Exhibit 99.1
"CONFIDENTIAL TREATMENT REQUESTED"
The symbol "[*]" is used throughout this exhibit to indicate that a
portion of the exhibit has been omitted and filed separately with the
Securities and Exchange Commission.
APS Analytical Standards, Inc.
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ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of February 13, 2003, by and among GFS Chemicals, Inc., an
Ohio corporation ("Buyer"), APS Analytical Standards, Inc., a
California corporation ("Seller"), and, with respect to Sections 9.3,
9.4, 9.8, 9.9, 11, and 12 only, A.P. Pharma, Inc., a Delaware
corporation ("Parent"). Buyer, Seller, and Parent are referred to
collectively herein as the "Parties."
RECITALS
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A. Seller is engaged in the business of using the Acquired
Assets (including its polymer microbeads technology and other
Intellectual Property) to formulate, process, package, and otherwise
manufacture or produce calibration standards (including the
Products) for turbidimeters, spectrophotometers, colorimeters,
percent solid analyzers, bacteria colony counters, process monitors
and other similar equipment which is used in government and industry
including for municipal water testing, biotechnology,
pharmaceutical, pulp and paper, beverage and for other uses in which
monitoring liquid production processes is necessary, advisable or
customary, as well as marketing and selling analytical instruments
and testing equipment relating to the above and providing incidental
services related thereto (the "Business").
B. Subject to the terms and conditions of this Agreement,
Buyer is willing to purchase, and Seller is willing to sell, the
assets, rights and properties of the Business.
AGREEMENT
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NOW, THEREFORE, in consideration of the promises and subject to
the representations, warranties, covenants, agreements and
conditions hereinafter set forth, Buyer, Seller and Parent hereby
agree as follows:
1. Definitions. For the purposes of this Agreement, the
definitions referenced below shall be applicable.
1.1 "Accounts Receivable" shall be as defined in Section
1.2.
1.2 "Acquired Assets" means all right, title, and
interest in and to all of the assets constituting the Business,
including (a) all product formulations of the Business and any and
all derivations thereof, including those listed in Schedule 1.2(a)
(the "Product Formulations"), (b) the products of the Business,
including those listed on Schedule 1.2(b) (the "Products"), (c) all
free-standing and detachable fixed assets and tangible personal
property (such as machinery, equipment, instruments, inventories of
materials and supplies, manufactured and purchased parts, goods in
process and finished goods, furniture, computer equipment and
software, detachable lab books and tools) used solely in the Business,
inclusive of those listed on Schedule 1.2(c), (d) Intellectual
Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder,
remedies against infringements thereof, and rights to protection of
interests therein under the laws of all jurisdictions, (e) leases,
subleases, and rights thereunder, (f) agreements, contracts,
indentures, mortgages, instruments, security interests, guaranties,
other similar arrangements, and rights thereunder, including those
listed on Schedule 1.2(f), (g) accounts, notes, and other receivables
(excluding inter-company receivables) (the "Accounts Receivable"),
(h) claims, deposits, prepayments, refunds, causes of action, choices
in action, rights of recovery, rights of set off, and rights of
recoupment (excluding any such item relating to the payment of Taxes),
(i) franchises, approvals, permits, licenses, orders, registrations,
certificates, variances, and similar rights obtained from
governments and governmental agencies, (j) books, records, ledgers,
files, documents, correspondence, lists, (including any and all lists
of past, current and prospective customers), architectural plans,
drawings, and specifications, creative materials, advertising and
promotional materials, studies, reports, and other printed or written
materials, and (k) telephone numbers (including toll free 800,
fax/telecopier, and other numbers), web domain names and websites,
and similar or related communication properties, rights or interests
used or held for use primarily in connection with the Business;
provided, however, that the Acquired Assets shall not include (i) the
Real Property, (ii) the corporate charter, qualifications to conduct
business as a foreign corporation, arrangements with registered
agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, stock transfer books,
blank stock certificates, and other documents relating to the
organization, maintenance, and existence of Seller as a corporation,
(iii) any of the rights of Seller under this Agreement (or under any
side agreement between Seller on the one hand and Buyer on the other
hand entered into on or after the date of this Agreement), (iv)
counters, platforms, shelving and mezzanines, automobiles, trucks,
tractors and trailers of Seller, or (v) specific assets listed on
Schedule 1.2(v).
1.3 "Adverse Consequences" shall be as defined in Section
10.2.
1.4 "Agreement" shall be as defined in the Preamble.
1.5 "Affiliate" has the meaning set forth in Rule 12b-2
of the regulations promulgated under the Securities Exchange Act of
1934, as amended.
1.6 "Applicable Rate" means the corporate base rate of
interest publicly announced from time to time by Bank One, Columbus,
NA.
1.7 "Assumed Liabilities" means (a) the trade accounts
payable of Seller as set forth on the face of the Most Recent Balance
Sheet, (b) the trade accounts payable of Seller which have arisen
after the Most Recent Fiscal Year End in the Ordinary Course of
Business, (c) all obligations of Seller under the agreements,
contracts, leases, licenses, and other arrangements referred to in
the definition of Acquired Assets either (i) to furnish goods,
services, and other non-cash benefits to another party after the
Closing or (ii) to pay for goods, services, and other non-cash
benefits that another party will furnish to it after the Closing, (d)
all other Liabilities and obligations of Seller set forth in Schedule
1.7 under an express statement (that the Buyer has initialed) to the
effect that the definition of Assumed Liabilities will include the
Liabilities and obligations so disclosed; provided, however, that the
Assumed Liabilities shall not include (i) any Liability of Parent or
Seller for unpaid Taxes (with respect to Parent or Seller or
otherwise) for periods prior to the Closing, (ii) any Liability of
Parent or Seller for income, transfer, sales, use, and other Taxes
arising in connection with the consummation of the transactions
contemplated hereby (including any income Taxes arising because
Parent or Seller is transferring the Acquired Assets, because Parent
has an Excess Loss Account in the stock of Seller, or because Parent
or Seller has deferred gain on any Deferred Intercompany
Transaction), (iii) any Liability of Parent or Seller for the unpaid
Taxes of any Person other than Parent or Seller under Reg. Paragraph
1.1502-6 (or any similar provision of state, local, or foreign law),
as a transferee or successor, by contract or otherwise, (iv) any
obligation of Parent or Seller to indemnify any Person by reason of
the fact that such Person was a director, officer, employee, or agent
of Parent or Seller or was serving at the request of Parent or Seller
as a partner, trustee, director, officer, employee, or agent of
another entity (whether such indemnification is for judgments,
damages, penalties, fines, costs, amounts paid in settlement, losses,
expenses, or otherwise and whether such indemnification is pursuant
to any statute, charter document, bylaw, agreement, or otherwise),
(v) any Liability of Parent or Seller for costs and expenses incurred
in connection with this Agreement and the transactions contemplated
hereby, (vi) any Liability or obligation of Parent or Seller under
this Agreement (or under any side agreement between Parent or Seller
on the one hand and Buyer on the other hand entered into on or after
the date of this Agreement), or (vii) any Liability of Parent or Seller
for intercompany payables.
1.8 "Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction
that forms or could form the basis for any specified consequence.
1.9 "Business" shall be as defined in the Recitals to this
Agreement.
1.10 "Buyer" shall be as defined in the Preamble to this
Agreement.
1.11 "CERCLA" shall be as defined in Section 3.25(e).
1.12 "Closing" shall be as defined in Section 2.7.
1.13 "Closing Date" shall be as defined in Section 2.7.
1.14 "Closing Date Balance Sheet" shall be as defined in
Section 2.3(b).
1.15 "COBRA" shall be as defined in Section 3.21.
1.16 "Code" means the Internal Revenue Code of 1986, as
amended.
1.17 "Competitive Activity" means directly or indirectly
(i) engaging in any activity that is the same as, materially similar
to, or competitive with the Business; (ii) engaging in the development
or distribution of any product that is the same as, materially similar
to, or competitive with any of the Products or Product Formulations;
(iii) employing, soliciting for employment, or recommending for
employment any person employed by Buyer as of the date hereof during
such person's employment with Buyer or within one year thereafter;
or (iv) diverting or attempting to divert from Buyer any business of
any kind in which it is engaged, including the solicitation of or
interference with any suppliers, contractors, or customers.
1.18 "Confidential Information" means any information
concerning the Business that is not already generally available to
the public.
1.19 "Deferred Intercompany Transaction" has the meaning
set forth in Reg. Paragraph 1.1502-13.
1.20 "Draft Closing Date Balance Sheet" shall be as defined
in Section 2.3(b).
1.21 "Employee Plan" means all present and prior
(including terminated and transferred) plans, programs, agreements,
arrangements and methods of contributions or compensation (including
all amendments to and components of the same, such as a trust with
respect to a plan) providing any remuneration or benefits, other than
current cash compensation, to any current or former employee of Seller
or to any other person who provides services to Seller's Business,
whether or not such plan or plans, programs, agreements, arrangements
and methods of contribution or compensation are subject to ERISA, and
whether or not such plan or plans, programs, agreements, arrangements
and methods of contribution or compensation are qualified under the
Internal Revenue Code. The term Employee Plan includes pension,
retirement, profit sharing, percentage compensation, stock purchase,
stock option, bonus and non-qualified deferred compensation plans.
The term Employee Plan also includes disability, medical, dental,
workers compensation, health insurance, life insurance or other death
benefits, incentive, severance plans, vacation benefits and fringe
benefits. The term Employee Plan also includes any employee plan that
is a Multiemployer Plan.
1.22 "Environmental, Health, and Safety Requirements"
shall mean all federal, state, local and foreign statutes,
regulations, ordinances and other provisions having the force or
effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and
pollution or protection of the environment, including without
limitation all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials,
substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation,
each as amended and as now or hereafter in effect.
1.23 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.24 "Escrow Agent" shall be as defined in Section 10.4.
1.25 "ERISA Affiliate" means each entity which is treated
as a single employer with the Target for purposes of Code Paragraph
414.
1.26 "Established Damages" shall be as defined in Section
10.4.
1.27 "Estimated Net Working Capital" means $215,535.
1.28 "Excess Loss Account" has the meaning set forth in
Reg. Paragraph 1.1502-19.
1.29 "Financial Statements" shall be as defined in Section
3.5.
1.30 "GAAP" means United States generally accepted
accounting principles as in effect from time to time.
1.31 "Hired Employee" shall be as defined in Section 7.9.
1.32 "Indemnified Party" has the meaning set forth in
Section 10.5(a) below.
1.33 "Indemnifying Party" has the meaning set forth in
Section 10.5(a) below.
1.34 "Intellectual Property" means all of the following in
any jurisdiction throughout the world used in connection with the
operation of the Business: (a) all synthetic process steps and
conditions for manufacturing the polymer microbead starting material
(concentrate), (b) all processes, procedures, and conditions for the
purification (cleanup) of the concentrate for use in the standards,
(c) all trade secrets, including without limitation those trade
secrets listed in Schedule 1.36(c), know-how, manufacturing
processes, formulations or other confidential information used to
manufacture or produce the Products, including the polymer microbeads
and other raw materials supplied to Parent and/or Seller pursuant to
the Supply Agreement, (d) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations
thereof, (e) all trademarks, service marks, trade dress, logos,
slogans, trade names, corporate names, Internet domain names, and
rights in telephone, fax and similar numbers, together with all
translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (f) all
copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (g) all mask
works and all applications, registrations, and renewals in connection
therewith, (h) all trade secrets and confidential business
information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications,
customer, supplier, prospects (i.e. leads) and similar lists, pricing
and cost information, marketing studies, competition analyses and
business and marketing plans and proposals), (i) all computer
software (including source code, executable code, data, databases and
related documentation), (j) all advertising and promotional
materials, (k) all other proprietary rights, and (l) all copies and
tangible embodiments thereof (in whatever form or medium).
1.35 "Knowledge" means (a) with respect to Seller, actual
knowledge of all of Seller's employees after reasonable
investigation, and (b) with respect to Parent, actual knowledge of
all Parent employees having direct involvement in the Business, after
reasonable investigations.
1.36 "Lease" means the Lease Agreement by and between
Metropolitan Life Insurance Company and Parent dated as of November
17, 1997.
1.37 "Liability" means any liability (whether known or
unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any
liability for Taxes.
1.38 "Liens" shall be as defined in Section 3.4.
1.39 "Minimum Royalty" shall be as defined in Section
2.3(d).
1.40 "Most Recent Balance Sheet" means the balance sheet
contained within the Most Recent Financial Statements.
1.41 "Most Recent Financial Statements" shall be as
defined in Section 3.5.
1.42 "Most Recent Fiscal Year End" shall be as defined in
Section 3.5.
1.43 "Multiemployer Plan" shall be as defined in ERISA
Paragraph 3(37).
1.44 "Net Working Capital" means the sum of (i) Accounts
Receivable (net) and (ii) inventory (net) less accounts payable-
trade of the Business as shown on the Closing Date Balance Sheet.
1.45 "Notice of Claim" shall be as defined in Section 10.4.
1.46 "Ordinary Course of Business" means the ordinary
course of business consistent with past custom and practice
(including with respect to quantity and frequency).
1.47 "Papacosta" shall be as defined in Section 9.6(b).
1.48 "Parent" shall be as defined in the Preamble to this
Agreement.
1.49 "Party" has the meaning set forth in the Preamble to
this Agreement.
1.50 "Person" means an individual, a partnership, a
corporation, a limited liability company or partnership, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
1.51 "Premises" shall be as defined in Section 9.6(b).
1.52 "Products" shall be as defined in Section 1.2(b).
1.53 "Product Formulation" shall be as defined in Section
1.2(a).
1.54 "Purchase Price" shall be as defined in Section
2.3(a).
1.55 "Raw Materials" shall be as defined in Section 9.3.
1.56 "Real Property" means all land, buildings,
structures, improvements, fixtures or other interest in real
property, including all leasehold or subleasehold estates or other
rights to use or occupy any land, buildings, structures,
improvements, fixtures or other interests in real property; provided,
however, that any and all improvements or fixtures capable of being
removed without any structural damage to such real property shall not
be considered to be Real Property for purposes of this Agreement.
1.57 "Resolution Period" shall be as defined in Section
10.4.
1.58 "Royalty" shall be as defined in Section 2.3(d).
1.59 "Royalty Period" shall be as defined in Section
2.3(d).
1.60 "Seller" shall be as defined in the Preamble to this
Agreement.
1.61 "Seller's Basket" shall be as defined in Section
10.7(a).
1.62 "Seller's Indemnification Cap" shall be as defined in
Section 10.7(a).
1.63 "Standards Products" means the consumable standards
as of the Closing included within the definition of the Products and
identified as the Standards Products in Schedule 1.2(b) and any
compilations, derivatives, modifications or improvements of the
Products.
1.64 "Subsidiary" means any corporation with respect to
which a specified Person (or a Subsidiary thereof) owns a majority
of the common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors
1.65 "Supply Agreement" means the Supply Agreement by and
between X.X. Xxxxxxx South, Inc. and Parent dated as of June 21, 2000.
1.66 "SWDA" shall be as defined in Section 3.25(e).
1.67 "Tax" means any federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Paragraph 59A), customs
duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not.
1.68 "Tax Return" means any return, declaration, report,
claim for refund, or information return or statement relating to
Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
1.69 "Third Party Claim" has the meaning set forth in
Section 10.5 below.
2. Sale and Purchase of Assets.
2.1 Sale of Assets. On the terms and subject to the
conditions of this Agreement, Seller agrees to sell, convey, assign,
transfer and deliver to Buyer, and Buyer agrees to purchase and
acquire from Seller, all of the Acquired Assets at the Closing for
the consideration specified herein.
2.2 Assets Not Purchased. Notwithstanding Section 2.1,
Seller shall not sell, and Buyer shall not acquire any interest in,
any of Seller's assets or contracts not included within the definition
of the Acquired Assets. Such assets and contracts shall remain the
property of Seller and Buyer shall have no liability or other
responsibility with respect thereto.
2.3 Purchase Price.
(a) Subject to the other terms and conditions of this
Agreement, and in full consideration for the Acquired Assets, Buyer
shall assume certain liabilities of Seller pursuant to Section 2.6
and shall pay to Seller at the Closing a sum of (i) $2,000,000 and
(ii) the Estimated Net Working Capital of Seller less $66,500 (the
"Purchase Price"). The Purchase Price shall be subject to a
post-Closing adjustment as described in Section 2.3(c) below. The
Purchase Price shall be payable to Seller by wire transfer of
immediately available funds.
(b) Preparation of Closing Date Balance Sheet.
(i) Within 30 days after the Closing Date,
Buyer will prepare and deliver to Seller a draft balance sheet (the
"Draft Closing Date Balance Sheet") for Seller as of the close of
business on the Closing Date setting forth, inter alia, Accounts
Receivable, inventory, and trade accounts payable of the Business
(determined on a pro forma basis as though the Parties had not
consummated the transactions contemplated by this Agreement). Buyer
will prepare the Draft Closing Date Balance Sheet in accordance with
GAAP applied on a basis consistent with the preparation of the
Financial Statements.
(ii) During the twenty (20) day period following
receipt of the Draft Closing Balance Sheet, Seller and its
representatives shall be permitted to discuss the same with Buyer and
its representatives. Buyer and its representatives shall reasonably
cooperate with Seller to enable Seller to review the records necessary
to determine the accuracy and fairness of the Draft Closing Date
Balance Sheet for purposes hereof. If Seller has any objections to
the Draft Closing Date Balance Sheet, it shall deliver a detailed
statement describing its objections to Buyer within twenty (20) days
after receiving the Draft Closing Date Balance Sheet. Buyer and
Seller shall thereafter negotiate in good faith to resolve any such
objections themselves. If the Parties do not obtain a final
resolution within ten (10) days after Buyer has received the statement
of objections, however, Buyer and Seller shall select an accounting
firm mutually acceptable to them to resolve any remaining objections.
The determination of any accounting firm so selected shall be set
forth in writing and shall be conclusive and binding upon the Parties
without any further right of appeal. If the accounting firm discovers
a discrepancy in Seller's favor equal to or greater than 5% of the
amount in question, Buyer shall pay the fees and expenses of the
accounting firm; otherwise, Seller shall pay such fees and expenses.
Buyer shall revise the Draft Closing Date Balance Sheet as appropriate
to reflect the resolution of any objections thereto pursuant to this
Section 2.3(b). The "Closing Date Balance Sheet" shall mean the Draft
Closing Date Balance Sheet together with any revisions thereto
pursuant to this Section 2.3(b). To the extent any Royalty payments
become due and payable while the Closing Date Balance Sheet remains
unresolved, Buyer shall deposit with the Escrow Agent all such Royalty
payments until such disputes are resolved. The terms of the escrow
payments shall be comparable to the terms of escrow for Royalty
payments as set forth in Section 10.4 below.
(c) The Purchase Price will be adjusted as follows:
(i) If the Net Working Capital exceeds the Estimated
Net Working Capital, Buyer will pay to Seller an amount equal to such
excess by wire transfer within three business days after the date on
which the Net Working Capital of Seller is finally determined pursuant
to Section 2.3(b) above.
(ii) If the Net Working Capital is less than the
Estimated Net Working Capital, Seller shall pay to Buyer an amount
equal to such deficiency by wire transfer within three business days
after the date on which the Net Working Capital of Seller is finally
determined pursuant to Section 2.3(b) above or, in the event any
Royalty payments have become due and payable and are then being held
by the Escrow Agent, by adjusting said Royalty payments by such
amount.
(d) In addition to the Purchase Price, Buyer shall pay to
Seller for a period of five (5) years after the Closing Date (the
"Royalty Period") royalties ("Royalty") based on the total annual
revenues of Buyer which arise from sales of the Standards Products
during the Royalty Period, equal to fifteen percent (15%) of such
revenues for the first full twelve months from the Closing Date, ten
percent (10%) during the second, third and fourth full twelve-month
periods thereafter, and five percent (5%) for the fifth full
twelve-month period thereafter, subject to a minimum royalty of $[*]
for the first two twelve-month periods and $[*] for the third, fourth
and fifth twelve-month periods (each, "Minimum Royalty"). The
Royalty shall be payable quarterly; provided that if the sum of the
four quarterly payments shall be less than Minimum Royalty, the fourth
quarterly payment shall be an amount equal to the difference between
(i) Minimum Royalty for such twelve-month period and (ii) the sum of
the previous three quarterly payments. Each Royalty payment shall be
made within 30 days after the end of each fiscal quarter during the
Royalty Period.
(e) Each Royalty payment shall be accompanied by a report
showing the quarterly revenues of Buyer which arise from sales of the
Standards Products, and the amount of the Royalty due to Seller.
During the twenty-one (21) day period following delivery of each
report, Seller and its representatives shall be permitted to discuss
the calculation of Royalty with Buyer and its representatives. Buyer
and its representatives shall reasonably cooperate with Seller to
enable Seller to review Buyer's records necessary in order to
determine the accuracy of the Royalty payment, including but not
limited to, access and review of Buyer's general ledger with respect
to the applicable revenues. If, within twenty-one (21) days after
Buyer delivers such calculation to Seller, Seller notifies Buyer that
Seller believes modifications are required to be made to the amount
of the Royalty payment or that Seller requires additional information
regarding the calculation of the Royalty payment, then Seller and
Buyer shall, for a period of 30 days negotiate in good faith toward
a resolution of the disagreement. If the parties cannot come to a
mutually acceptable resolution, at the request of Seller, Buyer shall
permit a mutually agreeable certified public accounting firm, at
reasonable times and upon reasonable advance notice, to audit Buyer's
relevant books and records to support such calculation of Royalty.
The independent accountant shall review only the calculation of the
Royalty payment and the basis on which it is made and as promptly as
practicable deliver to Seller and Buyer a statement in writing setting
forth its determination as to the proper calculation of the Royalty
payment for the applicable twelve month period, and such
determination shall be final and binding upon the parties without any
further right of appeal. Buyer shall pay any short-fall in the Royalty
payment as determined by the independent accountant to Seller within
5 days after such determination. Should Seller choose to audit
Buyer's records, Seller will bear the full cost of the audit;
provided, however, that in the event that Seller discovers a
discrepancy in its favor equal to or greater than five percent (5%)
of any Royalty payment, Buyer shall, in addition to correcting such
discrepancy, also pay the cost of the accounting firm in performing
Seller's audit.
2.4 Allocation. Buyer and Seller agree to allocate the
Purchase Price among the Acquired Assets in accordance with the
allocation set forth on Schedule 2.4. The parties agree that such
allocation is fair and reasonable, that the parties shall file all
applicable tax returns and reports in accordance with and based upon
such allocation, and that the parties shall not take any position in
any tax return or report that is inconsistent with such allocation.
2.5 Cash Distribution to Seller. Immediately prior to the
Closing, Seller may pay Parent an aggregate amount equal to Seller's
good faith estimate of the amount of the unpaid Taxes of Seller (net
of any amount Seller shall have paid to Parent with respect thereto
under any Tax sharing arrangement) with respect to periods prior to
the Closing for which the return is due after the Closing (computed
on a pro forma stand-alone basis in accordance with the past custom
and practice of Seller in filing its Tax Returns). Seller may make
any such payment to Parent in the form of a dividend or a redemption.
2.6 Assumption of Liabilities. On and subject to the
terms and conditions of this Agreement, Buyer agrees to assume and
become responsible for all of the Assumed Liabilities at the Closing.
Buyer will not assume or have any responsibility, however, with
respect to any other obligation or Liability of Parent or Seller not
included within the definition of Assumed Liabilities.
2.7 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place on
February 13, 2003 or at such other place or time as may be mutually
agreed by the parties hereto (hereinafter referred to as the "Closing
Date").
2.8 Seller's Deliveries. At the Closing, Seller shall
deliver or cause to be delivered to Buyer such documents and
instruments as called for in this Agreement, including without
limitation those documents and instruments described in Section 7
hereof, or as may be reasonably requested by Buyer to effect the
transactions contemplated hereby. Simultaneously with such
deliveries, Seller shall take such steps as are necessary to put Buyer
in actual possession and control of the Acquired Assets.
2.9 Buyer's Deliveries. On the date hereof, Buyer shall
deliver or cause to be delivered to Seller against delivery of the
items specified in Section 2.8: (a) a wire transfer in the amount of
the Purchase Price being due on the Closing Date, and (b) such other
documents and instruments as shall be reasonably requested by Seller
to effect the transactions contemplated hereby.
3. Representations and Warranties of Seller. Seller hereby
represents and warrants to Buyer that the statements contained in this
Section 3 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date
of this Agreement throughout this Section 3), except as set forth in
the Schedules accompanying this Agreement and initialed by the
Parties.
3.1 Organization and Authority. Parent and Seller: (a)
are corporations duly organized, validly existing and in good
standing under the laws of the States of Delaware and California,
respectively; (b) have all necessary corporate power to own and lease
their properties, to carry on their business as now being conducted
and to execute and deliver this Agreement and to perform their
obligations hereunder; and (c) are qualified to do business in all
jurisdictions in which the failure to so qualify would have a material
adverse effect on their business or financial condition. Parent and
Seller have delivered to Buyer complete and correct copies of records
of any and all proceedings and actions at all meetings of, or taken
by written consent by, the Board of Directors and sole stockholder
of Seller and the Board of Directors of Parent, related to the
transactions contemplated by this Agreement.
3.2 Authority Relating to this Agreement; No Violation of
Other Instruments. The execution and delivery of this Agreement and
the performance hereunder by Seller and Parent have been duly
authorized by all necessary corporate action on the part of Seller
and Parent and, assuming execution of this Agreement by Buyer, this
Agreement will constitute a legal, valid and binding obligation of
each of Seller and Parent, enforceable against them in accordance with
its terms, subject as to enforcement: (a) to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other laws of general
applicability relating to or affecting creditors' rights; and (b) to
general principles of equity, whether such enforcement is considered
in a proceeding in equity or at law.
3.3 Noncontravention. Neither the execution, delivery or
performance of this Agreement and the documents to be executed in
connection herewith by Seller and Parent nor the consummation of the
transactions contemplated hereby will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental
agency, or court to which any of Seller, Parent, the Business, or the
Acquired Assets are subject or any provision of the certificate of
incorporation or bylaws of Seller or Parent, (ii) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other
arrangement to which Seller or Parent is a party or by which it is
bound or to which any of the Acquired Assets or the Business are
subject. Neither Seller nor Parent need to give any notice to, make
any filing with, or obtain any authorization, consent, or approval
of any government or governmental agency in order for the Parties
hereto to consummate the transactions contemplated by this Agreement.
3.4 Ownership and Delivery of Acquired Assets. Seller is
the true and lawful owner of and has good and marketable title to the
Acquired Assets and has all necessary power and authority to transfer
the Acquired Assets to Buyer free and clear of all liens, charges,
easements, security interests, mortgages, conditional sale
contracts, equities, rights of way, covenants, restrictions, title
defects, objections, claims or other encumbrances ("Liens"). The
Acquired Assets constitute all of the assets used or held for use
primarily in connection with, and necessary for the conduct of, the
Business. No Person other than Seller, including Parent or any
officer, director, employee, or shareholder of Seller has, any direct
or indirect interest in any of the Acquired Assets. Seller is a
wholly-owned Subsidiary of Parent and has no Subsidiaries of its own.
Upon delivery to Buyer of the Xxxx of Sale and Assignment and other
instruments of conveyance with respect to the Acquired Assets, Buyer
will hereby acquire good and valid title to the Acquired Assets free
and clear of all Liens.
3.5 Financial Statements. Attached hereto on Schedule
3.5 are the following financial statements (collectively the
"Financial Statements"): unaudited balance sheets and statements of
income as of and for the fiscal years ended December 31, 1998, December
31, 1999, December 31, 2000, December 31, 2001 and December 31, 2002
(the "Most Recent Fiscal Year End") for Seller (the "Most Recent
Financial Statements"). The Financial Statements have been prepared
in accordance with GAAP as applied to a wholly-owned subsidiary of
a parent company (except that the Financial Statements do not contain
the notes required under GAAP) applied on a consistent basis
throughout the periods covered thereby, present fairly the financial
condition of Seller as of such dates and the results of operations
of Seller for such periods, are correct and complete, and are
consistent with the books and records of Seller (which books and
records are correct and complete).
3.6 Events Subsequent to Most Recent Fiscal Year End.
Since December 31, 2002, there has not been any material adverse
change in the business, financial condition, operations, results of
operations, or future prospects related to the Business or the
Acquired Assets and there has not been any other material occurrence,
event, incident, action, failure to act, or transaction with regard
to the Business or the Acquired Assets outside the Ordinary Course
of Business involving Seller. Seller has owned, used and operated
the Acquired Assets in the Ordinary Course of Business since the Most
Recent Fiscal Year End.
3.7 Undisclosed Liabilities. Neither the Seller nor the
Business has any Liability (and there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any
Liability), except for (i) Liabilities set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (ii)
Liabilities which have arisen after the Most Recent Fiscal Year End
in the Ordinary Course of Business (none of which results from, arises
out of, relates to, is in the nature of, or was caused by any breach
of contract, breach of warranty, tort, infringement, or violation of
law).
3.8 Compliance with Law. Seller and each of its
predecessors and Affiliates is in compliance with all applicable laws
and holds all licenses, permits and authorizations necessary for the
lawful ownership and operation of the Business and the Acquired Assets
wherever conducted pursuant to all applicable statutes, laws,
ordinances, rules and regulations of all governmental bodies,
agencies and subdivisions having, asserting or claiming jurisdiction
over Seller or over any part of Seller's operations, and Seller knows
of no violation thereof. Seller is not in violation of any decree,
judgment, order, law or regulation of any court or other governmental
body (including without limitation, applicable environmental
protection legislation and regulations, equal employment and civil
rights regulations, wages, hours and the payment of social security
taxes and occupational health and safety legislation), which
violation could have a material adverse effect on the condition,
financial or otherwise, of the Business, the Acquired Assets,
Liabilities, prospects or results of operations of Seller.
3.9 Tax Matters.
(a) Seller has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in
all respects. All Taxes owed by Seller (whether or not shown on any
Tax Return) have been paid. Currently Seller is not the beneficiary
of any extension of time within which to file any Tax Return. No claim
has ever been made by an authority in a jurisdiction where Seller does
not file Tax Returns that it is or may be subject to taxation in that
jurisdiction. There are no Liens on any of the Acquired Assets that
arose in connection with any failure (or alleged failure) to pay any
Tax.
(b) Seller has withheld and paid all Taxes required
to have been withheld and paid in connection with all amounts paid
or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(c) Neither Seller, nor any director or officer of
Seller, expects any authority to assess any additional Taxes with
respect to the Acquired Assets for any period for which Tax Returns
have been filed. There is no dispute or claim concerning any Tax
Liability for Seller. Seller has delivered to Buyer correct and
complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed
to by Seller since December 31, 2000.
3.10 Litigation. Neither Seller or Parent nor any officer,
director, shareholder, employee or agent of Seller or Parent is a
party to any pending, or, to the best of Seller's Knowledge,
threatened, action, suit, proceeding or investigation, at law or in
equity or otherwise in, for or by any court or other governmental body
which could have a material adverse effect on the Business or the
Acquired Assets or the transactions contemplated by this Agreement;
nor, to the best of Seller's Knowledge, does any Basis exist for any
such action, suit, proceeding or investigation. Neither Seller nor
Parent is subject to any decree, judgment, order, law or regulation
of any court or other governmental body which could have a material
adverse effect on the Business or Acquired Assets or which could
prevent the transactions contemplated by this Agreement.
3.11 Inventories. The inventories are of a quantity and
quality useable and saleable in accordance with good business
practices and represent a distribution of the types of inventories
utilized in the Business of Seller in accordance with good business
practices, subject to customary reserves. All of the inventory and
other goods manufactured by Seller which will be transferred to Buyer
pursuant to this Agreement were produced in compliance with all
applicable requirements of Sections 6, 7 and 12 of the Fair Labor
Standards Act, as amended, and the regulations and orders issued under
Section 14 thereof by the United States Department of Labor.
3.12 Intellectual Property.
(a) Seller owns or possesses or has the right to use
pursuant to a valid and enforceable, written license, sublicense,
agreement, or permission all of the Intellectual Property necessary
or desirable for the operation of the Business as presently conducted.
Each item of Intellectual Property will be owned or available for use
by Buyer on identical terms and conditions immediately subsequent to
the Closing hereunder. All necessary and desirable action has been
taken to maintain and protect each item of Intellectual Property.
(b) Seller has all ownership rights in and maintains
as a trade secret all techniques necessary to create the Products
associated with the Business, which are accurately reflected in the
marketing and promotional material provided to Buyer by Seller. All
finished goods turbidity calibration standards are and have been
produced by Seller using polymer microbeads ranging from about 0.02
micron to about 0.203 micron with a mean bead size of about 0.121
micron; and do not contain ammonia either as a direct additive or as
a reaction by-product from the addition of any necessary formulation
ingredients. Seller's current business plan does not require the
presence of ammonia in Products.
(c) Neither Seller nor Parent has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with
any Intellectual Property rights of third parties, and neither Seller
nor Parent nor any of the directors and officers (and employees with
responsibility for Intellectual Property matters) of Seller or Parent
have ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or
violation (including any claim that Seller or Parent must license or
refrain from using any Intellectual Property rights of any third
party). To the Knowledge of Seller, Parent, and the directors and
officers (and employees with responsibility for Intellectual
Property matters) of Seller or Parent, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of Seller.
(d) Schedule 3.12(d) identifies each patent or
registration which has been issued with respect to any of the
Intellectual Property, identifies each pending patent application or
application for registration made with respect to the Intellectual
Property, and identifies each license, sublicense, agreement, or
other permission granted to any third party with respect to the
Intellectual Property (together with any exceptions). Seller has
delivered to Buyer correct and complete copies of all such patents,
registrations, applications, licenses, sublicenses, agreements, and
permissions (as amended to date) and has made available to Buyer
correct and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each such
item. Schedule 3.12(d) also identifies each unregistered trademark,
service xxxx, trade name, corporate name or Internet domain name,
computer software item (other than commercially available
off-the-shelf software purchased or licenses for less than a total
cost of $1,000 in the aggregate) and each unregistered copyright used
in the Business. With respect to each item of Intellectual Property
required to be identified on Schedule 3.12(d):
(i) Seller owns and possesses all right, title,
and interest in and to the item, free and clear of any Lien, license,
or other restriction or limitation regarding use or disclosure;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to
the Knowledge of Seller, Parent, and the directors and officers (and
employees with responsibility for Intellectual Property matters) of
Seller or Parent, is threatened, which challenges the legality,
validity, enforceability, use, or ownership of the item and there is
no Basis for the same;
(iv) Neither Seller nor Parent has ever agreed
to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to the
item; and
(v) no loss or expiration of the item is
threatened, pending, or reasonably foreseeable, except for patents
expiring at the end of their statutory terms (and not as a result of
any act or omission by Seller or Parent, including a failure by Seller
or Parent to pay any required maintenance fees)
(e) Schedule 3.12(e) identifies each item of
Intellectual Property that any third party owns and that is used in
the Business pursuant to license, sublicense, agreement, or
permission. Seller has delivered to Buyer correct and complete copies
of all such licenses, sublicenses, agreements, and permissions (as
amended to date). With respect to each item of Intellectual Property
required to be identified in Schedule 3.12(d):
(i) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding, enforceable,
and in full force and effect;
(ii) the license, sublicense, agreement, or
permission will continue to be legal, valid, binding, enforceable,
and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby (including the
assignments and assumptions referred to in Section 2 above);
(iii) no party to the license, sublicense,
agreement, or permission is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration
thereunder;
(iv) no party to the license, sublicense,
agreement, or permission has repudiated any provision thereof;
(v) with respect to each sublicense, the
representations and warranties set forth in subsections (i) through
(iv) above are true and correct with respect to the underlying
license;
(vi) the underlying item of Intellectual
Property is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(vii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to
the Knowledge of Seller, Parent, and the directors and officers (and
employees with responsibility for Intellectual Property matters) of
Seller or Parent, is threatened, which challenges the legality,
validity, or enforceability of the underlying item of Intellectual
Property, and there are no grounds for the same; and
(viii) Neither Seller nor Parent has granted
any sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
(f) To the Knowledge of Seller and Parent, (and
employees of Seller and Parent with responsibility for Intellectual
Property matters): (i) neither Seller nor Parent has in the past or
will interfere with, infringe upon, misappropriate, or otherwise come
into conflict with, any Intellectual Property rights of third parties
as a result of the continued operation of the Business; (ii) there
are no facts that indicate a likelihood of any of the foregoing; and
(iii) no notices regarding any of the foregoing (including any demands
or offers to license any Intellectual Property from any third party)
have been received.
(g) Neither Seller nor Parent, (and employees of
Seller and Parent with responsibility for Intellectual Property
matters) has any Knowledge of any new products, inventions,
procedures, or methods of manufacturing or processing that any
competitors or other third parties have developed which reasonably
could be expected to supersede or make obsolete any currently active
Products or Product Formulations.
(h) Seller has taken all necessary and desirable
action to maintain and protect all of the Intellectual Property and
will continue to maintain and protect all of the Intellectual Property
prior to the Closing so as not to materially adversely affect the
validity or enforceability thereof. To the Knowledge of Seller and
Parent, the owners of any of the licensed Intellectual Property have
taken all necessary and desirable action to maintain and protect the
Intellectual Property covered by such license.
(i) Seller and Parent have complied with and are
presently in compliance with all foreign, federal, state, local,
governmental (including, but not limited to, the Federal Trade
Commission and State Attorneys General), administrative or
regulatory laws, regulations, guidelines and rules applicable to any
Intellectual Property and shall take all steps necessary to ensure
such compliance until Closing.
3.13 Real Property; Tangible Assets. All Real Property
used or held for use solely in connection with the Business is listed
and its use described in Schedule 3.13. Seller owns or leases all
machinery, equipment, and other tangible assets necessary for the
conduct of the Business as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free from
defects (patent and latent), and has been maintained in accordance
with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the
purposes for which it presently is used or presently proposed to be
used.
3.14 Contracts. Schedule 3.14 lists the following
contracts and other agreements included in the Acquired Assets or used
or held for use in connection with the Business (noting and
highlighting those not included in the Acquired Assets):
(a) any agreement (or group of related agreements)
for the lease of personal property to or from any Person providing
for lease payments in excess of $15,000 per annum;
(b) any agreement (or group of related agreements)
for the purchase or sale of raw materials, commodities, supplies,
Products, or other personal property, or for the furnishing or receipt
of services, the performance of which will extend over a period of
more than one year, result in a material loss to the Business, or
involve consideration in excess of $15,000;
(c) any agreement concerning a partnership or joint
venture;
(d) any agreement (or group of related agreements)
under which any indebtedness for borrowed money, or any capitalized
lease obligation, in excess of $15,000, has been created, incurred,
assumed, or guaranteed or under which a Lien on any of its assets,
tangible or intangible, has been imposed;
(e) any agreement concerning confidentiality or
noncompetition or otherwise restricting the operations of the
Business in any manner whatsoever;
(f) any agreement between or among Seller and any of
its Affiliates;
(g) any collective bargaining agreement;
(h) any agreement under which the consequences of a
default or termination could have a material adverse effect on the
financial condition, operations, results of operations, or future
prospects of Seller, the Acquired Assets, or the Business; or
(i) any other agreement (or group of related
agreements) the performance of which involves consideration in excess
of $15,000.
Seller has delivered to Buyer a correct and complete copy of each
written agreement (as amended to date) listed on Schedule 3.14 and
a written summary setting forth the terms and conditions of each oral
agreement referred to on Schedule 3.14. With respect to each such
agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (B) the agreement will continue to be
legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated hereby (including the assignments and assumptions
referred to in Section 2 above); (C) no party is in breach or default,
and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification,
or acceleration, under the agreement; and (D) no party has repudiated
any provision of the agreement.
3.15 Accounts Receivable. All Accounts Receivable of
Seller are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at
their recorded amounts, subject only to the reserve for bad debts set
forth on the face of the Most Recent Balance Sheet (rather than in
any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of
Seller.
3.16 Powers of Attorney. There are no outstanding powers
of attorney executed on behalf of Seller or in connection with the
Acquired Assets or the Business.
3.17 Insurance. Schedule 3.17 sets forth each current
insurance policy (including policies providing property, casualty,
liability and workers' compensation coverage) covering or otherwise
relating to the Business, or which Seller has been a party, a named
insured, or otherwise the beneficiary of coverage at any time within
the past five (5) years. With respect to each such insurance policy:
(A) the policy is legal, valid, binding, enforceable, and in full
force and effect; (B) the policy will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby;
(C) neither Seller nor any other party to the policy is in breach or
default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or
the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (D)
no party to the policy has repudiated any provision thereof. Seller
and the Business have been covered during the past ten (10) years by
insurance in scope and amount customary and reasonable for the
Business and any other businesses in which Seller has engaged during
the aforementioned period.
3.18 Product Warranty. Each Product manufactured, sold,
leased, or delivered by Seller or otherwise in the Business has been
in conformity with all applicable contractual commitments and all
express and implied warranties, and Seller and its Affiliates have
no Liability (and there is no Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand against any of them giving rise to any Liability) for
replacement or repair thereof or other damages in connection
therewith, subject only to the reserve for product warranty claims
set forth on the face of the Most Recent Balance Sheet (rather than
in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of Seller
and its Affiliates. No Product manufactured, sold, leased, or
delivered by Seller or otherwise in the Business is subject to any
guaranty, warranty, or other indemnity beyond the applicable standard
terms and conditions of sale or lease. Schedule 3.18 includes copies
of the standard terms and conditions of sale or lease for Seller
(containing applicable guaranty, warranty, and indemnity
provisions).
3.19 Product Liability. Neither Seller nor the Business
has any Liability (and there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against it giving rise to any Liability) arising out
of any injury to individuals or property as a result of the sale of
the Products, ownership, possession or use of any of the Acquired
Assets or operation of the Business.
3.20 Employees. Neither Seller nor Parent is a party to
or bound by any collective bargaining agreement, nor have they
experienced any strikes, grievances, claims of unfair labor
practices, or other collective bargaining disputes. Neither Seller
nor Parent have committed any unfair labor practice. Seller, Parent,
and the directors and officers (and employees with responsibility for
employment matters) of Seller or Parent have no Knowledge of any
organizational effort presently being made or threatened by or on
behalf of any labor union with respect to employees.
3.21 Employee Benefits. The requirements of ERISA and Code
Paragraph 4980B and of any similar state law ("COBRA") have been met
with respect to each employee benefit plan (as defined in ERISA
Paragraph 3(3)) and any other employee benefit plan, program or
arrangement of any kind which is an employee welfare benefit plan as
defined in ERISA Paragraph 3(1), subject to COBRA. Neither Seller
nor any ERISA Affiliate contributes to, has any obligation to
contribute to, or has any Liability (including withdrawal liability
as defined in ERISA Paragraph 4201) under or with respect to any
Multiemployer Plan.
3.22 Guaranties. Seller is not a guarantor or otherwise
liable for any liability or obligation (including indebtedness) of
any other person or entity.
3.23 Business Practices. Seller has not made, offered or
agreed to offer anything of value to any government official,
political party or candidate for government office nor has it taken
any action which would cause it to be in violation of the Foreign
Corrupt Practices Act of 1977.
3.24 Brokers and Finders. Except as set forth on Schedule
3.24, neither Seller, Parent, nor any shareholder, director, officer,
employee or agent of Seller or Parent have retained any broker or
finder in connection with the transactions contemplated by this
Agreement. Seller will indemnify and hold Buyer harmless against all
claims for brokers' or finders' fees made or asserted by any party
claiming to have been employed by Seller, Parent, or any shareholder,
director, officer, employee or agent of Seller or Parent and all costs
and expenses (including the reasonable fees of counsel) of
investigating and defending such claims.
3.25 Environmental, Health, and Safety Matters.
(a) Seller and its predecessors and Affiliates have
complied and are in compliance with all Environmental, Health, and
Safety Requirements.
(b) Without limiting the generality of the
foregoing, Seller and its predecessors and Affiliates have obtained
and complied with, and are in compliance with, all permits, licenses
and other authorizations that are required pursuant to Environmental,
Health, and Safety Requirements for the occupation of its facilities
and the operation of the Business; a list of all such permits, licenses
and other authorizations is set forth on the Schedule 3.25(b).
(c) Neither Seller nor its predecessors or
Affiliates has received any written or oral notice, report or other
information regarding any actual or alleged violation of
Environmental, Health, and Safety Requirements, or any liabilities
or potential liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or
corrective obligations, relating to any of them or its facilities
arising under Environmental, Health, and Safety Requirements.
(d) None of the following exists at any property or
facility owned or operated by Seller or used or held for use in
connection with the Business: (1) underground storage tanks, (2)
asbestos-containing material in any form or condition, (3) materials
or equipment containing polychlorinated biphenyls, or (4) landfills,
surface impoundments, or disposal areas.
(e) Neither Seller nor its predecessors or
Affiliates has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any
substance, including without limitation any hazardous substance, or
owned or operated any property or facility (and no such property or
facility is contaminated by any such substance) in a manner that has
given or would give rise to liabilities, including any liability for
response costs, corrective action costs, personal injury, property
damage, natural resources damages or attorney fees, pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA"), the Solid Waste Disposal Act, as
amended ("SWDA") or any other Environmental, Health, and Safety
Requirements.
(f) Neither this Agreement nor the consummation of
the transaction that is the subject of this Agreement will result in
any obligations for site investigation or cleanup, or notification
to or consent of government agencies or third parties, pursuant to
any of the so-called "transaction-triggered" or "responsible
property transfer" Environmental, Health, and Safety Requirements.
(g) Neither Seller nor its predecessors or
Affiliates has, either expressly or by operation of law, assumed or
undertaken any liability, including without limitation any
obligation for corrective or remedial action, of any other Person
relating to Environmental, Health, and Safety Requirements.
(h) No facts, events or conditions relating to the
past or present facilities, properties or operations of the Seller
or its predecessors or Affiliates will prevent, hinder or limit
continued compliance with Environmental, Health, and Safety
Requirements, give rise to any investigatory, remedial or corrective
obligations pursuant to Environmental, Health, and Safety
Requirements, or give rise to any other liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) pursuant to
Environmental, Health, and Safety Requirements, including without
limitation any relating to onsite or offsite releases or threatened
releases of hazardous materials, substances or wastes, personal
injury, property damage or natural resources damage.
3.26 Certain Business Relationships with Seller. Neither
Parent nor its Affiliates (other than Seller) have been involved in
any business arrangement or relationship with Seller or its
Affiliates within the past twelve (12) months, and neither Parent nor
its Affiliates (other than Seller) own any asset, tangible or
intangible, which is used in the Business.
3.27 Accuracy of Documents and Information. The copies of
all instruments, agreements, other documents and written information
set forth as, or referenced in, Schedules or Exhibits to this
Agreement or specifically required to be furnished pursuant to this
Agreement to Buyer by Seller are and will be complete and correct in
all material respects. No representations or warranties made by
Seller in this Agreement, nor any document, written information,
statement, financial statement, certificate, or Exhibit furnished
directly to Buyer pursuant to this Agreement contains any untrue
statement of a material fact, or omits to state a material fact
necessary to make the statements or facts contained herein not
misleading.
4. Representations and Warranties of Buyer. Buyer hereby
represents and warrants to Seller that the statements contained in
this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this Section 4).
4.1 Organization and Authority. Buyer: (a) is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Ohio; (b) has all necessary corporate
power to own and lease its properties, to carry on its business as
now being conducted and to execute and deliver this Agreement and to
perform its obligations hereunder; and (c) is qualified to do business
in all jurisdictions in which the failure to so qualify would have
a material adverse effect on its business or financial condition.
Buyer has delivered to Seller complete and correct copies of records
of any and all proceedings and actions at all meetings of, or taken
by written consent by, its Board of Directors and shareholders,
related to the transactions contemplated by this Agreement.
4.2 Authority Relating to this Agreement; No Violation of
Other Instruments. The execution and delivery of this Agreement and
the performance hereunder by Buyer have been duly authorized by all
necessary corporate action on the part of Buyer and, assuming
execution of this Agreement by Seller, this Agreement will constitute
a legal, valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms, subject as to enforcement: (a)
to bankruptcy, insolvency, reorganization, arrangement, moratorium
and other laws of general applicability relating to or affecting
creditors' rights; and (b) to general principles of equity, whether
such enforcement is considered in a proceeding in equity or at law.
4.3 Brokers and Finders. Neither Buyer nor any
shareholder, director, officer, employee or agent of Buyer has
retained any broker or finder in connection with the transactions
contemplated by this Agreement. Buyer will indemnify and hold Seller
harmless against all claims for brokers' or finders' fees made or
asserted by any party claiming to have been employed by Buyer or any
shareholder, director, officer, employee or agent of Buyer and all
costs and expenses (including the reasonable fees of counsel) of
investigating and defending such claims.
5. Pre-Closing Covenants. Buyer and Seller covenant and agree
as follows with respect to the period between the execution of this
Agreement and the Closing Date:
5.1 Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper,
or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction,
but not waiver, of the closing conditions set forth in Section 7
below).
5.2 Seller will not engage in any practice, take any
action, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, Seller
will not pay any amount to any third party with respect to any
Liability or obligation (including any costs and expenses Seller
incurred or may incur in connection with this Agreement and the
transactions contemplated hereby) which would not constitute an
Assumed Liability if in existence as of the Closing.
5.3 Seller will keep its business and properties
substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors,
licensors, suppliers, customers, and employees.
5.4 Seller will permit representatives of the Buyer to
have full access at all reasonable times, and in a manner so as not
to interfere with the normal business operations of Seller, to all
premises, properties, personnel, books, records (including Tax
records), contracts, and documents of or pertaining to the Business
and the Acquired Assets. Buyer will treat and hold as such any
Confidential Information it receives from Parent or Seller in the
course of the reviews contemplated by this Section 5.4, will not use
any of the Confidential Information except in connection with this
Agreement, and, if this Agreement is terminated for any reason
whatsoever, will return to Parent or Seller all tangible embodiments
(and all copies) of the Confidential Information which are in its
possession.
5.5 Each Party will give prompt written notice to the
other Party of any material adverse development causing a breach of
any of its own representations and warranties in Sections 3 and 4
above. No disclosure by any Party pursuant to this Section 5.5,
however, shall be deemed to amend or supplement the Schedules or
Exhibits to this Agreement or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
5.6 Neither Seller nor Parent nor their Affiliates will
(i) solicit, initiate, or encourage the submission of any proposal
or offer from any Person relating to the acquisition of any capital
stock or other voting securities, or any substantial portion of the
Acquired Assets or the Business (including any acquisition structured
as a merger, consolidation, or share exchange) or (ii) participate
in any discussions or negotiations regarding, furnish any information
with respect to, assist or participate in, or facilitate in any other
manner any effort or attempt by any Person to do or seek any of the
foregoing. Seller will notify Buyer immediately if any Person makes
any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
5.7 Seller shall provide assistance as reasonably
requested by Buyer for Buyer's personnel on all aspects of the
Business and on the use and operation of the Acquired Assets, to
provide such services as may be requested by Buyer in connection with
the transition of the Business and the Acquired Assets from Seller
to Buyer and to answer such questions and provide to Buyer information
relating to the Business and the Acquired Assets.
6. Conditions Precedent to the Obligations of Seller. The
obligation of Seller to consummate the transactions to be performed
by it in connection with the Closing is subject to the satisfaction
of the following conditions:
6.1 All representations and warranties made by Buyer in
Section 4 shall be accurate in all material respects at and as of the
Closing Date.
6.2 Buyer shall have performed and complied with all
agreements, covenants and conditions required by this Agreement to
be complied with on or prior to the Closing Date;
6.3 Seller shall have received the payment of the Purchase
Price as provided in Section 2.3(a).
6.4 No suit, action or proceeding against Seller shall be
pending or threatened before any court or governmental agency in which
it is sought to restrain or prohibit the consummation of this Agreement
or to obtain damages or other relief in connection with this Agreement
or the transactions contemplated hereby.
6.5 Buyer shall have delivered to Seller such other
certificates and instruments as may be, in the opinion of counsel to
Seller, reasonably necessary to effectuate the transactions
contemplated by this Agreement, and all legal matters in connection
with the Agreement and the transactions contemplated hereby shall
have been approved by counsel to Seller, which approval shall not be
unreasonably withheld.
7. Conditions Precedent to the Obligations of Buyer. The
obligation of Buyer to consummate the transactions to be performed
by it in connection with the Closing is subject to the satisfaction
of the following conditions:
7.1 All representations and warranties made by Seller in
this Agreement shall be true and correct in all material respects at
and as of the Closing Date.
7.2 Seller and Parent shall have performed and complied
with all agreements, covenants and conditions required by this
Agreement to be performed and complied with on or prior to the Closing
Date.
7.3 Seller shall have procured all third party consents
necessary to consummate the transactions contemplated by this
Agreement.
7.4 No suit, action or proceeding against Buyer shall be
pending or threatened before any court or governmental agency in which
it is sought to restrain or prohibit the consummation of this
Agreement or to obtain damages or other relief in connection with this
Agreement or the transactions contemplated hereby.
7.5 Delivery to Buyer by Seller of a certificate to the
effect that each of the conditions specified above in Sections 7.1
through 7.4 are satisfied in all respects.
7.6 Delivery to Buyer by Seller of (a) a Xxxx of Sale and
Assignment conveying the Acquired Assets to Buyer, a form of which
is attached hereto as Exhibit A; (b) a Trademark Assignment, a form
of which is attached hereto as Exhibit B; (c) a legal opinion of
Seller's counsel, a form of which is attached hereto as Exhibit C;
and (d) any other assignments, certificates, transfer documents and
other instruments as may be, in the opinion of counsel to Buyer,
reasonably necessary to effectuate the transfer of the Acquired
Assets and the transactions contemplated by this Agreement.
7.7 Buyer shall have received a copy of the resolutions
of the sole stockholder of Seller and the Board of Directors of Seller,
certified by an officer of Seller, authorizing and approving the
execution and delivery of this Agreement and consummation of the
transactions contemplated hereby.
7.8 Execution by employees of Seller and Parent
identified in Schedule 7.8 of an estoppel certificate (a) stating that
such employee does not have any right, title or interest in the
Acquired Assets, including the Intellectual Property, and (b) stating
that any existing nondisclosure agreements currently in effect are
and shall continue to be fully enforceable, or if any such
nondisclosure agreements are not fully enforceable or in effect, an
agreement by such employee to execute a new nondisclosure agreement.
7.9 No damage or destruction or other change has occurred
with respect to the Acquired Assets or the Business, that,
individually or in the aggregate, would have a material adverse effect
on the use or operation of the Acquired Assets or the Business.
8. Termination.
8.1 Termination of Agreement. This Agreement may be
terminated at any time prior to the Closing as provided below:
(a) Buyer and Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(b) Buyer may terminate this Agreement by giving
written notice to Seller at any time prior to the Closing
(i) in the event Seller has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, Buyer has notified
Seller of the breach, and the breach has continued without
cure for a period of fifteen (15) days after the notice of
breach or (ii) if the Closing shall not have occurred on
or before February 14, 2003, by reason of the failure of
any condition precedent under Section 7 hereof (unless the
failure results primarily from Buyer itself breaching any
representation, warranty, or covenant contained in this
Agreement, or unless both Parties have agreed in writing
to extend such date); and
(c) Seller may terminate this Agreement by giving
written notice to Buyer at any time prior to the Closing
(i) in the event Buyer has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, Seller has notified
Buyer of the breach, and the breach has continued without
cure for a period of fifteen (15) days after the notice of
breach or (ii) if the Closing shall not have occurred on
or before February 14, 2003, by reason of the failure of
any condition precedent under Section 6 hereof (unless the
failure results primarily from Seller itself breaching any
representation, warranty, or covenant contained in this
Agreement, or unless both Parties have agreed in writing
to extend such date).
8.2 Effect of Termination. If either Buyer or Seller
terminates this Agreement pursuant to Section 8.1 above, all
rights and obligations of the Parties hereunder shall terminate
without any Liability of any party to the other (except for any
Liability of any party then in breach).
9. Post-Closing Covenants. Buyer, Seller and Parent agree as
follows with respect to the period following the Closing.
9.1 Cooperation. At any time after the Closing, upon the
request of Buyer, Seller shall (a) execute and deliver any further
materials, documents and instruments of conveyance, transfer or
assignment as may reasonably be necessary to effect, record or verify
the transfer to, and vesting in Buyer, of Seller's right, title and
interest in and to the Acquired Assets and the Business, in accordance
with the terms of this Agreement; and (b) cooperate with Buyer, at
Buyer's expense, to enforce the terms of any Acquired Assets,
including terms relating to confidentiality and Intellectual Property
rights, and to contest or defend against any proceeding relating to
this Agreement or to the operation of the Business before the date
hereof. Seller acknowledges and agrees that from and after the Closing
Buyer will be entitled to (i) access to Tax records and (ii) possession
of all other documents, books, records, agreements, and financial data
of any sort relating to the Business and the Acquired Assets.
9.2 Advice of Developments. Seller shall have a
continuing obligation after the Closing Date to advise Buyer of all
significant matters of which it becomes aware concerning the Acquired
Assets and the Business.
9.3 Supply Agreement. After the Closing, Parent shall
make available to Buyer raw materials used in the Business supplied
to Parent by X.X. Xxxxxxx pursuant to the Supply Agreement (the "Raw
Materials"). At least 70 days prior to the start of each calendar
quarter, Buyer shall provide Seller with a written estimate of the
amounts of the Raw Materials it will desire for shipment during such
quarter and during each of the next three quarters (each such
four-quarter estimate after the first containing revisions of the
estimate previously made with respect to the first three quarters).
Buyer shall submit each firm purchase order for Raw Materials at least
60 days prior to the requested shipment date. The price to be paid
by Buyer for the Raw Materials shall be equal to the price paid by
the Parent pursuant to the Supply Agreement. Payment shall be made
for each delivery of the Raw Materials within 30 days after the date
of receipt of shipment. Buyer acknowledges and agrees that the Parent
shall not be liable for any delays or interruptions in Raw Materials
if such delays or interruptions are not caused by the Parent. In the
event the Supply Agreement is terminated for any reason, Parent shall
deliver a written notice to Buyer to inform Buyer of such termination.
Upon delivery of such written notice, the Parent's obligation under
this Section 9.3 shall terminate. Notwithstanding the foregoing,
Buyer may produce such Raw Material itself or independently acquire
Raw Materials from any supplier (including X.X. Xxxxxxx) in lieu of
acquiring Raw Materials through the Parent pursuant to the Supply
Agreement.
9.4 Confidentiality. Parent and Seller will treat and
hold as such all of the Confidential Information, refrain from using
any of the Confidential Information except in connection with this
Agreement, and deliver promptly to Buyer, at the request and option
of Buyer, all tangible embodiments (and all copies) of the
Confidential Information which are in its possession, except that
Seller shall be entitled to keep a copy of such materials as may be
required for accounting, tax and securities law compliance purposes.
In the event that either Parent or Seller is requested or required
(by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, Parent or
Seller will notify Buyer promptly of the request or requirement so
that the Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 9.4. If, in the absence
of a protective order or the receipt of a waiver hereunder, Parent
or Seller is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for
contempt, Parent or Seller may disclose the Confidential Information
to the tribunal; provided, however, that Parent and Seller shall use
its reasonable best efforts to obtain, at the reasonable request of
Buyer, an order or other assurance that confidential treatment will
be accorded to such portion of the Confidential Information required
to be disclosed as Buyer shall designate. Notwithstanding the
foregoing, the parties agree that the Confidentiality Agreement dated
as of July 19, 2002 by and between Encore Advisors, as agent for the
Seller, and Buyer shall survive this Agreement and shall continue
hereafter for the period of time provided for therein.
9.5 Litigation Support. In the event and for so long as
any party actively is contesting or defending against any action,
suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand in connection with (a) the Business or the Acquired Assets
or (b) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction on or prior to the Closing Date
involving the Business or the Acquired Assets, the other party will
cooperate with the contesting or defending party and its counsel in
the contest or defense, make available its personnel, and provide such
testimony and access to its books and records as shall be necessary
in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending party (unless the contesting
or defending party is entitled to indemnification therefor under
Section 10 below).
9.6 Premises.
(a) For a period of thirty (30) days after the
Closing Date, Seller shall grant to Buyer the right to utilize certain
employees of Seller (Xxx X. Xxxxxx, Xxxxxx Xxxxx and Xxxxxx Xxxxxx)
and the current facilities of Seller relating to the Business located
on a portion of the premises more particularly described as
approximately 2,400 square feet located at 000 Xxxxxxx Xxxxx, Xxxxxxx
Xxxx, Xxxxxxxxxx (the "Premises") in order for Buyer to fulfill
ongoing business activities related to the Business and the Acquired
Assets. Seller shall only provide use of the Premises and the
employees listed above to Buyer for no additional charge during this
thirty (30) day period. Thereafter, for a fee as may be reasonably
agreed upon by Buyer and Seller, Buyer shall have the right, at Buyer's
sole discretion, to continue to use the Premises and the employees
listed above to fulfill ongoing business activities related to the
Business for a period of time as may be reasonably determined by Buyer,
which shall not exceed twenty-eight (28) days, provided Buyer gives
Seller notice of such intent no later than twenty-one (21) days after
the Closing Date. Pursuant to the Lease (a complete copy of which
has been provided to Buyer) the Premises may be used for general
office, manufacturing and laboratory research purposes and for no
other purpose and Buyer agrees to use the Premises only for such
purposes in conducting its business activities.
(b) Buyer shall comply with all and use covenants and
regulations set forth in the Lease, a true and complete copy of which
has been provided to Buyer. Buyer shall cooperate with Seller to
prevent any violations of the terms of the Lease, including without
limitation compliance with any applicable safety, internal
operations and security regulations and procedures of Seller.
(c) Seller shall not be responsible for the
oversight, supervision and control of, and payment of all expenses
associated with, Buyer's visiting employees and independent
contractors and Buyer shall be solely responsible for all expenses
of any nature whatsoever associated with its employees while on the
Premises.
(d) Each party shall reasonably cooperate to prevent
interfering with the other party's use and enjoyment of the Premises.
In the event of any actual or reasonably anticipated interference,
the parties shall negotiate in good faith to resolve any resulting
disputes.
(e) Seller shall not be liable for any damage to
property or any injury to persons, sustained by Buyer or others,
caused by conditions or activities on the Premises, other than
conditions attributable to the failure of Seller to perform its
obligations hereunder or the negligence or intentional misconduct of
Seller, its employees, agents, contractors or representatives. Buyer
hereby agrees to defend, indemnify and hold Seller harmless from and
against any and all expense, including but not limited to, reasonable
attorney's fees, losses, claims or liability arising from injury to
person or property arising out of Buyer's use and possession of the
Premises, except to the extent that any such claim is attributable
to failure of Seller to perform its obligations hereunder or the
negligence or intentional misconduct of Seller, its employees,
agents, contractors or representatives.
(f) Seller shall provide Buyer's consultant, Kemon
Papacosta ("Papacosta"), with an office on the Premises, as may be
reasonably required by Papacosta in order to render consulting
services to Buyer. Pursuant to the Lease, the Premises may be used
for general office, manufacturing and laboratory research purposes
and for no other purpose and Papacosta shall use the Premises only
for such purposes. Prior to the Closing Date, Seller shall deliver
to Buyer and Papacosta all necessary consents and approvals
permitting Papacosta's use of the Premises. Seller shall provide
Papacosta with such office space without charge for the duration of
his consultancy period with Buyer, but in no event shall Papacosta's
occupancy of office space on the Premises exceed two (2) years from
the Closing Date.
(g) Seller shall not be responsible for providing
secretarial, administrative and clerical support to Papacosta,
except that Seller shall provide Papacosta with broadband Internet
access in order for Papacosta to retrieve e-mail.
(h) Seller shall not be responsible for the
oversight, supervision and control of, and payment of any expenses
associated with Papacosta's use of the Premises and Seller shall not
be responsible for any salaries, wages, other compensation, medical
and health insurance, pension plan contributions and assessments,
Social Security taxes, Medicare taxes, unemployment taxes, worker's
compensation insurance and other benefits, taxes and related tax
filings and other items.
9.7 Business Relationships. Neither Seller nor its
Affiliates will take any action that shall have the effect of
discouraging any lessor, licensor, customer, supplier, or other
business associate of the Business from maintaining the same business
relationships with Buyer after the Closing as it maintained with the
Business prior to the Closing. Seller and its Affiliates will refer
all customer inquiries relating to the Business or the Acquired Assets
to Buyer from and after the Closing.
9.8 Covenant Not to Compete. For a period of five (5)
years from and after the Closing Date, neither Seller nor Parent nor
any of their Affiliates will engage directly or indirectly in any
Competitive Activity anywhere in the world; provided, however, that
no owner of less than 1% of the outstanding stock of any publicly
traded corporation shall be deemed to be engaged in a Competitive
Activity solely by reason thereof. If the final judgment of a court
of competent jurisdiction declares that any term or provision of this
Section 9.8 is invalid or unenforceable, the parties agree that the
court making the determination of invalidity or unenforceability
shall have the power to reduce the scope, duration, or area of the
term or provision, to delete specific words or phrases, or to replace
any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified
after the expiration of the time within which the judgment may be
appealed.
9.9 Hired Employees; Employment. To the greatest extent
permitted by California law, Parent shall take all measures to ensure
that a valid and binding agreement shall be in effect after the Closing
Date between Parent and each Hired Employee which shall contain
provisions relating to the protection of the Business and Acquired
Assets reasonably satisfactory to Buyer and its counsel. Except for
the Hired Employees, Buyer shall have the right, but not the
obligation, to offer employment to Seller's employees or establish
consultancy relationship with Seller's employees, at such levels and
on other terms and conditions to be determined in Buyer's sole
discretion. Buyer shall have no Liability for Employee Plans, accrued
wages (including salaries and commissions), severance pay, sick leave
or other benefits, of any type or nature on account of Seller's
employment of or termination of such employees.
9.10 Estoppel Certificates. Within 30 days after the
Closing Date, Seller shall deliver to Buyer estoppel certificates,
duly executed by the employees of Seller and Parent identified in
Schedule 9.10 which shall state that (a) such employee does not have
any right, title or interest in the Acquired Assets, including the
Intellectual Property, and (b) any existing nondisclosure agreements
currently in effect are and shall continue to be fully enforceable,
or if any such nondisclosure agreements are not fully enforceable or
in effect, an agreement by such employee to execute a new
nondisclosure agreement. The parties further acknowledge and agree
that it would be extremely difficult and impractical to ascertain the
extent of the detriment to Buyer upon the failure of Seller to deliver
such estoppel certificates as referenced herein within 30 days after
the Closing Date. As a result, the parties agree that Buyer shall
be entitled to liquidated damages of Ten Thousand Dollars ($10,000)
for each estoppel certificate not delivered to Buyer by Seller, which
shall become due and payable by Seller immediately upon failure to
timely deliver such certificate. The payment of such amounts as
liquidated damages is not intended as a forfeiture or penalty within
the meaning of California Civil Code Sections 3275 or 3369, but is
intended to constitute liquidated damages to Buyer pursuant to
California Civil Code Section 1671.
10. Survival and Indemnification.
10.1 Survival of Representations and Warranties. All of
the representations and warranties of Seller contained in Sections
3.5 through 3.8 and Sections 3.10 through 3.27 of this Agreement shall
survive the Closing (even if Buyer knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect for a period of two years thereafter.
All of the other representations and warranties of Seller and Buyer
contained in this Agreement (including the representations and
warranties of Seller contained in Sections 3.1 through 3.4 and Section
3.9 hereof) shall survive the Closing (even if the damaged Party knew
or had reason to know of any misrepresentation or breach of warranty
at the time of Closing) and continue in full force and effect forever
thereafter (subject to any applicable statutes of limitations).
10.2 Indemnification of Buyer. Seller shall indemnify and
hold Buyer harmless from and against the entirety of any and all
actions, suits, proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders,
decrees, rulings, damages, dues, penalties, fines, costs, amounts
paid in settlement, Liabilities, (including court costs and
attorneys' fees and expenses) (collectively, "Adverse Consequences")
resulting from, arising out of, relating to, in the nature of, caused
by or in any manner connected with, directly or indirectly, (a) any
breach by Seller or Parent of any representations, warranties or
covenants of Seller or Parent contained in this Agreement (provided,
however, that Buyer must make a written claim for indemnification
within the applicable survival period with respect to those
representations and warranties having a survival period pursuant to
Section 10.1 above), (b) arising from ownership, use or operation of
the Acquired Assets or the Business prior to the Closing Date,
including any and all product liability, warranty or similar claims
in respect of any Products manufactured or sold on or prior to the
Closing Date, (c) any claim of infringement of U.S. Patent No.
5,906,772 with respect to Products made in accordance with Seller's
Product Formulations as of the Closing Date, (d) any Liability of
Seller or its Affiliates (including Parent) which is not an Assumed
Liability (including any Liability of Seller or its Affiliates
(including Parent) that becomes a Liability of Buyer under any bulk
transfer law of any jurisdiction, under any common law doctrine of
de facto merger or successor liability, under Environmental, Health,
and Safety Requirements, or otherwise by operation of law), (e) any
Liability of Seller or its Affiliates (including Parent) for unpaid
Taxes with respect to any Tax year or portion thereof ending on or
before the Closing Date (or for any Tax year beginning before and
ending after the Closing Date to the extent allocable to the portion
of such period beginning before and ending on the Closing Date), or
(f) any Liability of Seller or its Affiliates (including Parent) for
the unpaid Taxes of any Person under Reg. Paragraph 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee
or successor, by contract, or otherwise.
10.3 Indemnification of Seller. Buyer shall indemnify and
hold Seller harmless from and against any and all Adverse Consequences
arising from or in any manner connected with, directly or indirectly,
(a) any breach by Buyer of any representations, warranties or
covenants of Buyer contained in this Agreement, or (b) arising from
the ownership, use or operation of the Acquired Assets or the Business
following the Closing Date, including any and all product liability,
warranty or similar claims in respect of any Products manufactured
and sold on or following the Closing Date, or (c) any Assumed
Liability.
10.4 Notice; Claims. In the event that a Party suffers
Adverse Consequences, the party making a claim for indemnification
(the "Indemnified Party") shall within 30 days of discovering or
incurring such Adverse Consequences give the indemnifying party (the
"Indemnifying Party") written notice thereof ("Notice of Claim").
The Notice of Claim shall state in reasonable detail the nature of
the claim, the specific provisions in this Agreement alleged to have
been breached, and the amount of the claim for indemnification. Such
amount shall represent the Indemnified Party's good faith estimate
of the Adverse Consequences. The Indemnifying Party shall have 15
days from receipt of the Notice of Claim to accept or reject the claim
for indemnification in whole or in part. The Indemnified Party shall
be deemed to have waived its right to indemnification for any Adverse
Consequences for which notice is not given in a timely manner as set
forth herein if and to the extent that the Indemnifying Party can show
that such failure to give timely notice has materially prejudiced the
Indemnifying Party's ability to defend or otherwise respond to such
claim. Any claim for Adverse Consequences accepted by the
Indemnifying Party or any claim determined as valid under the claim
procedure set forth below, shall be deemed "Established Damages" for
the purposes of this Agreement. If a Notice of Claim is given and
no rejection is received within the 15-day period specified above,
then the Indemnifying Party shall be deemed to have accepted such
claim. If the Indemnifying Party rejects a claim within such 15-day
period, the parties shall, in good faith, attempt to negotiate a
resolution of such claim within 30 days thereafter (the "Resolution
Period"). To the extent a Notice of Claim contains both claims the
Indemnifying Party accepts as valid and claims the Indemnifying Party
rejects, the Indemnifying Party shall proceed to pay or otherwise
honor such accepted claims in accordance with this Section 10. If
the parties do not reach resolution during the Resolution Period of
any rejected claims, then the Indemnified Party may, within 15 days
after the end of the Resolution Period proceed to submit the
controversy to arbitration under the rules then in effect of the
American Arbitration Association. The determination of the
arbitrator(s) shall be binding, final and conclusive on the Parties.
If as a result of such arbitration it is determined that the
Indemnifying Party is obligated for such Damages, the amount set by
such arbitration shall be the amount of the Established Damages and
the Indemnifying Party shall owe such amount, along with all expenses
of the Indemnified Party relating to the arbitration, including
reasonable attorney's fees. If as a result of such arbitration it
is determined that the Indemnifying Party has no obligation to
indemnify, the Indemnifying Party shall have no further liability on
the claim and the Indemnified Party shall be required to pay all
expenses of the Indemnifying Party related to the arbitration,
including reasonable attorney's fees. To the extent Buyer suffers
any Adverse Consequences, Buyer shall be entitled to place all Royalty
payments then due and owing to Buyer into an interest bearing escrow
account with an escrow agent until such claim is resolved. Squire,
Xxxxxxx & Xxxxxxx L.L.P shall act as escrow agent (the "Escrow Agent")
and shall retain such Royalty payments until (i) Buyer and Seller have
settled the dispute, (ii) disposition has been ordered in accordance
with the arbitration procedures set forth in Section 12.16, or (iii)
pursuant to applicable court procedures. The Escrow Agent shall
continue to be able to represent Buyer in connection with any dispute
between the parties, including any dispute relating to any Royalty
payments held by the Escrow Agent, and Seller hereby waives any
conflict relating thereto and consents to such continued
representation of Buyer by the Escrow Agent.
10.5 Matters Involving Third Parties.
(a) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against
the other Party (the "Indemnifying Party") under this Section 10, then
the Indemnified Party shall promptly notify the Indemnifying Party
thereof in writing; provided, however, that no delay on the part of
the Indemnified Party in notifying the Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is
prejudiced.
(b) The Indemnifying Party will have the right to
defend the Indemnified Party against the Third Party Claim with
counsel of its choice reasonably satisfactory to the Indemnified Party
so long as (i) the Indemnifying Party notifies the Indemnified Party
in writing within 15 days after the Indemnified Party has given notice
of the Third Party Claim that the Indemnifying Party will indemnify
the Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party
Claim, (ii) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations
hereunder, (iii) the Third Party Claim involves only money damages
and does not seek an injunction or other equitable relief, (iv)
settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party,
likely to establish a precedential custom or practice materially
adverse to the continuing business interests of the Indemnified Party,
and (v) the Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with Section
10.5(b) above, (i) the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the defense
of the Third Party Claim, (ii) the Indemnified Party will not consent
to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iii) the
Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to
be withheld unreasonably).
(d) In the event any of the conditions in Section
10.5(b) above is or becomes unsatisfied, however, (i) the Indemnified
Party may defend against, and consent to the entry of any judgment
or enter into any settlement with respect to, the Third Party Claim
in any manner it reasonably may deem appropriate (and the Indemnified
Party need not consult with, or obtain any consent from, the
Indemnifying Party in connection therewith), (ii) the Indemnifying
Party will reimburse the Indemnified Party promptly and periodically
for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (iii) the Indemnifying
Party will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim to the fullest
extent provided in this Section 10.
10.6 Determination of Adverse Consequences. The Parties
shall take into account the time cost of money (using the Applicable
Rate as the discount rate) in determining Adverse Consequences for
purposes of this Section 10. All indemnification payments under this
Section 10 shall be deemed adjustments to the Purchase Price.
10.7 Limitations on Indemnification. Notwithstanding
anything herein to the contrary, (a) Seller shall not be obligated
to indemnify the Buyer or any Indemnified Party under this Section
10 unless the aggregate of all Adverse Consequences exceeds $20,000
(the "Seller's Basket"), in which case the Buyer shall be entitled
to recover all Adverse Consequences, including the amount equal to
the Seller's Basket. In addition, Seller shall not be obligated to
indemnify the Buyer or any Indemnified Party under this Section 10
to the extent that the aggregate of all Adverse Consequences exceeds
the amount of the Purchase Price (the "Seller's Indemnification
Cap"). Notwithstanding the foregoing, the Seller's Basket and the
Seller's Indemnification Cap shall not apply to any indemnification
obligation arising out of, relating to or resulting from fraud or
intentional misrepresentation by Seller or breach of any provision
of this Agreement other than those representations and warranties
having a survival period pursuant to Section 10.1 above.
10.8 Other. Except in the case of fraud or intentional
misrepresentation the indemnification rights in this Section 10 shall
be the sole and exclusive remedies of the Parties with respect to this
Agreement and the transactions contemplated hereby.
11. Unconditional Guaranty of Parent. Parent hereby covenants
and agrees to fully and unconditionally guaranty (a) all obligations
of Seller pursuant to this Agreement and all documents entered into
in connection herewith, however created, arising or evidenced,
whether direct or indirect, absolute or contingent, and whether now
or hereafter existing, (b) Seller's performance of, and compliance
with, all of the terms, covenants, conditions, stipulations and
agreements contained in this Agreement or any documents entered into
in connection herewith, and (c) the payment and performance by Seller
of all other obligations and Liabilities owed to Buyer or any
Affiliate thereof however created, of every kind and description,
whether now existing or hereafter arising, and whether direct or
indirect, primary or as guarantor or surety, absolute or contingent,
due or to become due, liquidated or unliquidated, matured or
unmatured, participated in whole or in part, created by trust
agreement, lease, overdraft, agreement or otherwise. If Parent or
Seller shall default in the performance or observance of any agreement
or covenant contained in this Agreement or any of the documents
entered into in connection herewith, or shall be in breach of any of
the representations, warranties or covenants set forth in this
Agreement or any of the documents entered into in connection herewith,
Buyer may proceed against Parent and Buyer shall have, in its sole
discretion, the right to proceed first and directly against Parent
without proceeding first or concurrently against Seller, exhausting
any other remedies it may have. This Section 11 is a guaranty of
payment and performance and not of collection and Parent further
waives any right to require that any action first be brought against
Seller or any other Person with respect to obligations and Liabilities
set forth in this Section 11.
12. Miscellaneous.
12.1 Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and
their respective successors and permitted assigns. No Party may
assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other
Party; provided, however, that the Buyer may (i) assign any or all
of its rights and interests hereunder to one or more of its Affiliates
and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer
nonetheless shall remain responsible for the performance of all of
its obligations hereunder).
12.2 Transfer Taxes. Any sales, use, or other transfer
taxes arising out of or incurred in connection with the transactions
contemplated by this Agreement, including but not limited to
California State sales taxes, shall be paid by Seller.
12.3 Expenses. Except as otherwise expressly provided
herein, each party will pay its own costs and expenses, including
legal and accounting expenses, related to the transactions provided
for herein, irrespective of when incurred.
12.4 Further Assurances. Seller will from time to time,
at Buyer's request and without further consideration, execute and
deliver such other instruments of conveyance, assignment and transfer
and take such other actions as Buyer may reasonably request in order
more effectively to convey, assign, transfer to and vest in Buyer,
the Acquired Assets and the right to operate the Assets.
12.5 Notices. Any notice or other communication required
or permitted hereunder shall be in writing and shall be deemed to have
been duly given on the date of service if served personally or by
facsimile, or five days after the date of mailing if mailed, by first
class mail, registered or certified, postage prepaid. Notices shall
be addressed as follows:
To Buyer at:
GFS Chemicals, Inc.
X.X. Xxx 000
Xxxxxx, Xxxx 00000
Telecopier No.: (000) 000-0000
Attn: J. Steel Xxxxxxxxxx
With a required copy to:
Squire, Xxxxxxx & Xxxxxxx L.L.P.
0000 Xxxxxxxxxx Xxxxxx
00 Xxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
To Seller at:
000 Xxxxxxx Xxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X'Xxxxxxx
With a required copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxxxxxxxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Peers, Esq.
To Parent at:
000 Xxxxxxx Xxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X'Xxxxxxx
With a required copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxxxxxxxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Peers, Esq.
or to such other address as a party has designated by notice in writing
to the other party in the manner provided by this Section.
12.6 Entire Agreement and Modification. This Agreement
constitutes and contains the entire agreement of the parties and
supersedes any and all prior negotiations, correspondence,
understandings and agreements between the parties respecting the
subject matter hereof. This Agreement may only be amended by written
instrument signed by the parties.
12.7 Survival of Terms. All warranties, representations
and covenants contained in this Agreement and any certificate or other
instrument delivered by or on behalf of the Parties pursuant to this
Agreement shall be continuous and shall survive the signing of this
Agreement.
12.8 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of California
without giving effect to any choice or conflict of law provision or
rule (whether of the State of California or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other
than the State of California.
12.9 Severability. If any provision of this Agreement is
held to be unenforceable for any reason, it shall be adjusted rather
than voided, if possible, in order to achieve the intent of the parties
to the extent possible. If any event, all other provisions of this
Agreement shall be deemed valid and enforceable to the fullest extent
possible.
12.10 Headings. The headings appearing at the
beginning of several sections contained herein have been inserted for
the convenience of the parties and shall not be used to determine the
construction or interpretation of this Agreement.
12.11 Counterparts. This Agreement may be executed in
counterparts, including by facsimile, each of which shall be deemed
an original, but both of which when taken together shall constitute
one and the same instrument.
12.12 Public Announcement. None of the Parties shall
make any public announcement with respect to the transaction
contemplated hereby without the prior written consent of the other
Parties, which shall not be unreasonably withheld or delayed,
provided however, that the Parties may at any time make announcements
which are required by applicable law so long as the Party so required
to make an announcement promptly upon learning of such requirement
notifies the other parties of such requirement and discuss with the
other Parties in good faith the exact wording of any such
announcement.
12.13 Construction. The Parties have participated
jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises,
this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context
requires otherwise. The word "including" shall mean including without
limitation. Nothing in the Schedules shall be deemed adequate to
disclose an exception to a representation or warranty made herein
unless the Schedules identify the exception with reasonable
particularity and describes the relevant facts in reasonable detail.
Without limiting the generality of the foregoing, the mere listing
(or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made
herein (unless the representation or warranty has to do with the
existence of the document or other item itself). The Parties intend
that each representation, warranty, and covenant contained herein
shall have independent significance. If any Party has breached any
representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty,
or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall
not detract from or mitigate the fact that the Party is in breach of
the first representation, warranty, or covenant.
12.14 Incorporation of Exhibits and Schedules. The
Exhibits and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
12.15 Specific Performance. Each of the Parties
acknowledges and agrees that the other Party would be damaged
irreparably in the event any of the provisions of this Agreement are
not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the Parties agrees that the other
Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in
any action instituted in any court of the United States or any state
thereof having jurisdiction over the Parties and the matter (subject
to the provisions set forth in Section 12.16 below), in addition to
any other remedy to which it may be entitled, at low or in equity.
12.16 Arbitration. Any controversy, dispute or claim
arising out of or relating to this Agreement (including any
controversy, dispute or claim based on contract, tort, statute,
common law or otherwise and whether or not, and the extent to which,
any controversy, dispute or claim is subject to arbitration),
excluding claims for injunctive relief, shall be resolved by binding
arbitration, at the request of any Party, in accordance with the rules
of the American Arbitration Association. Any such arbitration shall
take place in Chicago, Illinois. The arbitrator(s) shall have the
power to grant all legal and equitable remedies and award compensatory
damages as provided by applicable law but no power to award punitive
damages or any other damages not measured by the actual damages of
the prevailing party. The arbitrator(s) may not in any event make
any ruling, finding or award that does not conform to the terms and
conditions of the Agreement. The arbitrator(s) shall prepare in
writing, and provide to the Parties, an award including factual
findings and the reasoning on which the decision is based.
12.17 Bulk Transfer Laws. Buyer acknowledges that
Seller will not comply with the provisions of any bulk transfer laws
of any jurisdiction in connection with the transactions contemplated
by this Agreement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above set forth.
Buyer: GFS CHEMICALS, INC.,
an Ohio corporation
By: /S/ J. Steel Xxxxxxxxxx
------------------------
J. Steel Xxxxxxxxxx
President
Seller: APS ANALYTICAL STANDARDS, INC.,
a California corporation
By: /S/ Xxxxxxx X'Xxxxxxx
----------------------
Xxxxxxx X'Xxxxxxx
President
With respect to Sections 9.3, 9.4, 9.8, 9.9, 11 and 12 only:
Parent: A.P. PHARMA, INC.,
a Delaware corporation
By: /S/ Xxxxxxx X'Xxxxxxx
----------------------
Xxxxxxx X'Xxxxxxx
President
