ASSET PURCHASE
AGREEMENT
THIS
ASSET PURCHASE AGREEMENT (“ Agreement ”) is made
and entered into effective as of September 1, 2006 (the “
Effective Date ”), by and among EXL III GROUP
CORPORATION, a California corporation (“ EXL ”),
HUMAN BIOSYSTEMS, a California corporation (“ HBS
”) and HBS BIOENERGY, a California corporation (“
HBS Bio ”). Certain capitalized terms used in
this Agreement are defined in Exhibit A
hereto.
RECITALS
A.
EXL is
the owner of the following property, which EXL desires to transfer,
sell and assign to HBS Bio (collectively, the “ Subject
Property ”), subject to the terms and conditions of this
Agreement:
(i)
All
right, title and interest of EXL (to the extent such right, title
and interest are assignable) in and to that certain Option
Agreement, dated July 26, 2006, by and between EXL and K.M. Biggs,
Inc. and Katydid Farms, Inc., to purchase that certain real
property located in Lumberton County, North Carolina, a copy of
which Option Agreement is attached as Exhibit B
hereto (the “ Lumberton Option ”);
(ii)
All
right, title and interest of EXL (to the extent such right, title
and interest are assignable) in and to any and all use permits,
encroachment permits, licenses and other governmental
authorizations that are applicable to the construction,
maintenance, repair, use, operation, replacement, and improvement
of any part of the property and/or interests described in the above
subparagraphs (i) and (ii), inclusive, some of which are described
in the Schedule of Permits attached as Exhibit
C hereto (the “
Permits ”); and
(iii)
All
records of EXL primarily relating to the Subject Property,
including property files, contract files, environmental files,
health and safety files, Permit files, abstracts and title opinions
or policies, tax records, insurance and related records,
transportation records, surveys and maps and all other books,
records, files and data that relate to the Subject Property (the
“ Records ”).
B.
HBS
Bio desires to acquire, purchase and accept an assignment of the
Subject Property from EXL, subject to the terms and conditions of
this Agreement.
AGREEMENT
NOW,
THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and based upon the
foregoing recitals, the parties agree as follows:
1.
Purchase and
Sale . EXL shall
sell the Subject Property to HBS Bio, and HBS Bio shall purchase
the Subject Property from EXL, on all of the terms, covenants and
conditions set forth in this Agreement.
1.1
No
Assumption of Liabilities . HBS Bio
shall not assume any Liabilities of EXL (whether or not related to
the Subject Properties), including (a) any Tax Liabilities of EXL;
(b) any obligations of EXL relating to accounts payable or other
indebtedness; (c) any wages or salaries or other obligations
relating to employment or any employees of EXL; or (d) any other
Liabilities of EXL, except (i) obligations of EXL under the
Lumberton Option (provided that EXL shall pay all expenses of
obtaining the Lumberton Option).
1.2
Transaction
Taxes . EXL shall
be liable for any sales taxes, use taxes, transfer taxes or similar
taxes, charges or fees that may become payable in connection with
the conveyance and sale of the Subject Property to HBS
Bio.
1.3
Allocation
.
EXL and HBS Bio shall determine in good faith the manner in
which the Purchase Price (as defined below) is to be allocated
among the Subject Property. Neither EXL nor its members shall
file any Tax Return or other document with, or make any statement
or declaration to, any Governmental Body that is inconsistent with
such allocation.
2.
Purchase
Price .
2.1
Consideration
.
As consideration for the transfer of the Subject Property
(the “ Purchase Price ”), HBS Bio shall transfer
to EXL an aggregate of Fifty Thousand (50,000) shares of HBS common
stock, no par value, as increased to reflect any stock dividend or
other adjustment to the HBS common stock (the “ Shares
”). HBS Bio shall also pay EXL, at the Closing, the sum
of $40,000 as reimbursement for expenses incurred with respect to
the Lumberton Option and the proposed ethanol projects.
3.
Representations
and Warranties of EXL . EXL
represents and warrants to HBS Bio and HBS as follows:
3.1
Organization and
Good Standing . EXL is a
corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all requisite
power and authority to own and lease the properties and assets it
owns and leases in connection with its business and to carry on its
business as currently conducted. EXL is duly licensed to do
business in the State of California and all other jurisdictions in
which the character of the Subject Property or the nature of its
business requires it to be so licensed or qualified except where a
failure to have such license or qualification would not have a
material adverse effect upon the operation of the Subject Property
or the business as presently conducted by EXL.
3.2
Corporate
Authority; Authorization of Agreement . EXL has
all corporate requisite power and authority to execute and deliver
this Agreement and the documents provided for herein to be executed
and delivered by EXL at the Closing, to consummate the transactions
contemplated hereby and to perform its obligations under this
Agreement and such documents. EXL has taken all proper
corporate action to authorize and approve the execution and
delivery of this Agreement and the documents provided for herein to
be executed and delivered by EXL at the Closing, the performance of
all the terms and conditions hereof and thereof to be performed by
EXL and the consummation of the transactions contemplated hereby
and thereby. No other act or proceeding on the part of EXL is
necessary to authorize the execution, delivery or performance of
this Agreement or such other documents, or the transactions
contemplated hereby or thereby. This Agreement constitutes
(and the documents provided for herein to be executed and delivered
by EXL at Closing will, when executed and delivered, constitute)
the legal, valid and binding obligations of EXL, enforceable
against EXL in accordance with their terms, except as may be (i)
limited by any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors’ rights generally and (ii) subject to general
principles of equity (regardless of whether that enforceability is
considered in a proceeding in equity or at law).
3.3
No
Violation . The
execution and delivery by EXL of this Agreement and the documents
provided for herein, the consummation by EXL of the transactions
contemplated hereby and thereby and the compliance by EXL with the
terms hereof and thereof, do not and will not (i) violate or
conflict with or result in a breach of any provisions of or
constitute a default (or an event which, with notice or lapse of
any applicable cure period, or both, would constitute a default) or
require a consent under, or result in the termination of, or
accelerate the performance required by or result in the creation of
any lien upon any of the Subject Property under, any of the terms,
conditions or provisions or the articles of incorporation, bylaws
or similar charter documents of EXL, or (ii) violate any order,
writ, injunction, decree, statute, rule or regulation of any
Government Authority (as defined below) applicable to EXL or the
Subject Property.
3.4
Actions and
Proceedings . Except as
disclosed on Schedule 3.4:
(a)
there
is no action, suit, proceeding or investigation pending against EXL
which has been served on EXL, or to the best of EXL’s
knowledge, threatened against EXL involving or affecting the
Subject Property;
(b)
there
are no decrees, injunctions, liens or orders of any Governmental
Authority outstanding against EXL relating to or affecting the
Subject Property that would have a Material Adverse Effect (as
defined below) upon the Subject Property;
(c)
there
is no action, suit, proceeding or investigation pending against EXL
which has been served on EXL by which any Person (as defined below)
seeks to restrain, prohibit or enjoin the performance by EXL of the
transactions contemplated hereby.
3.5
No
Brokers . No Person
acting on behalf of EXL has any valid claim against HBS Bio, HBS or
the Subject Property for any broker’s or finder’s fee
or similar compensation in connection with the transactions
contemplated hereby. EXL shall indemnify and hold HBS Bio and
HBS harmless from and against any and all Claims (as defined below)
by any Person alleging a right to a broker’s or
finder’s fee from or through EXL.
3.6
Material
Contracts .
(a)
Schedule 3.6(a)
contains a true and complete listing of all Material Contracts
relating to the Subject Property. For the purposes of this
Agreement, “Material Contracts” means the following
contracts or agreements to which EXL is a party and that relate
primarily to the Subject Property: (i) any written contract or
agreement obligating EXL to make capital expenditures which as of
the date hereof are reasonably estimated by EXL to exceed $50,000
after the date hereof; (ii) any contract or agreement obligating
EXL to pay, or entitling EXL to receive, an amount which as of the
date hereof is reasonably estimated by EXL to exceed either (A)
$50,000 in any 12-month period after the date hereof or (B) $50,000
in the aggregate over the remainder of the current term of the
contract or agreement; (iii) any other contract or agreement that
is material to the Subject Property; (iv) any rights of first
refusal, buy/sell, option or similar rights in favor of Persons
other than EXL with respect to the Subject Property; and (v) any
material amendment or modification to any of the foregoing.
EXL has delivered to HBS Bio accurate and complete copies of
all such Material Contracts.
(b)
Except
as disclosed on Schedule 3.6(b), (i) all of the Material Contracts
are valid and binding against EXL and (ii) no defaults by EXL exist
thereunder nor has any event occurred which, solely with the giving
of notice or the lapse of any applicable cure period, or both,
would constitute a default by EXL under any Material Contract,
except where a default or termination of such Material Contract
would not have a Material Adverse Effect upon the Subject Property.
To the knowledge of EXL, except as disclosed on Schedule
3.6(b), (i) all of the Material Contracts are valid and binding
against the other parties thereto (or their successors in
interest); (ii) no defaults by the other parties thereto (or their
successors in interest) exist thereunder nor has any event occurred
which, solely with the giving of notice or the lapse of any
applicable cure period, or both, would constitute a default by such
other parties (or their successors in interest) under any Material
Contract, except where a default or termination of such Material
Contract would not have a Material Adverse Effect upon the Subject
Property.
(c)
Except
as disclosed on Schedule 3.6(c), no consents or approvals are
required in connection with the assignment by EXL to HBS Bio of
EXL’s rights and obligations under the Material Contracts, no
violations would occur under the Material Contracts in connection
with or as a result of the transfer from EXL to HBS Bio of the
Subject Property, and no violations would occur under the Material
Contracts in connection with the assignment by EXL to HBS Bio of
EXL’s rights and obligations under the Material Contracts,
except where failing to obtain such consent or such approval would
not have a Material Adverse Effect upon the Subject
Property.
3.7
Other
Agreements . There
exist no agreements or arrangements for the sale by EXL of the
Subject Property (including, without limitation, calls on or other
rights in favor of Persons other than EXL to purchase such Subject
Property whether or not the same are currently being
exercised).
3.8
Permits
.
(a)
Schedule 3.8
contains a true and complete listing of all Permits (as defined
below) that EXL holds with respect to the Subject Property or for
which EXL has applied.
(b)
Except
as disclosed on Schedule 3.8, (i) to the knowledge of EXL, EXL
holds, or has applied for, or are in the process of applying for,
all Permits material to the ownership of the Subject Property; (ii)
all such Permits are in full force and effect, and to the knowledge
of EXL, all applications for such Permits are complete; and (iii)
EXL is in compliance in all material respects with such Permits.
3.9
Compliance With
Laws . EXL is in
compliance in all material respects with all Permits, judgments,
orders, decrees, injunctions, statutes, rules, regulations and
other legal or administrative requirements of all Governmental
Authorities having jurisdiction over the Subject Property, except
where non-compliance would not have a Material Adverse Effect upon
the Subject Property. EXL has not received any written notice
of a material violation of any such Permit, judgment, order,
decree, injunction, statute, rule, regulation or other legal or
administrative requirement from any Governmental Authority having
jurisdiction over the Subject Property other than violations which,
to the best of EXL’s knowledge, have been cured or remedied
to such Government Authority’s satisfaction.
3.10
Title to Subject
Property . EXL has
good title and/or a valid ownership interest in all of the Subject
Property free and clear of all liens, claims and encumbrances other
than Permitted Encumbrances (as defined below) and as set forth on
Schedule 3.10. Upon consummation of the transactions
contemplated hereby, HBS Bio will have acquired good title and/or a
valid ownership interest in the Subject Property, free and clear of
any liens or encumbrances, except for Permitted Encumbrances and
liens and encumbrances created by or through EXL.
3.11
Full
Disclosure . Neither
this Agreement nor any Exhibit or Schedule hereto contains or will
contain any untrue statement of fact, and neither this Agreement
nor any such Exhibits or Schedules omits or will omit to state any
fact necessary to make any of the representations, warranties or
other statements or information contained therein not
misleading.
4.
Representation and
Warranties of HBS BioEnergy .
4.1
Organization and
Good Standing . HBS Bio is
a corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all requisite
corporate power and authority to own and lease the properties and
assets it owns and leases and to carry on its business as such
business is presently conducted. HBS Bio is duly licensed or
qualified to do business in the State of California and all other
jurisdictions in which the character of the properties and assets
owned or leased by it or the nature of the business conducted by it
requires it to be so licensed or qualified, except where the
failure to be so licensed or qualified would not have a material
adverse effect on HBS Bio, taken as a whole, or the transactions
contemplated by this Agreement, taken as a whole.
4.2
Corporate
Authority; Authorization of Agreement . HBS has
all requisite corporate power and authority to execute and deliver
this Agreement and the documents provided for herein to be executed
and delivered by HBS Bio at the Closing, to consummate the
transactions contemplated hereby and to perform its obligations
under this Agreement and such documents. HBS Bio has taken
all proper corporate action to authorize and approve the execution
and delivery of this Agreement and the documents provided for
herein to be executed and delivered by HBS Bio at the Closing, the
performance of all the terms and conditions hereof and thereof to
be performed by HBS Bio and the consummation of the transactions
contemplated hereby and thereby. No other act or proceeding
on the part of HBS Bio is necessary to authorize the execution,
delivery or performance of this Agreement or such other documents,
or the transactions contemplated hereby or thereby. This
Agreement constitutes (and the documents provided for herein to be
executed and delivered by HBS Bio at Closing will, when executed
and delivered, constitute) the legal, valid and binding obligations
of HBS Bio, enforceable against HBS Bio in accordance with their
terms, except as may be (i) limited by any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors’ rights generally and (ii)
subject to general principles of equity (regardless of whether that
enforceability is considered in a proceeding in equity or at
law).
4.3
No
Violation . The
execution and delivery by HBS Bio of this Agreement and the
documents provided for herein, the consummation by HBS Bio of the
transactions contemplated hereby and thereby and the compliance by
HBS Bio with the terms hereof and thereof, do not and will not (i)
violate or conflict with or result in a breach of any
provis
