sets forth a true
and complete list of each Subsidiary Key Agreement and Instrument (oral or
written) to which a Contributed Subsidiary is a party or its assets bound
other than Subsidiary Key Agreements and Instruments under which each
Contributed Subsidiary has no further liabilities (whether accrued, absolute,
contingent, liquidated or otherwise, whether due or to become due, whether or
not known to ZGNA or a Contributed Subsidiary) or obligations as of the date
hereof. Each Subsidiary Key Agreement and Instrument that is currently in
effect, is valid, binding and enforceable against such Contributed Subsidiary
and, to ZGNA's and Contributed Subsidiaries' best knowledge, the other parties
thereto, in accordance with its terms, and in full force and effect on the
date hereof. A true and complete copy of each Subsidiary Key Agreement has
been delivered or made available to
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the Company. There is no breach, violation or default by any Contributed
Subsidiary and no event (including, without limitation, the consummation of
the transactions contemplated herein) which, with notice or lapse of time or
both, would (i) constitute a breach, violation or default by any Contributed
Subsidiary under any Subsidiary Key Agreement or Instrument, or (ii) give rise
to any lien or right of termination, modification, cancellation, prepayment,
suspension, limitation, revocation or acceleration against any Contributed
Subsidiary under any Subsidiary Key Agreement or Instrument except for
breaches, violations or defaults that would not have a Subsidiary Material
Adverse Effect. To the best of ZGNA's and the Contributed Subsidiaries'
knowledge, no other party to any Subsidiary Key Agreement or Instrument is in
material breach of any such Subsidiary Key Agreement or Instrument, no waiver
or indulgence has been granted by any of the parties thereto and no party to
any such Subsidiary Key Agreement and Instrument has repudiated any provision
thereof. No Contributed Subsidiary is a party to, nor are any of their assets
subject to, any guaranty, "make well" agreement or other arrangement to be
responsible for the obligations of another, including any obligation to
maintain the financial condition of another person.
5.13. Absence of Undisclosed Liabilities.
None of the Contributed Subsidiaries has any debt,
obligation or liability (whether accrued, absolute, contingent, liquidated or
otherwise, whether due or to become due, whether or not known to ZGNA or a
Contributed Subsidiary) arising out of any transaction entered into at or
prior to Closing, or any act or omission at or prior to Closing, or any state
of facts existing at or prior to Closing, including Taxes with respect to or
based upon transactions or events occurring at or prior to Closing, and
including, without limitation, unfunded past service liabilities under any
pension, profit sharing or similar plan, except as disclosed in the CS Balance
Sheets, current liabilities incurred since the date of the CS Balance Sheet,
current obligations (other than as a result of breach or default) under
agreements set forth on Section 5.12 of ZGNA Disclosure Schedule, and
obligations under agreements which are not required to be set forth on such
schedule entered into in the usual and ordinary course of business, none of
which (individually or in the aggregate) could have a Subsidiary Material
Adverse Effect.
5.14. Employees.
(a) The Contributed Subsidiaries are in full compliance with
all laws regarding employment, wages, hours, equal opportunity, collective
bargaining and payment of social security and other taxes except to the extent
that noncompliance would not have a Subsidiary Material Adverse Effect. Since
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January 1, 1998, no complaint of any unfair labor practice or discriminatory
employment practice against the Contributed Subsidiaries has been filed or, to
the best of ZGNA's and the Contributed Subsidiaries' knowledge, threatened to
be filed with or by the National Labor Relations Board, the Equal Employment
Opportunity Commission or any other administrative agency, local, foreign,
federal or state, that regulates labor or employment practices, nor is any
grievance filed or, to the best of ZGNA's and the Contributed Subsidiaries'
knowledge, threatened to be filed, against any Contributed Subsidiary by any
employee pursuant to any collective bargaining or other employment agreement
to which any Contributed Subsidiary is a party or is bound, except as would
not reasonably be expected to have a Subsidiary Material Adverse Effect. The
Contributed Subsidiaries are in compliance with all applicable foreign,
federal, state and local laws and regulations regarding occupational safety
and health standards except to the extent that noncompliance will not have a
Subsidiary Material Adverse Effect, and, since January 1, 1997, have received
no complaints from any foreign, federal, state or local agency or regulatory
body alleging violations of any such laws and regulations. No Contributed
Subsidiary is bound or subject to any arrangement with any labor union, and,
to ZGNA's and Contributed Subsidiaries' best knowledge no union organizing
activities are ongoing or threatened.
(b) All sums due for employee compensation and benefits and
all vacation time owing to any employees of the Contributed Subsidiaries have
been duly and adequately accrued on the accounting records of the Contributed
Subsidiaries.
(c) ZGNA and the Contributed Subsidiaries are not aware that
any of the Contributed Subsidiaries' executive officers or persons whose
principal occupation is the creation of intellectual property is obligated
under any contract (including licenses, covenants or commitments of any
nature) or other agreement, or subject to any judgment, decree or order of any
court or administrative agency, that would interfere with the use of such
executive officer's or person's best efforts to promote the interests of the
Contributed Subsidiaries or that would conflict with the Contributed
Subsidiaries' business as proposed to be conducted.
(d) ZGNA and the Contributed Subsidiaries are not aware that
any officer, key employee, key purchasing personnel anticipated to provide
sourcing of biomass under the Sourcing Agency Agreement or key sales personnel
anticipated to engage in sales under the Agreement Regarding Employees or that
any group of such employees, intends to terminate their employment with any
Contributed Subsidiary, nor does any Contributed Subsidiary have a present
intention to terminate the employment of any of the foregoing.
(e) Set forth on Section 5.14 of ZGNA Disclosure Schedule is
(i) a list of employees of a Contributed Subsidiary
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with an annual base compensation over $50,000, (ii) a list of all officers of
a Contributed Subsidiary and (iii) a list of all employment agreements to
which a Contributed Subsidiary is a party (copies of which have been delivered
to the Company).
5.15. Tax Matters.
There are no Taxes due and payable by the Contributed
Subsidiaries which have not been paid except those being disputed in good
faith by appropriate proceeding with appropriate reserves being made therefore
on the accounting books of the Contributed Subsidiaries. The provisions for
Taxes on the audited and unaudited balance sheets delivered by ZGNA and the
Contributed Subsidiaries to the Company will be sufficient for the payment in
all material respects of all accrued and unpaid Taxes of the Contributed
Subsidiaries, whether or not assessed or disputed in good faith as of the
respective dates of such balance sheets. The Contributed Subsidiaries have
duly filed or received extensions to filing all foreign, federal, state and
local Tax returns required to have been filed by them, and there are in effect
no waivers of applicable statutes of limitations with respect to taxes for any
year except where the failure to file such returns or the existence of waivers
of applicable statutes of limitations is not reasonably likely to have a
Subsidiary Material Adverse Effect. All such returns (including those
delivered by ZGNA to the Company) are true, complete and correct in all
material respects and have been prepared from, and are in accordance with, the
books and records of each. No Contributed Subsidiary is a party to a Tax
sharing agreement or liable for the Taxes of any other person. No Contributed
Subsidiary has filed a consent to the application of Section 341(f) of the
Code. The Contributed Subsidiaries have made all estimated income tax deposits
and all other required Tax payments or deposits and have complied for all
prior periods with the Tax withholding provisions of all applicable foreign,
federal, state and local laws applicable to them. None of the Contributed
Subsidiaries has been subject to a foreign, federal or state tax audit since
April 30, 1996.
5.16. Employee Benefit Plans.
Except as set forth on Section 5.16 of ZGNA Disclosure
Schedule, the Contributed Subsidiaries have no employee benefit plans (as
defined in Section 3(3) of ERISA) covering former and current employees of the
Contributed Subsidiaries, or under which a Contributed Subsidiary has any
obligation or liability. Section 5.16 of ZGNA Disclosure Schedule lists all
material plans, contracts, bonuses, commissions, profit-sharing, savings,
stock options, insurance, deferred compensation, or other similar fringe or
employee benefits covering former or current employees of the Contributed
Subsidiaries or under which the
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Contributed Subsidiaries have any obligation or liability. True and complete
copies of all Benefit Arrangements have been provided or made available to the
Company prior to the date hereof. The Benefit Arrangements are and have been
administered in substantial compliance with their terms and with the
requirements of applicable law. No "prohibited transaction" within the meaning
of Section 4475 of the Code or Section 406 of ERISA, has occurred with respect
to any Benefit Arrangements. All payments to current or former employees of
the Contributed Subsidiaries pursuant to the Benefit Arrangements are and have
been fully deductible under the Code.
5.17. Patents, Licenses, etc.
The Contributed Subsidiaries own, free and clear of all
encumbrances, restrictions, liens, security interests and charges, and has
good and marketable title to, or holds adequate licenses or otherwise
possesses all such rights as are necessary to use all Intellectual Property.
To the knowledge of ZGNA and ZBI, one or more of the Contributed Subsidiaries
has the right to use the names "Zuellig Botanicals" (but not "Zuellig
Botanicals Powders"), and "ZetaPharm" as a trade name or mark for the purposes
for which they have been used in the United States. Set forth on Section 5.17
of ZGNA Disclosure Schedule is a list of the significant marks and names used
by each Contributed Subsidiary.
None of the Contributed Subsidiaries has received notice nor
has knowledge of any conflict or alleged conflict with the rights of others
pertaining to the Intellectual Property described in this Section 5.17 where
the effect of such conflict could have a Subsidiary Material Adverse Effect.
To ZGNA's and the Contributed Subsidiaries' best knowledge, the Contributed
Subsidiaries' business, as presently conducted, and as proposed to be
conducted, does not infringe upon or violate any patent rights, copyrights,
marks, names, trade names or trade secrets of others. To ZGNA's and the
Contributed Subsidiaries' best knowledge, the Contributed Subsidiaries have
the right to use all trade secrets, processes, customer lists and other rights
incident to their respective businesses as now conducted.
To ZGNA's and the Contributed Subsidiaries' best knowledge,
no employee of the Contributed Subsidiaries has violated any employment
agreement, non-compete agreement, or proprietary information agreement which
he or she had with a previous employer or other person, or any intellectual
property policy of such employer, or is a party to or threatened by any
litigation concerning any patents, marks, trade secrets, service names, trade
names, copyrights, licenses and the like.
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5.18. Title to Tangible Assets.
The Contributed Subsidiaries have good title to their
properties and assets and good title to all their leasehold estates, in each
case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other
than or resulting from Taxes which have not yet become delinquent and minor
liens and encumbrances which do not in any case materially detract from the
value of the property subject thereto or materially impair the operations of
the Contributed Subsidiaries and which have not arisen otherwise than in the
ordinary course of business.
5.19. Insurance.
The Contributed Subsidiaries and their respective properties
are insured in such amounts, against such losses and with such insurers as are
prudent when considered in light of the nature of the properties and
businesses of the Contributed Subsidiaries and customary in light of such
Contributed Subsidiaries' exposure. No notice of any termination or threatened
termination, or denial of a material claim made since January 1, 1997, of, or
under any of such policies has been received and such policies are in full
force and effect. A summary of all such policies, including whether they are
on a "claims made" basis, is attached as Section 5.19 of ZGNA Disclosure
Schedule. None of such policies will be terminated or reduced in coverage as a
result of the transactions described herein. All such policies are in full
force and effect and all premiums with respect thereto have been paid. No
Contributed Subsidiary has failed to give any notice or present any claim
under any such insurance policy in due and timely fashion or as required by
any of such insurance policies or has not otherwise, through any act, omission
or non-disclosure, jeopardized or impaired full recovery of any claim under
such policies, and there are no claims by any Contributed Subsidiary under any
of such policies to which any insurance company is denying liability or
defending under a reservation of rights or similar clause.
5.20. Transactions with Related Parties.
None of the Contributed Subsidiaries is a party to any
agreement with any of their respective directors, officers or, to their best
knowledge stockholders holding more than 1/2% of its stock, or, to their best
knowledge, any Affiliate or family member of any of the foregoing, including
but not limited to, under which it: (i) leases any real or personal property
(either to or from such Person), (ii) licenses technology (either to or from
such Person), (iii) is obligated to purchase any tangible or intangible asset
from or sell such asset to such Person, (iv) purchases products or services
from such Person or (v) has borrowed money from or lent money to such Person.
None of the
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Contributed Subsidiaries employs as an employee or engages as a consultant any
family member of any of their respective directors or officers. There exist no
agreements among stockholders of the Contributed Subsidiaries to act in
concert with respect to their voting or holding of Contributed Subsidiary
securities.
5.21. Registration Rights.
The Contributed Subsidiaries are not under any obligation to
register any of their securities under the Securities Act.
5.22. Private Offering.
None of ZGNA, ZBI, the Contributed Subsidiaries or anyone
acting on their behalf has sold or has offered any of the Subsidiary Shares
for sale to, or solicited offers to buy from, or otherwise approached or
negotiated with respect thereto with, any prospective purchaser of the
Subsidiary Shares, other than the Company. None of ZGNA, ZBI, the
Contributed Subsidiaries or anyone acting on their behalf shall offer the
Subsidiary Shares for issue or sale to, or solicit any offer to acquire any
of the same from, anyone so as to bring the issuance and sale of the
Subsidiary Shares, or any part thereof, within the provisions of Section 5
of the Securities Act. Based in part upon the representations of the Company
set forth in Section 4, the offer and sale of the Subsidiary Shares are and
will be exempt from the registration and prospectus delivery requirements of
the Securities Act, and have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.
5.23. Investment.
(a) Each of ZGNA and ZBI is acquiring the Shares for its own
account for investment and not with a view towards the resale, transfer,
pledge or distribution thereof, nor with any present intention of distributing
the Shares, other than a pledge in favor of ZGNA's lender pursuant to the
credit agreement referred to in Section 8.7 and the delivery of a portion of
the Shares to the Escrow Agent under the Escrow Agreement.
(b) Each of ZGNA and ZBI has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of its investment in the Company as contemplated by this Agreement,
and is able to bear the economic risk of such investment for an indefinite
period of time. ZGNA and ZBI have been furnished access to such information
and documents as they have requested and have been afforded an opportunity to
ask questions of and receive answers from representatives of the Company
concerning the terms and
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conditions of this Agreement and the purchase of the Shares contemplated
hereby.
(c) Each of ZGNA and ZBI is an "accredited investor" as
defined under Regulation D of the Securities Act.
(d) ZGNA and ZBI are located in California and the offer and
sale of the Shares occurred in the States of Colorado and California.
5.24. Brokerage.
Except for ZGNA's agreement with The Beacon Group Capital
Services, LLC whose fees and expenses shall be paid by ZGNA, there are no
claims for brokerage commissions or finder's fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement made by or on behalf of ZGNA, ZBI or the Contributed Subsidiaries,
and ZGNA agrees to indemnify and hold the Company harmless against any costs
or damages incurred as a result of any such claim.
5.25. Material Facts.
This Agreement, ZGNA Disclosure Schedules, and the other
agreements, documents, certificates or written statements furnished or to be
furnished to the Company through the Closing Date by or on behalf of ZGNA, ZBI
and the Contributed Subsidiaries in connection with the transactions
contemplated hereby taken as a whole, and the information provided by ZGNA and
ZBI for inclusion in the Company's Proxy Statement, do not contain any untrue
statement by ZGNA, ZBI or the Contributed Subsidiaries of a material fact or
omit to state a material fact necessary to make the statements contained
therein or herein, in light of the circumstances in which they were made, not
misleading. There is no fact which is known to ZGNA, ZBI or the Contributed
Subsidiaries and which has not been disclosed herein or otherwise by ZGNA, ZBI
or the Contributed Subsidiaries to the Company which is reasonably likely to
have a Subsidiary Material Adverse Effect.
5.26. Debt.
As of the Closing Date, the "Debt" (as defined below) of the
Contributed Subsidiaries will not exceed $22,000,000 in the aggregate. For
purposes of this Section, "Debt" means debt for borrowed money (long term, for
working capital purposes or otherwise), obligations under letters of credit
and capital lease obligations.
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5.27. Financial Records.
The financial records of the Contributed Subsidiaries for
the period from April 1, 1995, up to and through the Closing Date are readily
auditable (including to allocate inter-company accounts and to reflect the
recent formation of Zuellig Botanicals Extracts) to permit compliance with SEC
reporting requirements of the Company. Such financial records are located at
Zuellig Group, N.A., Inc., 2550 El Presidio Street, Long Beach, CA 90810;
Wilcox, 755 George Wilson Road, Boone, N.C. 28697; and ZetaPharm, 70 West 36th
Street, New York, NY 10018 and Datalok Co., 15540 Del Amo Avenue, Tustin, CA
92680.
5.28. Subsidiary Real Property
(a) Section 5.28 of ZGNA Disclosure Schedule lists all real
property owned or leased by each Contributed Subsidiary. Each Contributed
Subsidiary has title to its owned real properties and any improvements thereon
(collectively, the "Subsidiary Owned Real Properties") in each case, free and
clear of all imperfections of title and all encumbrances, except for (i) those
consisting of zoning or planning restrictions, easements, permits and other
restrictions or limitations on the use of such property or irregularities in
title thereto which, individually and in the aggregate, do not materially
impair the use of such property, (ii) warehousemen's, mechanics', carriers',
landlords', repairmen's or other similar encumbrances arising in the ordinary
course of business and securing obligations not yet due and payable, (iii)
other encumbrances which arise in the ordinary course of business and which
individually and in the aggregate do not materially impair its use of such
property or its ability to obtain financing by using such assets as
collateral, (iv) any state of facts, including, without limitation, easements,
encroachments or encumbrances, either shown by any survey or other inspection
or granted by ZGNA prior to the date hereof, of such Subsidiary Owned Real
Property which do not materially adversely interfere with the occupancy or
use, as presently used or occupied, of such Subsidiary Owned Real Property,
(v) liens for taxes and/or assessments not yet delinquent or which are being
contested in good faith through appropriate proceedings, (vi) all rights or
easements, if any, of any municipality or other public or private utility
company, to maintain telephone wires, pipes, conduits or other facilities
which enter or cross such Subsidiary Owned Real Property and (vii) any state
of facts, including without limitation, rights, easements, liens,
encroachments or encumbrances that any title report, title commitment or title
insurance policy would disclose (encumbrances referenced in clauses (i)through
(vii) collectively referred to as the "Subsidiary Permitted Encumbrances").
(b) ZGNA has delivered to the Company a true and complete
list of all of the leases and subleases to which the Contributed Subsidiaries
are a party as described on Section 5.28
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of ZGNA Disclosure Schedule (collectively, the "Subsidiary Leased Real
Properties," together with Subsidiary Owned Real Properties, the "Subsidiary
Real Properties"). The leases and subleases described on Section 5.28 of ZGNA
Disclosure Schedule (i) have not been further modified or amended and (ii) are
in full force and effect. To the knowledge of ZGNA and the Contributed
Subsidiaries, there is no default which remains uncured and would materially
adversely interfere with the occupancy or use, as presently used or occupied,
of any Subsidiary Leased Real Property. No Contributed Subsidiary is obligated
to purchase any Subsidiary Leased Real Property and no Subsidiary Leased Real
Property is required to be accounted for under GAAP as a capitalized lease.
5.29. Company Security Holdings
Neither ZGNA nor any Contributed Subsidiary holds or has
held at any time during the 270 days preceding the Closing Date any debt or
equity security of the Company (or derivative securities thereof), except for
debt or equity securities (or derivative securities thereof) purchased
pursuant to the Stock Option Agreement.
5.30. Bank Accounts; Powers of Attorney.
Section 5.30 of ZGNA Disclosure Schedule lists all bank,
money market, brokerage, savings and similar accounts and safe deposit boxes
of all Contributed Subsidiaries and all powers of attorney of any Contributed
Subsidiaries.
5.31. Corporate Minute Books.
The corporate records of the Contributed Subsidiaries are
correct and complete. True and correct copies of all minutes of meetings or
other actions by the directors, stockholders or incorporators of the
Contributed Subsidiaries for the past five years have been provided and since
their inception have previously been provided or made available to the
Company.
5.32. Sufficient Assets.
The assets and properties owned by, or leased to, the
Contributed Subsidiaries, and the Subsidiary Key Agreements and Instruments,
are sufficient for the conduct of the business and operation of the
Contributed Subsidiaries as presented conducted and as presently proposed to
be conducted.
5.33. Good Condition.
The buildings, facilities, machinery, equipment, furniture,
leasehold and other improvements, fixtures, vehicles, structures, any related
capitalized items and other tangible
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property owned by or leased to the Contributed Subsidiaries (i) are to ZGNA's
and the Contributed Subsidiaries' best knowledge, in all material respects in
good operating condition and repair (normal wear and tear excepted) and, in
the case of buildings or structures located on the Subsidiary Real Properties,
free of any structural or engineering defects, and (ii) to ZGNA's and the
Contributed Subsidiaries' best knowledge, are suitable in all material
respects for their current use. ZGNA and the Contributed Subsidiaries have not
received notice of, and have no knowledge of, any pending, threatened or
contemplated condemnation proceeding or similar taking affecting the assets of
the Contributed Subsidiaries (including the Subsidiary Real Properties).
5.34. Bank Commitment.
As of the date of this Agreement, ZGNA has a bank commitment
letter from a lender, a copy of which has been delivered to the Company, to
provide the new credit facility to the Company contemplated hereby, and to
ZGNA's knowledge, such commitment has not been modified or terminated.
SECTION 6. ADDITIONAL COVENANTS OF THE PARTIES
6.1. Resale of Securities.
(a) ZGNA and ZBI will not sell or otherwise transfer the
Shares except pursuant to an effective registration under the Securities Act
and any state securities or blue sky laws or in a transaction which, in the
opinion of counsel reasonably satisfactory to the Company, qualifies as an
exempt transaction under such laws.
(b) The Shares will bear substantially the following legend
reflecting the foregoing restrictions on the transfer of such securities:
"The securities evidenced hereby have not been registered
under the Securities Act of 1933, as amended (the "Act"), or
any state securities law, and may not be sold, transferred
or otherwise disposed of except pursuant to an effective
registration under the Act or in a transaction which, in the
opinion of counsel reasonably acceptable to the Company, is
exempt from such registration."
"The securities evidenced hereby are subject to the terms of
that certain Governance Agreement, dated as of
_____________, 1999, by and among the Company, ZGNA and ZBI,
as amended from time to time. A copy of such
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Governance Agreement has been filed with the Secretary of the
Company and is available upon request."
6.2. Proxy Statement.
(a) The Company shall promptly prepare and file with the
Commission preliminary and final versions of the Proxy Statement relating to
this Agreement and the transactions contemplated hereby, and to increase size
of or adopt a new stock option plan for up to 1,000,000 shares of Common Stock
(the "Proxy Statement"). The Company shall use its best efforts to have the
Proxy Statement cleared by the Commission and mailed to its stockholders at
the earliest practicable date. The Company shall cooperate and consult with
ZGNA with respect to the Proxy Statement and any related Commission comments.
(b) The Company will furnish ZGNA with such information
concerning the Company and its Subsidiaries as is necessary in order to cause
the Proxy Statement, insofar as it relates to the Company and its
Subsidiaries, to comply with applicable law. None of the information relating
to the Company and its Subsidiaries supplied by the Company for inclusion in
the Proxy Statement will be false or misleading with respect to any material
fact or will omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Company agrees
promptly to advise ZGNA if, at any time prior to the meeting of the
stockholders of the Company referenced herein, any information provided by it
in the Proxy Statement is or becomes incorrect or incomplete in any material
respect and to provide ZGNA with the information needed to correct such
inaccuracy or omission. The Company will furnish ZGNA and the Company's
shareholders with such supplemental information as may be necessary in order
to cause the Proxy Statement, insofar as it relates to the Company and its
Subsidiaries, to comply with applicable law after the mailing thereof to the
stockholders of the Company.
(c) ZGNA will furnish the Company with such information
concerning ZGNA, ZBI and the Contributed Subsidiaries as is necessary in order
to cause the Proxy Statement, insofar as it relates to ZGNA, ZBI and the
Contributed Subsidiaries, to comply with applicable law. None of the
information relating to ZGNA, ZBI and the Contributed Subsidiaries supplied by
ZGNA for inclusion in the Proxy Statement will be false or misleading with
respect to any material fact or will omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. ZGNA
agrees promptly to advise the Company if, at any time prior to the meeting of
stockholders of the Company referenced herein, any information provided by it
in the Proxy Statement is or becomes incorrect or incomplete in
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any material respect and to provide the Company with the information needed to
correct such inaccuracy or omission. ZGNA will furnish the Company with such
supplemental information as may be necessary in order to cause the Proxy
Statement, insofar as it relates to ZGNA, ZBI and the Contributed
Subsidiaries, to comply with applicable law after the mailing thereof to the
stockholders of the Company.
6.3. Access to Information.
The Company shall (and shall cause each of its Subsidiaries
to), and ZGNA shall and ZGNA shall cause each of ZBI and the Contributed
Subsidiaries to afford to the officers, employees, accountants, counsel and
other representatives of ZGNA or the Company, as the case may be, access,
during normal business hours during the period prior to the Closing Date, to
all its properties, books, contracts, commitments and records and, during such
period, the Company shall (and shall cause each of its Subsidiaries to) and
ZGNA shall cause the Contributed Subsidiaries to furnish promptly to ZGNA and
the Company, as the case may be, (a) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of Federal securities laws and (b) all
other information concerning its business, properties and personnel as ZGNA or
the Company, as the case may be, may reasonably request.
6.4. Stockholders Meeting.
The Company shall call a meeting of its stockholders to be
held as promptly as practicable for the purpose of voting upon this Agreement
and the election of directors as contemplated by Section 7.11 hereof. The
Company will, through its Board of Directors, recommend to its stockholders
approval of this Agreement and the transactions contemplated hereby and shall
use its best efforts to hold such meeting as soon as reasonably practicable
after the date hereof; provided, however, that the Board of Directors shall
not be so obligated if it receives a written opinion from outside counsel to
the effect that it would be inconsistent with its fiduciary duties to
recommend to its stockholders approval of this Agreement and the transactions
contemplated hereby.
6.5. Execution and Delivery of Agreements.
ZGNA or its Subsidiary a party thereto shall execute and
deliver to the Company, and the Company shall execute and deliver to ZGNA, (i)
the Governance Agreement, (ii) the Sourcing Agency Agreement, (iii) the Escrow
Agreement, (iv) the Powders Option Agreement, (v) the Agreement Regarding
Employees and (vi)
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their respective tax affidavits in the form attached hereto as Exhibit K, at
or prior to the Closing.
6.6. Ordinary Course.
(a) Except as expressly contemplated by this Agreement or as
set forth on Schedule 6.6(a) and except for the possible sale of the Company's
paclitaxel business and assets, during the period from the date of this
Agreement to the Closing Date, (i) the Company shall conduct, and it shall
cause its Subsidiaries to conduct, its or their businesses in the ordinary
course and consistent with past practice, and the Company shall, and it shall
cause its Subsidiaries to, use its or their reasonable commercial efforts to
preserve intact its business organization, to keep available the services of
its officers and employees and to maintain satisfactory relationships with all
persons with whom it does business and (ii) without limiting the generality of
the foregoing, neither the Company nor any of its Subsidiaries will:
(A) amend or propose to amend its Organizational
Documents in any material respect;
(B) authorize for issuance, issue, grant, sell,
pledge, dispose of or propose to issue, grant, sell, pledge or
dispose of any shares of, or any options, warrants, commitments,
subscriptions or rights of any kind to acquire or sell any shares of,
the capital stock or other securities of the Company or any of its
Subsidiaries including, but not limited to, any securities
convertible into or exchangeable for shares of stock of any class of
the Company or any of its Subsidiaries, except for (a) the issuance
of shares pursuant to the exercise of either incentive or
non-qualified stock options, including management stock options
outstanding the date of this Agreement in accordance with their
present terms and (b) grants of options pursuant to the 1999
Incentive Plan or the Company's stock option plan for directors in
effect as of the date hereof for attendance at meetings of the Board,
on terms and in amounts consistent with past practice;
(C) split, combine or reclassify any shares of its
capital stock or declare, pay or set aside any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock, other than dividends or
distributions to the Company or a Subsidiary of the Company, or
directly or indirectly redeem, purchase or otherwise acquire or offer
to acquire any shares of its capital stock or other securities;
(D) other than in the ordinary course of business
consistent with past practice, (a) create, incur or assume any debt,
except refinancings of existing obligations on
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terms that are no less favorable to the Company or its Subsidiaries
than the existing terms; (b) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, indirectly,
contingently or otherwise) for the obligations of any Person; (c) make
any capital expenditures or make any loans, advances or capital
contributions to, or investments in, any other Person (other than to a
Company Subsidiary and customary travel, relocation or business
advances to employees); (d) acquire the stock or assets of, or merge or
consolidate with, any other Person; (e) voluntarily incur any material
liability or obligation (absolute, accrued, contingent or otherwise);
or (f) sell, transfer, mortgage, pledge or otherwise dispose of, or
encumber, or agree to sell, transfer, mortgage, pledge or otherwise
dispose of or encumber, any assets or properties, real, personal or
mixed, material to the Company and its Subsidiaries taken as a whole
other than to secure debt permitted under (a) of this clause (D); and
(E) maintain in full force and effect the insurance
described in Section 4.19 or comparable insurance.
(b) Except as expressly contemplated by this Agreement,
during the period from the date of this Agreement to the Closing Date, (i)
ZGNA shall cause the Contributed Subsidiaries to conduct their businesses in
the ordinary course and consistent with past practice, and ZGNA shall cause
the Contributed Subsidiaries to use their reasonable commercial efforts to
preserve intact their business organization, to keep available the services of
their officers and employees and to maintain satisfactory relationships with
all persons with whom they do business, (ii) ZGNA will use its reasonable
commercial efforts to maintain in place the sales force of ZBI whom will be
subject to the Agreement Regarding Employees and (iii) without limiting the
generality of the foregoing, none of the Contributed Subsidiaries will:
(A) amend or propose to amend its Organizational
Documents in any material respect;
(B) authorize for issuance, issue, grant, sell,
pledge, dispose of or propose to issue, grant, sell, pledge or dispose
of any shares of, or any options, warrants, commitments, subscriptions
or rights of any kind to acquire or sell any shares of, the capital
stock or other securities of the Contributed Subsidiaries including,
but not limited to, any securities convertible into or exchangeable
for shares of stock of any class of the Contributed Subsidiaries;
(C) split, combine or reclassify any shares of its
capital stock or declare, pay or set aside any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock,
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other than dividends or distributions to the other Contributed
Subsidiaries, or directly or indirectly redeem, purchase or otherwise
acquire or offer to acquire any shares of its capital stock or other
securities;
(D) other than in the ordinary course of business
consistent with past practice, (a) create, incur or assume any debt,
except refinancings of existing obligations on terms that are no less
favorable to the Contributed Subsidiaries than the existing terms;
(b) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, indirectly, contingently or otherwise)
for the obligations of any Person; (c) make any capital expenditures
or make any loans, advances or capital contributions to, or
investments in, any other Person (other than customary travel,
relocation or business advances to employees); (d) acquire the stock
or assets of, or merge or consolidate with, any other Person; (e)
voluntarily incur any material liability or obligation (absolute,
accrued, contingent or otherwise); or (f) sell, transfer, mortgage,
pledge or otherwise dispose of, or encumber, or agree to sell,
transfer, mortgage, pledge or otherwise dispose of or encumber, any
assets or properties, real, personal or mixed, material to the
Contributed Subsidiaries taken as a whole other than to secure debt
permitted under (a) of this clause (D); and
(E) maintain in full force and effect the insurance
described in Section 5.19 or comparable insurance.
(c) Absent the prior written consent of ZGNA, during the two
year period following consummation of the Mergers, the Company agrees (i) that
it will not (x) liquidate Zuellig Botanical Extracts or (y) other than in the
ordinary course of business, transfer more than an insubstantial portion of
the assets of Zuellig Botanical Extracts to the Company or an Affiliate of the
Company; (ii) the Company shall take no action, and shall cause the
Contributed Subsidiaries to take no action, if such action would jeopardize
the characterization of the Mergers as reorganizations within the meaning of
Section 368(a) of the Code.
6.7. Further Assurances.
Upon the request of a party hereto at any time after the
Closing Date, the other party will forthwith execute and deliver such further
instruments of assignment, transfer, conveyance, endorsement, direction or
authorization and other documents as the requesting party or its counsel may
request in order to perfect title of ZGNA and the Company and their successors
and assigns to the Shares and the Subsidiary Shares, respectively, or
otherwise to effectuate the purposes of this Agreement.
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6.8. Confidentiality.
Except as may be required by law, (i) prior to the Closing,
the Company and ZGNA shall not, directly or indirectly, disclose to any person
or entity or use any information not in the public domain or generally known
in the industry, in any form, whether acquired prior to or after the Closing
Date, received from the Company or ZGNA, as the case may be, relating to the
business and operations of the Company and its Subsidiaries or ZGNA and its
Subsidiaries, as the case may be, and (ii) after the Closing, ZGNA and ZBI
shall not so disclose or use such information relating to the business of the
Company or the Contributed Subsidiaries except as permitted by other
agreements between ZGNA or its affiliates and the Company.
6.9. Standstill.
(a) From the date hereof through the Closing Date (or, if
this Agreement is terminated in accordance with its terms, for a period of 18
months from the date hereof), neither ZGNA or ZBI will, without the prior
consent of the Board:
(i) acquire any of the Voting Stock or direct or
indirect rights to acquire or sell Voting Stock of the Company other than the
Option or the shares of Common Stock issuable upon exercise of the Option;
(ii) make, or in any way participate, directly or
indirectly, in any "solicitation" of "proxies" to vote (as such terms are used
in the rules under the Exchange Act), enter into any agreement to vote, or
seek to agree with, advise or influence any person or entity with respect to
the voting of any Voting Stock of the Company (except to the extent necessary
to have its three representatives on the Board);
(iii) make any public announcement with respect to
any transaction or proposed or contemplated transaction between the Company or
any of its security holders and ZGNA or any of its Affiliates, including,
without limitation, any tender or exchange offer, merger or other business
combination or acquisition of a material portion of the assets of the Company;
(iv) disclose any intention, plan or arrangement
regarding any of the matters referred to in clauses (i), (ii) or (iii); or
(v) sell or otherwise transfer shares of Common
Stock except pursuant to a transaction approved by the Board of Directors of
the Company.
(b) For a period of five years from the Closing Date,
neither ZGNA or ZBI will, without the prior consent of the Board:
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(i) acquire more than 49% of the Voting Stock or
direct or indirect rights to acquire more than 49% of the Voting Stock of the
Company;
(ii) make, or in any way participate, directly or
indirectly, in any "solicitation" of "proxies" to vote (as such terms are used
in the rules under the Exchange Act), enter into any agreement to vote, or
seek to agree with, advise or influence any person or entity with respect to
the voting of any Voting Stock of the Company (except to the extent necessary
to have its three representatives on the Board);
(iii) make any public announcement with respect to
any transaction or proposed or contemplated transaction between the Company or
any of its security holders and ZGNA or any of its Affiliates, including,
without limitation, any tender or exchange offer, merger or other business
combination or acquisition of a material portion of the assets of the Company;
(iv) disclose any intention, plan or arrangement
regarding any of the matters referred to in clauses (i), (ii) or (iii); or
(v) except in an underwritten transaction, sell or
otherwise transfer such number of shares of Common Stock to the public which
is greater than 1% of the outstanding shares of Common Stock in any two week
period or 20% of weekly volume of the Common Stock.
(c) For a period of 18 months from the Closing Date, neither
ZGNA or ZBI will, without the prior consent of the Board, sell or otherwise
dispose of its shares of Common Stock, other than a pledge in favor of ZGNA's
lender pursuant to the credit agreement referred to in Section 8.7 and other
than transfers by ZBI to ZGNA or an entity wholly owned by ZGNA.
6.10. Ownership of Shares.
(a) In order to meet its obligations under Section 9 hereof,
ZGNA and ZBI agree to continue to own its portion of the Shares or other
Liquid Assets of approximately equivalent value to its portion of the Shares
until the later of (i) the second anniversary of the Closing Date, or (ii) in
the event the Company asserts any claims pursuant to Section 9.4(b)(i), until
the final resolution of such claims. For purposes hereof, the term "Liquid
Assets" shall mean cash, money market funds, commercial paper of a U.S. based
entity, or securities that are publicly traded on the New York Stock Exchange,
the American Stock Exchange or the Nasdaq National Market.
(b) Notwithstanding the foregoing subsection (a), after the
first anniversary of the Closing Date, ZGNA's and ZBI's obligation to hold its
portion of the
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Shares or other Liquid Assets of approximately equivalent value to its portion
of the Shares shall be reduced to 60% of the initial value of its portion of
the Shares plus an amount equal to the value of the claims made, asserted or
pending under Section 9 as of such date.
(c) In the event the Company, ZBI or ZGNA shall be required
to make an indemnification payment pursuant to Section 9, they may elect to
make such payment with the shares of Common Stock in lieu of cash. The market
price of the shares of Common Stock shall be determined by the average closing
price of a share of Common Stock for the 15 consecutive trading days preceding
the date of such payment on the principal national securities exchange on
which the shares of Common Stock are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, the average
of the reported bid and asked prices during such 15 consecutive trading days
on the Nasdaq National Market or, if the shares are not listed on the Nasdaq
National Market, in the over-the-counter market or, if the shares of Common
Stock are not publicly traded, the market price for such day shall be the fair
market value thereof determined jointly by the Company and ZGNA; provided,
however, that if such parties are unable to reach agreement within a
reasonable period of time, the market price shall be determined in good faith
by an independent investment banking firm selected jointly by the Company and
ZGNA or, if that selection cannot be made within 15 days, by an independent
investment banking firm selected by the American Arbitration Association in
accordance with its rules. All costs and expenses incurred in connection with
the determination of market price shall be borne by the party seeking to make
payment in stock.
6.11. Noncompetition.
(a) ZGNA shall not, and shall cause its parent corporation
and its Affiliates, for a period of five (5) years following the Closing Date,
for any reason whatsoever, directly or indirectly, or on behalf of or in
conjunction with any other person:
(i) engage in any business selling any products or
services in direct competition with the Company, including, but not limited
to, the Contributed Subsidiaries, in North America as conducted as of the
Closing Date;
(ii) engage in the business of acquiring biomass
also used by the Company for the purpose of retail or wholesale sales in North
America (including after processing) for use as a human nutraceutical; or
(iii) solicit any person who is an employee of the
Company, including, but not limited to the Contributed Subsidiaries, in a
managerial, sales or purchasing capacity for the purpose or with the intent of
enticing such employee away from or out of employ of the Company or its
Subsidiaries.
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(b) Notwithstanding the above, the foregoing covenant shall
not prohibit ZGNA from acquiring as an investment not more than five percent
(5%) or continuing to own no more than the percentage ZGNA owns on the date of
this Agreement of the capital stock of a competing business, provided that
ZGNA shall not control such competing business.
(c) If any provision of this Section 6.11 relating to a time
period or geographic area shall be declared by a court of competent
jurisdiction unenforceable as unreasonable, the maximum time period or
geographic area, as applicable, that such court deems reasonable and
enforceable shall thereafter be deemed applicable and this Agreement shall
automatically be considered to have been amended and revised to reflect such
determination. This Section 6.11 may be enforced by specific performance.
6.12. Resignation of Directors.
Effective as of the Closing Date, all directors of each
Contributed Subsidiary shall cease to be directors. ZGNA will use its good
faith effort to obtain the resignation of all directors of each Contributed
Subsidiary.
6.13. Subscription Right.
(a) If at any time after the date hereof, the Company
proposes to issue equity securities of any kind (the term "equity securities"
shall include for these purposes any warrants, options or other rights to
acquire equity securities and debt securities convertible into equity
securities) of the Company (other than the issuance of securities (i) to the
public in a firm commitment underwriting pursuant to a registration statement
filed under the Securities Act, (ii) pursuant to the acquisition of another
entity by the Company by merger, purchase of substantially all of the assets
or stock or other form of acquisition, (iii) pursuant to an employee,
consultant or director stock option plan, stock bonus plan, stock purchase
plan or other management equity program, or (iv) as an "equity kicker" for a
debt or leasing financing with an institutional lender), then the Company
shall:
(i) give written notice setting forth in reasonable
detail (1) the designation and all of the terms and provisions of the
securities proposed to be issued (the "Proposed Securities"),
including, where applicable, the voting powers, preferences and
relative participating, optional or other special rights, and the
qualification, limitations or restrictions thereof and interest rate
and maturity; (2) the price and other terms of the proposed sale of
such securities; (3) the amount of such securities proposed to be
issued; and (4) such other information as ZGNA may reasonably request
in order to evaluate the proposed issuance; and
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(ii) offer to issue to ZGNA upon the terms
described in subparagraph (i) above a portion of the Proposed
Securities (the "Subscription Securities") equal to a percentage
determined by dividing (x) the number of shares of Common Stock
beneficially owned (within the meaning of Rule 13d-3 under the
Exchange Act) by ZGNA, by (y) the total number of shares of Common
Stock beneficially owned (within the meaning of Rule 13d-3 under the
Exchange Act) by all holders of Common Stock, in each case,
immediately preceding the issuance of the Proposed Securities.
(b) ZGNA must exercise its right to purchase all or any
portion of the Subscription Securities hereunder within ten (10) days after
receipt of such notice from the Company. To the extent that the Company offers
two or more securities in units, ZGNA must purchase such units as a whole and
will not be given the opportunity to purchase only one of the securities
making up such unit.
(c) Upon the expiration of the offering periods described
above, the Company will be free to sell such Subscription Securities that ZGNA
has not elected to purchase during the ninety (90) days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to ZGNA. Any Subscription Securities offered or sold by the
Company after such 90 day period must be reoffered to ZGNA pursuant to this
Section 6.13.
(d) The election by ZGNA not to exercise its subscription
rights under this Section 6.13 in any one instance shall not affect its right
(other than in respect of a reduction in its percentage holdings) as to any
subsequent proposed issuance.
(e) Notwithstanding the foregoing, the rights set forth in
this Section 6.13 shall terminate (i) if this Agreement is terminated in
accordance with its terms, seven months after the date hereof or (ii) upon the
Closing Date.
(f) The exercise by ZGNA of its rights under this Section
6.13 shall be subject to compliance with applicable laws, rules and
regulations, including HSR.
6.14. Letters of Accountants.
(a) The Company shall use its reasonable best efforts to
cause to be delivered to ZGNA "comfort" letters regarding the Company of
Arthur Andersen, LLP, the Company's independent public accountants, dated and
delivered the date of the proxy statement and addressed to ZGNA, in form and
substance reasonably satisfactory to ZGNA and reasonably customary in scope
and substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by
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this Agreement consistent with procedures set forth in Exhibit 6.14 hereto.
(b) ZGNA shall use its reasonable best efforts to cause to
be delivered to the Company "comfort" letters regarding the Contributed
Subsidiaries of Deloitte & Touche LLP, ZGNA's independent public accountants,
dated and delivered the date of the proxy statement and addressed to the
Company, in form and substance reasonably satisfactory to the Company and
reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with transactions such as those
contemplated by this Agreement consistent with procedures set forth in Exhibit
6.14 hereto.
6.15. Efforts to Satisfy Conditions; Notice of Inability
to Meet Conditions.
Between the date hereof and the Closing, each party shall
make a good faith effort to obtain all third party consents required for
Closing and otherwise act to cause all closing conditions to be satisfied. If
a party believes that a condition to its obligation to close will not be
satisfied by Closing, or becomes aware of an event that causes a Company
Material Adverse Effect or a Subsidiary Material Adverse Effect, it shall
promptly notify the other party including informing it of the nature of such
company's Material Adverse Effect and steps which are being done to attempt to
correct or respond to the failure of such condition or material adverse event.
6.16. HSR.
As soon as practical after the date hereof, each of the
Company, ZGNA and, if necessary, the controlling persons of ZGNA shall make
all filings required pursuant to the HSR in connection with this Agreement.
The parties will cooperate in the preparation of all filings and responses to
all reasonable requests for additional information.
6.17. Public Announcement.
Prior to the Closing and for three months thereafter, the
timing and content of all public announcements regarding any aspect of this
Agreement or the transactions contemplated hereby shall be mutually agreed
upon in advance by the Company and ZGNA, except to the extent that legal
counsel advises a party that such announcement or other disclosure is required
to be made pursuant to applicable law or the rules of the National Association
of Securities Dealers. A party shall promptly notify the other if it has
received such advise and intends to make a public announcement that has not
been mutually agreed upon.
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6.18. Cooperation in Defense.
If prior to or within two years after the Closing, any
claim, action, investigation or governmental action is brought which questions
the validity or legality of the transactions contemplated hereunder or seeks
damages in connection therewith, the parties agree to cooperate and use
reasonable efforts to defend against such claim, action, investigation or
governmental action, and seek the removal of any injunction preventing or
restraining any transactions contemplated hereby. This provision is not a
limitation on any other obligations of the parties in this Agreement or the
Transaction Documents.
6.19. Volker Wypyszyk.
Both before and after the Closing, ZGNA and its Affiliates
shall use their reasonable best efforts to cause Volker Wypyszyk, for the
first 12 months after the Closing, to devote a significant amount of his time,
and after 12 months after the Closing, to devote substantially all of his
time, to the business of the Company. For the purposes of this Section,
"reasonable best efforts" shall mean that ZGNA and its Affiliates shall not
require Volker Wypyszyk to devote his time to the business of ZGNA or its
Affiliates that would be inconsistent with this Section.
6.20. Repayment of Debt.
On the Closing Date, the Company shall use a portion of the
proceeds of the credit facility referred to in Section 7.9 to cause the
Contributed Subsidiaries to repay the Debt for borrowed money of the
Contributed Subsidiaries referred to in Section 5.26.
SECTION 7. ZGNA'S CLOSING CONDITIONS
The obligation of ZGNA to consummate the Mergers on the
Closing Date, as provided in Sections 2 and 3 hereof, shall be subject to the
performance in all material respects by the Company of its agreements
theretofore to be performed hereunder and to the satisfaction, prior thereto
or concurrently therewith, of the following further conditions:
7.1. Representations and Warranties.
The representations and warranties of the Company contained
in this Agreement shall be true and correct in all material respects on and as
of the Closing Date as though such warranties and representations were made at
and as of such date, except as otherwise specifically permitted herein.
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7.2. Compliance with Agreement.
The Company shall have performed and complied in all
material respects with all agreements, covenants and conditions contained in
this Agreement which are required to be performed or complied with by the
Company prior to or on the Closing Date.
7.3. Injunction.
There shall be no effective injunction, writ, preliminary
restraining order or any order of any nature issued by a court of competent
jurisdiction or governmental body or agency of competent jurisdiction
directing that the transactions provided for herein or any of them not be
consummated as herein provided.
7.4. Stockholder Approval.
This Agreement shall have been approved and adopted by the
affirmative vote of the holders of a majority of the outstanding shares of the
Common Stock.
7.5. Consents and Approvals.
All material consents, waivers, authorizations and approvals
of any governmental or regulatory authority, domestic or foreign shall have
been duly obtained and shall be in full force and effect on the Closing Date.
7.6. NASDAQ Listing.
The Shares shall have been approved for listing on the
NASDAQ market or any other exchange the shares of Common Stock then trade.
7.7. Adverse Development.
There shall have been no developments in the business of the
Company or any of its Subsidiaries which in the reasonable opinion of ZGNA
would have a Company Material Adverse Effect.
7.8. Transaction Documents.
The Company and each of the other parties thereto shall have
executed and delivered (i) the Escrow Agreement, (ii) the Powders Option
Agreement, (iii) the Governance Agreement, (iv) the Sourcing Agency Agreement,
(v) the Registration Rights Agreement and (vi) the Agreement Regarding
Employees.
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7.9. Credit Agreements.
The Company and ZGNA shall have entered into definitive
credit agreements with their respective lenders on terms reasonably
satisfactory to ZGNA and such credit agreements shall be in full force and
effect.
7.10. HSR Act.
All required waiting periods applicable to this Agreement
and the transactions contemplated hereby under the HSR shall have been expired
or terminated.
7.11. Election of Officer and Directors.
Mr. Volker Wypyszyk shall have been appointed as the
President and Co-Chief Executive Officer of the Company and shall have been
elected to the Board, effective upon the Closing. Mr. Dean Stull shall have
been elected as the Chairman of the Board and Co-Chief Executive Officer. The
Board shall have been constituted as of the Closing Date as provided in
Section 2 of the Governance Agreement.
7.12. Officer's Certificate.
ZGNA shall have received a certificate, dated the Closing
Date, signed by the Chairman of the Board of the Company, certifying that the
conditions specified in Sections 7.1 and 7.2 of this Agreement have been
fulfilled.
7.13. Counsel's Opinion.
ZGNA shall have received from the Company's counsel,
Chrisman, Bynum & Johnson, P.C., an opinion, dated the Closing Date,
substantially as set forth in Exhibit A hereto.
7.14. Completion of Mergers. The Certificates of Merger
shall have been filed with the Secretary of State of the respective
jurisdiction of incorporation and the Mergers shall have become effective in
accordance with the laws of the respective jurisdiction of incorporation.
7.15. Approval of Proceedings.
All proceedings to be taken in connection with the
transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to ZGNA and
its counsel, Willkie Farr & Gallagher; and ZGNA shall have received copies of
all documents or other evidence which it and Willkie Farr & Gallagher may
request in connection with such transactions and of all records of corporate
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proceedings in connection therewith in form and substance satisfactory to ZGNA
and Willkie Farr & Gallagher.
7.16. Accountant's Letter.
ZGNA shall have received the accountant's letter referred to
in Section 6.14(a).
SECTION 8. COMPANY CLOSING CONDITIONS
The obligation of the Company to issue and deliver the
Shares and to consummate the Mergers on the Closing Date, as provided in
Sections 2 and 3 hereof, shall be subject to the performance in all material
respects by ZGNA and the Contributed Subsidiaries of their agreements
theretofore to be performed hereunder and to the satisfaction, prior thereto
or concurrently therewith, of the following further conditions:
8.1. Representations and Warranties.
The representations and warranties of ZGNA, ZBI and the
Contributed Subsidiaries contained in this Agreement shall be true and correct
and in all material respects on and as of the Closing Date as though such
warranties and representations were made at and as of such date, except as
otherwise specifically permitted herein.
8.2. Compliance with Agreement.
ZGNA and ZBI shall have performed and complied in all
material respects with, and shall have caused the Contributed Subsidiaries to
perform and comply in all material respects with, all agreements, covenants
and conditions contained in this Agreement which are required to be performed
or complied with by it prior to or on the Closing Date.
8.3. Injunction.
There shall be no effective injunction, writ, preliminary
restraining order or any order of any nature issued by a court of competent
jurisdiction or governmental body or agency of competent jurisdiction
directing that the transactions provided for herein or any of them not be
consummated as herein provided.
8.4. Stockholder Approval.
This Agreement shall have been approved by the affirmative
vote of the holders of a majority of the outstanding shares of the Common
Stock.
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8.5. Election of Officer and Directors.
Mr. Volker Wypyszyk shall have been appointed as the
President and Co-Chief Executive Officer of the Company and shall have been
elected to the Board, effective upon the Closing. Mr. Dean Stull shall have
been elected as the Chairman of the Board and Co-Chief Executive Officer. The
Board shall have been constituted as of the Closing Date as provided in
Section 2 of the Governance Agreement.
8.6. Adverse Development.
There shall have been no developments in the business of the
Contributed Subsidiaries which in the reasonable opinion of the Company would
have a Subsidiary Material Adverse Effect.
8.7. Credit Agreements.
The Company and ZGNA shall have entered into definitive
credit agreements with their respective lenders on terms reasonably
satisfactory to the Company and such credit agreements shall be full force and
effect.
8.8. Consents and Approvals.
All material consents, waivers, authorizations and approvals
of any governmental or regulatory authority, domestic or foreign shall have
been duly obtained and shall be in full force and effect on the Closing Date.
8.9. HSR Act.
All required waiting periods applicable to this Agreement
and the transactions contemplated hereby under the HSR shall have been expired
or terminated.
8.10. Transaction Documents.
ZGNA or its Subsidiary and each of the other parties thereto
shall have executed and delivered (i) the Escrow Agreement, (ii) the Powders
Option Agreement, (iii) the Governance Agreement, (iv) the Sourcing Agency
Agreement, (v) the Registration Rights Agreement and (vi) the Agreement
Regarding Employees.
8.11. ZGNA's Certificates.
The Company shall have received a certificate from an
executive officer of ZGNA, dated the Closing Date, certifying that the
conditions specified in Sections 8.1 and 8.2 of this Agreement have been
fulfilled.
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8.12. Counsel's Opinion.
The Company shall have received from ZGNA's counsel, Willkie
Farr & Gallagher, an opinion, dated the Closing Date, substantially as set
forth in Exhibit B hereto.
8.13. Completion of Mergers.
The Certificates of Merger shall have been filed with the
Secretary of State of the respective jurisdiction of incorporation and the
Mergers shall have become effective in accordance with the laws of the
respective jurisdiction of incorporation.
8.14 Approval of Proceedings.
All proceedings to be taken in connection with the
transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to the Company
and its counsel, Chrisman, Bynum & Johnson, P.C.; and the Company shall have
received copies of all documents or other evidence which it and Chrisman,
Bynum & Johnson, P.C. may request in connection with such transactions and of
all records of corporate proceedings in connection therewith in form and
substance satisfactory to the Company and Chrisman, Bynum & Johnson, P.C.
8.15. Accountant's Letter.
The Company shall have received the accountant's letter
referred to in Section 6.14(b).
8.16. Employees.
(a) Individuals responsible for at least 75% of all sales of
products of the Contributed Subsidiaries in the 90 days prior to the date of
this Agreement shall be available to work in connection with the Agreement
Regarding Employees in substantially the same role as before the execution of
this Agreement, and not more than 25% of such individuals shall have stated in
writing to ZGNA that they intend to stop working for the Surviving Corporation
in such role.
(b) Employees responsible for at least 75% of all purchases
of biomass material of the Contributed Subsidiaries in the 90 days prior to
the date of this Agreement shall be available to work for the Contributed
Subsidiaries in substantially the same role as before the execution of this
Agreement, and not more than 25% of such individuals shall have stated in
writing to ZGNA that they intend to stop working for a Contributed Subsidiary
in such role (including after the Closing)
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if the Contributed Subsidiary offers them a salary and compensation
arrangement comparable to that currently in place as of the date hereof and
Benefit Arrangements as contemplated by this Agreement.
8.17. Exclusive Distributorship Agreement.
The agreement listed under the heading "Exclusive
Distributorship Agreement" in Section 5.12 of ZGNA Disclosure Schedule shall
have been terminated without further liability to ZBI or the Contributed
Subsidiaries, including, without limitation, any restrictions on their ability
to engage in business contained therein.
SECTION 9. TERMINATION AND INDEMNIFICATION
9.1. Termination.
This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual consent of ZGNA and the Company;
(b) by ZGNA or the Company if the Closing shall not have
occurred on or before April 30, 1999, except that ZGNA and the Company shall
have the right, in their mutual discretion, to extend the time period in this
Section 9.1(b) an additional 45 days; provided that the right to terminate
this Agreement pursuant to this Section 9.1(b) shall not be available to any
party whose failure to perform any of its obligations under this Agreement
results in the failure of the Closing to be consummated by such date;
(c) by ZGNA if the Board shall have withdrawn, modified or
amended (or resolved to withdraw, modify or amend) in any respect its
recommendation that this Agreement be approved by the Company's stockholders;
or
(d) by ZGNA or the Company, if any governmental entity shall
have threatened to, or issued, an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting any of the material
transactions contemplated hereby.
9.2. Procedure and Effect of Termination.
In the event of termination of this Agreement pursuant to
Section 9.1 hereof, by one party, written notice thereof shall forthwith be
given to the other party, and, except as set forth below, this Agreement shall
terminate and be void and have no effect except for the provisions of Section
9.4 which shall
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survive such termination and the transactions contemplated hereby shall be
abandoned except for the provisions of Section 9.4 which shall survive such
termination. If this Agreement is terminated as provided herein:
(a) ZGNA and the Company will destroy or redeliver, and will
cause its respective agents (including, without limitation, attorneys and
accountants) to destroy or redeliver all documents, electronic files or other
media containing confidential information with respect to the Company or the
Contributed Subsidiaries, as the case may be, delivered in connection with
this Agreement, unless ZGNA or the Company believes in its reasonable judgment
that such destruction could give rise to any liability under applicable law or
prevent it from reasonably asserting a known claim hereunder;
(b) all information received by ZGNA or the Company with
respect to the business, operations, assets or financial condition of the
Company or the Contributed Subsidiaries, as the case may be, shall remain
subject to the confidentiality provision of Section 6.8; and
(c) except as otherwise expressly set forth herein, no party
to this Agreement shall have any liability hereunder to any other party,
except (i) for any intentional breach or misrepresentation by such party of
the terms and provisions of this Agreement and (ii) as stated in paragraphs
(a) and (b) of this Section 9.2.
9.3. Survival of Representations, Warranties and
Covenants.
All representations and warranties contained in Sections
4.6(c), 4.15, 5.6(c), 5.15 and third party claims arising out of
misrepresentation of any of the representations or warranties herein shall
survive the Closing and remain in full force and effect for a period of 24
months following the Closing Date. All representations and warranties
contained in Section 4.31 shall terminate as of the Closing. All other
representations and warranties herein or in any other Transaction Documents
shall survive the Closing and remain in full force and effect for a period of
18 months following the Closing Date. All covenants and agreements contained
herein shall survive the Closing and remain in full force and effect until
sixty (60) days after the expiration of the applicable statute of limitations
(including any extensions thereof).
9.4. Indemnification.
(a) From and after the Closing, the Company shall indemnify
and hold harmless ZGNA, ZBI and their respective
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officers, directors and Affiliates (collectively, the "ZGNA Indemnified
Parties") from and against any liabilities, costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages and
amounts paid in settlement (collectively, "Damages") arising from or in
connection with (i) any inaccuracy in any representation or the breach of any
warranty of the Company under a Transaction Document or (ii) the failure of
the Company to duly perform or observe any term, provision, covenant or
agreement to be performed or observed by the Company pursuant to a Transaction
Document.
(b) From and after the Closing, ZGNA and ZBI shall indemnify
and hold harmless the Company and its officers, directors and Affiliates
(collectively, the "Company Indemnified Parties") from and against any Damages
to the extent they are the result of (i) any inaccuracy in any representation
or the breach of any warranty of ZGNA, ZBI or a Contributed Subsidiary under a
Transaction Document or (ii) the failure of ZGNA, ZBI or a Contributed
Subsidiary to duly perform or observe any term, provision, covenant or
agreement to be performed or observed by ZGNA, ZBI or a Contributed Subsidiary
pursuant to a Transaction Document.
(c) Notwithstanding anything herein to the contrary, no
indemnification shall be available to ZGNA Indemnified Parties under Section
9.4(a)(i) hereof or to the Company Indemnified Parties under Section 9.4(b)(i)
hereof unless and until the aggregate amount of Damages that would otherwise
be subject to indemnification, exceeds $750,000 (in each case, the "Basket
Amount"), in which case the party entitled to such indemnification shall be
entitled to receive only the amounts in excess of the Basket Amount. For
purposes of clause (i) of Section 9.4(a) and 9.4(b), in determining whether
there has been a breach of any representation or warranty contained herein or
in the other Transaction Documents or the amount of any Damages resulting from
such breach, such representations and warranties shall be read without regard
to any "Company Material Adverse Effect", "Subsidiary Material Adverse Effect"
or "material" qualifier contained therein except to the extent that the term
"material" is used to define "Company Key Agreements and Instruments" and
"Subsidiary Key Agreements and Instruments."
(d) Notwithstanding anything herein to the contrary, the
maximum aggregate liability of (i) the Company to ZGNA Indemnified Parties and
(ii) ZGNA and ZBI to the Company Indemnified Parties under this Section 9.4
hereof shall not exceed $15 million.
(e) Notwithstanding anything herein to the contrary, none of
ZGNA Indemnified Parties shall be entitled to indemnification by the Company
for any Damages arising from any
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matter of which ZGNA had knowledge at or prior to Closing by reason of the
Company having delivered written notice thereto, either in a supplemented
disclosure schedule or an officer's certificate, at or prior to Closing, if
(i) the conditions to ZGNA's obligation set forth in Section 7 fail to be
satisfied at Closing by reason of the matters disclosed in such supplemented
disclosure schedule or officer's certificate and ZGNA waives its right not to
Close unless (ii) the Company made a knowing misrepresentation with respect to
such matter on the date of this Agreement; provided that clause (i) above
shall not apply in respect of any matter as to which the Company has the
explicit right set forth in Section 4 to notify ZGNA thereof at or prior to
Closing and modify the corresponding disclosures.
(f) Notwithstanding anything herein to the contrary, none of
the Company Indemnified Parties shall be entitled to indemnification by ZGNA
for any Damages arising from any matter of which the Company had knowledge at
or prior to Closing by reason of ZGNA having delivered written notice thereto,
either in a supplemented disclosure schedule or an officer's certificate, at
or prior to Closing, if (i) the conditions to the Company's obligation set
forth in Section 8 fail to be satisfied at Closing by reason of the matters
disclosed in such supplemented disclosure schedule or officer's certificate
and the Company waives its right not to Close unless (ii) ZGNA made a knowing
misrepresentation with respect to such matter on the date of this Agreement;
provided that clause (i) above shall not apply in respect of any matter as to
which ZGNA has the explicit right set forth in Section 5 to notify the Company
thereof at or prior to Closing and modify the corresponding disclosures.
(g) Any calculation of Damages for purposes of this Section
9.4 shall be (i) net of any insurance recovery made by the Indemnified Party
(whether paid directly to such Indemnified Party or assigned by the
Indemnifying Party to such Indemnified Party) and (ii) reduced to take account
of any net Tax benefit realized by the Indemnified Party arising from the
deductibility of any such Damages or Tax. Any indemnification payment
hereunder shall initially be made without regard to this paragraph and shall
be reduced to reflect any such net Tax benefit only after the Indemnified
Party has actually realized such benefit. For purposes of this Agreement, an
Indemnified Party shall be deemed to have "actually realized" a net Tax
benefit to the extent that, and at such time as, the amount of Taxes payable
by such Indemnified Party is reduced below the amount of Taxes that such
Indemnified Party would have been required to pay but for deductibility of
such Damages. The amount of any reduction hereunder shall be adjusted to
reflect any final determination (which shall include the execution of Form
870-AD or successor form) with respect to the Indemnified Party's liability
for Taxes and, if necessary, the Company or
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ZGNA and ZBI, as the case may be, shall make payments to the other to reflect
such adjustment. Any indemnity payment under this Agreement shall be treated
as an adjustment to the consideration for Tax purposes, unless a final
determination (which shall include the execution of a Form 870-AD or successor
form) with respect to the Indemnified Party or any of its Affiliates causes
any such payment not to be treated as an adjustment to the consideration for
U.S. Federal income Tax purposes.
(h) No action, claim or setoff for Damages subject to
indemnification under this Section 9.4 shall be brought or made:
(i) with respect to claims for Damages resulting
from a breach of any covenant contained in this Agreement after the date on
which such covenant shall terminate pursuant to Section 9.3 hereof; and
(ii) with respect to claims for Damages resulting
from a breach of any representation or warranty, after the date on which such
representation or warranty shall terminate pursuant to Section 9.3 hereof;
provided, however, that any claim made with reasonable specificity by the
party seeking indemnification (the "Indemnified Party") to the party from
which indemnification is sought (the "Indemnifying Party") within the time
periods set forth above shall survive (and be subject to indemnification)
until it is finally and fully resolved.
(i) Upon receipt by the Indemnified Party of notice of any
action, suit, proceedings, claim, demand or assessment against such
Indemnified Party which might give rise to a claim for Damages, the
Indemnified Party shall give written notice thereof to the Indemnifying Party
indicating the nature of such claim and the basis therefor; provided, however,
that failure to give such notice shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure. A claim to indemnity hereunder may, at
the option of the Indemnified Party, be asserted as soon as Damages have been
threatened by a third party orally or in writing, regardless of whether actual
harm has been suffered or out-of-pocket expenses incurred, provided the
Indemnified Party shall reasonably determine that it may be liable or
otherwise incur such Damages. The Indemnifying Party shall have the right, at
its option, to assume the defense of, at its own expense and by its own
counsel, any such matter involving the asserted liability of the Indemnified
Party as to which the Indemnifying Party shall have acknowledged its
obligation to indemnify the Indemnified Party. If any Indemnifying Party shall
undertake to compromise or defend any such asserted liability, it
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<PAGE>
shall promptly notify the Indemnified Party of its intention to do so, and the
Indemnified Party agrees to cooperate fully with the Indemnifying Party and
its counsel in the compromise of, or defense against, any such asserted
liability; provided, however, that the Indemnifying Party shall not settle any
such asserted liability without the written consent of the Indemnified Party
(which consent will not be unreasonably withheld); provided, further, however
that the immediately preceding clause shall not apply in the case of relief
consisting solely of money damages at least 80% of which shall be borne by the
Indemnifying Party after taking into account any limitation thereon.
Notwithstanding an election to assume the defense of such action or
proceeding, such Indemnified Party shall have the right to employ separate
counsel and to participate in the defense of such action or proceeding, and
the Indemnifying Party shall bear the reasonable fees, costs and expenses of
such separate counsel (and shall pay such fees, costs and expenses at least
quarterly), if (A) the use of counsel chosen by the Indemnifying Party to
represent such Indemnified Party would present such counsel with a conflict of
interest; (B) the defendants in, or targets of, any such action or proceeding
include both an Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have reasonably concluded that there may be legal
defenses available to it or to other Indemnified Parties which are different
from or additional to those available to the Indemnifying Party (in which case
the Indemnifying Party shall not have the right to direct the defense of such
action or proceeding on behalf of the Indemnified Party); (C) the Indemnifying
Party shall not have employed counsel reasonably satisfactory to such
Indemnified Party to represent such Indemnified Party within a reasonable time
after notice of the institution of such action or proceeding; or (D) the
Indemnifying Party shall authorize such Indemnified Party to employ separate
counsel at the Indemnifying Party's expense. In any event, the Indemnified
Party and its counsel shall cooperate with the Indemnifying Party and its
counsel and shall not assert any position in any proceeding inconsistent with
that asserted by the Indemnifying Party. All costs and expenses incurred in
connection with an Indemnified Party's cooperation shall be borne by the
Indemnifying Party. In any event, the Indemnified Party shall have the right
at its own expense to participate in the defense of such asserted liability.
(j) The sole and exclusive remedy for any breach of any
representation, warranty, covenant or agreement shall be pursuant to this
Section 9.4, except in the case of fraud. Absent fraud, under no circumstances
shall either party be liable to other for consequential or punitive damages.
(k) Each party hereby acknowledges and agrees that the other
party is not making any representation or warranty whatsoever, express or
implied, including, without limitation, in
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<PAGE>
respect of their respective assets, liabilities and businesses, except those
representations and warranties explicitly set forth in the Transaction
Document or in any certificate contemplated hereby and delivered in connection
herewith.
9.5. Break-Up Fee.
(a) In the event that (i) upon a vote at a duly held meeting
of the stockholders of the Company or any adjournment thereof, any stockholder
approval contemplated by this Agreement shall not have been approved or (ii)
the Board shall have withdrawn, modified or amended (or resolved to withdraw,
modify or amend) in any respect its recommendation to its stockholders that
this Agreement be approved by the Company's stockholders, the Company shall
pay ZGNA all of ZGNA's reasonable out-of-pocket expenses incurred in
connection with the transactions contemplated hereby, including fees and
expenses of its counsel and financial advisors; provided, that the Company
shall not be liable for out-of-pocket expenses in excess of $500,000.
(b) If within twelve (12) months of the termination date of
this Agreement for either of the reasons set forth in 9.5(a) the Company shall
sell such number of shares of Common Stock equal to or greater than 49% of the
issued and outstanding shares of the Common Stock (calculated by using the
number of issued and outstanding shares of Common Stock as of the date hereof)
by way of sale of securities, merger, reorganization, or shall sell all or
substantially all of its assets, the Company shall pay $1,500,000 (the
"Termination Fee") to ZGNA in immediately available funds no later than two
(2) Business Days after entry into such agreement. The Company agrees that it
will not structure any transaction or agreement for the purpose of avoiding
payment of Termination Fee. The Company acknowledges that the agreements
contained in this Section 9.5 are an integral part of the transactions
contemplated in this Agreement, and that, without these agreements, ZGNA would
not enter into this Agreement; accordingly, if the Company fails to promptly
pay the amount due pursuant to this Section 9.5, and, in order to obtain such
payment, ZGNA commences a suit which results in a judgment against the Company
for the Termination Fee, the Company shall pay to ZGNA its costs and expenses
(including attorneys' fees) in connection with such suit, together with
interest on the amount of the fee at the prime rate of Citibank, N.A. on the
date such payment was required to be made. Notwithstanding the foregoing, no
Termination Fee or payment under Section 9.5(a) shall be payable if the
transactions contemplated hereunder are not consummated because (i) the
Company's Board of Directors withdraws its recommendation of this Agreement as
a result of a material breach or misrepresentation by ZGNA, (ii) the Company
or ZGNA failed to enter into a definitive credit agreement with their
respective lenders, (iii) the Company terminates this Agreement because of a
material breach (including a material breach of Section 6.9 herein) or a
material misrepresentation by
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<PAGE>
ZGNA, (iv) approval under the HSR is not obtained (assuming the Company and
ZGNA have made appropriate HSR filings) or (v) the Company terminates this
Agreement as a result of failure to satisfy Sections 8.3 (Injunction), 8.6
(Adverse Development), 8.10 (Transaction Documents), 8.11 (ZGNA's
Certificates), 8.12 (Counsel's Opinion), 8.13 (Completion of Mergers) or 8.16
(Sales Force).
(c) Notwithstanding, in the event ZGNA shall have exercised
the Option and shall thereafter sell the shares of Common Stock received by it
upon exercise of the Option, ZGNA shall pay to the Company any fees and
expenses (including Termination Fee) received by it pursuant to this Section
to the extent the net proceeds received by it in connection with such sale
exceed the exercise price for the Option.
SECTION 10. MISCELLANEOUS
10.1. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado applicable to contracts made
and to be performed entirely within such State, except that all issues
relating to the Delaware Mergers shall be governed by and construed in
accordance with the laws of the State of Delaware and all issues relating to
the New York Merger shall be governed by and construed in accordance with the
laws of the State of New York.
10.2. Paragraph and Section Headings.
The headings of the sections and subsections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
10.3. Notices.
(a) All communications under this Agreement shall be in
writing and shall be delivered by hand, by facsimile or mailed by overnight
courier or by registered mail or certified mail, postage prepaid:
(1) if to ZGNA or ZBI, at 2550 El Presidio Street, Long
Beach, California 90810-1193 (facsimile: (310) 637-3644),
marked for attention of President, or at such other address
as ZGNA may have furnished the Company in writing (with a
copy to Willkie Farr & Gallagher, 787 Seventh Avenue, New
York, NY 10019-6099, Attention: Harvey L. Sperry, Esq.
(facsimile: 212-728-8111), or at
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<PAGE>
such other address it may have furnished the Company in
writing), or
(2) if to the Company, at 5555 Airport Boulevard, Boulder,
Colorado 80301 (facsimile: (303) 441-5802) marked for
attention of Dean Stull, or at such other address as the
Company may have furnished ZGNA in writing (with a copy to
Laurie Glasscock, Chrisman, Bynum & Johnson, P.C., 1900
Fifteenth Street, Boulder, Colorado 80302 (facsimile: (303)
449-5426) or at such other address as it may have furnished
in writing to ZGNA).
(b) Any notice so addressed shall be deemed to be given: if
delivered by hand or by facsimile, on the date of such delivery; if delivered
by courier, on the first Business Day following the date of the delivery to
the courier; and if mailed by registered or certified mail, on the third
Business Day after the date of such mailing.
10.4. Expenses and Taxes.
Subject to Section 9.5, whether or not the Closing shall
have occurred, each party shall pay its own fees and expenses incurred in
connection with the transactions contemplated hereby.
10.5. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties.
10.6. Entire Agreement; Amendment and Waiver.
(a) This Agreement and the agreements attached as Exhibits
hereto constitute the entire understandings of the parties hereto and
supersede all prior agreements or understandings with respect to the subject
matter hereof among such parties. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with)
the written consent of the Company and ZGNA. No course of dealing between the
Company and ZGNA nor any delay in exercising any rights hereunder shall
operate as a waiver of any rights of either party hereto.
(b) Subject to applicable law, by agreement of the parties,
this Agreement, the Transaction Documents and other documents entered into in
connection herewith, may be terminated, amended, or the observance of any
terms waived, after the Company's stockholder approval.
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<PAGE>
10.7. Severability.
In the event that any part or parts of this Agreement shall
be held illegal or unenforceable by any court or administrative body of
competent jurisdiction, such determination shall not effect the remaining
provisions of this Agreement which shall remain in full force and effect.
10.8. Third Parties.
Nothing contained in this Agreement or in any instrument or
document executed by any party in connection with the transactions
contemplated hereby shall create any rights in, or be deemed to have been
executed for the benefit of, any person that is not a party hereto or thereto
or a successor or permitted assign of such a party.
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<PAGE>
10.9. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall be
considered one and the same agreement.
HAUSER, INC. ZUELLIG GROUP N.A., INC.
By:/s/Dean P. Stull By:/s/Volker Wypyszyk
-------------------------- ------------------
Name: Dean P. Stull Name: Volker Wypyszyk
Title: CEO Title: President
QQB HOLDINGS I, Inc. ZUELLIG BOTANICAL EXTRACTS, INC.
By:/s/Dean P. Stull By:/s/Ralph L. Heimann
-------------------------- -------------------
Name: Dean P. Stull Name: Ralph L. Heimann
Title: President Title: Secretary & Treasurer
QQB HOLDINGS II, Inc. ZETAPHARM, INC.
By:/s/Dean P. Stull By:/s/Ralph L. Heimann
-------------------------- -------------------
Name: Dean P. Stull Name: Ralph L. Heimann
Title: President Title: Secretary & Treasurer
QQB HOLDINGS III, Inc. WILCOX DRUG COMPANY, INC.
By:/s/Dean P. Stull By:/s/Ralph L. Heimann
-------------------------- -------------------
Name: Dean P. Stull Name: Ralph L. Heimann
Title: President Title: Secretary & Treasurer
ZUELLIG BOTANICALS, INC.
By:/s/Ralph L. Heimann
-------------------
Name: Ralph L. Heimann
Title: Secretary & Treasurer
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<PAGE>
Exhibit F
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDMENT NO. 1,
dated as of February 11, 1999,
to
AGREEMENT AND PLAN OF MERGER
dated as of December 8, 1998,
by and among
ZUELLIG GROUP N.A., INC.
HAUSER, INC.
AND CERTAIN OTHER PARTIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
This AMENDMENT NO. 1 (this "Amendment"), dated as of February
11, 1999, is by and among Hauser, Inc., a Colorado corporation (the "Company"),
QQB Holdings I, Inc., a Delaware corporation and a wholly owned subsidiary of
the Company, QQB Holdings II, Inc., a New York corporation and a wholly owned
subsidiary of the Company, QQB Holdings III, Inc., a Delaware corporation and a
wholly owned subsidiary of the Company, Zuellig Group N.A., Inc., a Delaware
corporation ("ZGNA"), Zuellig Botanicals, Inc., a Delaware corporation and a
wholly owned subsidiary of ZGNA ("ZBI"), Zuellig Botanical Extracts, Inc., a
Delaware corporation and a wholly owned subsidiary of ZBI, ZetaPharm, Inc., a
New York corporation and a wholly owned subsidiary of ZGNA, and Wilcox Drug
Company, Inc., a Delaware corporation and a wholly owned subsidiary of ZGNA.
R E C I T A L S :
WHEREAS, the parties hereto have entered into that certain
Agreement and Plan of Merger (the "Agreement"), dated as of December 8, 1998;
and
WHEREAS, such parties wish to amend the Agreement and certain
related agreements pursuant to Section 10.6(a) of the Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual representations, warranties, covenants and agreements contained in
the Agreement, the parties hereby agree as follows:
SECTION 1. DEFINITIONS.
(A) Capitalized terms used in this Amendment without
definition shall have the meaning ascribed to them in the Agreement.
(B) Section 1 of the Agreement is hereby amended to add the
following defined terms:
"Letter Agreement" shall mean the letter agreement
relating to the goodwill associated with the name and mark "Botanicals
International" and the name "Zuellig Botanical Extracts, Inc.", dated
as of the Closing Date, by and between the Company and ZBI,
substantially in the form of Exhibit M.
"License Agreement" shall mean the license agreement
relating to the name and mark "Botanicals
<PAGE>
International" and the name "Zuellig Botanical Extracts, Inc.", dated
as of the Closing Date, by and between ZBI and Zuellig Botanical
Extracts, substantially in the form of Exhibit L.
"Transaction Documents" shall mean this Agreement,
the Governance Agreement, the Escrow Agreement, the Stock Option
Agreement, the Sourcing Agency Agreement, the Agreement Regarding
Employees, the Registration Rights Agreement, the Powders Option
Agreement, the License Agreement and the Letter Agreement.
SECTION 2. AMENDMENTS.
(A) Section 7.4 of the Agreement is amended in its entirety to
read as follows:
"7.4. Stockholder Approval.
At the stockholders meeting called by the Company
pursuant to Section 6.4 hereof, this Agreement and the transactions
contemplated hereby shall have been approved and adopted by a majority
of a quorum of the Company's stockholders pursuant to the rules of the
NASDAQ market, by the number of votes required under the Colorado
Business Corporation Act."
(B) Section 7.8 is hereby amended in its entirety to read as
follows:
"7.8. Transaction Documents.
The Company and each of the other parties thereto
shall have executed and delivered (i) the Escrow Agreement, (ii) the
Powders Option Agreement, (iii) the Governance Agreement, (iv) the
Sourcing Agency Agreement, (v) the Registration Rights Agreement, (vi)
the Agreement Regarding Employees, (vii) the Letter Agreement and
(viii) the License Agreement."
(C) Section 8.10 is hereby amended in its entirety to read as
follows:
"8.10. Transaction Documents.
ZGNA or its Subsidiary and each of the other parties
thereto shall have executed and delivered (i) the Escrow Agreement,
(ii) the Powders Option Agreement, (iii) the Governance Agreement, (iv)
the Sourcing Agency Agreement, (v) the Registration Rights Agreement,
(vi) the
<PAGE>
Agreement Regarding Employees, (vii) the Letter Agreement and (viii)
the License Agreement."
(D) Section 9.1(b) of the Agreement is amended in its entirety
to read as follows:
"(b) by ZGNA or the Company if the Closing shall not
have occurred on or before May 31, 1999, except that ZGNA and the
Company shall have the right, in their mutual discretion, to extend the
time period in this Section 9.1(b) an additional 45 days; provided that
the right to terminate this Agreement pursuant to this Section 9.1(b)
shall not be available to any party whose failure to perform any of its
obligations under this Agreement results in the failure of the Closing
to be consummated by such date;"
(E) The following Section 10.9 is hereby added to the
Agreement:
"10.9. Arbitration.
(a) The parties shall initially attempt to resolve by
direct negotiation any dispute, controversy or claim arising out of or
relating to (i) this Agreement or the other Transaction Documents, (ii)
its or their breach, interpretation, termination or validity, or (iii)
the transactions contemplated hereby or thereby (each, a "Dispute").
(b) If the parties are not able to settle the Dispute
by direct negotiations within thirty (30) days after written notice by
one party to the other of the Dispute, any party may initiate an
arbitration to resolve the Dispute; the parties hereto agree that
arbitration pursuant to this Section shall be the sole means of
resolving Disputes, and that no party shall commence any proceeding in
any court or tribunal with respect to a Dispute. All such Disputes
shall be arbitrated in Denver, Colorado pursuant to the Commercial
Arbitration Rules of the American Arbitration Association except that
the parties expressly do not constitute the American Arbitration
Association as administrator of the arbitration as provided in Rule 3
of such Rules and the arbitration shall be administered by the Chair of
the Panel. Each of the Company, on the one hand, and ZGNA and ZBI, on
the other hand, shall select an arbitrator, and the two arbitrators
shall select a third arbitrator. The third arbitrator shall act as
Chair of the panel. The arbitrators shall be certified public
accountants, attorneys or other persons, in each case, who are
experienced in the buying and selling of businesses. If the two
arbitrators fail to agree upon the appointment of a third arbitrator
within 30 days,
<PAGE>
the American Arbitration Association shall appoint the third
arbitrator.
(c) Judgment upon any award rendered by the
arbitrator(s), which may include specific performance of the
obligations of the parties under this Agreement, shall be binding and
may be entered in any court having jurisdiction. Nothing in this
Section shall preclude any party from seeking temporary or preliminary
injunctive equitable relief from a court of competent jurisdiction and
Section 10.9(a) and (b) shall not apply in that situation. No such
court order shall stay or otherwise impede the arbitration proceeding.
The statute of limitations, estoppel, waiver, laches, and similar
doctrines, which would otherwise be applicable in any action brought by
a party shall be applicable in any arbitration proceeding and the
commencement of an arbitration proceeding shall be deemed the
commencement of an action for those purposes. The Federal Arbitration
Act shall apply to the construction, interpretation and enforcement of
this arbitration provision.
(d) Nothing in this Agreement shall preclude the
arbitrator(s) from rendering an interim award (which may include
equitable relief) which may be enforced by the parties hereto as though
a final award.
(e) The Company, on the one hand, and ZGNA and ZBI,
on the other hand, shall jointly and equally bear all arbitration
expenses, provided, however, that any legal fees or expenses incurred
by any party in connection with such arbitration shall be borne by the
party incurring such expenses."
(F) The form of Escrow Agreement, attached to the Agreement as
Exhibit D, is amended and restated in its entirety in the form of Attachment I
hereto.
(G) The form of Governance Agreement, attached to the
Agreement as Exhibit E, is amended and restated in its entirety in the form of
Attachment II hereto.
(H) The form of License Agreement shall be attached to the
Agreement as Exhibit L, and shall be substantially in the form attached hereto
as Attachment III.
(I) The form of Letter Agreement shall be attached to the
Agreement as Exhibit M, and shall be substantially in the form attached hereto
as Attachment IV.
<PAGE>
SECTION 3. MISCELLANEOUS.
3.1. Governing Law.
This Amendment shall be governed by and construed in
accordance with the laws of the State of Colorado applicable to contracts made
and to be performed entirely within such State, except that all issues relating
to the Delaware Mergers shall be governed by and construed in accordance with
the laws of the State of Delaware and all issues relating to the New York Merger
shall be governed by and construed in accordance with the laws of the State of
New York.
3.2. Paragraph and Section Headings.
The headings of the sections and subsections of this Amendment
are inserted for convenience only and shall not be deemed to constitute a part
thereof.
3.3. Successors and Assigns.
This Amendment shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties.
3.4. Severability.
In the event that any part or parts of this Amendment shall be
held illegal or unenforceable by any court or administrative body of competent
jurisdiction, such determination shall not effect the remaining provisions of
this Amendment which shall remain in full force and effect.
3.5. Third Parties.
Nothing contained in this Amendment or in any instrument or
document executed by any party in connection with the transactions contemplated
hereby shall create any rights in, or be deemed to have been executed for the
benefit of, any person that is not a party hereto or thereto or a successor or
permitted assign of such a party.
<PAGE>
3.6. Counterparts.
This Amendment may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall be
considered one and the same agreement.
HAUSER, INC. ZUELLIG GROUP N.A., INC.
By: /s/ Dean P. Stull By: /s/ Volker Wypyszyk
------------------------------ --------------------------------
Name: Dean P. Stull Name: Volker Wypyszyk
Title: Chief Executive Officer Title: President
QQB HOLDINGS I, INC. ZUELLIG BOTANICAL EXTRACTS, INC.
By: /s/ Dean P. Stull By: /s/ Ralph Heimann
----------------------------- --------------------------------
Name: Dean P. Stull Name: Ralph Heimann
Title: President Title: Secretary & Treasurer
QQB HOLDINGS II, INC. ZETAPHARM, INC.
By: /s/ Dean P. Stull By: /s/ Ralph Heimann
----------------------------- --------------------------------
Name: Dean P. Stull Name: Ralph Heimann
Title: President Title: Secretary & Treasurer
QQB HOLDINGS III, INC. WILCOX DRUG COMPANY, INC.
By: /s/ Dean P. Stull By: /s/ Ralph Heimann
----------------------------- --------------------------------
Name: Dean P. Stull Name: Ralph Heimann
Title: President Title: Secretary & Treasurer
ZUELLIG BOTANICALS, INC.
By: /s/ Ralph Heimann
--------------------------------
Name: Ralph Heimann
Title: Secretary & Treasurer
<PAGE>
Exhibit G
GOVERNANCE AGREEMENT
This GOVERNANCE AGREEMENT (this "Agreement"), dated as of June
11, 1999, is by and between Hauser, Inc., a Colorado corporation (the
"Company"), Zuellig Group N.A., Inc. a Delaware corporation ("ZGNA") and Zuellig
Botanicals, Inc., a Delaware corporation ("ZBI").
R E C I T A L S :
WHEREAS, pursuant to the terms of an Agreement and Plan of
Merger, dated as of December 8, 1998, between ZGNA and the Company (the "Merger
Agreement"), ZGNA and ZBI have simultaneously herewith acquired from the
Company, and the Company has issued to ZGNA and ZBI, shares of its Common Stock,
par value $.001 per share (the "Common Stock"); and
WHEREAS, the parties wish to set forth certain arrangements
regarding ZGNA's and ZBI's ownership in the Company.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual representations, warranties, covenants and agreements herein
contained, ZGNA, ZBI and the Company hereby agree as follows:
SECTION 1. DEFINITIONS.
The terms defined in this Section 1, whenever used herein,
shall have the following meanings for all purposes of this Agreement.
"Affiliate" means any Person or entity, directly or
indirectly, controlling, controlled by or under common control with such Person
or entity.
"Agreement" shall have the meaning set forth in the preamble
hereto.
"Board" shall mean the board of directors of the Company.
"Common Stock" shall have the meaning set forth in the
recitals hereto.
"Company" shall have the meaning set forth in the preamble
hereto.
<PAGE>
"Continuing Directors" shall mean at any date a member of the
Board (i) who was a member of the Board on the day preceding the Closing Date of
the Mergers or (ii) who was nominated or elected by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election or whose election to the Board was recommended or endorsed by at least
a majority of the directors who were Continuing Directors at the time of such
nomination or election.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
an amended.
"Independent Director" shall mean at any date a member of the
Board (i) who at any time in the preceding five (5) years has not been an
Affiliate of or employed by, or retained as a consultant to, the Company or ZGNA
or any Affiliate of the Company or ZGNA (except to the extent such member is
deemed to be an Affiliate solely in his or her capacity as a director of the
Company) and (ii) who was nominated or elected by at least a majority of the
directors who were Independent Directors at the time of such nomination or
election or whose election to the Board was recommended or endorsed by at least
a majority of the directors who were Independent Directors at the time of such
nomination or election.
"Mergers" shall mean the mergers pursuant to the Merger
Agreement.
"Merger Agreement" shall have the meaning set forth in the
recitals hereto.
"Person" shall mean an individual, partnership, joint-stock
company, corporation, limited liability company, trust or unincorporated
organization, or a government, agency, regulatory authority or political
subdivision thereof.
"Securities Act" shall mean the Securities Act of 1933, an
amended.
"Substitute Director" shall have the meaning set forth in
Section 2(b).
"Withdrawing Director" shall have the meaning set forth in
Section 2(b).
"ZBI" shall have the meaning set forth in the preamble hereto.
"ZGNA" shall have the meaning set forth in the preamble
hereto.
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<PAGE>
"ZGNA Director" shall have the meaning set forth in
Section 2(a).
SECTION 2. BOARD OF DIRECTORS.
(a) Election of Directors. As of the date hereof, the Board
consists of the following nine directors: Dean P. Stull, William E. Coleman,
Robert F. Saydah, Volker Wypyszyk, Peter Zuellig, Harvey L. Sperry, Rodolfo C.
Bryce, Herbert Elish, and James Mellor, all of whom were elected to serve as
directors pursuant to the Merger Agreement and the approval thereof at the
Special Meeting of the Company's shareholders held on June 11, 1999. From and
after the effective date of the Mergers, ZGNA, ZBI and the Company shall take
all action within their respective power, including in the case of ZGNA and ZBI,
the voting of all shares of capital stock of the Company owned by them, required
to cause the Board to consist of nine (9) members, and at all times throughout
the term of this Agreement to include (i) as long as ZGNA and ZBI together own
beneficially (within the meaning of Rule 13d-3 under the Exchange Act) at least
twenty percent (20%) of the Common Stock, three (3) representatives designated
by ZGNA (each, a "ZGNA Director"), (ii) three (3) representatives designated by
the Continuing Directors and (iii) three (3) Independent Directors. The parties
acknowledge that Messrs. Volker Wypyszyk, Peter Zuellig and Harvey L. Sperry are
the initial ZGNA Directors, Messrs. Dean P. Stull, William E. Coleman and Robert
F. Saydah are the initial Continuing Directors and Messrs. Rodolfo C. Bryce,
Herbert Elish, and James Mellor are the initial Independent Directors.
(b) Replacement Directors.
(i) In the event that any ZGNA Director,
Continuing Director or Independent Director (a "Withdrawing Director")
designated in the manner set forth in Section 2(a) hereof is unable to serve, or
once having commenced to serve, is removed or withdraws from the Board, such
Withdrawing Director's replacement (the "Substitute Director") will be
designated by ZGNA, if the Withdrawing Director is a ZGNA Director, by a vote of
the remaining Continuing Directors, if the Withdrawing Director is a Continuing
Director, or by a vote of the remaining Independent Directors, if the
Withdrawing Director is an Independent Director, as the case may be. ZGNA, ZBI
and the Company agree to take all action within their respective power,
including in the case of ZGNA and ZBI, the voting of capital stock of the
Company owned by them to cause the election of such Substitute Director promptly
following his or her nomination pursuant to this Section 2(b).
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(ii) In the event there are no Continuing
Directors remaining to appoint Substitute Directors pursuant to Section 2(b)(i),
then ZGNA, ZBI and the Company shall take all action within their respective
power, including in the case of ZGNA and ZBI, the voting of all shares of
capital stock of the Company owned by them, required to cause the Board to
consist of three (3) ZGNA Directors and six (6) Independent Directors.
(iii) In the event there are no Independent
Directors remaining to appoint Substitute Directors pursuant to Section 2(b)(i)
or (ii), then ZGNA, ZBI and the Company shall take all action within their
respective power, including in the case of ZGNA and ZBI, the voting of all
shares of capital stock of the Company owned by them, to appoint three or six,
as the case may be, additional Independent Directors to the Board.
SECTION 3. NOTICE OF MEETINGS; QUORUM.
(a) Notice of any regular or special meeting of the Board
shall be mailed to each director addressed to him at his residence or usual
place of business at least three days before the day on which the meeting is to
be held, or if sent to him at such place by telecopy, telegraph or cable, or
delivered personally or by telephone, not later than the day before the day on
which the meeting is to be held. No notice of the annual meeting of the Board of
Directors shall be required if it is held immediately after the annual meeting
of the stockholders and if a quorum is present. Members of the Board, or any
committee designated by the Board, shall, except as otherwise provided by law or
the Articles of Incorporation of the Company, have the power to participate in a
meeting of the Board, or any committee, by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation shall constitute
presence in person at the meeting.
(b) A majority of the Board at any time in office shall
constitute a quorum. At any meeting at which a quorum is present, the vote of a
majority of the members present shall be the act of the Board unless the act of
a greater number is specifically required by law or by the Articles of
Incorporation or the By-laws of the Company; provided, however, that any
proposed change to the Articles of Incorporation or By-laws of the Company,
shall require the approval of a majority of the entire Board, and any
transaction with the person entitled to appoint ZGNA Directors or an Affiliate
of such person shall require the approval of a majority of the Continuing
Directors and Independent Directors. The members of the Board shall act only as
the Board and the individual members thereof shall not have any powers as such.
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SECTION 4. MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado applicable to
contracts made and to be performed entirely within such State.
(b) Paragraph and Section Headings. The headings of the
sections and subsections of this Agreement are inserted for convenience only and
shall not be deemed to constitute a part thereof.
(c) Notices.
(i) All communications under this Agreement shall be in
writing and shall be delivered by hand, by facsimile or mailed by overnight
courier or by registered mail or certified mail, postage prepaid:
(1) if to ZGNA or ZBI, at 2550 El Presidio Street, Long Beach,
California 90810-1193 (facsimile: (310) 637-3644),marked for
attention of President, or at such other address as ZGNA or
ZBI may have furnished the Company in writing (with a copy to
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, NY
10019-6099, Attention: Harvey L. Sperry, Esq. (facsimile:
212-728-8111), or at such other address it may have furnished
the Company in writing), or
(2) if to the Company, at 5555 Airport Boulevard, Boulder,
Colorado 80301 (facsimile: (303) 441-5802), marked for the
attention of Dean Stull, or at such other address as the
Company may have furnished Investor in writing (with a copy to
Chrisman, Bynum & Johnson, P.C., 1900 Fifteenth Street,
Boulder, Colorado 80302, Attention: Laurie Glasscock, Esq.
(facsimile: 303-449-5426) or at such other address as it may
have furnished in writing to ZGNA).
(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand or by facsimile, on the date of such delivery; if delivered by
courier, on the first Business Day following the date of the delivery to the
courier; and if mailed by registered or certified mail, on the third Business
Day after the date of such mailing.
(d) Expenses and Taxes. Whether or not the Closing shall have
occurred, each party shall pay its own fees and expenses incurred in connection
with the transactions contemplated hereby.
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(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties; provided, however, that ZGNA may only assign its rights hereunder to a
transferee of a majority of the Common Stock acquired by ZGNA and ZBI pursuant
to the Mergers and securities issued in respect thereof.
(f) Entire Agreement; Amendment and Waiver. This Agreement
and the agreements attached as Exhibits hereto constitute the entire
understandings of the parties hereto and supersede all prior agreements or
understandings with respect to the subject matter hereof among such parties.
This Agreement may be amended, and the observance of any term of this Agreement
may be waived, with (and only with) the written consent of the Company and ZGNA.
No course of dealing between the Company and ZGNA nor any delay in exercising
any rights hereunder shall operate as a waiver of any rights of either party
hereto.
(g) Severability. In the event that any part or parts of this
Agreement shall be held illegal or unenforceable by any court or administrative
body of competent jurisdiction, such determination shall not effect the
remaining provisions of this Agreement which shall remain in full force and
effect.
(h) Termination. This Agreement shall terminate and shall be
of no further force or effect on or after the earlier of (i) the fifth
anniversary of the date hereof or (ii) the date on which ZGNA and ZBI together
own less than twenty percent (20%) of the outstanding shares of Common Stock.
(i) Loss of ZGNA Directorships. If a court of competent
jurisdiction shall determine that ZGNA or ZBI has breached Section 6.9 of the
Merger Agreement (Standstill), ZGNA and ZBI shall automatically lose their right
to designate three (3) representatives as set forth in Section 2(a) hereof. In
such event, ZGNA and ZBI shall cause ZGNA Directors to immediately resign as
directors of the Board and shall take all action within their power to elect
three (3) nominees of the Continuing Directors to the Board. If such court's
determination shall be reversed on appeal, ZGNA's and ZBI's right to designate
three (3) representatives as set forth in Section 2(a) hereof shall be
immediately restored and the Company shall cause three (3) Continuing Directors
to immediately resign as directors of the Board and shall take all action within
its power to elect three (3) nominees of ZGNA and ZBI to the Board.
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(j) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
HAUSER, INC.
By: /s/ Dean P. Stull
----------------------------
Name: Dean P. Stull
Title: CEO
ZUELLIG GROUP N.A., INC.
By: /s/ Volker Wypyszyk
-----------------------------
Name: Volker Wypyszyk
Title: President
ZUELLIG BOTANICALS, INC.
By: /s/ Ralph Heimann
----------------------------
Name: Ralph Heimann
Title: President
<PAGE>
Exhibit H
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated
as of December 8, 1998, is by and among HAUSER, INC., a Colorado corporation
(the "Company"), Zuellig Group N.A., Inc., a Delaware corporation ("ZGNA") and
Zuellig Botanicals, Inc., a Delaware corporation ("ZBI").
R E C I T A L S :
WHEREAS, on the date hereof, ZGNA has acquired an option (the
"Option") to acquire 2,000,000 share of Common Stock (as herein defined); and
WHEREAS, pursuant to the terms of an Agreement and Plan of
Merger (the "Merger Agreement"), dated as of the date hereof, ZGNA and ZBI will
acquire 49% of the issued and outstanding shares of Common Stock, subject to
the terms and conditions of the Merger Agreement; and
WHEREAS, as a condition and inducement to ZGNA's pursuit of
the transactions contemplated by the Merger Agreement and the transactions
contemplated thereby, and in consideration therefor, the Company has agreed to
grant ZGNA certain registration rights, all in accordance with and subject to
the terms and conditions of this Agreement; and
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual representations, warranties, covenants and agreements herein
contained, ZGNA and the Company hereby agree as follows:
SECTION 1. DEFINITIONS
The terms defined in this Section 1, whenever used herein,
shall have the following meanings for all purposes of this Agreement.
"Affiliate" means any Person or entity, directly or
indirectly, controlling, controlled by or under common control with such Person
or entity.
"Agreement" shall have the meaning set forth in the preamble
hereto.
"Board" shall mean the board of directors of the Company.
"Business Day" shall mean a day other than a Saturday, Sunday
or other day on which banks in the State of New York are not required or
authorized to close.
<PAGE>
"Commission" shall mean the Securities and Exchange
Commission.
"Common Stock" shall mean the common stock, par value $0.001
per share, of the Company.
"Company" shall have the meaning set forth in the preamble
hereto.
"Demanding Holders" shall have the meaning set forth in
Section 2.2(b).
"Exchange Act" shall mean the Securities Exchange Act of
1934, an amended.
"Final Prospectus" shall have the meaning set forth in
Section 2.5(f).
"Holder" shall mean any holder of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 2.5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 2.5(c).
"Initiating Holder" shall mean any Holder or Holders who in
the aggregate are Holders of more than 50% of the then outstanding Registrable
Securities.
"Merger Agreement" shall have the meaning set forth in the
Recitals hereto.
"Option" shall have the meaning set forth in the Recitals
hereto.
"Other Stockholders" shall have the meaning set forth in
Section 2.1(b).
"Person" shall mean an individual, partnership, joint-stock
company, corporation, limited liability company, trust or unincorporated
organization, or a government, agency, regulatory authority or political
subdivision thereof.
"Register," "registered" and "registration" shall mean a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (and any post-effective amendments filed or
required to be filed) and the declaration or ordering of effectiveness of such
registration statement.
"Registrable Securities" shall mean (i) the shares of Common
Stock issuable upon exercise of the Option, (ii) the
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shares of Common Stock issuable to ZGNA and ZBI pursuant to the Merger
Agreement, (iii) any additional shares of Common Stock, if any, acquired by
ZGNA or ZBI from the Company from time to time and (iv) any capital stock of
the Company issued as a dividend or other distribution with respect to, or in
exchange for or in replacement of, the shares of Common Stock, if any, referred
to in clause (i), (ii) or (iii). As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities has been
declared effective under the Securities Act and such securities shall have been
sold in accordance with such registration statement, or (ii) such securities
shall have been sold pursuant to Rule 144 (or any successor provision) under
the Securities Act.
"Registration Expenses" shall mean all expenses incurred by
the Company in compliance with Sections 2.1 and 2.2 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company, which
shall be paid in any event by the Company).
"Securities Act" shall mean the Securities Act of 1933, an
amended.
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for each of the Holders.
"ZBI" shall mean Zuellig Botanicals, Inc., a Delaware
corporation and a wholly owned subsidiary --- of ZGNA.
"ZGNA" shall have the meaning set forth in the preamble
hereto.
SECTION 2. REGISTRATION RIGHTS
2.1. Requested Registration.
(a) Request for Registration. If the Company shall receive
from an Initiating Holder a written request that the Company effect any
registration with respect to all or a part of the Registrable Securities, the
Company will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders of Registrable
Securities; and
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(ii) as soon as practicable, use its diligent best
efforts to effect such registration (including, without limitation, the
execution of an undertaking to file post- effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act) as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within ten (10) Business Days after
written notice from the Company is given under Section 2.1(a)(i) above;
provided that the Company shall not be obligated to effect, or take any action
to effect, any such registration pursuant to this Section 2.1:
(A) In any particular jurisdiction in which
the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance, unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Securities Act or applicable rules or regulations thereunder;
(B) After the Company has effected two (2)
such registrations pursuant to this Section 2.1 and such registrations have
been declared or ordered effective and the sales of such Registrable Securities
shall have closed; or
(C) If the Registrable Securities requested
by all Holders to be registered pursuant to such request have an anticipated
aggregate public offering price (before any underwriting discounts and
commissions) of less than $10,000,000; or
(D) If in the good faith judgment of the
Board, such registration would be seriously detrimental to the Company, the
Company shall have the right to delay or suspend the effectiveness of any
registration for up to 90 days but not more than once in any twelve month
period.
The registration statement filed pursuant to the request of
the Initiating Holders may, subject to the provisions of Section 2.1(b) below,
include other securities of the Company which are held by Persons who, by
virtue of agreements with the Company, are entitled to include their securities
in any such registration.
The registration rights set forth in this Section 2 shall be
assignable, in whole or in part, to any transferee of Registrable Securities
(who shall be bound by all obligations of this Section 2).
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(b) Underwriting. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to Section 2.1.
If holders of securities of the Company other than
Registrable Securities who are entitled, by contract with the Company or
otherwise, to have securities included in such a registration (the "Other
Stockholders") request such inclusion, the Holders shall offer to include the
securities of such Other Stockholders in the underwriting and may condition
such offer on their acceptance of the further applicable provisions of this
Section 2. The Holders whose shares are to be included in such Registration and
the Company shall (together with all Other Stockholders proposing to distribute
their securities through such underwriting) enter into an underwriting
agreement in customary form with the representative of the underwriter or
underwriters selected for such underwriting by the Initiating Holders and
reasonably acceptable to the Company. Notwithstanding any other provision of
this Section 2.1, if the representative advises the Holders in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the securities of the Company held by Other Stockholders shall be
excluded from such registration to the extent so required by such limitation.
If, after the exclusion of such shares, further reductions are still required,
the number of shares included in the registration by each Holder shall be
reduced on a pro rata basis (based on the number of shares held by such
Holder), by such minimum number of shares as is necessary to comply with such
request. No Registrable Securities or any other securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. If any of the Holders or any Other Stockholder
who has requested inclusion in such registration as provided above disapproves
of the terms of the underwriting, such person may elect to withdraw therefrom
by written notice to the Company, the underwriter and the Initiating Holders.
The securities so withdrawn shall also be withdrawn from registration. If the
underwriter has not limited the number of Registrable Securities to be
underwritten, the Company may include its securities for its own account in
such registration if the representative so agrees and if the number of
Registrable Securities which would otherwise have been included in such
registration and underwriting will not thereby be limited.
2.2. Company Registration.
(a) Inclusion in Registration. If the Company shall determine
to register any of its Common Stock either for its own account or for the
account of a security holder or holders exercising their respective demand
registration rights, other than a registration relating solely to employee
benefit plans, or registration relating solely to a SEC Rule 145 transaction,
or a registration on any registration form which does not permit
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<PAGE>
secondary sales or does not include substantially the same information as would
be required to be included in a registration statement covering the sale of
Registrable Securities, the Company will:
(i) promptly give to each of the Holders a written notice
thereof (which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable blue sky or
other state securities laws); and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made by the Holders within fifteen (15) days after receipt of the
written notice from the Company described in clause (i) above, except as set
forth in Section 2.2(b) below. Such written request may specify all or a part
of the Holders' Registrable Securities.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise each of the Holders as a part of the written notice
given pursuant to Section 2.2(a)(i). In such event, the right of each of the
Holders to registration pursuant to this Section 2.2 shall be conditioned upon
such Holders' participation in such underwriting and the inclusion of such
Holders' Registrable Securities in the underwriting to the extent provided
herein. The Holders whose shares are to be included in such registration shall
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected for underwriting by the Company.
Notwithstanding any other provision of this Section 2.2, if the representative
determines that marketing factors require a limitation on the number of shares
to be underwritten, the representative may (subject to the allocation priority
set forth below) limit the number of Registrable Securities to be included in
the registration and underwriting. The Company shall so advise all holders of
securities requesting registration, and the number of shares of securities that
are entitled to be included in the registration and underwriting shall be
allocated in the following manner: the securities of the Company held by Other
Stockholders of the Company (other than Registrable Securities and other than
securities held by holders who by contractual right demanded such registration
("Demanding Holders")) shall be excluded from such registration and
underwriting to the extent required by such limitation, and, if a limitation on
the number of shares is still required, the number of shares that may be
included in the registration and underwriting by each of the Holders and
Demanding Holders shall be reduced, on a pro rata basis (based on the number of
shares held by such Holder), by such minimum number of shares as is necessary
to comply with such limitation. If any of the Holders or any Other Stockholder
disapproves of the terms
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<PAGE>
of any such underwriting, such person may elect to withdraw therefrom by
written notice to the Company and the underwriter. Any Registrable Securities
or other securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
2.3. Expenses of Registration.
Except as provided in the next sentence, all Registration
Expenses incurred in connection with any registration, qualification or
compliance pursuant to this Section 2 shall be borne by the Company, and all
Selling Expenses shall be borne by the holders of the securities so registered
pro rata on the basis of the number of their shares so registered. If a
registration has been requested pursuant to Section 2.1 and a registration
statement is declared effective by the Securities and Exchange Commission, but
the sales of the Registrable Securities does not close, the Holders are not
considered to have used a requested registration under Section 2.1(a)(ii)(B),
but after the second requested registration which results in the filing of a
registration statement which is declared effective (whether or not sales
occur), the holders of the Registrable Securities in any subsequent requested
registration will pay all Registration Expenses and Selling Expenses pro rata
on the basis of the number of shares so registered.
2.4. Registration Procedures.
In the case of each registration effected by the Company
pursuant to this Section 2, the Company will keep the Holders, as applicable,
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will:
(i) keep such registration effective for a period of one
hundred twenty (120) days or until the Holders, as applicable, have completed
the distribution described in the registration statement relating thereto,
whichever first occurs; provided, however, that such 120-day period shall be
extended for a period of time equal to the period during which the Holders, as
applicable, refrain from selling any securities included in such registration
in accordance with provisions in Section 2.8 hereof;
(ii) furnish such number of prospectuses and other documents
incident thereto as each of the Holders, as applicable, from time to time may
reasonably request;
(iii) notify each Holder of Registrable Securities covered by
such registration at any time when a prospectus relating thereto is required to
be delivered under the Securities Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or
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<PAGE>
necessary to make the statements therein not misleading in the light of the
circumstances then existing; and
(iv) furnish, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (1) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
participating in such registration, addressed to the underwriters, if any, and
to the Holders participating in such registration and (2) a letter, dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders participating in such
registration, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders participating in such
registration.
2.5. Indemnification.
(a) The Company will indemnify each of the Holders, as
applicable, each of its officers, directors and partners, and each person
controlling each of the Holders, with respect to each registration which has
been effected pursuant to this Section 2, and each underwriter, if any, and
each person who controls any underwriter, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the Company of the Securities Act or any rule or regulation thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse each of the Holders, each of its officers, directors and
partners, and each person controlling each of the Holders, each such
underwriter and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission based upon
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written information furnished to the Company by the Holders or underwriter and
stated to be specifically for use therein.
(b) Each of the Holders will, if Registrable Securities held
by it are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers and each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter, each Other Stockholder and other Holders and
each of their officers, directors, and partners, and each person controlling
such other Stockholder against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document made by such Holder,
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements by such Holder therein
not misleading, and will reimburse the Company and such Other Stockholders and
other Holders, directors, officers, partners, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by such Holder for use therein; provided, however, that the
obligations of each of the Holders hereunder shall be limited to an amount
equal to the net proceeds to such Holder of securities sold as contemplated
herein.
(c) Each party entitled to indemnification under this Section
2.5 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom; provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld) and the Indemnified Party
may participate in such defense at such party's expense (unless the Indemnified
Party shall have reasonably concluded that there may be a conflict of interest
between the Indemnifying Party and the Indemnified Party in such action, in
which case the fees and expenses of counsel shall be at the expense of the
Indemnifying Party), and provided, further, that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party of its obligations under this Section 2 unless the Indemnifying Party is
materially prejudiced
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thereby. No Indemnifying Party, in the defense of any such claim or litigation
shall, except with the consent of each Indemnified Party, which shall not be
unreasonably withheld, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section 2.5
is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or expense
referred to herein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the statements or omissions which resulted in such
loss, liability, claim, damage or expense, as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and of
the Indemnified Party shall be determined by reference to, among other things,
whether the untrue (or alleged untrue) statement of a material fact or the
omission (or alleged omission) to state a material fact relates to information
supplied by the Indemnifying Party or by the Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with any underwritten public offering
contemplated by this Agreement are in conflict with the foregoing provisions,
the provisions in such underwriting agreement shall be controlling.
(f) The foregoing indemnity agreement of the Company and the
Holders is subject to the condition that, insofar as they relate to any loss,
claim, liability or damage from a statement or omission made in a preliminary
prospectus but eliminated or remedied in the amended prospectus on file with
the Commission at the time the registration statement in question becomes
effective or the amended prospectus filed with the Commission pursuant to
Commission Rule 424(b) (the "Final Prospectus"), such indemnity agreement shall
not inure to the benefit of an underwriter if a copy of the Final Prospectus
was furnished to such underwriter and was not furnished by such underwriter to
the person asserting
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<PAGE>
the loss, liability, claim or damage at or prior to the time such action is
required by the Securities Act.
2.6. Information by the Holders.
Each of the Holders holding securities included in any
registration shall furnish to the Company such information regarding such
Holder and the distribution proposed by such Holder as the Company may
reasonably request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this Section
2.
2.7. Rule 144 Reporting.
With a view to making available the benefits of certain rules
and regulations of the Commission which may permit the sale of restricted
securities to the public without registration, so long as the Company is
required to file reports pursuant to the Exchange Act, the Company agrees to:
(i) make and keep public information available as those terms
are understood and defined in Rule 144;
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act at any time after it has become subject to
such reporting requirements; and
(iii) so long as the Holder owns any Registrable Securities,
furnish to the Holder upon request, a written statement by the Company as to
its compliance with the reporting requirements of Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
as the Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing the Holder to sell any such securities
without registration.
2.8. "Market Stand-off" Agreement.
Each of the Holders agrees, if requested by the Company and
an underwriter of Common Stock (or other securities) of the Company, not to
sell, short sell, or purchase or sell derivative securities in respect of
Common Stock, or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Holder during the 90-day period
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that all executive officers and directors of
the Company enter into similar agreements other than in respect of securities
included in such registration.
If requested by the underwriters, the Holders shall execute a
separate agreement to the foregoing effect. The
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<PAGE>
Company may impose stop-transfer instructions with respect to the shares (or
securities) subject to the foregoing restriction until the end of said 90-day
period. The provisions of this Section 2.8 shall be binding upon any transferee
who acquires Registrable Securities, whether or not such transferee is entitled
to the registration rights provided hereunder.
2.9. Termination.
The registration rights set forth in this Section 2 shall not
be available to any Holder if, in the opinion of counsel to the Company, all of
the Registrable Securities desired to be sold by such Holder could be sold in
any 90-day period pursuant to Rule 144 under the Securities Act (without giving
effect to the provisions of Rule 144(k)).
2.10. Merger Agreement.
The obligation of the Company to register Registrable
Securities is subject to Section 6.9 of the Merger Agreement in respect of
limitation on sales of Registrable Securities.
2.11. Legend.
The Company may place the following legend on certificates of
Registrable Securities: "The shares represented by this certificate are subject
to a Registration Rights Agreement, dated as of December 8, 1998, as amended
from time to time, a copy of which may be obtained at the office of the
Company."
SECTION 3. MISCELLANEOUS
3.1. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado applicable to contracts made
and to be performed entirely within such State.
3.2. Paragraph and Section Headings.
The headings of the sections and subsections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
3.3. Notices.
(a) All communications under this Agreement shall be in
writing and shall be delivered by hand, by facsimile or mailed by overnight
courier or by registered mail or certified mail, postage prepaid:
(1) if to ZGNA or ZBI, at 2550 El Presidio Street, Long
Beach, California 90810-1193 (facsimile: (310) 637-3644), marked
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<PAGE>
for attention of President, or at such other address as ZGNA or ZBI may have
furnished the Company in writing (with a copy to Willkie Farr & Gallagher, 787
Seventh Avenue, New York, NY 10019-6099, Attention: Harvey L. Sperry, Esq.
(facsimile: 212-728-8111), or at such other address it may have furnished the
Company in writing), or
(2) if to the Company, at 5555 Airport Boulevard, Boulder,
Colorado 80301 (facsimile: (303) 441-5802), marked for the attention of Dean
Stull, or at such other address as the Company may have furnished Investor in
writing (with a copy to Chrisman, Bynum & Johnson, P.C., 1900 Fifteenth Street,
Boulder, Colorado 80302, Attention: Laurie Glasscock, Esq. (facsimile:
303-449-5426) or at such other address as it may have furnished in writing to
the Investor and the Escrow Agent), or
(b) Any notice so addressed shall be deemed to be given: if
delivered by hand or by facsimile, on the date of such delivery; if delivered
by courier, on the first Business Day following the date of the delivery to the
courier; and if mailed by registered or certified mail, on the third Business
Day after the date of such mailing.
3.4. Expenses and Taxes.
Whether or not the Closing shall have occurred, each party
shall pay its own fees and expenses incurred in connection with the
transactions contemplated hereby.
3.5. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties.
3.6. Entire Agreement; Amendment and Waiver.
This Agreement and the agreements attached as Exhibits hereto
constitute the entire understandings of the parties hereto and supersede all
prior agreements or understandings with respect to the subject matter hereof
among such parties. This Agreement may be amended, and the observance of any
term of this Agreement may be waived, with (and only with) the written consent
of the Company and holders of the majority of the Registrable Securities. No
course of dealing between the Company and any holder of the Registrable
Securities nor any delay in exercising any rights hereunder shall operate as a
waiver of any rights of either party hereto.
3.7. Severability.
In the event that any part or parts of this Agreement shall
be held illegal or unenforceable by any court or administrative body of
competent jurisdiction, such determination
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<PAGE>
shall not effect the remaining provisions of this Agreement which shall remain
in full force and effect.
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<PAGE>
3.8. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall be
considered one and the same agreement.
HAUSER, INC.
By: /s/ Dean P. Stull
--------------------------
Name: Dean P. Stull
Title: CEO
ZUELLIG GROUP N.A., INC.
By: /s/ Volker Wypyszyk
--------------------------
Name: Volker Wypyszyk
Title: President
ZUELLIG BOTANICALS, INC.
By: /s/ Ralph Heimann
--------------------------
Name: Ralph Heimann
Title: Secretary and Treasurer
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<PAGE>
Exhibit I
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of June 11, 1999, (the "Agreement")
by and among Zuellig Group N.A., Inc., a Delaware corporation (the "ZGNA"),
Hauser, Inc., a Colorado corporation (the "Company"), Zuellig Botanicals, Inc.,
a Delaware Corporation ("ZBI") and American Securities Transfer & Trust, Inc.,
as Escrow Agent (the "Escrow Agent").
R E C I T A L S
WHEREAS, ZGNA, ZBI, the Company and certain other parties are
parties to an Agreement and Plan of Merger (the "Merger Agreement"), dated as of
December 8, 1998, pursuant to which, among other things, the Company acquired
three subsidiaries from ZGNA and ZBI in exchange for shares of Common Stock, par
value $0.001 per share, of the Company (the "Common Stock");
WHEREAS, pursuant to the Merger Agreement, the Company and
ZGNA have agreed to have the Escrow Agent hold 1,083,078 shares of Common Stock
registered in the name of ZGNA, and 1,323,761 shares of Common Stock registered
in the name of ZBI1 (the ratio of 45 to 55 being the "ZGNA-ZBI Ratio"), on the
terms
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1 This amount in total will equal the lesser of (a) such number of shares
of Common Stock as will result in ZGNA and ZBI owning (excluding the
Escrow Shares) 42% of the shares of Common Stock outstanding after
giving effect to the transaction and (b) such number of shares of
Common Stock as will result in ZGNA and ZBI owning (excluding the
Escrow Shares) 40% of the shares of Common Stock outstanding on a fully
diluted basis after giving effect to the transaction. The shares of
Common Stock for each of ZGNA and ZBI to be deposited in escrow will be
in proportion to the shares of Common Stock received in the merger. For
purposes of this calculation, the shares of Common Stock outstanding on
a fully diluted basis shall equal the number of shares of Common Stock
issued and outstanding on the Closing Date, plus all shares of Common
Stock issuable (i) upon the exercise of all outstanding options or
warrants to acquire shares of Common Stock (whether or not then
exercisable) other than the ZGNA Option or (ii) upon conversion or
exchange of any securities convertible into or exchangeable for shares
of Common Stock.
<PAGE>
and subject to the conditions set forth herein; and
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. Appointment of Escrow Agent; Escrow Deposit. The Company
and ZGNA hereby appoint the Escrow Agent as the escrow agent under this
Agreement, and the Escrow Agent accepts such appointment according to the terms
and conditions set forth herein. On the date hereof, the Company, ZGNA and ZBI
have deposited with the Escrow Agent, and the Escrow Agent hereby acknowledges
receipt of, certificates ("Certificates") registered in the name of ZGNA and ZBI
evidencing 1,083,078 shares and 1,323,761 shares of Common Stock, respectively
(the "Escrow Shares"). The Escrow Agent shall hold, manage, administer,
distribute and dispose of the Escrow Shares and Proceeds (as defined below) in
accordance with the terms and conditions of this Agreement. The parties hereto
acknowledge that the Escrow Shares have been pledged to Wells Fargo Bank,
National Association.
2. Payments From Escrow. The Escrow Agent shall hold the
Escrow Shares and Proceeds in escrow in accordance with this Agreement and shall
make payments from the Escrow Shares and Proceeds only as follows or as provided
in Section 3 below:
(a) On November 8, 1999 (the "Claim Expiration Date"), the
Escrow Agent shall deliver the respective Escrow Shares and Proceeds to Wells
Fargo Bank, National Association at 333 South Grand Avenue, Suite 1040, Los
Angeles, California 90071, Attention: Carla Axelrod, unless, prior to the Claim
Expiration Date, the Escrow Agent shall have received a Sale Notice (as defined
below) from the Company.
(b) Any delivery required to be made hereunder by the Escrow
Agent shall be delivered in accordance with written instructions given to the
Escrow Agent by the party entitled under this Agreement to receive such
delivery.
3. Claims. The procedure for the delivery of Escrow
Shares and Proceeds shall be as follows:
(a) If a Paclitaxel Transaction has occurred prior to the
Claim Expiration Date, the Company will provide written notice (a "Sale Notice")
to the Escrow Agent and ZGNA to the effect that one or more transactions have
occurred that constitute a Paclitaxel Transaction (as defined below).
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<PAGE>
(b) At any time up to the conclusion of the final accounting,
ZGNA may request additional information regarding any Paclitaxel Transaction and
the related calculations of Net Proceeds, Transaction Expenses and gross
proceeds, and the Company shall provide all available financial information
related to the transaction.
(c) For purposes hereof:
(i) a "Paclitaxel Transaction" means a sale
of any tangible or intangible asset of the Company (which
includes any asset of its subsidiaries) which is a part of the
paclitaxel business of the Company (a "Paclitaxel Asset"),
whether in bulk, as a going concern, by occasional sale, or
otherwise, at any time on or after December 9, 1998 and on or
before October 31, 1999. Exhibit I hereto includes a
non-exclusive list of assets which would be included in the
category of Paclitaxel Asset.
(ii) "Net Proceeds" means the gross cash
proceeds received by the Company on or before October 31,
1999, in connection with a Paclitaxel Transaction, less the
Paclitaxel Expenses, less Accrued Termination Expenses, and
less $3,000,000.
(iii) "Paclitaxel Expenses" means the sum
of: (a) all cash expenses incurred on or after December 9,
1998, through and including October 31, 1999, in connection
with the Termination of the Paclitaxel Business or in
connection with any Paclitaxel Transaction, plus (b) all
Accrued Termination Expenses as of October 31, 1999. Exhibit 2
hereto is a nonexclusive list of cash expenses that would be
considered Paclitaxel Expenses.
(iv) "Accrued Termination Expenses" means
the estimated present value as of October 31, 1999, of the
cash cost of disposing of all Paclitaxel Assets and otherwise
with respect to Termination of the Paclitaxel Business which
have not been disposed of by the Company as of October 31,
1999. Present value shall be calculated using an interest rate
of eight percent (8%). Accrued Termination Expenses is not
based upon accounting write-offs or write downs and is solely
calculated on an estimated cash expenditure basis. Exhibit 3
hereto is a non-exclusive list of possible Accrued Termination
Expenses.
(v) "Termination of the Paclitaxel Business"
means those activities necessary to be done so that the
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<PAGE>
Company no longer owns assets or employs personnel used in the
paclitaxel business or has liabilities related to the
paclitaxel business other than liabilities in connection with
the performance of normal functions related to sold inventory
(such as stability testing and historical types of warranty
performance obligations, but actual pending warranty claims to
the extent not covered by insurance shall be a liability that
shall be an expense). Assets or personnel that are utilized in
other parts of the Company's business are not considered as
part of a Termination of the Paclitaxel Business to the extent
that such utilization is bona fide, so that, for example, the
bona fide use for herbal industry purposes of laboratory
equipment that was previously used in paclitaxel research
would result in there not being an expense charged for that
equipment.
(d) The Escrow Agent shall within five (5) days furnish
ZGNA with a copy of any Sale Notice received by it.
(e) If any Sale Notice has been given, then the following
procedures shall apply:
The Company, ZGNA and ZBI shall meet within ten (10) days
after the Claim Expiration Date to determine each element of the calculation of
the Net Proceeds. The parties shall freely share information and attempt to
agree on the final amount of the Net Proceeds within thirty (30) days after the
Claim Expiration Date. If the parties cannot agree within forty five (45) days
after the Claim Expiration Date, they shall submit the matter to arbitration as
provided for in the Merger Agreement. The parties (or arbitrator) shall then
jointly direct the Escrow Agent to cause the disbursement of the Escrow Shares
and Proceeds to the Company, ZGNA and ZBI by directing the Company's transfer
agent to cancel the Escrow Shares in an amount equal to the number (the
"Canceled Shares") derived by dividing the Net Proceeds by $3.50 and as between
ZGNA and ZBI in the ZGNA-ZBI Ratio. The Canceled Shares shall be specified in a
notice from the Escrow Agent to the Company and ZGNA and in the event of a
fractional share the number of shares to be canceled shall be rounded down to
the next whole share. The Company shall promptly deliver stock certificates for
the balance of the Escrow Shares to the Escrow Agent, registered in the name of
ZGNA and ZBI, respectively, and bearing all the legends on the Certificates. All
Proceeds shall follow the Escrow Shares to which the Proceeds relate and shall
be disbursed to the person receiving the respective Escrow Share (except for
Escrow Shares delivered to the Company's transfer agent), and any reference
herein to delivery of Escrow Shares (except to the transfer agent) shall include
delivery of Proceeds.
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<PAGE>
(f) If at the end of the forty-five day period after the end
of the Claim Expiration period the parties have not agreed on the number of
Canceled Shares, within three business days thereafter the parties will issue
instructions to the Escrow Agent specifying the number of Escrow Shares which
are in dispute ("Disputed Escrow Shares"), the number to be Canceled Shares and
the number to be delivered to ZGNA and ZBI as provided in the preceding
subparagraph. The Escrow Agent and the Company shall take all steps necessary to
issue certificates to ZGNA and ZBI in respect of such shares and to cause
residual certificates representing the Disputed Escrow Shares to be delivered to
the Escrow Agent.
Certificates representing the Disputed Escrow Shares shall be
released by the Escrow Agent from the escrow only either (i) in accordance with
a joint written instruction by ZGNA and the Company or (ii) if and to the extent
consistent with a copy of a final judgment by or order of a court of competent
jurisdiction with respect to which any period of time to appeal such judgment or
order shall have lapsed pertaining to the Disputed Escrow Shares, sent to the
Escrow Agent by ZGNA or the Company, in any case accompanied by a certification
that any period of time to file an appeal of such judgment or order has lapsed
and no such appeal has been filed or is otherwise pending (a "Final
Determination").
4. Conditions to Escrow. The Escrow Agent agrees to hold the
Escrow Shares and Proceeds and to perform in accordance with the terms and
provisions of this Agreement. The Company, ZBI and ZGNA agree that the Escrow
Agent does not assume any responsibility for the failure of the Company or ZGNA
to perform in accordance with the Merger Agreement or this Agreement. The
acceptance by the Escrow Agent of its responsibilities hereunder is subject to
the following terms and conditions, which the parties hereto agree shall govern
and control with respect to the Escrow Agent's rights, duties, liabilities and
immunities:
(a) The Escrow Agent may conclusively rely, and shall be
protected in acting or refraining from acting upon, any written notice,
certification, request, waiver, consent, receipt or other paper or document
furnished to it, not only as to its due execution and validity and effectiveness
of its provisions but also as to the truth and accuracy of any information
therein contained which the Escrow Agent reasonably believes to be genuine and
to have been signed and presented by the proper party or parties. Should it be
necessary for the Escrow Agent to act upon any instructions, directions,
documents or instruments issued or signed by or on behalf of any corporation,
fiduciary, or individual acting on behalf of another party hereto, it shall not
be necessary for the Escrow Agent to inquire into such
5
<PAGE>
corporation's, fiduciary's or individual's authority, capacity, existence or
identity. The Escrow Agent is also relieved from the necessity of satisfying
itself as to the authority of the persons executing this Agreement in a
representative capacity. It is understood that any references herein to joint
instructions or joint written instructions or words of similar import include
any instructions signed in counterpart.
(b) The Escrow Agent shall not be liable for any error of
judgment or for any act done or step taken or omitted by it in good faith, or
for any mistake of fact or law, or for anything which it may do or refrain from
doing in connection herewith, except for its own gross negligence or willful
misconduct.
(c) The Escrow Agent may consult with, and obtain advice from,
legal counsel in the event of any question as to any of the provisions hereof or
the duties hereunder, and it shall incur no liability and shall be fully
protected in acting in good faith in accordance with the opinion and
instructions of such counsel. The reasonable costs of such counsel's services
shall be paid to the Escrow Agent in accordance with Section 7 below.
(d) The Escrow Agent shall have no duties except those which
are expressly set forth herein and it shall not be bound by (i) the Merger
Agreement or any agreement of the other parties hereto (whether or not it has
any knowledge thereof) or by any notice of a claim, or demand with respect
thereto, or (ii) any waiver, modification, amendment, termination or rescission
of this Agreement unless the Escrow Agent agrees thereto in writing.
(e) The Escrow Agent may resign and be discharged from its
duties and obligations hereunder by giving notice in writing of such resignation
specifying a date (no earlier than 30 days following the date of such notice)
when such resignation will take effect, provided, however, that until a
successor escrow agent is appointed by ZGNA and the Company and such successor
accepts such appointment, the Escrow Agent shall continue to hold the Escrow
Shares and otherwise comply with the terms of this Agreement; provided further
that the parties to this Escrow Agreement agree to use their best efforts to
mutually agree on a successor escrow agent within 30 days after the giving of
Escrow Agent's notice and if no such successor escrow agent shall be appointed
within 30 days of the Escrow Agent providing its notice, the Escrow Agent may,
at the expense of the Company and ZGNA, (i) appoint a successor escrow agent
which shall be a national or state-chartered banking, trust or savings
association, (ii) petition any court of competent jurisdiction for the
appointment of a successor escrow agent or (iii) may deposit the Escrow Shares
and Proceeds ("Escrow Deposit") with the Clerk of the United States District
Court for the District of
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<PAGE>
Colorado, or with the office of the clerk of registry of any other court of
competent jurisdiction, at which time the Escrow Agent's duties hereunder shall
terminate. Any successor escrow agent shall execute and deliver an instrument
accepting such appointment and it shall, without further acts, be vested with
all the estates, properties, rights, powers and duties of the predecessor escrow
agent as if originally named as escrow agent. The resigning Escrow Agent shall
thereupon be discharged from any further obligations under this Escrow
Agreement.
(f) Upon delivery of all of the entire Escrow Shares to ZGNA,
to the Transfer Agent for cancellation in full, or to ZGNA after prior delivery
to the Transfer Agent, as the case may be, and the Proceeds, pursuant to the
terms of Section 3 above, or to a successor escrow agent, the Escrow Agent shall
thereafter be discharged from any further obligations hereunder. The Escrow
Agent is hereby authorized, in any and all events, to comply with and obey any
and all final judgments, orders and decrees (not subject to appeal) of any court
of competent jurisdiction which may be filed, entered or issued, and, if it
shall so comply or obey, it shall not be liable to any other person by reason of
such compliance or obedience.
(g) The Escrow Agent shall not have any responsibility or
liability for the completeness, correctness or accuracy of any transactions
between ZGNA and ZBI, on the one hand, and the Company, on the other hand.
(h) In the event that the Escrow Agent shall be uncertain as
to its duties or rights hereunder or shall receive instructions with respect to
the Escrow Shares or Proceeds which, in its sole opinion, are in conflict with
either other instructions received by it or any provision of this Agreement, it
shall without liability of any kind, be entitled to hold the Escrow Shares and
Proceeds pending the resolution of such uncertainty to the Escrow Agent's sole
satisfaction, by final judgment of a court or courts of competent jurisdiction
or otherwise, or the Escrow Agent, at its option, may, in final satisfaction of
its duties hereunder, deposit the Escrow Shares and Proceeds with the Clerk of
the United States District Court for the District of Colorado or with the office
of the clerk of registry of any other court of competent jurisdiction.
5. Indemnification. From and at all times after the date of this Escrow
Agreement, the Company, ZBI and ZGNA (the "Indemnifying Parties") shall, except
as otherwise hereinafter provided, to the fullest extent permitted by law,
indemnify and hold harmless Escrow Agent and each partner, employee, attorney,
agent and affiliate of Escrow Agent, (collectively, the "Indemnified Parties")
against any and all actions, claims
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<PAGE>
(whether or not valid), losses, damages, liabilities, costs and expenses of any
kind or nature whatsoever (including without limitation reasonable attorneys'
fees, costs and expenses) incurred by or asserted against any of the Indemnified
Parties from and after the date hereof, whether direct, indirect or
consequential, as a result of or arising from or in any way relating to any
claim, demand, suit, action or proceeding (including any inquiry or
investigation) by any person, including without limitation the Indemnifying
Parties, whether threatened or initiated, asserting a claim for any legal or
equitable remedy against any person under any statute or regulation, including,
but not limited to, any federal or state securities laws, or under any common
law or equitable cause or otherwise, arising from or in connection with the
negotiation, preparation, execution, performance or failure of performance of
this Escrow Agreement or any transactions contemplated herein, whether or not
any such Indemnified Party is a party to any such action, proceeding, suit or
the target of any such inquiry or investigation; provided, however, that no
Indemnified Party shall have the right to be indemnified hereunder for any
liability finally determined by a court of competent jurisdiction, subject to no
further appeal, to have resulted solely from the gross negligence or willful
misconduct of such Indemnified Party. If any such action or claim shall be
brought or asserted against any Indemnified Party, such Indemnified Party shall
promptly notify the Indemnifying Parties in writing, and the Indemnifying
Parties shall assume the defense thereof, including the employment of counsel
and the payment of all expenses. Such Indemnified Party shall, in its sole
discretion, have the right to employ separate counsel, (who may be selected by
such Indemnified Party in its sole discretion) in any such action and to
participate in the defense thereof, and the fees and expenses of such counsel
shall be paid by such Indemnified Party, except that the Indemnifying Parties
shall be required to pay such fees and expenses if (i) the Indemnifying Parties
agree to pay such fees and expenses (ii) the Indemnifying Parties shall fail, in
the reasonable discretion of such Indemnified Party, to employ counsel
satisfactory to the Indemnified Party in any such action of proceeding, (iii)
the Indemnifying Parties are the plaintiff in any such action or proceeding, or
(iv)the named parties to any such action or proceeding (including any impleaded
parties) include both Indemnified Party and the Indemnifying Parties, and the
Indemnified Party shall have been advised by counsel that there may be one or
more legal defenses available to it which are different from or additional to
those available to the Indemnifying Parties, the Indemnifying Parties shall be
liable to pay fees and expenses of counsel pursuant to the preceding sentence.
All such fees and expenses payable by the Indemnifying Parties pursuant to the
foregoing sentence shall be paid from time to time as incurred, both in advance
of and after the final
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<PAGE>
disposition of such action or claim. The obligations of the Indemnifying Parties
under this Section 5 shall survive any termination of this Escrow Agreement and
the resignation or renewal of Escrow Agent.
6. Banking Days. If any date on which the Escrow Agent is
required to make a delivery pursuant to the provisions hereof is not a banking
day, then the Escrow Agent shall make such investment or delivery on the next
succeeding banking day.
7. Escrow Costs; No Right of Set-off. The Escrow Agent shall
be entitled to be paid a fee for its services pursuant to the attached Fee
Schedule and to be reimbursed for its reasonable costs and expenses hereunder
(including reasonable counsel fees), which fees, costs and expenses shall be
paid from time to time by the Company. Nothing in this Section 7 limits the
Escrow Agent's rights against the Company and ZGNA for the payment of amounts
due to the Escrow Agent under Section 5 above or the Escrow Agent's fees, costs
and expenses hereunder.
The Escrow Agent acknowledges and agrees that it is holding
the Escrow Shares and Proceeds in its capacity as escrow agent and that it has
no right to apply amounts in the Escrow Deposit against any obligations of (a)
the other parties to this Agreement that do not arise under this Agreement or
(b) the Company.
8. Proceeds, Investment of Proceeds; Split Adjustment;
Voting.
(a) The term "Proceeds" means, as to each Escrow Share, any
stock, cash or other dividend or distribution (whether or not liquidating or a
return of capital) made in respect of an Escrow Share, including any resulting
from a subdivision, combination or reclassification of the outstanding capital
stock of the Company or as a result of a merger, consolidation, acquisition or
other exchange of assets, to which the Company may be a party or otherwise.
(b) The Escrow Agent may invest all cash Proceeds in an
insured savings account in a United States federal or state chartered bank with
total assets in excess of $100,000,000, and the Escrow Agent shall have no
obligation to maximize the rate of return thereof. The Escrow Agent has no duty
to convert any Proceeds received in any form other than cash, to cash, and may
hold any such non-cash Proceeds in the form received.
(c) The number of Escrow Shares to be treated as Canceled
Shares and Disputed Shares shall be equitably adjusted for stock splits, stock
dividends paid in capital stock of the
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<PAGE>
Company, and stock combinations, in respect of Common Stock. ZGNA and the
Company shall deliver joint instructions to Escrow Agent as to such adjustment.
(d) ZGNA and ZBI shall be entitled to exercise all voting
rights as to all Escrow Shares other than Canceled Shares.
9. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado applicable to
contracts made and to be performed entirely within such State.
(b) Paragraph and Section Headings. The headings of the
sections and subsections of this Agreement are inserted for convenience only and
shall not be deemed to constitute a part thereof.
(c) Notices.
(i) All communications under this Agreement shall be in
writing and shall be delivered by hand, by facsimile or
mailed by overnight courier or by registered mail or
certified mail, postage prepaid:
(1) if to ZGNA or ZBI, at 2550 El Presidio Street, Long Beach,
California 90810-1193 (facsimile: (310) 637-3644), marked for
the attention of President, or at such other address as ZGNA
may have furnished the Company in writing (with a copy to
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, NY
10019-6099, Attention: Harvey L. Sperry, Esq. (facsimile:
212-728-8111), or at such other address it may have furnished
the Company and the Escrow Agent in writing), or
(2) if to the Company, at 5555 Airport Boulevard, Boulder,
Colorado 80301 (facsimile: (303) 441-5802), marked for the
attention of Dean Stull, or at such other address as the
Company may have furnished ZGNA in writing (with a copy to
Chrisman, Bynum & Johnson, P.C., 1900 Fifteenth Street,
Boulder, Colorado 80302, Attention: Laurie Glasscock, Esq.
(facsimile: 303-449-5426) or at such other address as it may
have furnished in writing to ZGNA and the Escrow Agent), or
(4) if to the Escrow Agent and Transfer Agent, at American
Securities Transfer & Trust, Inc., 938 Quail Street, Suite
101, Lakewood, Colorado 80215 (facsimile: (303) 234-5340),
marked for the attention of Corporate
10
<PAGE>
Trust Department, or at such other address as it may have
furnished in writing to ZGNA, the Company and the Escrow
Agent).
(ii) Any notice so addressed shall be deemed to be given:
if delivered by hand or by facsimile, on the date of such
delivery; if delivered by courier, on the first business
day following the date of the delivery to the courier; and
if mailed by registered or certified mail, on the third
business day after the date of such mailing.
(d) Expenses and Taxes. Each party shall pay its own fees and
expenses incurred in connection with the transactions contemplated hereby.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties.
(f) Entire Agreement; Amendment and Waiver. This Agreement
constitutes the entire understandings of the parties hereto and supersede all
prior agreements or understandings with respect to the subject matter hereof
among such parties. This Agreement may be amended, and the observance of any
term of this Agreement may be waived, with (and only with) the written consent
of the Company and ZGNA. No course of dealing between the Company and ZGNA nor
any delay in exercising any rights hereunder shall operate as a waiver of any
rights of either party hereto.
(g) Severability. In the event that any part or parts of this
Agreement shall be held illegal or unenforceable by any court or administrative
body of competent jurisdiction, such determination shall not effect the
remaining provisions of this Agreement which shall remain in full force and
effect.
(h) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
(i) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Escrow Agreement on the date first written above.
HAUSER, INC.
By: /s/ David I. Rosenthal
-----------------------------------------
Name: David I. Rosenthal
Title: Chief Financial Officer
ZUELLIG GROUP N.A., INC.
By: /s/ Volker Wypyszyk
------------------------------------------
Name: Volker Wypyszyk
Title: President and Chief Executive Officer
ZUELLIG BOTANICALS, INC.
By: /s/ Ralph L. Heimann
-----------------------------------------
Name: Ralph L. Heimann
Title: President, Treasurer and Secretary
AMERICAN SECURITIES TRANSFER & TRUST, INC.
By: /s/ Cathy Haggerty
-----------------------------------------
Name: Cathy Haggerty
Title: Client Services Manager
By: /s/ Jennifer Owens
-----------------------------------------
Name: Jennifer Owens
Title: Corporate Trust Officer
* * * * * *
12
<PAGE>
EXHIBIT 1
Paclitaxel Assets
Non-exclusive list of Paclitaxel Assets includes:
Bulk paclitaxel inventory (any volume amounts)
Fixed assets and other tangible assets primarily used in paclitaxel
production, testing and research
Technology, patents, license, and contract rights related primarily to
paclitaxel and paclitaxel technology
Taxanees, sidesteams, and other derivative products related primarily
to paclitaxel and paclitaxel technologies
Proceeds from royalties derived primarily from paclitaxel and
paclitaxel technology
Goodwill associated with the foregoing
13
<PAGE>
EXHIBIT 2
Paclitaxel Expenses
Non-exclusive list of Paclitaxel Expenses includes:
Costs to complete production of sold bulk paclitaxel from which Hauser
has received cash
Costs of analytical and stability process requirements
Legal costs
Salaries, travel etc. for purposes of exiting the paclitaxel business
Plant shutdown costs
Cash costs of terminating yew tree cultivar contracts
14
<PAGE>
EXHIBIT 3
Accrued Termination Expenses
Non-exclusive list of Accrued Termination Expenses includes:
Estimated future cash costs to terminate yew tree cultivar contracts
Pending warranty claims on paclitaxel assets not covered by insurance
15
<PAGE>
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign
and transfer to ____________________________, ________ shares of Common Stock,
par value $0.001 per share, of Hauser, Inc., a Delaware corporation, represented
by Certificate No. _____________(the "Stock"), standing in the name of the
undersigned on the books of said corporation and does hereby irrevocably
constitute and appoint _______________________ as the undersigned's true and
lawful attorney, for it and in its name and stead, to sell, assign and transfer
all or any of the Stock, and for that purpose to make and execute all necessary
acts of assignment and transfer thereof; and to substitute one or more persons
with like full power, hereby ratifying and confirming all that said attorney or
substitute or substitutes shall lawfully do by virtue hereof.
Dated: __________________
ZUELLIG GROUP N.A., INC.
By:
Name:
Title:
Executed in presence of:
- ------------------------
Name:
16
<PAGE>
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign
and transfer to ____________________________, ________ shares of Common Stock,
par value $0.001 per share, of Hauser, Inc., a Delaware corporation, represented
by Certificate No. ____________(the "Stock"), standing in the name of the
undersigned on the books of said corporation and does hereby irrevocably
constitute and appoint _______________________ as the undersigned's true and
lawful attorney, for it and in its name and stead, to sell, assign and transfer
all or any of the Stock, and for that purpose to make and execute all necessary
acts of assignment and transfer thereof; and to substitute one or more persons
with like full power, hereby ratifying and confirming all that said attorney or
substitute or substitutes shall lawfully do by virtue hereof.
Dated: __________________
ZUELLIG Botanicals, INC.
By:
Name:
Title:
Executed in presence of:
- ------------------------
Name:
17
<PAGE>
WELLS FARGO BANK EXHIBIT J
- --------------------------------------------------------------------------------
GRANT OF SECURITY INTEREST. In consideration of any financial accommodation
or loan heretofore, now or hereafter extended to or made to ZUELLIG BOTANICALS,
INC. ("Borrowers"), or any of them if more than one Borrower, by WELLS FARGO
BANK, NATIONAL ASSOCIATION ("Bank"), and as security for the payment of all
Indebtedness of Borrowers to Bank, the undersigned ZUELLIG GROUP N.A., INC.
("Pledgor") hereby assigns, transfers to and pledges with Bank the following
money and property:
All shares of common stock, par value $.001 per share, of Hauser, Inc., a
Colorado corporation ("Hauser"), now owned or hereafter acquired by Pledgor,
and that certain Registration Rights Agreement dated December 8, 1998, by and
among Hauser, Pledgor, and Borrower, and that certain Escrow Agreement dated as
of June 11, 1999 among Pledgor, Hauser, Borrowers and American Securities &
Trust, Inc. ("Escrow Agreement").
together with all other money or property heretofore delivered or which shall
hereafter be delivered to or come into the possession, custody or control of
Bank in any manner or for any purpose whatsoever during the existence of this
Agreement (collectively called "Collateral"), and whether held in a general or
special account or deposit for safekeeping or otherwise, together with whatever
is receivable or received when any of the Collateral or proceeds thereof are
sold, collected, exchanged or otherwise disposed of, whether such disposition
is voluntary or involuntary, including without limitation, (a) all rights to
payment, including returned premiums, with respect to any insurance relating to
any of the foregoing, (b) all rights to payment with respect to any cause of
action affecting or relating to any of the foregoing, and (c) all stock rights,
rights to subscribe, stock splits, liquidating dividends, cash dividends,
dividends paid in stock, new securities or other property of any kind which
Pledgor is or may hereafter be entitled to receive on account of any securities
pledged hereunder, including without limitation, stock received by Pledgor due
to stock splits or dividends paid in stock or sums paid upon or in respect of
any securities pledged hereunder upon the liquidation or dissolution of the
issuer thereof (hereinafter called "Proceeds"), and in the event that Pledgor
receives any such Proceeds, Pledgor will hold the same in trust on behalf of
and for the benefit of Bank and will immediately deliver all such Proceeds to
Bank in the exact form received, with the endorsement of Pledgor if necessary
and/or appropriate undated stock powers duly executed in blank, to be held by
Bank as part of the Collateral, subject to all terms hereof. The word
"Indebtedness" is used herein in its most comprehensive sense and includes any
and all advances, debts, obligations and liabilities of Borrowers, or any of
them, heretofore, now or hereafter made, incurred or created, whether voluntary
or involuntary and however arising, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, and whether
Borrowers may be liable individually or jointly with others, or whether
recovery upon such Indebtedness may be or hereafter becomes unenforceable.
Notwithstanding any provision herein to the contrary, the pledge hereunder in
favor of Bank shall be subject to the transfer restrictions contained the
Escrow Agreement and in Section 6.9 (c) of the Agreement and Plan of Merger
dated as of December 8, 1998, as amended, among Pledgor, Hauser, Borrowers.,
Zuellig Botanical Extracts, Inc., ZetaPharm, Inc., Wilcox Drug Company, Inc.,
QQB Holdings I, Inc., QQB Holdings II, Inc. and QQB Holdings III, Inc. and the
voting restrictions contained in the Governance Agreement dated as of June 11,
1999 among Hauser, Pledgor, and Borrowers.
CONTINUING AGREEMENT; REVOCATION; OBLIGATION UNDER OTHER AGREEMENTS. This
is a continuing agreement and all rights, powers and remedies hereunder shall
apply to all past, present and future Indebtedness of each of the Borrowers to
Bank, including that arising under successive transactions which shall either
continue the Indebtedness, increase or decrease it, or from time to time create
new Indebtedness after all or any prior Indebtedness has been satisfied, and
notwithstanding the death, incapacity, dissolution, liquidation or bankruptcy
of any of the Borrowers or Pledgor or any other event or proceeding affecting
any of the Borrowers or Pledgor. This Agreement shall not apply to any new
Indebtedness created after actual receipt by Bank of written notice of its
revocation as to such new Indebtedness; provided however, that loans or
advances made by Bank to any of the Borrowers after revocation under
commitments existing prior to receipt by Bank of such revocation, and
extensions, renewals or modifications, of any kind, of Indebtedness incurred by
any of the Borrowers or committed by Bank prior to receipt by Bank of such
revocation, shall not be considered new Indebtedness. Any such notice must be
sent to Bank by registered U.S. mail, postage prepaid, addressed to its office
at 333 South Grand Avenue, 8th Floor, Los Angeles, CA 90071, or at such other
address as Bank shall from time to time designate. The obligations of Pledgor
hereunder shall be in addition to any obligations of Pledgor under any other
grants or pledges of security for any liabilities or obligations of any of the
Borrowers or any other person heretofore or hereafter given to Bank unless said
other grants or pledges of security are expressly modified or revoked in
writing; and this Agreement shall not, unless expressly herein provided, affect
or invalidate any such other grants or pledges of security.
OBLIGATIONS JOINT AND SEVERAL; SEPARATE ACTIONS; WAIVER OF STATUTE OF
LIMITATIONS; REINSTATEMENT OF LIABILITY. The obligations hereunder are joint
and several and independent of the obligations of Borrowers, and a separate
action or actions may be brought and prosecuted against Pledgor whether action
is brought against any of the Borrowers or any other person, or whether any of
the Borrowers or any other person is joined in any such action or actions.
Pledgor acknowledges that there are no conditions precedent to the
effectiveness of this Agreement, and that this Agreement is in full force and
effect and is binding on Pledgor as of the date written below, regardless of
whether Bank obtains collateral or any guaranties from others or takes any
other action contemplated by Pledgor. Pledgor waives the benefit of any statute
of limitations affecting Pledgor's liability hereunder or the enforcement
thereof, and Pledgor agrees that any payment of any Indebtedness or other act
which shall toll any statute of limitations applicable thereto shall similarly
operate to toll such statute of limitations applicable to Pledgor's liability
hereunder. The liability of Pledgor hereunder shall be reinstated and revived
and the rights of Bank shall continue if and to the extent that for any reason
any amount at any time paid on account of any Indebtedness secured hereby is
rescinded or must be otherwise restored by Bank, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise, all as though such
amount had not been paid. The determination as to whether any amount so paid
must be rescinded or restored shall be made by Bank in its sole discretion;
provided however, that if Bank chooses to contest any such matter at the
request of Pledgor, Pledgor agrees to indemnify and hold Bank harmless from and
against all costs and expenses, including reasonable attorneys' fees, expended
or incurred by Bank in connection therewith, including without limitation, in
any litigation with respect thereto.
Page 1 of 6
<PAGE>
OBLIGATIONS OF BANK.
Any money received by Bank in respect of the Collateral may be
deposited, at Bank's option, into a non-interest bearing account
over which Pledgor shall have no control, and the same shall, for
all purposes, be deemed Collateral hereunder and shall be applied
to reduce the Indebtedness.
Bank's obligation with respect to Collateral and Proceeds in its
possession shall be strictly limited to the duty to exercise
reasonable care in the custody and preservation of such Collateral
and Proceeds, and such duty shall not include any obligation to
ascertain or to initiate any action with respect to or to inform
Pledgor of maturity dates, conversion, call or exchange rights, or
offers to purchase the Collateral or Proceeds, or any similar
matters, notwithstanding Bank's knowledge of the same. Bank shall
have no duty to take any steps necessary to preserve the rights of
Pledgor against prior parties, or to initiate any action to protect
against the possibility of a decline in the market value of the
Collateral or Proceeds. Bank shall not be obligated to take any
actions with respect to the Collateral or Proceeds requested by
Pledgor unless such request is made in writing and Bank determines,
in its sole discretion, that the requested action would not
unreasonably jeopardize the value of the Collateral and Proceeds as
security for the Indebtedness. Bank may at any time deliver the
Collateral and Proceeds, or any part thereof, to Pledgor, and the
receipt thereof by Pledgor shall be a complete and full acquittance
for the Collateral and Proceeds so delivered, and Bank shall
thereafter be discharged from any liability or responsibility
therefor.
REPRESENTATIONS AND WARRANTIES.
Pledgor represents and warrants to Bank that: (i) Pledgor is the owner
and has possession or control of the Collateral and Proceeds; (ii)
Pledgor has the right to pledge the Collateral and Proceeds; (iii)
all Collateral and Proceeds are genuine, free from liens, adverse
claims, setoffs, default, prepayment, defenses and conditions
precedent of any kind or character, except as heretofore disclosed
to Bank in writing; (iv) all statements contained herein and, where
applicable, in the Collateral are true and complete; (v) no
financing statement covering any of the Collateral or Proceeds, and
naming any secured party other than Bank, is on file in any public
office; and (vi) specifically with respect to Collateral and
Proceeds consisting of investment securities, instruments, chattel
paper, documents, contracts, insurance policies or any like
property, all persons appearing to be obligated thereon have
authority and capacity to contract and are bound as they appear to
be, and the same comply with applicable laws concerning form,
content and manner of preparation and execution.
Pledgor further represents and warrants to Bank that: (i) the
Collateral pledged hereunder is so pledged at Borrowers' request;
(ii) Bank has made no representation to Pledgor as to the
creditworthiness of any of the Borrowers; and (iii) Pledgor has
established adequate means of obtaining from each of the Borrowers
on a continuing basis financial and other information pertaining to
Borrowers' financial condition. Pledgor agrees to keep adequately
informed from such means of any facts, events or circumstances
which might in any way affect Pledgor's risks hereunder, and
Pledgor further agrees that Bank shall have no obligation to
disclose to Pledgor any information or material about any of the
Borrowers which is acquired by Bank in any manner.
COVENANTS OF PLEDGOR.
Pledgor Agrees in General: (i) to indemnify Bank against all losses,
claims, demands, liabilities and expenses of every kind caused by
property subject hereto; (ii) to pay all costs and expenses,
including reasonable attorneys' fees, incurred by Bank in the
perfection, preservation, realization, enforcement and exercise of
its rights, powers and remedies hereunder; (iii) to permit Bank to
exercise its powers; (iv) to execute and deliver such documents as
Bank deems necessary to create, perfect and continue the security
interests contemplated hereby; and (v) not to change Pledgor's
chief place of business (or personal residence, if applicable) or
the places where Pledgor keeps any of the Collateral or Pledgor's
records concerning the Collateral and Proceeds without first giving
Bank written notice of the address to which Pledgor is moving same.
Pledgor Agrees with Regard to the Collateral and Proceeds: (i) not to
permit any lien on the Collateral or Proceeds, except in favor of
Bank; (ii) not to withdraw any funds from any deposit account
pledged to Bank hereunder without Bank's prior written consent;
(iii) not to sell, hypothecate or otherwise dispose of any of the
Collateral or Proceeds, or any interest therein, without Bank's
prior written consent; (iv) to keep, in accordance with generally
accepted accounting principles, complete and accurate records
regarding all Collateral and Proceeds, and to permit Bank to
inspect the same and make copies thereof at any reasonable time;
(v) if requested by Bank, to receive and use reasonable diligence
to collect Proceeds, in trust and as the property of Bank, and to
immediately endorse as appropriate and deliver such Proceeds to
Bank daily in the exact form in which they are received together
with a collection report in form satisfactory to Bank; (vi) not to
commingle Collateral or Proceeds, or collections thereunder, with
other property; (vii) in the event Bank elects to receive payments
of Proceeds hereunder, to pay all expenses incurred by Bank in
connection therewith, including expenses of accounting,
correspondence, collection efforts, reporting to account or
contract debtors, filing, recording, record keeping and expenses
incidental thereto; (viii) to provide any service and do any other
acts which may be necessary to keep all Collateral and Proceeds
free and clear of all defenses, rights of offset and counterclaims;
and (ix) if the Collateral or Proceeds consists of securities and
so long as no Event of Default exists, to vote said securities and
to give consents, waivers and ratifications with respect thereto,
provided that no vote shall be cast or consent, waiver or
ratification given or action taken which would impair Bank's
interest in the Collateral and Proceeds or be inconsistent with or
violate any provisions of this Agreement.
Page 2 of 6
<PAGE>
POWERS OF BANK. Pledgor appoints Bank its true attorney in fact to perform
any of the following powers, which are coupled with an interest, are
irrevocable until termination of this Agreement and may be exercised from time
to time by Bank's officers and employees, or any of them, whether or not any of
the Borrowers or Pledgor is in default: (a) to perform any obligation of
Pledgor hereunder in Pledgor's name or otherwise; (b) to notify any person
obligated on any security, instrument or other document subject to this
Agreement of Bank's rights hereunder; (c) to collect by legal proceedings or
otherwise all dividends, interest, principal or other sums now or hereafter
payable upon or on account of the Collateral or Proceeds; (d) to enter into any
extension, reorganization, deposit, merger or consolidation agreement, or any
other agreement relating to or affecting the Collateral or Proceeds, and in
connection therewith to deposit or surrender control of the Collateral and
Proceeds, to accept other property in exchange for the Collateral and Proceeds,
and to do and perform such acts and things as Bank may deem proper, with any
money or property received in exchange for the Collateral or Proceeds, at
Bank's option, to be applied to the Indebtedness or held by Bank under this
Agreement; (e) to make any compromise or settlement Bank deems desirable or
proper in respect of the Collateral and Proceeds; (f) to insure, process and
preserve the Collateral and Proceeds; (g) to exercise all rights, powers and
remedies which Pledgor would have, but for this Agreement, with respect to all
Collateral and Proceeds subject hereto; and (h) to do all acts and things and
execute all documents in the name of Pledgor or otherwise, deemed by Bank as
necessary, proper or convenient in connection with the preservation, perfection
or enforcement of its rights hereunder. To effect the purposes of this
Agreement or otherwise upon instructions of Pledgor, Bank may cause any
Collateral and/or Proceeds to be transferred to Bank's name or the name of
Bank's nominee. If an Event of Default has occurred and is continuing, any or
all Collateral and/or Proceeds consisting of securities may be registered,
without notice, in the name of Bank or its nominee, and thereafter Bank or its
nominee may exercise, without notice, all voting and corporate rights at any
meeting of the shareholders of the issuer thereof, any and all rights of
conversion, exchange or subscription, or any other rights, privileges or
options pertaining to such Collateral and/or Proceeds, all as if it were the
absolute owner thereof. The foregoing shall include, without limitation, the
right of Bank or its nominee to exchange, at its discretion, any and all
Collateral and/or Proceeds upon the merger, consolidation, reorganization,
recapitalization or other readjustment of the issuer thereof, or upon the
exercise by the issuer thereof or Bank of any right, privilege or option
pertaining to any shares of the Collateral and/or Proceeds, and in connection
therewith, the right to deposit and deliver any and all of the Collateral
and/or Proceeds with any committee, depository, transfer agent, registrar or
other designated agency upon such terms and conditions as Bank may determine.
All of the foregoing rights, privileges or options may be exercised without
liability on the part of Bank or its nominee except to account for property
actually received by Bank. Bank shall have no duty to exercise any of the
foregoing, or any other rights, privileges or options with respect to the
Collateral or Proceeds and shall not be responsible for any failure to do so or
delay in so doing.
PLEDGOR'S WAIVERS.
Pledgor waives any right to require Bank to: (i) proceed against any of
the Borrowers or any other person; (ii) proceed against or exhaust
any security held from any of the Borrowers or any other person;
(iii) give notice of the terms, time and place of any public or
private sale of personal property security held from any of the
Borrowers or any other person, or otherwise comply with the
provisions of Section 9504 of the California Uniform Commercial
Code; (iv) pursue any other remedy in Bank's power; or (v) make any
presentments or demands for performance, or give any notices of
nonperformance, protests, notices of protest or notices of dishonor
in connection with any obligations or evidences of indebtedness
held by Bank as security or which constitute in whole or in part
the Indebtedness secured hereunder, or in connection with the
creation of new or additional Indebtedness.
Pledgor waives any defense to its obligations hereunder based upon or
arising by reason of: (i) any disability or other defense of any of
the Borrowers or any other person; (ii) the cessation or limitation
from any cause whatsoever, other than payment in full, of the
Indebtedness of any of the Borrowers or any other person; (iii) any
lack of authority of any officer, director, partner, agent or any
other person acting or purporting to act on behalf of any of the
Borrowers which is a corporation, partnership or other type of
entity, or any defect in the formation of any such Borrower; (iv)
the application by any of the Borrowers of the proceeds of any
Indebtedness for purposes other than the purposes represented by
Borrowers to, or intended or understood by, Bank or Pledgor; (v)
any act or omission by Bank which directly or indirectly results in
or aids the discharge of any of the Borrowers or any portion of the
Indebtedness by operation of law or otherwise, or which in any way
impairs or suspends any rights or remedies of Bank against any of
the Borrowers; (vi) any impairment of the value of any interest in
the Collateral or Proceeds, or any other security for the
Indebtedness or any portion thereof, including without limitation,
the failure to obtain or maintain perfection or recordation of any
interest in any such security, the release of any such security
without substitution, and/or the failure to preserve the value of,
or to comply with applicable law in disposing of, any such
security; or (vii) any modification of the Indebtedness, in any
form whatsoever, including any modification made after revocation
hereof to any Indebtedness incurred prior to such revocation, and
including without limitation the renewal, extension, acceleration
or other change in time for payment of, or other change in the
terms of the Indebtedness or any portion thereof, including
increase or decrease of the rate of interest thereon. Until all
Indebtedness shall have been paid in full, Pledgor shall have no
right of subrogation. Pledgor waives all rights and defenses
Pledgor may have arising out of (A) any election of remedies by
Bank, even though that election of remedies, such as a
non-judicial foreclosure with respect to any security for any
portion of the Indebtedness, destroys Pledgor's rights of
subrogation or Pledgor's rights to proceed against any of the
Borrowers for reimbursement, or (B) any loss of rights Pledgor may
suffer by reason of any rights, powers or remedies of any of the
Borrowers in connection with any anti-deficiency laws or any other
laws limiting, qualifying or discharging Borrowers' Indebtedness
whether by operation of Sections 726 and 580d of the California
Code of Civil Procedure as from time to time amended, or otherwise.
Until all Indebtedness of each of the Borrowers to Bank shall have
been paid in full, Pledgor further waives any right to enforce any
remedy which Bank now has or may hereafter have against any of the
Borrowers or any other person, and waives any benefit of, or any
right to participate in, any security now or hereafter held by
Bank.
Page 3 of 6
<PAGE>
AUTHORIZATIONS TO BANK. Pledgor authorizes Bank either before or after
revocation hereof, without notice to or demand on Pledgor, and without
affecting Pledgor's liability hereunder, from time to time to: (a) alter,
compromise, renew, extend, accelerate or otherwise change the time for payment
of, or otherwise change the terms of, the Indebtedness or any part thereof,
including increase or decrease of the rate of interest thereon; (b) take and
hold security, other than the Collateral and Proceeds, for the payment of the
Indebtedness or any portion thereof, and exchange, enforce, waive, subordinate
or release the Collateral and Proceeds, or any part thereof, or any such other
security; (c) apply the Collateral and Proceeds or such other security and
direct the order or manner of sale thereof, including without limitation, a
non-judicial sale permitted by the terms of the controlling security agreement
or deed of trust, as Bank in its discretion may determine; (d) release or
substitute any one or more of the endorsers or guarantors of the Indebtedness,
or any portion thereof, or any other party thereto; and (e) apply payments
received by Bank from any of the Borrowers to any Indebtedness of any of the
Borrowers to Bank, in such order as Bank shall determine in its sole
discretion, whether or not such Indebtedness is covered by this Agreement, and
Pledgor hereby waives any provision of law regarding application of payments
which specifies otherwise. Bank may without notice assign this Agreement in
whole or in part.
PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS. Pledgor agrees
to pay, prior to delinquency, all insurance premiums, taxes, charges, liens and
assessments against the Collateral and Proceeds, and upon the failure of
Pledgor to do so, Bank at its option may pay any of them and shall be the sole
judge of the legality or validity thereof and the amount necessary to discharge
the same. Any such payments made by Bank shall be obligations of Pledgor to
Bank, due and payable immediately upon demand, together with interest at a rate
determined in accordance with the provisions of Section 14 hereof, and shall be
secured by the Collateral and Proceeds, subject to all terms and conditions of
this Agreement.
EVENTS OF DEFAULT. The occurrence of any of the following shall constitute
an "Event of Default" under this Agreement: (a) any default in the payment or
performance of any obligation, or any defined event of default, under (i) any
contract or instrument evidencing any Indebtedness, or (ii) any other agreement
between any of the Borrowers and Bank, including without limitation any loan
agreement, relating to or executed in connection with any Indebtedness; (b) any
representation or warranty made by Pledgor herein shall prove to be incorrect,
false or misleading in any material respect when made; (c) Pledgor shall fail
to observe or perform any obligation or agreement contained herein; (d) any
attachment or like levy on any property of Pledgor; and (e) Bank, in good
faith, believes any or all of the Collateral and/or Proceeds to be in danger of
misuse, dissipation, commingling, loss, theft, damage or destruction, or
otherwise in jeopardy or unsatisfactory in character or value.
REMEDIES. Upon the occurrence of any Event of Default, Bank shall have and
may exercise without demand any and all rights, powers, privileges and remedies
granted to a secured party upon default under the California Uniform Commercial
Code or otherwise provided by law, including without limitation, the right to
contact all persons obligated to Pledgor on any Collateral or Proceeds and to
instruct such persons to deliver all Collateral and/or Proceeds directly to
Bank. All rights, powers, privileges and remedies of Bank shall be cumulative.
No delay, failure or discontinuance of Bank in exercising any right, power,
privilege or remedy hereunder shall affect or operate as a waiver of such
right, power, privilege or remedy; nor shall any single or partial exercise of
any such right, power, privilege or remedy preclude, waive or otherwise affect
any other or further exercise thereof or the exercise of any other right,
power, privilege or remedy. Any waiver, permit, consent or approval of any kind
by Bank of any default hereunder, or any such waiver of any provisions or
conditions hereof, must be in writing and shall be effective only to the extent
set forth in writing. It is agreed that public or private sales, for cash or on
credit, to a wholesaler or retailer or investor, or user of property of the
types subject to this Agreement, or public auction, are all commercially
reasonable since differences in the sales prices generally realized in the
different kinds of sales are ordinarily offset by the differences in the costs
and credit risks of such sales. While an Event of Default exists: (a) Bank may,
at any time and at Bank's sole option, liquidate any time deposits pledged to
Bank hereunder, whether or not said time deposits have matured and
notwithstanding the fact that such liquidation may give rise to penalties for
early withdrawal of funds; (b) Pledgor will not dispose of any of the
Collateral or Proceeds except on terms approved by Bank; (c) Bank may
appropriate the Collateral and apply all Proceeds toward repayment of the
Indebtedness in such order as Bank may from time to time elect; and (d) at
Bank's request, Pledgor will assemble and deliver all Collateral and Proceeds,
and books and records pertaining thereto, to Bank at a reasonably convenient
place designated by Bank. For any Collateral or Proceeds consisting of
securities, Bank shall be under no obligation to delay a sale of any portion
thereof for the period of time necessary to permit the issuer thereof to
register such securities for public sale under any applicable state or Federal
law, even if the issuer thereof would agree to do so.
DISPOSITION OF COLLATERAL AND PROCEEDS. Upon the transfer of all or any
part of the Indebtedness, Bank may transfer all or any part of the Collateral
or Proceeds and shall be fully discharged thereafter from all liability and
responsibility with respect to any of the foregoing so transferred, and the
transferee shall be vested with all rights and powers of Bank hereunder with
respect to any of the foregoing so transferred; but with respect to any
Collateral or Proceeds not so transferred, Bank shall retain all rights,
powers, privileges and remedies herein given. Any proceeds of any disposition
of any of the Collateral or Proceeds, or any part thereof, may be applied by
Bank to the payment of expenses incurred by Bank in connection with the
foregoing, including reasonable attorneys' fees, and the balance of such
proceeds may be applied by Bank toward the payment of the Indebtedness in such
order of application as Bank may from time to time elect.
COSTS, EXPENSES AND ATTORNEYS' FEES. Pledgor shall pay to Bank immediately
upon demand the full amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys' fees (to include outside counsel fees
and all allocated costs of Bank's in-house counsel), incurred by Bank in
exercising any right, power, privilege or remedy conferred by this Agreement or
in the enforcement thereof, whether incurred at the trial or appellate level,
in an arbitration proceeding or otherwise, and including any of the foregoing
incurred in connection with any bankruptcy proceeding relating to Pledgor or
the valuation of the Collateral and/or Proceeds, including without limitation,
the seeking of relief from or modification of the automatic stay or the
negotiation and drafting of a cash collateral order. All of the foregoing shall
be paid by Pledgor with interest at a rate per annum equal to the greater of
ten percent (10%) or
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<PAGE>
the Prime Rate in effect from time to time. The "Prime Rate" is a base rate
that Bank from time to time establishes and which serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto.
DISCLOSURE OF INFORMATION. Pledgor acknowledges that Bank has the right to
sell, assign, transfer, negotiate or grant participations in all or any part
of, or any interest in, any Indebtedness of Borrowers to Bank and any
obligations with respect thereto, including this Agreement. In connection
therewith, Bank may disclose all documents and information which Bank now has
or hereafter acquires relating to Pledgor and/or this Agreement, whether
furnished by Borrowers, Pledgor or otherwise. Pledgor further agrees that Bank
may disclose such documents and information to Borrowers.
APPLICATION OF SINGULAR AND PLURAL IN CONTEXT AND CONSTRUCTION. In all
cases where there is but a single Borrower, then all words used herein in the
plural shall be deemed to have been used in the singular where the context and
construction so require; and when there is more than one Borrower named herein
or when this Agreement is executed by more than one Pledgor, the word
"Borrowers" and the word "Pledgor" respectively shall mean all or any one or
more of them as the context requires.
NOTICES. All notices, requests and demands required under this Agreement
must be in writing, addressed to Bank at the address specified in Paragraph 2
hereof and to Pledgor at the address of its chief executive office (or
residence, if applicable) specified below or to such other address as any party
may designate by written notice to each other party, and shall be deemed to
have been given or made as follows: (a) if personally delivered, upon delivery;
(b) if sent by mail, upon the earlier of the date of receipt or three (3) days
after deposit in the U.S. mail, first class and postage prepaid; and (c) if
sent by telecopy, upon receipt.
GOVERNING LAW; SUCCESSORS, ASSIGNS. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, and shall be
binding upon and inure to the benefit of the heirs, executors, administrators,
legal representatives, successors and assigns of the parties.
SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be
held to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or any remaining provisions of
this Agreement.
20. ARBITRATION.
(a) Arbitration. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in
accordance with the terms of this Agreement. A "Dispute" shall mean any action,
dispute, claim or controversy of any kind, whether in contract or tort,
statutory or common law, legal or equitable, now existing or hereafter arising
under or in connection with, or in any way pertaining to, this Agreement and
each other document, contract and instrument required hereby or now or
hereafter delivered to Bank in connection herewith (collectively, the
"Documents"), or any past, present or future extensions of credit and other
activities, transactions or obligations of any kind related directly or
indirectly to any of the Documents, including without limitation, any of the
foregoing arising in connection with the exercise of any self-help, ancillary
or other remedies pursuant to any of the Documents. Any party may by summary
proceedings bring an action in court to compel arbitration of a Dispute. Any
party who fails or refuses to submit to arbitration following a lawful demand
by any other party shall bear all costs and expenses incurred by such other
party in compelling arbitration of any Dispute.
(b) Governing Rules. Arbitration proceedings shall be administered by the
American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
Loan Documents. The arbitration shall be conducted at a location in California
selected by the AAA or other administrator. If there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set forth
herein shall control. All statutes of limitation applicable to any Dispute
shall apply to any arbitration proceeding. All discovery activities shall be
expressly limited to matters directly relevant to the Dispute being arbitrated.
Judgment upon any award rendered in an arbitration may be entered in any court
having jurisdiction; provided however, that nothing contained herein shall be
deemed to be a waiver by any party that is a bank of the protections afforded
to it under 12 U.S.C. '91 or any similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary
remedies, including without limitation injunctive relief, sequestration,
attachment, garnishment or the appointment of a receiver, from a court of
competent jurisdiction before, after or during the pendency of any arbitration
or other proceeding. The exercise of any such remedy shall not waive the right
of any party to compel arbitration or reference hereunder.
(d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy or relief that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Any Dispute in which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than
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<PAGE>
$5,000,000. Any Dispute in which the amount in controversy exceeds $5,000,000
shall be decided by majority vote of a panel of three arbitrators; provided
however, that all three arbitrators must actively participate in all hearings
and deliberations.
(e) Judicial Review. Notwithstanding anything herein to the contrary, in
any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
California, and (iii) the parties shall have in addition to the grounds
referred to in the Federal Arbitration Act for vacating, modifying or
correcting an award the right to judicial review of (A) whether the findings of
fact rendered by the arbitrators are supported by substantial evidence, and (B)
whether the conclusions of law are erroneous under the substantive law of the
state of California. Judgment confirming an award in such a proceeding may be
entered only if a court determines the award is supported by substantial
evidence and not based on legal error under the substantive law of the state of
California.
(f) Real Property Collateral; Judicial Reference. Notwithstanding anything
herein to the contrary, no Dispute shall be submitted to arbitration if the
Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or
benefits that might accrue to them by virtue of the single action rule statute
of California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to
a referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to
the AAA's selection procedures. Judgment upon the decision rendered by a
referee shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.
(g) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Documents or the subject matter of the Dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Documents, or any relationship between the parties.
Pledgor warrants that its chief executive office (or residence, if applicable)
is located at the following address:
2550 El Presidio Street
Long Beach, California 90810-1193
IN WITNESS WHEREOF, this Agreement has been duly executed as of June 11, 1999.
"PLEDGOR"
ZUELLIG GROUP N.A., INC.
By: /s/ Volker Wypyszyk
-------------------------------
Name: Volker Wypysyk
Title: President
By: /s/ Ralph Heimann
-------------------------------
Name: Ralph Heimann
Title: Secretary and Treasurer
Page 6 of 6
<PAGE>
WELLS FARGO BANK
- --------------------------------------------------------------------------------
TO: WELLS FARGO BANK, NATIONAL ASSOCIATION
GRANT OF SECURITY INTEREST. For valuable consideration, the undersigned
ZUELLIG BOTANICALS, INC., a Delaware corporation, or any of them if more than
one debtor ("Debtor"), hereby assigns, transfers to and pledges with WELLS FARGO
BANK, NATIONAL ASSOCIATION ("Bank") all money and property this day delivered to
and deposited with Bank, together with all other money or property heretofore
delivered or which shall hereafter be delivered to or come into the possession,
custody or control of Bank in any manner or for any purpose whatsoever during
the existence of this Agreement (collectively called "Collateral"), and whether
held in a general or special account or deposit for safekeeping or otherwise,
together with whatever is receivable or received when any of the Collateral or
proceeds thereof are sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary, including without
limitation, (a) all rights to payment, including returned premiums, with respect
to any insurance relating to any of the foregoing, (b) all rights to payment
with respect to any cause of action affecting or relating to any of the
foregoing, and (c) all stock rights, rights to subscribe, stock splits,
liquidating dividends, cash dividends, dividends paid in stock, new securities
or other property of any kind which Debtor is or may hereafter be entitled to
receive on account of any securities pledged hereunder, including without
limitation, stock received by Debtor due to stock splits or dividends paid in
stock or sums paid upon or in respect of any securities pledged hereunder upon
the liquidation or dissolution of the issuer thereof (hereinafter called
"Proceeds"), and in the event that Debtor receives any such Proceeds, Debtor
will hold the same in trust on behalf of and for the benefit of Bank and will
immediately deliver all such Proceeds to Bank in the exact form received, with
the endorsement of Debtor if necessary and/or appropriate undated stock powers
duly executed in blank, to be held by Bank as part of the Collateral, subject to
all terms hereof. For the purposes of this General Pledge Agreement, Collateral
shall mean:
All shares of common stock, par value $.001 per share, of Hauser, Inc., a
Colorado corporation ("Hauser"), now owned or hereafter acquired by Debtor, and
that certain Registration Rights Agreement dated December 8, 1998, by and among
Hauser, Zuellig Group N.A., Inc. ("Zuellig Group"), and Debtor, and that certain
Escrow Agreement dated as of June 11, 1999 among Debtor, Zuellig Group, Hauser
and American Securities & Trust, Inc. ("Escrow Agreement").
Notwithstanding any provision herein to the contrary, the pledge hereunder in
favor of the Bank shall be subject to the transfer restrictions contained in the
Escrow Agreement and in Section 6.9 (c) of the Agreement and Plan of Merger
dated as of December 8, 1998, as amended, among Zuellig Group, N.A. Inc.,
Hauser, Debtor, Zuellig Botanical Extracts, Inc., ZetaPharm, Inc., Wilcox Drug
Company, Inc., QQB Holdings I, Inc., QQB Holdings II, Inc. and QQB Holdings III,
Inc. and the voting restrictions contained in the Governance Agreement dated as
of June 11, 1999 among Hauser, Zuellig Group N.A., Inc., and Debtor.
OBLIGATIONS SECURED. The obligations secured hereby are the payment and
performance of: (a) all present and future Indebtedness of Debtor to Bank; (b)
all obligations of Debtor and rights of Bank under this Agreement; and (c) all
present and future obligations of Debtor to Bank of other kinds. The word
"Indebtedness" is used herein in its most comprehensive sense and includes any
and all advances, debts, obligations and liabilities of Debtor, or any of them,
heretofore, now or hereafter made, incurred or created, whether voluntary or
involuntary and however arising, whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, and whether Debtor may
be liable individually or jointly with others, or whether recovery upon such
Indebtedness may be or hereafter becomes unenforceable.
TERMINATION. This Agreement will terminate upon the performance of all
obligations of Debtor to Bank, including without limitation, the payment of all
Indebtedness of Debtor to Bank existing or committed by Bank at the time Bank
receives written notice from Debtor of the termination of this Agreement.
OBLIGATIONS OF TRADE BANK. (a) Bank has no obligation to make any loans
hereunder. Any money received by Bank in respect of the Collateral may be
deposited, at Bank's option, into a non-interest bearing account over which
Debtor shall have no control, and the same shall, for all purposes, be deemed
Collateral hereunder and shall be applied to reduce the Indebtedness. (b) Bank's
obligation with respect to Collateral and Proceeds in its possession shall be
strictly limited to the duty to exercise reasonable care in the custody and
preservation of such Collateral and Proceeds, and such duty shall not include
any obligation to ascertain or to initiate any action with respect to or to
inform Debtor of maturity dates, conversion, call or exchange rights, or offers
to purchase the Collateral or Proceeds, or any similar matters, notwithstanding
Bank's knowledge of the same. Bank shall have no duty to take any steps
necessary to preserve the rights of Debtor against prior parties, or to initiate
any action to protect against the possibility of a decline in the market value
of the Collateral or Proceeds. Bank shall not be obligated to take any action
with respect to the Collateral or Proceeds requested by Debtor unless such
request is made in writing and Bank determines, in its sole discretion, that the
requested action would not unreasonably jeopardize the value of the Collateral
and Proceeds as security for the Indebtedness. Bank may at any time deliver the
Collateral and Proceeds, or any part thereof, to any Debtor, and the receipt
thereof by any Debtor shall be a complete and full acquittance for the
Collateral and Proceeds so delivered, and Bank shall thereafter be discharged
from any liability or responsibility therefor.
REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to Bank that: (a)
Debtor is the owner and has possession or control of the Collateral and
Proceeds; (b) Debtor has the right to pledge the Collateral and Proceeds; (c)
all Collateral and Proceeds are genuine, free from liens, adverse claims,
setoffs, default, prepayment, defenses and conditions precedent of any kind or
character, except as heretofore disclosed to Bank in writing; (d) all statements
contained herein and, where applicable, in the Collateral, are true and
complete; (e) no financing statement covering any of the Collateral or Proceeds,
and naming any secured party other than Bank, is on file in any public office;
and (f) specifically with respect to Collateral and Proceeds consisting of
investment securities, instruments, chattel paper, documents, contracts,
insurance policies or any like property, (i) all persons appearing to be
obligated thereon have authority and capacity to contract and are bound as they
appear to be, and (ii) the same comply with applicable laws
Page 1 of 5
<PAGE>
concerning form, content and manner of preparation and execution.
COVENANTS OF DEBTOR. (a) Debtor Agrees in General: (i) to pay
Indebtedness secured hereby when due; (ii) to indemnify Bank against all losses,
claims, demands, liabilities and expenses of every kind caused by property
subject hereto; (iii) to pay all costs and expenses, including reasonable
attorneys' fees, incurred by Bank in the perfection, preservation, realization,
enforcement and exercise of its rights, powers and remedies hereunder; (iv) to
permit Bank to exercise its powers; (v) to execute and deliver such documents as
Bank deems necessary to create, perfect and continue the security interests
contemplated hereby; and (vi) not to change its chief place of business or the
places where Debtor keeps any of the Collateral or Debtor's records concerning
the Collateral and Proceeds without first giving Bank written notice of the
address to which Debtor is moving same. (b) Debtor Agrees with Regard to the
Collateral and Proceeds: (i) not to permit any lien on the Collateral or
Proceeds, except in favor of Bank; (ii) not to withdraw any funds from any
deposit account pledged to Bank hereunder without Bank's prior written consent;
(iii) not to sell, hypothecate or otherwise dispose of any of the Collateral or
Proceeds, or any interest therein, without Bank's prior written consent; (iv) to
keep, in accordance with generally accepted accounting principles, complete and
accurate records regarding all Collateral and Proceeds, and to permit Bank to
inspect the same and make copies thereof at any reasonable time; (v) if
requested by Bank, to receive and use reasonable diligence to collect Proceeds,
in trust and as the property of Bank, and to immediately endorse as appropriate
and deliver such Proceeds to Bank daily in the exact form in which they are
received together with a collection report in form satisfactory to Bank; (vi)
not to commingle Collateral or Proceeds, or collections thereunder, with other
property; (vii) in the event Bank elects to receive payments of Proceeds
hereunder, to pay all expenses incurred by Bank in connection therewith,
including expenses of accounting, correspondence, collection efforts, filing,
recording, record keeping and expenses incidental thereto; (viii) to provide any
service and do any other acts which may be necessary to keep all Collateral and
Proceeds free and clear of all defenses, rights of offset and counterclaims; and
(ix) if the Collateral or Proceeds consists of securities and so long as no
Event of Default exists, to vote said securities and to give consents, waivers
and ratifications with respect thereto, provided that no vote shall be cast or
consent, waiver or ratification given or action taken which would impair Bank's
interests in the Collateral and Proceeds or be inconsistent with or violate any
provisions of this Agreement.
POWERS OF TRADE BANK. Debtor appoints Bank its true attorney in fact to
perform any of the following powers, which are coupled with an interest, are
irrevocable until termination of this Agreement and may be exercised from time
to time by Bank's officers and employees, or any of them, whether or not Debtor
is in default: (a) to perform any obligation of Debtor hereunder in Debtor's
name or otherwise; (b) to notify any person obligated on any security,
instrument or other document subject to this Agreement of Bank's rights
hereunder; (c) to collect by legal proceedings or otherwise all dividends,
interest, principal or other sums now or hereafter payable upon or on account of
the Collateral or Proceeds; (d) to enter into any extension, reorganization,
deposit, merger or consolidation agreement, or any other agreement relating to
or affecting the Collateral or Proceeds, and in connection therewith to deposit
or surrender control of the Collateral and Proceeds, to accept other property in
exchange for the Collateral and Proceeds, and to do and perform such acts and
things as Bank may deem proper, with any money or property received in exchange
for the Collateral or Proceeds, at Bank's option, to be applied to the
Indebtedness or held by Bank under this Agreement; (e) to make any compromise or
settlement Bank deems desirable or proper in respect of the Collateral and
Proceeds; (f) to insure, process and preserve the Collateral and Proceeds; (g)
to exercise all rights, powers and remedies which Debtor would have, but for
this Agreement, with respect to all Collateral and Proceeds subject hereto; and
(h) to do all acts and things and execute all documents in the name of Debtor or
otherwise, deemed by Bank as necessary, proper and convenient in connection with
the preservation, perfection or enforcement of its rights hereunder. To effect
the purposes of this Agreement or otherwise upon instructions of Debtor, [or any
of them,] Bank may cause any Collateral and/or Proceeds to be transferred to
Bank's name or the name of Bank's nominee. If an Event of Default has occurred
and is continuing, any or all Collateral and/or Proceeds consisting of
securities may be registered, without notice, in the name of Bank or its
nominee, and thereafter Bank or its nominee may exercise, without notice, all
voting and corporate rights at any meeting of the shareholders of the issuer
thereof, any and all rights of conversion, exchange or subscription, or any
other rights, privileges or options pertaining to such Collateral and/or
Proceeds, all as if it were the absolute owner thereof. The foregoing shall
include, without limitation, the right of Bank or its nominee to exchange, at
its discretion, any and all Collateral and/or Proceeds upon the merger,
consolidation, reorganization, recapitalization or other readjustment of the
issuer thereof, or upon the exercise by the issuer thereof or Bank of any right,
privilege or option pertaining to any shares of the Collateral and/or Proceeds,
and in connection therewith, the right to deposit and deliver any and all of the
Collateral and/or Proceeds with any committee, depository, transfer agent,
registrar or other designated agency upon such terms and conditions as Bank may
determine. All of the foregoing rights, privileges or options may be exercised
without liability on the part of Bank or its nominee except to account for
property actually received by Bank. Bank shall have no duty to exercise any of
the foregoing, or any other rights, privileges or options with respect to the
Collateral or Proceeds and shall not be responsible for any failure to do so or
delay in so doing.
PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS. Debtor
agrees to pay, prior to delinquency, all insurance premiums, taxes, charges,
liens and assessments against the Collateral and Proceeds, and upon the failure
of Debtor to do so, Bank at its option may pay any of them and shall be the sole
judge of the legality or validity thereof and the amount necessary to discharge
the same. Any such payments made by Bank shall be obligations of Debtor to Bank,
due and payable immediately upon demand, together with interest at a rate
determined in accordance with the provisions of Section 12 hereof, and shall be
secured by the Collateral and Proceeds, subject to all terms and conditions of
this Agreement.
EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement: (a) any default in the
payment or performance of any obligation, or any defined event of default, under
(i) any contract or instrument evidencing any Indebtedness, or (ii) any other
agreement between any Debtor and Bank, including without limitation any loan
agreement, relating to or executed in connection with any Indebtedness; (b) any
representation or warranty made by any Debtor herein shall prove to be
incorrect, false or misleading in any material respect when made; (c) any Debtor
shall fail to observe or perform any obligation or agreement contained herein;
(d) any attachment or like levy on any property of any Debtor; and (e) Bank, in
good faith, believes any or all of the Collateral and/or Proceeds to be in
danger of misuse, dissipation, commingling, loss, theft, damage or destruction,
or otherwise in jeopardy or unsatisfactory in character or value.
Page 2 of 5
<PAGE>
REMEDIES. Upon the occurrence of any Event of Default, Bank shall have
the right to declare immediately due and payable all or any Indebtedness secured
hereby and to terminate any commitments to make loans or otherwise extend credit
to Debtor. Bank shall have all other rights, powers, privileges and remedies
granted to a secured party upon default under the California Uniform Commercial
Code or otherwise provided by law, including without limitation, the right to
contact all persons obligated to Debtor on any Collateral or Proceeds and to
instruct such persons to deliver all Collateral and/or Proceeds directly to
Bank. All rights, powers, privileges and remedies of Bank shall be cumulative.
No delay, failure or discontinuance of Bank in exercising any right, power,
privilege or remedy hereunder shall affect or operate as a waiver of such right,
power, privilege or remedy; nor shall any single or partial exercise of any such
right, power, privilege or remedy preclude, waive or otherwise affect any other
or further exercise thereof or the exercise of any other right, power, privilege
or remedy. Any waiver, permit, consent or approval of any kind by Bank of any
default hereunder, or any such waiver of any provisions or conditions hereof,
must be in writing and shall be effective only to the extent set forth in
writing. It is agreed that public or private sales, for cash or on credit, to a
wholesaler or retailer or investor, or user of property of the types subject to
this Agreement, or public auction, are all commercially reasonable since
differences in the sales prices generally realized in the different kinds of
sales are ordinarily offset by the differences in the costs and credit risks of
such sales. While an Event of Default exists: (a) Bank may, at any time and at
Bank's sole option, liquidate any time deposits pledged hereunder, whether or
not said time deposits have matured and notwithstanding the fact that such
liquidation may give rise to penalties for early withdrawal of funds; (b) Debtor
will not dispose of any of the Collateral or Proceeds except on terms approved
by Bank; (c) Bank may appropriate the Collateral and apply all Proceeds toward
repayment of the Indebtedness in such order of application as Bank may from time
to time elect; and (d) at Bank's request, Debtor will assemble and deliver all
Collateral and Proceeds, and books and records pertaining thereto, to Bank at a
reasonably convenient place designated by Bank. For any Collateral or Proceeds
consisting of securities, Bank shall have no obligation to delay a sale of any
portion thereof for the period of time necessary to permit the issuer thereof to
register such securities for public sale under any applicable state or Federal
law, even if the issuer thereof would agree to do so.
DISPOSITION OF COLLATERAL AND PROCEEDS. Upon the transfer of all or any
part of the Indebtedness, Bank may transfer all or any part of the Collateral or
Proceeds and shall be fully discharged thereafter from all liability and
responsibility with respect to any of the foregoing so transferred, and the
transferee shall be vested with all rights and powers of Bank hereunder with
respect to any of the foregoing so transferred; but with respect to any
Collateral or Proceeds not so transferred, Bank shall retain all rights, powers,
privileges and remedies herein given. Any proceeds of any disposition of any of
the Collateral or Proceeds, or any part thereof, may be applied by Bank to the
payment of expenses incurred by Bank in connection with the foregoing, including
reasonable attorneys' fees, and the balance of such proceeds may be applied by
Bank toward the payment of the Indebtedness in such order of application as Bank
may from time to time elect.
COSTS, EXPENSES AND ATTORNEYS' FEES. Debtor shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), incurred by
Bank in exercising any right, power, privilege or remedy conferred by this
Agreement or in the enforcement thereof, including any of the foregoing incurred
in connection with any bankruptcy proceeding relating to Debtor or the valuation
of the Collateral and/or Proceeds, including without limitation, the seeking of
relief from or modification of the automatic stay or the negotiation and
drafting of a cash collateral order. All of the foregoing shall be paid by
Debtor with interest at a rate per annum equal to the greater of ten percent
(10%) or the Prime Rate in effect from time to time. The "Prime Rate" is a base
rate that Wells Fargo Bank, N.A. from time to time establishes and which serves
as the basis upon which effective rates of interest are calculated for those
loans making reference thereto.
STATUTE OF LIMITATIONS. Until all Indebtedness shall have been paid in
full, the power of sale and all other rights, powers, privileges and remedies
granted to Bank hereunder shall continue to exist and may be exercised by Bank
at any time and from time to time irrespective of the fact that the Indebtedness
or any part thereof may have become barred by any statute of limitations, or
that the personal liability of Debtor may have ceased, unless such liability
shall have ceased due to the payment in full of all Indebtedness secured
hereunder.
MISCELLANEOUS. The obligations of Debtor are joint and several;
presentment, protest, notice of protest, notice of dishonor and notice of
nonpayment are waived with respect to any Proceeds to which Bank is entitled
hereunder; any right to direct the application of payments or security for any
Indebtedness of Debtor, or indebtedness of customers of Debtor, and any right to
require proceedings against others or to require exhaustion of security are
waived; and consent to extensions, forbearances or alterations of the terms of
Indebtedness, the release or substitution of security, and the release of
guarantors is given with respect to Proceeds subject to this Agreement; provided
however, that in each instance Bank believes in good faith that the action in
question is commercially reasonable in that it does not unreasonably increase
the risk of nonpayment of the Indebtedness to which the action applies. Until
all Indebtedness shall have been paid in full, no Debtor shall have any right of
subrogation or contribution, and each Debtor hereby waives any benefit of or
right to participate in any of the Collateral or Proceeds or any other security
now or hereafter held by Bank.
OBLIGATIONS OF MARRIED PERSONS. Any married person who signs this
Agreement as Debtor hereby expressly agrees that recourse may be had against his
or her separate property for all his or her Indebtedness to Bank secured by the
Collateral and Proceeds under this Agreement.
NOTICES. All notices, requests and demands required under this
Agreement must be in writing, addressed to Bank at the address specified in any
other loan documents entered into between Debtor and Bank and to Debtor at the
address of its chief executive office (or personal residence, if applicable)
specified below or to such other address as any party may designate by written
notice to each other party, and shall be deemed to have been given or made as
follows: (a) if personally delivered, upon delivery; (b) if sent by mail, upon
the earlier of the date of receipt or three (3) days after deposit in the U.S.
mail, first class and postage prepaid; and (c) if sent by telecopy, upon
receipt.
Page 3 of 5
<PAGE>
GOVERNING LAW; SUCCESSORS, ASSIGNS. This Agreement shall be governed by
and construed in accordance with the laws of the State of California, and shall
be binding upon and inure to the benefit of the heirs, executors,
administrators, legal representatives, successors and assigns of the parties.
SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be
held to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
Debtor warrants that its chief executive office (or personal residence,
if applicable) is located at the following address: 2550 El Presidio Street,
Long Beach, CA 90810.
Page 4 of 5
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of June 11, 1999.
"BORROWER"
ZUELLIG BOTANICALS, INC.
By: /s/ Terry Feit
-----------------------
Name: Terry Feit
Title: Assistant Secretary
Page 5 of 5
<PAGE>
Exhibit K
POWER OF ATTORNEY
Know all by these presents, that the undersigned, Zatpack Inc., hereby
constitutes and appoints Harvey L. Sperry the undersigned's true and lawful
attorney-in-fact to:
(1) execute for and on behalf of the undersigned, as a beneficial
owner of greater than 10% of a class of equity securities of
Hauser, Inc. (the "Company"), Forms 3, 4, and 5 in accordance
with Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules thereunder;
(2) do and perform any and all acts for and on behalf of the
undersigned which may be necessary or desirable to complete and
execute any such Form 3, 4, or 5 and timely file such form with
the United States Securities and Exchange Commission (the "SEC")
and any stock exchange or similar authority;
(3) execute for and on behalf of the undersigned, as a beneficial
owner of greater than 5% a class of equity securities of the
Company, and to file with the SEC any schedules or other filings
or amendments thereto made by the undersigned pursuant to Section
13(d) of the Exchange Act;
(4) do and perform any and all acts for and on behalf of the
undersigned which may be necessary or desirable to complete and
execute any such filing pursuant to Section 13(d) of the Exchange
Act and timely file such form with the SEC and any stock exchange
or similar authority; and
(5) take any other action of any type whatsoever in connection with
the foregoing which, in the opinion of such attorney-in-fact, may
be of benefit to, in the best interest of, or legally required
by, the undersigned, it being understood that the documents
executed by such attorney-in-fact on behalf of the undersigned
pursuant to this Power of Attorney shall be in such form and
shall contain such terms and conditions as such attorney-in-fact
may approve in such attorney-in-fact's discretion.
The undersigned hereby grants to such attorney-in-fact full power and
authority to do and perform any and every act and thing whatsoever requisite,
necessary, or proper to be done in the exercise of any of the rights and powers
herein granted, as fully to all intents and purposes as the undersigned might
or could do if personally present, with full power of substitution or
revocation, hereby ratifying and confirming all that such attorney-in-fact, or
such attorney-in-fact's substitute or substitutes, shall lawfully do or cause
to be done by virtue of this power of attorney and the rights and powers herein
granted. The undersigned acknowledges that the foregoing attorney-in-fact, in
serving in such capacity at the request of the undersigned, is not assuming,
nor is the Company
<PAGE>
assuming, any of the undersigned's responsibilities to comply with Section
13(d) or Section 16 of the Exchange Act.
This Power of Attorney shall remain in full force and effect until the
undersigned is no longer required to file Forms 3, 4, 5, and Schedule 13D with
respect to the undersigned's holdings of and transactions in securities issued
by the Company, unless earlier revoked by the Board of Directors of Zatpack
Inc. in a signed writing delivered to the foregoing attorney-in-fact.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney
to be executed as of this 23rd day of March, 1999.
ZATPACK INC.
By: /s/ Peter Zuellig
------------------------------
Name: Peter Zuellig
Title: Director, Zatpack Inc.
<PAGE>
POWER OF ATTORNEY
Know all by these presents, that the undersigned, Zuellig Group N.A.,
Inc., hereby constitutes and appoints Harvey L. Sperry the undersigned's true
and lawful attorney-in-fact to:
(1) execute for and on behalf of the undersigned, as a beneficial owner
of greater than 10% of a class of equity securities of Hauser, Inc.
(the "Company"), Forms 3, 4, and 5 in accordance with Section 16(a)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules thereunder;
(2) do and perform any and all acts for and on behalf of the
undersigned which may be necessary or desirable to complete and
execute any such Form 3, 4, or 5 and timely file such form with the
United States Securities and Exchange Commission (the "SEC") and
any stock exchange or similar authority;
(3) execute for and on behalf of the undersigned, as a beneficial owner
of greater than 5% of a class of equity securities of the Company,
and to file with the SEC any schedules or other filings or
amendments thereto made by the undersigned pursuant to Section
13(d) of the Exchange Act;
(4) do and perform any and all acts for and on behalf of the
undersigned which may be necessary or desirable to complete and
execute any such filing pursuant to Section 13(d) of the Exchange
Act and timely file such form with the SEC and any stock exchange
or similar authority; and
(5) take any other action of any type whatsoever in connection with the
foregoing which, in the opinion of such attorney-in-fact, may be of
benefit to, in the best interest of, or legally required by, the
undersigned, it being understood that the documents executed by
such attorney-in-fact on behalf of the undersigned pursuant to this
Power of Attorney shall be in such form and shall contain such
terms and conditions as such attorney-in-fact may approve in such
attorney-in-fact's discretion.
The undersigned hereby grants to such attorney-in-fact full power and
authority to do and perform any and every act and thing whatsoever requisite,
necessary, or proper to be done in the exercise of any of the rights and powers
herein granted, as fully to all intents and purposes as the undersigned might
or could do if personally present, with full power of substitution or
revocation, hereby ratifying and confirming all that such attorney-in-fact, or
such attorney-in-fact's substitute or substitutes, shall lawfully do or cause
to be done by virtue of this power of attorney and the rights and powers herein
granted. The undersigned acknowledges that the foregoing attorney-in-fact, in
serving in such capacity at the request of the undersigned, is not assuming,
nor is the Company
<PAGE>
assuming, any of the undersigned's responsibilities to comply with Section
13(d) or Section 16 of the Exchange Act.
This Power of Attorney shall remain in full force and effect until the
undersigned is no longer required to file Forms 3, 4, 5, and Schedule 13D with
respect to the undersigned's holdings of and transactions in securities issued
by the Company, unless earlier revoked by the Board of Directors of Zuellig
Group N.A., Inc. in a signed writing delivered to the foregoing
attorney-in-fact.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney
to be executed as of this 23rd day of March, 1999.
ZUELLIG GROUP N.A., INC.
By: /s/ Peter Zuellig
------------------------------
Name: Peter Zuellig
Title: Director
Zuellig Group N.A., Inc.
<PAGE>
POWER OF ATTORNEY
Know all by these presents, that the undersigned, Zuellig Botanicals,
Inc., hereby constitutes and appoints Harvey L. Sperry the undersigned's true
and lawful attorney-in-fact to:
(1) execute for and on behalf of the undersigned, as a beneficial owner
of greater than 10% of a class of equity securities of Hauser, Inc.
(the "Company"), Forms 3, 4, and 5 in accordance with Section 16(a)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules thereunder;
(2) do and perform any and all acts for and on behalf of the
undersigned which may be necessary or desirable to complete and
execute any such Form 3, 4, or 5 and timely file such form with the
United States Securities and Exchange Commission (the "SEC") and
any stock exchange or similar authority;
(3) execute for and on behalf of the undersigned, as a beneficial owner
of greater than 5% of a class of equity securities of the Company,
and to file with the SEC any schedules or other filings or
amendments thereto made by the undersigned pursuant to Section
13(d) of the Exchange Act;
(4) do and perform any and all acts for and on behalf of the
undersigned which may be necessary or desirable to complete and
execute any such filing pursuant to Section 13(d) of the Exchange
Act and timely file such form with the SEC and any stock exchange
or similar authority; and
(5) take any other action of any type whatsoever in connection with the
foregoing which, in the opinion of such attorney-in-fact, may be of
benefit to, in the best interest of, or legally required by, the
undersigned, it being understood that the documents executed by
such attorney-in-fact on behalf of the undersigned pursuant to this
Power of Attorney shall be in such form and shall contain such
terms and conditions as such attorney-in-fact may approve in such
attorney-in-fact's discretion.
The undersigned hereby grants to such attorney-in-fact full power and
authority to do and perform any and every act and thing whatsoever requisite,
necessary, or proper to be done in the exercise of any of the rights and powers
herein granted, as fully to all intents and purposes as the undersigned might
or could do if personally present, with full power of substitution or
revocation, hereby ratifying and confirming all that such attorney-in-fact, or
such attorney-in-fact's substitute or substitutes, shall lawfully do or cause
to be done by virtue of this power of attorney and the rights and powers herein
granted. The undersigned acknowledges that the foregoing attorney-in-fact, in
serving in such capacity at the request of the undersigned, is not assuming,
nor is the Company
<PAGE>
assuming, any of the undersigned's responsibilities to comply with Section
13(d) or Section 16 of the Exchange Act.
This Power of Attorney shall remain in full force and effect until the
undersigned is no longer required to file Forms 3, 4, 5, and Schedule 13D with
respect to the undersigned's holdings of and transactions in securities issued
by the Company, unless earlier revoked by the Board of Directors of Zuellig
Botanicals, Inc. in a signed writing delivered to the foregoing
attorney-in-fact.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney
to be executed as of this 23rd day of March, 1999.
ZUELLIG BOTANICALS, INC.
By: /s/ Volker Wypyszyk
------------------------------
Name: Volker Wypyszyk
Title: Director and President,
Zuellig Botanicals, Inc.
