EXHIBIT 10.19
Redacted Version
ASSET PURCHASE AGREEMENT
dated as of July 13, 2001
by and between
EMERALD PHARMACEUTICALS, L.P.
and
PROCYTE CORPORATION
This ASSET PURCHASE AGREEMENT dated as of July 13, 2001 is made and entered
into by and between ProCyte Corporation, a Washington corporation ("Seller"),
and Emerald Pharmaceuticals, L.P., a Delaware limited partnership ("Purchaser").
RECITALS:
---------
WHEREAS, Seller is engaged in the business of (i) providing manufacturing
and related services to parties regarding products other than Seller's own
proprietary products (including specialty chemical and quality control, product
and process development, validation, analytical chemistry services and
lyophilization) (collectively, the "Business"), as well as (ii) other business
activities (collectively, the "Retained Business"), including the research,
development, commercialization, production, marketing, distribution, and sale of
Seller's proprietary skin and hair care products and wound care products; and
WHEREAS, Seller desires to sell, transfer and assign to Purchaser, and
Purchaser desires to purchase and acquire from Seller, substantially all of the
assets of Seller relating to the operation of the Business, on the terms set
forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
SALE OF ASSETS AND CLOSING
1.01 Assets.
------
(a) Assets Transferred. On the terms and subject to the conditions set
--- ------------------
forth in this Agreement, Seller will sell, transfer, convey, assign and deliver
to Purchaser, and Purchaser will purchase and pay for, at the Closing, free and
clear of all Liens other than Permitted Liens, all of Seller's right, title and
interest in, to and under the following assets and properties of Seller that are
used or held for use in connection with the Business, as the same shall exist on
the Closing Date (the "Assets"), but specifically excluding the Excluded Assets
(as such term is defined in Section 1.01(b)):
---------------
(i) Inventory. Except as set forth in Section 1.01(a)(i) of the
--------- -------------------------
Disclosure Schedule, all inventories of raw materials, work-in-process,
-------------------
finished goods, products under research and development, demonstration
equipment, office and other supplies, parts, packaging materials and other
accessories related thereto (the "Inventory");
(ii) Tangible Personal Property. All equipment, machinery and other
--------------------------
tangible personal property (other than Inventory) listed in Section
-------
1.01(a)(ii) of the Disclosure Schedule) ("Tangible Personal Property");
--------------------------------------
(iii) Furniture and Fixtures. All furniture and fixtures of Seller
----------------------
used or held for use in the conduct of the Business;
(iv) Personal Property Leases. The leases of tangible personal property
------------------------
used in the conduct of the Business described in Section 1.01(a)(iv) of the
--------------------------
Disclosure Schedule as
-------------------
1
to which Seller is the lessee or sublessee, together with any options to
purchase the underlying property (the leases and subleases described above,
the "Personal Property Leases");
(v) Contracts and Prepaid Item. All Contracts (other than the Real
--------------------------
Property Lease and the Personal Property Leases) to which Seller is a party
and which are utilized in the conduct of the Business described in Section
-------
1.01(a)(v) of the Disclosure Schedule (the "Assumed Agreements"), as well
-------------------------------------
as the cash sum of Seven Hundred Twenty Thousand Dollars ($724,000)
provided by ****** to Seller as pre-payment under the Contract with ******
being conveyed to Purchaser hereunder;
(vi) Intellectual Property. All Intellectual Property used or held for
---------------------
use in the conduct of the Business (including Seller's goodwill therein),
including without limitation all rights in the name "Cascade" and all
derivations thereof, as well as any items listed in Section 1.01(a)(vi) of
----------------------
the Disclosure Schedule (the "Intellectual Property Assets");
-----------------------
(vii) Licenses. All Licenses (including applications therefor)
--------
utilized in the conduct of the Business;
(viii) Books and Records. All original Books and Records used or held
-----------------
for use exclusively in the conduct of the Business or otherwise exclusively
relating to the Assets (and copies of all other Books and Records used or
held for use in the conduct of the Business or otherwise relating to the
Assets), other than the minute books, stock transfer books and corporate
seal of Seller (the "Business Books and Records");
(ix) Claims. All rights of Seller under any claims, warranties,
------
guaranties, refunds, causes of action, rights of recovery, rights of set-
off and rights of recoupment of every kind and nature regarding the
Business, other than those relating exclusively to the Excluded Assets or
the Retained Liabilities; and
(x) Other Assets and Properties. All other assets and properties
--------------------------------
of Seller used or held for use exclusively in connection with the Business.
(b) Excluded Assets. Notwithstanding anything in this Agreement to the
--- ---------------
contrary, the following assets and properties of Seller (the "Excluded Assets")
shall be excluded from and shall not constitute Assets:
(i) Real Property Leases. The leases of real property described in
--- --------------------
Section 1.01(b)(i) of the Disclosure Schedule as to which Seller is the
---------------------------------------------
lessee or sublessee, together with any options to purchase the underlying
property and leasehold improvements thereon (the "Real Property Lease");
****** Indicates certain information has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
2
(ii) Personal Property Leases. The leases of tangible personal property
------------------------
described in Section 1.01(b)(ii) of the Disclosure Schedule as to which
----------------------------------------------
Seller is the lessee or sublessee, together with any options to purchase
the underlying property;
(iii) Contracts. All Contracts described in Section 1.01(b)(iii) of
--------- -----------------------
the Disclosure Schedule;
-----------------------
(iv) Corporate Records. The minute books, stock transfer books and
-----------------
corporate seal of Seller;
(v) Benefit Plans. All Benefit Plans of Seller, including all assets
-------------
thereof;
(vi) Insurance Policies. All casualty, liability or other policies of
------------------
insurance maintained by or on behalf of the Seller and the rights
thereunder and all rights under self insurance programs (A) relating to
Retained Liabilities, (B) insurance policies relating to directors' and
officers' liability, or (C) which, by their terms, are not assignable;
(vii) Accounts Receivable. All trade and other accounts receivable and
-------------------
all notes, bonds and other evidences of Indebtedness of and rights to
receive payments arising out of sales or licenses occurring in the conduct
of the Business, including any rights of Seller with respect to any third
party collection procedures or any other Actions or Proceedings which have
been commenced in connection therewith;
(viii) This Agreement. Seller's rights under this Agreement;
--------------
(ix) Prepaid Expenses. All prepaid Expenses (other than as provided in
----------------
Section 1.01(a)), relating to the Business;
(x) Tax Refunds. Seller's rights to refunds of Taxes paid with respect
-----------
to the Business for the periods on or prior to the Closing Date; and
(xi) Except for the Assets described in Section 1.01(a) hereof, all the
assets and properties of Seller that are used or held for use in connection
with the Retained Business (including, without limitation, the items listed
on Section 1.01(b)(xi) of the Disclosure Schedule).
----------------------------------------------
1.02 Liabilities.
-----------
(a) Assumed Liabilities. In connection with the sale, transfer,
-------------------
conveyance, assignment and delivery of the Assets pursuant to this Agreement, on
the terms and subject to the conditions set forth in this Agreement, at the
Closing, Purchaser will assume and agree to pay, perform and discharge when due
only the following obligations of Seller arising in connection with the
operation of the Business, as the same shall exist on the Closing Date (the
"Assumed Liabilities"), and no others:
(i) Personal Property Lease Obligations. All obligations of Seller
-----------------------------------
under the Personal Property Leases, so long as such obligations are current
liabilities and have been
3
incurred in the ordinary course of business consistent with past practices
(but specifically excluding liabilities for breaches thereof occurring
prior to the Closing Date, whether occurring as a result of the
transactions contemplated by this Agreement or otherwise); and
(ii) Obligations under Assumed Agreements. All obligations of Seller
------------------------------------
under the Assumed Agreements, so long as such obligations are current
liabilities and have been incurred in the ordinary course of business
consistent with past practices (but specifically excluding liabilities for
breaches thereof occurring prior to the Closing Date, whether occurring as
a result of the transactions contemplated by this Agreement or otherwise).
(b) Retained Liabilities. Except for the Assumed Liabilities, Purchaser
--------------------
shall not assume by virtue of this Agreement or the transactions contemplated
hereby, and shall have no liability for, any Liabilities of Seller (including,
without limitation, those related to the Business or any Benefit Plans) of any
kind, character or description whatsoever, whether accrued, absolute or
contingent, whether known or unknown, whether disclosed or undisclosed and
regardless of when asserted (the "Retained Liabilities"). Seller shall
discharge in a timely manner or shall make adequate provision for all of the
Retained Liabilities. This Section 1.02(b) shall not diminish or otherwise
affect Purchaser's obligations under Section 8.13.
1.03 Purchase Price; Allocation.
----- --------------------
(a) Purchase Price. The Purchase Price for the Assets (the "Purchase
--------------
Price"), to be paid at Closing, will consist of (i) TWO HUNDRED FIFTY THOUSAND
DOLLARS ($250,000) in cash; and (ii) a promissory note issued by Purchaser in
the original principal amount of TWO MILLION DOLLARS ($2,000,000) and in the
form of Exhibit A attached hereto (the "Note").
---------
(b) Allocation of Purchase Price. Purchaser and Seller shall negotiate in
----------------------------
good faith prior to the Closing Date and determine the allocation of the
consideration paid by Purchaser for the Assets. Each party hereto agrees (i)
that any such allocation shall be consistent with the requirements of Section
1060 of the Code and the regulations thereunder, and (ii) that no party will
take a position on any Tax Return, before any Governmental or Regulatory
Authority charged with the collection of any such Tax or in any judicial
proceeding, that is in any manner inconsistent with the terms of any such
allocation without the consent of the other party.
1.04 Closing. The Closing will take place at the offices of Seller, 8511
-------
000xx Xxxxxx, X.X., Xxxx. X, Xxxxxxx, XX 00000-0000, at 10:00 A.M. local time,
on July 17, 2001 or on such other date and time as Purchaser and Seller shall
mutually agree (the "Closing Date"). At the Closing, Purchaser will (a) pay
Seller the cash portion of the Purchase Price by wire transfer of immediately
available funds to such account as Seller may reasonably direct by written
notice delivered to Purchaser by Seller at least two (2) Business Days before
the Closing Date and (b) deliver the duly executed original of the Note.
Simultaneously, Seller will assign and transfer to Purchaser good and valid
title in and to the Assets (free and clear of all Liens, other than Permitted
Liens) by delivery of (i) a Xxxx of Sale in form and substance reasonably
acceptable to Purchaser (the "Xxxx of Sale"), duly executed by Seller, (ii) an
assignment of the Intellectual Property Assets and other intangible Assets in
form and substance reasonably
4
acceptable to Purchaser, duly executed by Seller, (iii) payment to Purchaser - -
by cashier's check made out to "Emerald Pharmaceuticals, L.P." or by wire
transfer of immediately available funds to such account as Purchaser may
reasonably direct by written notice delivered to Seller by Purchaser at least
two (2) Business Days before the Closing Date - -of the cash sum of Seven
Hundred Twenty Thousand Dollars ($724,000) regarding the funds provided by
****** to Seller as pre-payment under the Contract with ****** being conveyed to
Purchaser hereunder, and (iv) such other good and sufficient instruments of
conveyance, assignment and transfer, in form and substance reasonably acceptable
to Purchaser, as shall be effective to vest in Purchaser good title to the
Assets (the Xxxx of Sale and the other instruments referred to in clauses (ii)
and (iv) being collectively referred to herein as the "Assignment Instruments"),
and (d) Purchaser will assume from Seller the due payment, performance and
discharge of the Assumed Liabilities by delivery of an Assumption Agreement, in
form and substance reasonably acceptable to Seller, duly executed by Purchaser,
and such other good and sufficient instruments of assumption, in form and
substance reasonably acceptable to Seller, as shall be effective to cause
Purchaser to assume the Assumed Liabilities as and to the extent provided in
Section 1.02(a) (the Assumption Agreement and such other instruments being
---------------
collectively referred to herein as the "Assumption Instruments"). At the
Closing, there shall also be delivered to Seller and Purchaser the opinions,
certificates and other contracts, documents and instruments required to be
delivered under Articles V and VI.
---------- --
1.05 Prorations. Prorations relating to the Assets and the ownership and
----------
operation of the Business will be made by the parties as of the Closing Date,
(other than Purchaser's assumption of the Assumed Liabilities) with the Seller
liable to the extent such items relate to any time period prior to the Closing
Date and Purchaser liable to the extent such items relate to the periods
beginning with and subsequent to the Closing Date. Except as otherwise agreed
by the parties, the net amount of all such prorations will be settled and paid
within forty-five (45) days of the Closing Date. The parties agree to prorate
payables in respect to products or services delivered to customers of the
Business both before and after the Closing but not invoiced until after the
Closing Date.
1.06 Accounts Receivable. The parties have agreed that the accounts
-------------------
receivable of the Business as of the Closing Date shall be retained by Seller.
Purchaser agrees that all payments from customers of the Business on account of
unpaid accounts due to Seller as of the Closing Date shall be applied against
such accounts until they have been paid in full. Purchaser shall give Seller a
weekly accounting of monies received from each customer of the Business which
has an unpaid account due to Seller, and shall pay monies to Seller within five
days of receipt, until the customer's account balance as of the Closing Date has
been paid in full.
****** Indicates certain information has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
2.01 Organization of Seller. Seller is a corporation duly organized,
----------------------
validly existing and in good standing under the Laws of Washington and has full
corporate power and authority to conduct the Business as and to the extent now
conducted and to own, use and lease its assets and properties. Seller is duly
qualified, licensed or admitted to do business and is in good standing in those
jurisdictions specified in Section 2.01 of the Disclosure Schedule, which are
---------------------------------------
the only jurisdictions in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of the Business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified or
licensed and in good standing as could not reasonably be expected to have a
materially adverse effect (a "Material Adverse Effect") on the Condition of the
Business.
2.02 Authority; Execution. Seller has full corporate power and authority
--------------------
to execute and deliver this Agreement and the Operative Agreements to which it
is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by Seller of this Agreement and the Operative Agreements to which it is
a party, and the performance by Seller of its obligations hereunder and
thereunder, have been duly and validly authorized by its board of directors
(and, if required, its shareholders), no other corporate action on the part of
Seller or its shareholders being necessary. This Agreement has been duly and
validly executed and delivered by Seller and constitutes, and upon the execution
and delivery by Seller of the Operative Agreements to which Seller is a party,
such Operative Agreements, assuming the due authorization, execution and
delivery of this Agreement and the Operative Agreements by Purchaser, will
constitute legal, valid and binding obligations of Seller enforceable against
such party in accordance with their respective terms.
2.03 Reserved. [Blank]
--------
2.04 No Conflicts. The execution and delivery by Seller of this
------------
Agreement does not, and the execution and delivery by Seller of the Operative
Agreements to which is a party, the performance by Seller of its obligations
under this Agreement and such Operative Agreements and the consummation of the
transactions contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the articles or certificate of incorporation or
bylaws of Seller;
(b) subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in Section 2.04 of the Disclosure
------------------------------
Schedule, conflict with or result in a violation or breach of any term or
--------
provision of any Law or Order applicable to Seller or any of the Assets; or
(c) except as disclosed in Section 2.04 of the Disclosure Schedule, (i)
---------------------------------------
conflict with or result in a violation or breach of, (ii) constitute (with or
without notice or lapse of time or both) a default under, (iii) require Seller
to obtain any consent, approval or action of, make any filing with or give any
notice to any Person as a result or under the terms of, or (iv) result in the
creation or imposition of any Lien upon Seller or any of the Assets under, any
Contract or License to which Seller is a party or by which any of the Assets is
bound.
6
2.05 Governmental Approvals and Filings. Except as disclosed in Section
---------------------------------- -------
2.05 of the Disclosure Schedule, no consent, approval or action of, filing with
-------------------------------
or notice to any Governmental or Regulatory Authority on the part of Seller is
required in connection with the execution, delivery and performance of this
Agreement or any of the Operative Agreements to which it is a party or the
consummation of the transactions contemplated hereby or thereby.
2.06 Reserved. [Blank]
--------
2.07 Absence of Changes. Since the Annual Financial Statement Date there
------------------
has not been any material adverse change, or any event or development which,
individually or together with other such events, could reasonably be expected to
result in a material adverse change, in the Condition of the Business. Without
limiting the foregoing, except as disclosed in Section 2.07 of the Disclosure
------------------------------
Schedule, there has not occurred, between the Annual Financial Statement Date
--------
and the date hereof, any of the following:
(a) (i) any material increase in the salary, wages or other compensation of
any Employee whose annual salary is, or after giving effect to such change would
be, $100,000 or more; (ii) any establishment or material modification of (A)
targets, goals, pools or similar provisions in respect of any fiscal year under
any employment-related Contract or other compensation arrangement with or for
Employees or (B) salary ranges, increase guidelines or similar provisions in
respect of any employment-related Contract or other compensation arrangement
with or for Employees; or (iii) any adoption, entering into or becoming bound by
any Benefit Plan, employment-related Contract or collective bargaining
agreement, or amendment, modification or termination (partial or complete) of
any Benefit Plan, employment-related Contract or collective bargaining
agreement, except to the extent required by applicable Law and, in the event
compliance with legal requirements presented alternatives, only to the extent
the alternative which Seller reasonably believed to be the least costly was
chosen;
(b) any physical damage, destruction or other casualty loss (whether or not
covered by insurance) affecting any of the plant, real or personal property or
equipment of Seller used or held for use in the conduct of the Business in an
aggregate amount exceeding $25,000;
(c) any material change in (i) any pricing, investment, accounting,
financial reporting, inventory, credit, allowance or Tax practice or policy of
the Business or (ii) any method of calculating any bad debt, contingency or
other reserve of the Business for accounting, financial reporting or Tax
purposes;
(d) any material write-off or write-down of or any determination to write-
off or write-down any of the Assets;
(e) (i) any acquisition or disposition of any Assets, other than Inventory
in the ordinary course of business consistent with past practice; or (ii) any
creation or incurrence of a Lien, other than a Permitted Lien, on any Assets;
(f) any entering into, amendment, modification, termination (partial or
complete) or granting of a waiver under or giving any consent with respect to
(i) any Contract which is
7
required (or had it been in effect on the date hereof would have been required)
to be disclosed in the Disclosure Schedule pursuant to Section 2.18 or (ii) any
------------
License;
(g) capital expenditures or commitments for additions to property, plant or
equipment used or held for use in the conduct of the Business constituting
capital assets in an aggregate amount exceeding $25,000;
(h) any transaction with any officer, director, Affiliate or Associate of
Seller or any Associate of any such officer, director or Affiliate (i) outside
the ordinary course of business consistent with past practice or (ii) other than
on an arm's-length basis;
(i) any disposal of or lapse of any rights to the use of any Intellectual
Property Assets, or disclosure to any Person of any trade secret, formula,
process or know-how not theretofore a matter of public knowledge without
obtaining an appropriate confidentiality agreement from such person;
(j) any sale, assignment, transfer or license of any Intellectual Property
Assets, except for nonexclusive licenses granted to customers in the ordinary
course of business;
(k) any entering into of a Contract to do or engage in any of the foregoing
after the date hereof; or
(l) any other material transaction involving or material development
affecting the Business or the Assets outside the ordinary course of business
consistent with past practice.
2.08 No Undisclosed Liabilities. Except as reflected or reserved against
--------------------------
in the balance sheet included in the Annual Financial Statements or as disclosed
in Section 2.08 of the Disclosure Schedule, there are no Liabilities against,
---------------------------------------
relating to or affecting the Business or any of the Assets, other than
Liabilities incurred in the ordinary course of business consistent with past
practice which in the aggregate are not material to the Condition of the
Business.
2.09 Taxes.
-----
Seller has timely paid all Taxes due and payable by it for the Pre-Closing Tax
Period which will have been required to be paid on or prior to the Closing Date,
the non-payment of which would result in a Lien on any Asset, would otherwise
adversely affect the Business or would result in Purchaser becoming liable or
responsible therefor.
Seller has established, in accordance with generally accepted accounting
principles applied on a basis consistent with that of preceding periods,
adequate reserves for the payment of, and will timely pay all Tax liabilities,
assessments, interest and penalties which arise from or with respect to the
Assets or the operation of the Business and are incurred in or attributable to
the Pre-Closing Tax Period, the non-payment of which would result in a Lien on
any Asset, would otherwise adversely affect the Business or would result in
Purchaser becoming liable therefor.
Schedule 2.09(c) contains an entity-by-entity complete and accurate list of (i)
----------------
all jurisdictions to which any material amount of Tax has been paid or is
properly payable by or with respect to Seller or its Affiliates with respect to
the Business or the Assets during the preceding five years, and (ii) all Tax
Returns that have been filed or are properly required to be filed in any such
jurisdiction and on which material amounts of Taxes are required to be shown by
or with respect
8
to Seller or its Affiliates with respect to the Business or the Assets during
the preceding five years (or with respect to which the failure to file could
reasonably be expected to have a Material Adverse Effect on the Condition of the
Business).
Except as set forth in Schedule 2.09(d): (i) Seller and its Affiliates has
----------------
filed on a timely basis with the appropriate Tax Authorities all Tax Returns
(applicable to the Business or the Assets) on which material amounts of Taxes
are required to be shown by the applicable laws of any jurisdiction (or the
failure of which to file could reasonably be expected to have a Material Adverse
Effect on the Condition of the Business); and (ii) all such returns are true,
correct, and complete in all material respects.
Seller has (i) withheld proper and accurate amounts in compliance with the tax
withholding provisions of all applicable Laws from its employees and former
employees for all periods which, as of the date of this Agreement, remain open
under federal, state, municipal, local or other Laws for assessment or
collection, (ii) correctly and properly prepared and duly and timely filed all
returns and reports relating to Taxes withheld from its employees and former
employees and to its employer liability for employment Taxes under federal,
state, municipal, local and other Laws, and (iii) duly and timely paid and
remitted to the appropriate taxing authorities all amounts withheld from its
employees and former employees and any additional amounts that represent its
employer liability for employment Taxes under applicable Law.
Seller is a United States person within the meaning of Section 7701(a)(9) and
(a)(1) of the Code. Seller is not a "United States real property holding
corporation" as defined in Section 897(c)(2) of the Code.
There are no Tax liens upon any of the Assets of the Seller, other than liens
for ad valorem taxes not yet due and payable. None of the Assets (i) is "tax-
exempt use property" within the meaning of Section 168(h) of the Code, (ii) is
subject to a tax benefit transfer lease subject to the provisions of former
Section 168(f)(8) of the Internal Revenue Code of 1954, or (iii) secures any
debt, the interest on which is exempt from tax under Section 103 of the Code.
2.10 Legal Proceedings. Except as disclosed in Section 2.10 of the
----------------- -------------------
Disclosure Schedule (with paragraph references corresponding to those set forth
-------------------
below):
(a) there are no Actions or Proceedings pending or, to the Knowledge of
Seller, threatened against, relating to or affecting Seller with respect to the
Business or any of the Assets which (i) could reasonably be expected to result
in the issuance of an Order restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or otherwise result in a material
diminution of the benefits contemplated by this Agreement or any of the
Operative Agreements to Purchaser, or (ii) if determined adversely to Seller,
could reasonably be expected to result in (A) any injunction or other equitable
relief that would interfere in any material respect with the Business or (B)
Losses by Seller, individually or in the aggregate with Losses in respect of
other such Actions or Proceedings, exceeding $25,000;
(b) there are no facts or circumstances known to Seller that could
reasonably be expected to give rise to any Action or Proceeding that would be
required to be disclosed pursuant to clause (a) above; and
(c) there are no Orders outstanding against Seller with respect to the
Business or the Assets.
9
2.11 Compliance With Laws and Orders. Except as disclosed in Section
------------------------------- -------
2.11 of the Disclosure Schedule, Seller is not, nor has it at any time within
-------------------------------
the last five (5) years been, nor has it received any notice that it is or has
at any time within the last five (5) years been, in violation of or in default
under any Law or Order applicable to the Business or the Assets in a manner that
could reasonably be expected to have a Material Adverse Effect on the Condition
of the Business.
2.12 Employee Benefits; ERISA.
------------------------
(a) Section 2.12(a) of the Disclosure Schedule sets forth a complete
------------------------------------------
and accurate list of all Benefit Plans. True, complete and correct copies of
such plans, and any agreements, insurance contracts and trusts related thereto,
have been delivered to Purchaser or made available to Purchaser for review.
Except for the Benefit Plans described on Section 2.12(a) of the Disclosure
---------------------------------
Schedule, Seller does not sponsor, maintain, contribute to or have any material
--------
Liability with respect to any Benefit Plan. No Benefit Plan: (i) constitutes a
"multiemployer plan", as defined in Section 3(37) of ERISA (for purposes of this
Section, a "Multiemployer Plan"), (ii) is maintained in connection with any
trust described in Section 501(c)(9) of the Code, or (iii) is subject to Title
IV of ERISA or to the minimum funding standards of ERISA or the Code. Neither
Seller nor any affiliate of Seller has made or been required to make
contributions to any Multiemployer Plan. Seller has no accumulated funding
deficiencies as defined in Section 412 of the Code (whether or not waived) with
respect to any Benefit Plan. Neither Seller nor any affiliate of Seller has
incurred any material Liability under Title IV of ERISA arising in connection
with the termination of, or complete or partial withdrawal from, any plan
covered or previously covered by Title IV of ERISA. All Benefit Plans and the
administration thereof comply in all material respects with the terms thereof
and all applicable provisions of ERISA, as well as all other applicable Laws. As
of the Interim Financial Statement Date, all material accrued contribution
obligations of Seller with respect to all Benefit Plans have either been paid or
are reflected on the Interim Financial Statements as of the Interim Financial
Statement Date. For purposes of this Section 2.12 only, an "affiliate" of any
person means any other person that, together with such person, would be treated
as a single employer under Section 414 of the Code. For purposes of this Section
2.12, "material" shall mean, as applicable, a matter that would, or could
reasonably be expected to, have a Material Adverse Effect on the Condition of
the Business.
(b) With respect to each Benefit Plan, there are no actions, suits or
claims pending (other than routine claims for benefits) or, to the Knowledge of
Seller threatened, with respect to such Benefit Plan or against the assets or
fiduciaries of such Benefit Plan.
(c) Seller has not announced any plan or commitment (whether or not
legally binding) to create any additional Benefit Plans or to amend or modify
any existing Benefit Plan, and Seller has no material Liability with respect to
or in connection with providing post-employment health and welfare benefits to
any of its employees or former employees.
10
2.13 Property.
--------
(a) Seller does not own any real property. Section 2.13(a) of the
----------------------
Disclosure Schedule lists all leases of real property to which Seller is a party
-------------------
and that pertain to the Business.
(b) Seller is in possession of and has good title to, or has valid
leasehold interests in or valid rights under Contract to use, all the Tangible
Personal Property, which is reflected on the balance sheet included in the
Annual Financial Statements and tangible personal property acquired since the
Annual Financial Statement Date other than tangible personal property disposed
of since such date in the ordinary course of business consistent with past
practice. All the Tangible Personal Property is free and clear of all Liens,
other than Permitted Liens and Liens disclosed in Section 2.13(b) of the
----------------------
Disclosure Schedule, and is in good working order and condition, ordinary wear
-------------------
and tear excepted, and its use complies with all applicable Laws.
2.14 Orders; Commitments; Warranties and Returns. Section 2.14 of
------------------------------------------- ---------------
the Disclosure Schedule sets forth Seller's warranties currently made with
-----------------------
respect to the Business, and current policies with respect to returns of
products. Except as set forth in Section 2.14 of the Disclosure Schedule, Seller
---------------------------------------
has experienced no actual or, to their Knowledge, threatened claims against them
for warranty costs exceeding $25,000 in the aggregate. As used above, the term
"warranty cost" shall mean costs and expenses associated with correcting,
returning or replacing defective or allegedly defective products or services,
whether such costs and expenses arise out of claims sounding in warranty,
contract, tort or otherwise.
2.15 Intellectual Property
---------------------
(a) Section 2.15(a) of the Disclosure Schedule sets forth a list of
------------------------------------------
all patents, patent applications, copyright registrations (and applications
therefor), and trademark and trade name registrations (and applications
therefor) owned by Seller and used in the Business. Each of the federal and
state registrations relating to the foregoing Assets is valid and in full force
and effect. Section 2.15(a) of the Disclosure Schedule also sets forth a list of
------------------------------------------
any unregistered trademarks, trade names, service marks, brand names, logos or
other identifiers for the Products or otherwise used in the Business.
(b) Section 2.15(b) of the Disclosure Schedule sets forth a list of
------------------------------------------
all patents, formulae and other technology used in the Business and for which
Seller does not own all right, title and interest (other than "shrink-wrap"
software licensed in the ordinary course of business) (collectively, the "Third
Party Technology"), and all license agreements or other contracts pursuant to
which Seller has the right to use the Third Party Technology (the "Third Party
Licenses"). Seller has the lawful right to use (free of any material restriction
not expressly set forth in the Third Party Licenses) all Third Party Technology
that is incorporated or used in the Business. Seller has not received notice
that any party to any such license intends to cancel, terminate or refuse to
renew (if renewable) such license or to exercise or decline to exercise any
option or right thereunder, and Seller has used the Third Party Technology in
accordance with all of the terms of the Third Party Licenses.
11
(c) Section 2.15(c) of the Disclosure Schedule sets forth a list of
------------------------------------------
all products and formulae developed, produced, marketed or sold by Seller in the
operation of the Business as of the Closing, or during the ten years prior to
the date of this Agreement (the "Products").
(d) All the Intellectual Property Assets are owned by Seller free and
clear of all Liens, other than Permitted Liens. Other than nonexclusive
licenses granted in the ordinary course of business, Seller has not granted to
any third party any rights or permissions to use any of the Intellectual
Property Assets. Seller has not received any notice or claim (whether written,
oral or otherwise) challenging Seller's ownership or rights in the Intellectual
Property Assets or claiming that any other person or entity has any legal or
beneficial ownership with respect thereto or challenging the validity or
enforceability of the Intellectual Property Assets.
(e) Neither Seller's operation of the Business prior to Closing nor
the Intellectual Property Assets infringe, violate or interfere with or
constitute a misappropriation of any right, title or interest (including,
without limitation, any patent, copyright, trademark or trade secret right) held
by any other person or entity. Seller has not received any notice or claim
(whether written, oral or otherwise) regarding any infringement,
misappropriation, misuse, abuse or other interference with any third party
intellectual property or proprietary rights (including, without limitation,
infringement of any patent, copyright, trademark or trade secret right of any
third party) by either Seller's operation of the Business or the Intellectual
Property Assets.
(f) To the Seller's Knowledge, no other person or entity is infringing
or misappropriating the Intellectual Property Assets.
(g) Except as disclosed on Section 2.15(g) to the Disclosure Schedule,
------------------------------------------
(i) Seller has not disclosed any then-non-publicly-available aspect of any
Product to any person or entity; (ii) Seller has at all times maintained and
diligently enforced commercially reasonable procedures to protect all
confidential information of the Business; and (iii) Seller has not deposited any
rights to any Product into any escrow or similar arrangement. If, as disclosed
in Section 2.15(g) of the Disclosure Schedule, Seller has deposited any rights
------------------------------------------
to any Product into any escrow or similar arrangement, then to Seller's
Knowledge, no event has occurred that has or could reasonably form the basis for
a release of such rights from such escrow or arrangement.
(h) Section 2.15(h) of the Disclosure Schedule sets forth a list of
------------------------------------------
all Internet domain names used by Seller in the Business (collectively, the
"Domain Names"). Seller has, and upon the Closing the Purchaser will have, a
valid registration and all material rights (free of any material restriction) in
and to the Domain Names, including, without limitation, all rights necessary to
continue to conduct the Business as it is currently conducted.
(i) The Intellectual Property Assets contain all of the Intellectual
Property used or held for use in, and necessary for the conduct of, the Business
as conducted by Seller.
2.16 Reserved. [blank]
--------
2.17 Insurance. Seller maintains commercially reasonable levels of (a)
---------
insurance on its property (including leased premises) that insures against loss
or damage by fire or other
12
casualty and (b) insurance against liabilities, claims and risks of a nature and
in such amounts as are normal and customary in Seller's industry for companies
of similar size and financial condition. All insurance policies of Seller are in
full force and effect, all premiums with respect thereto covering all periods up
to and including the date this representation is made have been paid, and no
notice of cancellation or termination has been received with respect to any such
policy or binder. Such policies or binders are sufficient for compliance with
all requirements of law currently applicable to Seller and of all agreements to
which Seller is a party (except as has not had and could not reasonably be
expected to have a Material Adverse Effect) and will not in any way
automatically be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement.
2.18 Contracts.
---------
(a) Section 2.18(a) of the Disclosure Schedule (with paragraph
------------------------------------------
references corresponding to those set forth below) contains a true and complete
list of each of the following Contracts or other arrangements (true and complete
copies or, if none, reasonably complete and accurate written descriptions of
which, together with all amendments and supplements thereto and all waivers of
any terms thereof, have been delivered to Purchaser prior to the execution of
this Agreement) to which Seller is a party or by which any of the Assets is
bound:
(i) (A) all Contracts (excluding Benefit Plans) providing for a
commitment of employment or consultation services for a specified or
unspecified term to, or otherwise relating to employment or the termination
of employment of, any Employee, the name, position and rate of compensation
of each Employee party to such a Contract and the expiration date of each
such Contract; and (B) any written or unwritten representations,
commitments, promises, communications or courses of conduct (excluding
Benefit Plans and any such Contracts referred to in clause (A)) involving
an obligation of Seller to make payments in any year, other than with
respect to salary or incentive compensation payments in the ordinary course
of business, to any Employee;
(ii) all Contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of Seller to engage in any
business activity or compete with any Person in connection with the
Business or prohibiting or limiting the ability of any Person to compete
with Seller in connection with the Business;
(iii) all partnership, joint venture, shareholders' or other similar
Contracts with any Person in connection with the Business;
(iv) all Contracts with licensors, licensees, distributors, dealers,
manufacturer's representatives, sales agencies or franchises with whom
Seller deals in connection with the Business;
(v) all Contracts to which Seller is a party, or by which Seller
is bound, that relate to Intellectual Property Assets;
(vi) to the extent relevant to the Business, the Assets or the
Acquisition, all Contracts between or among Seller, on the one hand, and
any officer, director, Affiliate of
13
Associate of Seller or any Associate of any such officer, director or
Affiliate, on the other hand;
(vii) to the extent relevant to the Business, the Assets or the
Acquisition, all collective bargaining or similar labor Contracts;
(viii) to the extent relevant to the Business, the Assets or the
Acquisition, all Contracts relating to Indebtedness of Seller;
(ix) all Contracts relating to (A) the future disposition or
acquisition of any Assets, other than dispositions or acquisitions of
Inventory in the ordinary course of business consistent with past practice,
and (B) to the extent relevant to the Business, the Assets or the
Acquisition, any merger or other business combination;
(x) all Contracts containing development obligations of Seller that
have not been completed; and
(xi) all other Contracts with respect to the Business that (A)
involve the payment or potential payment, pursuant to the terms of any such
Contract, by or to Seller of more than $5,000 annually and (B) cannot be
terminated within thirty (30) days after giving notice of termination
without resulting in any material cost or penalty to Seller.
(b) Each Contract required to be disclosed in Section 2.18(a) of the
----------------------
Disclosure Schedule is in full force and effect and constitutes a legal, valid
-------------------
and binding agreement, enforceable in accordance with its terms, of each party
thereto; and except as disclosed in Section 2.18(b) of the Disclosure Schedule,
------------------------------------------
neither Seller nor, to the Knowledge of Seller, any other party to such Contract
is, or has received notice that it is, in violation or breach of or default
under any such Contract (or with notice or lapse of time or both, would be in
violation or breach of or default under any such Contract) in any respect.
2.19 Licenses. Section 2.19 of the Disclosure Schedule contains a true
-------- ---------------------------------------
and complete list of all material Licenses used or held for use in the Business
(and all pending applications for any such Licenses), setting forth the grantor,
the grantee, the function and the expiration and renewal date of each. Prior to
the execution of this Agreement, Seller has delivered to Purchaser true and
complete copies of all such Licenses. Except as disclosed in Section 2.19 of
---------------
the Disclosure Schedule:
-----------------------
(a) Seller owns or validly hold all Licenses that are material,
individually or in the aggregate, to the Business;
(b) each License is valid, binding and in full force and effect;
(c) Seller is not, nor has it received any notice that it is, in default
(or with the giving of notice or lapse of time or both, would be in default)
under any License; and
(d) As of the Closing, all such Licenses will be validly assigned to
Purchaser.
14
2.20 Affiliate Transactions. Except as disclosed in Section 2.20 of
---------------------- ---------------
the Disclosure Schedule, (a) no officer, director, Affiliate or Associate of
-----------------------
Seller or any Associate of any such officer, director or Affiliate provides or
causes to be provided any assets, services or facilities used or held for use in
connection with the Business, and (b) the Business does not provide or cause to
be provided any assets, services or facilities to any such officer, director,
Affiliate or Associate. Each of the transactions listed in Section 2.20 of the
-------------------
Disclosure Schedule is on terms that are, when considered as a whole, at least
-------------------
as favorable to Seller as are currently available at arm's-length.
2.21 Employees; Labor Relations.
--------------------------
(a) Section 2.21(a) of the Disclosure Schedule contains a list of the
------------------------------------------
name of each Employee at the date hereof, together with such Employee's position
or function, annual base salary or wages and any incentive or bonus arrangement
with respect to such Employee in effect on such date. Seller has no reason to
believe that any of such Employees will or may cease to be Employees, or will
refuse offers of employment from Purchaser, because of the consummation of the
transactions contemplated by this Agreement. Each Employee has executed a
nondisclosure and invention agreement in the form provided to Purchaser. To
Seller's Knowledge, no Employee is in violation of any agreement relating to the
relationship of such Employee with Seller.
(b) Except as disclosed in Section 2.21(b) of the Disclosure Schedule,
------------------------------------------
(i) no Employee is presently a member of a collective bargaining unit and, to
the Knowledge of Seller, there are no threatened or contemplated attempts to
organize for collective bargaining purposes any of the Employees, and (ii) no
unfair labor practice complaint or sex, age, race or other discrimination claim
has been brought during the last five (5) years against Seller with respect to
the conduct of the Business before the National Labor Relations Board, the Equal
Employment Opportunity Commission or any other Governmental or Regulatory
Authority. Seller is in material compliance with all applicable Laws relating to
the employment of labor, including, without limitation those relating to wages,
hours and collective bargaining.
2.22 Substantial Customers and Suppliers. Section 2.22 of the
----------------------------------- -------------------
Disclosure Schedule lists the twenty (20) largest customers of the Business, on
-------------------
the basis of revenues for the most recently-completed fiscal year. Section 2.22
------------
of the Disclosure Schedule lists the ten (10) largest suppliers of the Business,
--------------------------
on the basis of cost of goods or services purchased for the most recently-
completed fiscal year. Except as disclosed in Section 2.22 of the Disclosure
------------------------------
Schedule, no such customer or supplier has ceased or materially reduced its
--------
purchases from, use of the services of, sales to or provision of services to the
Business since the Annual Financial Statement Date, or to the Knowledge of
Seller, has threatened to cease or materially reduce such purchases, use, sales
or provision of services after the date hereof. Except as disclosed in Section
-------
2.22 of the Disclosure Schedule, to the Knowledge of Seller, no such customer or
-------------------------------
supplier is threatened with bankruptcy or insolvency.
2.23 Inventory. All the Inventory consists of a quality and quantity
---------
usable and salable in the ordinary course of business consistent with past
practice.
15
2.24 Entire Business. Except as disclosed in Section 2.24 of the
--------------- -------------------
Disclosure Schedule, there are no shared facilities or services which are used
-------------------
in connection with the Business and any other business or other operations of
Seller or any of Seller's Affiliates or Associates.
2.25 Disclosure. No representation or warranty contained in this
----------
Agreement, and no statement contained in the Disclosure Schedule or in any
certificate, list or other writing furnished to Purchaser pursuant to any
provision of this Agreement (including without limitation the Financial
Statements) contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein, in
the light of the circumstances under which they were made, not misleading.
2.26 Brokers. Except as disclosed in Section 2.26 of the Disclosure
------- ------------------------------
Schedule, all negotiations relative to this Agreement and the transactions
---------
contemplated hereby have been carried out by Seller directly with Purchaser
without the intervention of any Person on behalf of Seller in a manner as to
give rise to any valid claim by any Person against Purchaser for a finder's fee,
brokerage commission or similar payment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
3.01 Organization, Standing and Power. Purchaser is a limited
--------------------------------
partnership duly organized and in good standing under the laws of the State of
Delaware. Purchaser has the full limited partnership power and authority to
conduct its business as and to the extent now conducted and to own, use and
lease its assets and properties. Purchaser is duly qualified, licensed or
admitted to do business and is in good standing in each jurisdiction where the
ownership, use or leasing of its assets and properties, or the conduct or the
nature of its business makes such qualification, licensing or admission
necessary, except for such failures to be so duly qualified or licensed and in
good standing that could not reasonably be expected to have a materially adverse
effect on the financial condition of Purchaser (a "Purchaser Material Adverse
Effect").
3.02 Authority. The execution and delivery by Purchaser of this
---------
Agreement and the Operative Agreements to which it is a party, and the
performance by Purchaser of its obligations hereunder and thereunder, have been
duly and validly authorized by the Partners of Purchaser and no other
partnership action on the part of Purchaser is necessary. This Agreement has
been duly and validly executed and delivered by Purchaser and, assuming the due
authorization, execution and delivery of this Agreement and the Operative
Agreements by Seller, constitutes, and upon the execution and delivery by
Purchaser of the Operative Agreements to which it is a party, such Operative
Agreements will constitute, legal, valid and binding obligations of Purchaser
enforceable against Purchaser in accordance with their respective terms.
3.03 No Conflicts. The execution and delivery by Purchaser of this
------------
Agreement do not, and the execution and delivery by Purchaser of the Operative
Agreements to which it is a
16
party, the performance by Purchaser of its obligations under this Agreement and
such Operative Agreements and the consummation of the transactions contemplated
hereby and thereby will not: (a) conflict with or result in a violation or
breach of any of the terms, conditions or provisions of the Certificate of
Limited Partnership or Agreement of Limited Partnership of Purchaser; (b)
conflict with or result in a violation or breach of any term or provision of any
Law or Order applicable to Purchaser or any of its assets and properties; or (c)
(i) conflict with or result in a violation or breach of, (ii) constitute (with
or without notice or lapse of time or both) a default under, (iii) require
Purchaser to obtain any consent, approval or action of, make any filing with or
give any notice to any Person as a result or under the terms of, or (iv) result
in the creation or imposition of any Lien upon Purchaser or any of its assets or
properties under, any Contract or License to which Purchaser is a party or by
which any of its assets and properties is bound.
3.04 Governmental Approvals and Filings. No consent, approval or
----------------------------------
action of, filing with or notice to any Governmental or Regulatory Authority on
the part of Purchaser is required in connection with the execution, delivery and
performance of this Agreement or the Operative Agreements to which it is a party
or the consummation of the transactions contemplated hereby or thereby.
3.05 Legal Proceedings. There are no Actions or Proceedings pending
-----------------
or, to the Knowledge of Purchaser, threatened against, relating to or affecting
Purchaser or any of its assets and properties which could reasonably be expected
to result in the issuance of an Order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative Agreements. There are no
suits, actions or legal, administrative, arbitration or other proceedings or
governmental investigations against Purchaser pending or, to Purchaser's
Knowledge, threatened, which if determined adversely to Purchaser, could be
expected to result in a Purchaser Material Adverse Effect.
3.06 Brokers. All negotiations relative to this Agreement and the
-------
transaction contemplated hereby have been carried out by Purchaser directly with
Seller without the intervention of any Person on behalf of Purchaser in a manner
as to give rise to any valid claim by any Person against Seller for a finder's
fee, brokerage commission or similar payment.
3.07 Absence of Changes. Since its inception, there has not been any
------------------
Purchaser Material Adverse Affect, or any event or development which,
individually or together with other such events, could be expected to result in
a Purchaser Material Adverse Effect. Except for the Note, there are no
Liabilities against, relating to or affecting Purchaser, other than Liabilities
incurred in the ordinary course of business which in the aggregate are not
material to Purchaser.
ARTICLE IV
CERTAIN COVENANTS
4.01 Access. During the period commencing on the date of this
------
Agreement and continuing through the Closing Date, Seller, upon reasonable prior
notice from Purchaser to Seller, will (a) afford to Purchaser and its
Representatives, at all reasonable times during normal business hours, full and
complete access to Seller's personnel, professional advisors, properties,
17
contracts, books and records, and other documents and data related to the
Business, (b) furnish Purchaser and its Representatives with copies of all such
contracts, books and records, and other existing documents and data as Purchaser
may reasonably request, and (c) furnish Purchaser and its Representatives with
such additional financial, operating, and other data and information as
Purchaser may reasonably request, all of which shall be done under the
supervision of such Representatives of Seller as may be designated by Seller
from time to time.
4.02 Operation of the Business of Seller. Between the date of this
-----------------------------------
Agreement and the Closing Date, unless otherwise agreed in writing by Purchaser,
Seller will:
(a) except as otherwise allowed or required pursuant to the terms of
this Agreement, conduct the Business in the ordinary course in a manner
consistent with past practice;
(b) use commercially reasonable, good faith efforts to: (i) preserve
intact the current business organization of Seller relating to the Business,
(ii) keep available the services of the current officers, employees and agents
of Seller, and (iii) maintain the relations and goodwill with the suppliers,
customers, landlords, trade creditors, employees, agents, and others having
business relationships with Seller relating to the Business;
(c) confer with Purchaser concerning business or operational matters
relating to the Business of a significant nature;
(d) use commercially reasonable, good faith efforts to: (i) maintain
all of the Assets in their current condition, ordinary wear and tear excepted,
and (ii) maintain in full force and effect the insurance described in Section
-------
2.17 or insurance providing comparable coverage and, in the event of any damage
----
to or destruction of any of the Assets prior to the Closing Date that are
necessary for the operation of the Business as currently conducted and which
have a value in excess of Ten Thousand Dollars ($10,000.00), Seller will either,
at Seller's sole option, (A) use commercially reasonable, good faith efforts to
repair or replace any such Assets as soon as reasonably practicable after such
loss or damage occurs or (B) assign to Purchaser, at the Closing, all right,
title and interest in and to any insurance proceeds with respect to the Assets
so damaged or destroyed;
(e) maintain the Business Books and Records in the usual, regular and
ordinary manner, on a basis consistent with prior years; and
(f) report periodically to Purchaser, but in no event more frequently
than weekly and otherwise in response to Purchaser's reasonable request,
concerning the status and operation of the Business.
4.03 Negative Covenants. Except as otherwise expressly permitted by
------------------
this Agreement, between the date of this Agreement and the Closing Date, Seller
will not, without the prior written consent of Purchaser, take any action, or
fail to take any action within Seller's reasonable control, as a result of which
any of the changes or events listed in Section 2.07 would occur. In addition,
------------
without the prior written consent of Purchaser (which consent shall not be
unreasonably withheld, delayed or conditioned), Seller will not:
18
(a) settle any pending Actions or Proceedings or obtain any releases
of threatened Actions or Proceedings if (i) such settlement or release would
impose restrictions on Seller's ability to conduct the Business or may adversely
affect Seller other than by reason of Seller's payment of monies thereunder or
(ii) the amounts payable by Seller pursuant to such settlement or release would
exceed Five Thousand Dollars ($5,000.00);
(b) accelerate or delay collection of any notes or accounts receivable
in advance of or beyond their regular due dates or the dates when the same would
have been collected in the ordinary course of business consistent with past
practice; or
(c) take any action, or fail to take any action within Seller's
reasonable control, which would result in any of the representations and
warranties set forth in Article II not being true and correct on and as of the
----------
Closing Date with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date.
4.04 No Negotiation. Until such time, if any, as this Agreement is
--------------
terminated pursuant to Article XI, Seller will not, nor will Seller cause or
----------
permit any of its Affiliates or Representatives to, directly or indirectly,
solicit, initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, or provide any nonpublic information to, any Person (other than
Purchaser and its Representatives) relating to any transaction involving the
sale of the Business or any material portion of the Assets (an "Acquisition
Transaction"). Seller covenants that from the date hereof through the Closing
Date (or the termination of this Agreement), Seller will not, directly or
indirectly, enter into or authorize, or permit any Affiliate or Representative
to enter into, any negotiation, letter of intent, commitment, agreement,
understanding, or agreement in principle with any third Person for an
Acquisition Transaction. Seller covenants and agrees to inform Purchaser in
writing by facsimile within twenty-four (24) hours following the receipt (from
the date hereof through the Closing Date or the termination of this Agreement)
by Seller, its Affiliates or their Representatives of any inquiry, proposal,
offer or bid (including the terms thereof and the identity of the Person making
such inquiry, proposal, offer or bid) in respect of any Acquisition Transaction.
4.05 Governmental Filings. As promptly as practicable after the date
---------------------
of this Agreement, Seller will make all filings that are required under
applicable Laws to be made by Seller in order to consummate the Acquisition.
Between the date of this Agreement and the Closing Date, Seller and Purchaser
will cooperate with each other with respect to all filings or notices that
Purchaser elects to make or is required by applicable Laws to make in connection
with the Acquisition.
4.06 Supplementation and Correction of Information. Between the date
---------------------------------------------
of this Agreement and the Closing Date, Seller will promptly correct and
supplement the information set forth on the Disclosure Schedule delivered by
Seller pursuant to this Agreement in order to cause such Disclosure Schedule to
remain correct and complete in all respects. Seller's delivery to Purchaser of
any corrections or supplements will, without further notice or action on the
part of Seller or Purchaser, immediately and automatically constitute an
amendment to the Disclosure Schedule to which such corrections and supplements
relate; provided, however, that solely for purposes of determining whether the
condition precedent pursuant to Section 5.01 has been
------------
19
satisfied, or whether Purchaser has the right to terminate this Agreement
pursuant to Sections 10.01(b) or (d), any such amendment to the Disclosure
------------------------
Schedule may be disregarded by Purchaser in its sole discretion.
4.07 Best Efforts; Further Assurances; Cooperation. Subject to the
---------------------------------------------
other provisions of this Agreement, the parties hereto shall each use their
reasonable, good faith efforts to perform their obligations herein and to take,
or cause to be taken or do, or cause to be done, all things necessary, proper or
advisable under applicable law to satisfy all conditions to the obligations of
the parties under this Agreement and to cause the transactions contemplated
herein to be effected in accordance with the terms hereof and shall cooperate
fully with each other and their respective Representatives in connection with
any steps required to be taken as a part of their respective obligations under
this Agreement.
4.08 Public Announcements. Neither party hereto will issue any press
--------------------
release or make any other public announcement relating to the transactions
contemplated by this Agreement without the prior consent of the other party
hereto, except that a party may make any disclosure required to be made under
applicable law or stock exchange rule if such party determines in good faith
that it is necessary to do so and, if practicable, gives prior notice to the
other party; provided, that such other party has a reasonable prior opportunity
to approve any information regarding such other party.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder to purchase the Assets and to assume and
to pay, perform and discharge the Assumed Liabilities are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by Purchaser in its sole
discretion):
5.01 Representations and Warranties. Each of the representations and
------------------------------
warranties made by Seller in this Agreement shall be true and correct when made
and, except to the extent such representations and warranties speak as of an
earlier date, shall be true and correct in all material respects on and as of
the Closing Date, as though made on that date (it being agreed that any
representations and warranties already expressly qualified herein as to
materiality shall be true and correct in all respects in accordance with their
terms including such qualification).
5.02 Performance. Seller shall have performed and complied with, in
-----------
all material respects, each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by Seller at or before the
Closing.
5.03 Closing Certificates. Seller shall have delivered to Purchaser:
--------------------
(a) a certificate, dated the Closing Date and executed by an authorized officer
of Seller, in form and substance reasonably satisfactory to Purchaser,
certifying that the conditions in Sections 5.01, 5.02 and 5.04 have been
fulfilled (or, in the case of 5.04, such event is not required); and (b) a
certificate, dated the Closing Date and executed by the Secretary of Seller, in
form and substance reasonably satisfactory to Purchaser, as to the authenticity
of the actions of the Board of Directors
20
(and, if required, shareholders) authorizing the transactions contemplated
herein and in the Operative Agreements. Certified copies of Seller's certificate
or articles of incorporation and bylaws shall be attached to the secretary's
certificate.
5.04 Shareholder Approval. If required, the shareholders of Seller
--------------------
shall have approved the Acquisition in accordance with applicable Laws and
Seller's articles of incorporation.
5.05 Orders and Laws. There shall not be in effect on the Closing
---------------
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements.
5.06 Regulatory Consents and Approvals. All consents, approvals and
---------------------------------
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser and Seller to perform their obligations under this
Agreement and the Operative Agreements and to consummate the transactions
contemplated hereby and thereby shall have been duly obtained, made or given,
and all terminations or expirations of waiting periods imposed by any
Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement and the Operative Agreements, shall
have occurred.
5.07 Third Party Consents. All consents (or in lieu thereof waivers)
--------------------
to the performance by Seller of their respective obligations under this
Agreement and the Operative Agreements or to the consummation of the
transactions contemplated hereby and thereby as are required under any Contract
to which Seller is a party or by which any of the Assets are bound shall have
been obtained.
5.08 Opinion of Counsel. Purchaser shall have received the opinion
------------------
of Xxxxxxx Coie LLP, counsel to Seller, dated the Closing Date, substantially in
the form and to the effect of Exhibit B hereto.
---------
5.09 Deliveries. Seller shall have delivered to Purchaser the
----------
Assignment Instruments.
5.10 Employment and Non-Competition Agreements; Employees. Xxxxxxx
----------------------------------------------------
X. Xxxxxxx shall have executed and delivered to Purchaser the Employment and
Non-Competition Agreements, substantially in the form attached hereto as Exhibit
-------
C.
-
5.11 Reserved. [Blank].
--------
5.12 Proceedings. All proceedings to be taken on the part of Seller
-----------
in connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Purchaser, and Purchaser shall have received copies of all such
documents and other evidences as Purchaser may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
21
5.13 Termination of Financing Statements. There shall have been
-----------------------------------
terminated all UCC-1 and other financing statements on the Assets.
5.14 No Material Adverse Change. Since the date of this Agreement
--------------------------
through the Closing Date, no event shall have occurred that has had or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Condition of the Business.
5.15 Tax Matters. Seller shall have delivered to Purchaser, in form,
-----------
date and content reasonably acceptable to Purchaser, a Certificate of Non-
Foreign Status, as defined in the Code, duly executed by the Seller pursuant to
Section 1445 of the Code and the regulations promulgated thereunder.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder to sell the Assets are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by Seller in its sole
discretion):
6.01 Representations and Warranties. Each of the representations and
------------------------------
warranties made by Purchaser in this Agreement shall be true and correct when
made and, except to the extent such representations and warranties speak as of
an earlier date, shall be true and correct in all material respects on and as of
the Closing Date, as though made on that date (it being agreed that any
representations and warranties already expressly qualified herein as to
materiality shall be true and correct in all respects in accordance with their
terms including such qualification).
6.02 Performance. Purchaser shall have performed and complied with,
-----------
in all material respects, each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by Purchaser at or before the
Closing.
6.03 Officers' Certificate; Secretary's Certificate. Purchaser shall
----------------------------------------------
have delivered to Seller: (a) a certificate, dated the Closing Date and executed
by an authorized officer of the General Partner of Purchaser, in form and
substance reasonably satisfactory to Seller, certifying that the conditions in
Sections 6.01 and 6.02 have been fulfilled; and (b) a certificate, dated the
Closing Date and executed by the Secretary of the General Partner of Purchaser,
in form and substance reasonably satisfactory to Seller, as to the authenticity
of the actions of the Partners of Purchaser authorizing the transactions
contemplated herein and in the Operative Agreements. Certified copies of
Purchaser's Certificate of Limited Partnership and Agreement of Limited
Partnership shall be attached to such secretary's certificate.
6.04 Orders and Laws. There shall not be in effect on the Closing
---------------
Date any Order or Law that became effective after the date of this Agreement
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the Operative Agreements.
22
6.05 Regulatory Consents and Approvals. All consents, approvals and
---------------------------------
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Seller and Purchaser to perform their obligations under this
Agreement and the Operative Agreements and to consummate the transactions
contemplated hereby and thereby shall have been duly obtained, made or given,
and all terminations or expirations of waiting periods imposed by any
Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement and the Operative Agreements shall
have occurred.
6.06 Deliveries. Purchaser shall have delivered to Seller the
----------
Assumption Agreement and the other Assumption Instruments.
6.07 Proceedings. All proceedings to be taken on the part of
-----------
Purchaser in connection with the transactions contemplated by this Agreement and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Seller, and Seller shall have received copies of all such documents
and other evidences as Seller may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
7.01 Survival of Representations, Warranties, Covenants and
------------------------------------------------------
Agreements. Notwithstanding any right of Purchaser (whether or not exercised) to
----------
investigate the Business or any right of any party (whether or not exercised) to
investigate the accuracy of the representations and warranties of the other
party contained in this Agreement, Purchaser has the right to rely fully upon
the representations and warranties of Seller contained in this Agreement. The
representations and warranties contained in Sections 2.02 (Authority;
Execution), 2.08 (No Undisclosed Liabilities), 2.09 (Taxes), 2.11 (Compliance
With Laws and Orders), 2.12 (Employee Benefits; ERISA), and 2.13 (Property)
shall survive the Closing without contractual limitation; each other
representation and warranty contained in this Agreement will survive the Closing
for a period of one (1) year. The covenants and agreements of Seller and the
other parties contained in this Agreement will survive the Closing until all
obligations with respect thereto have been performed or shall have been
terminated in accordance with their terms.
ARTICLE VIII
INDEMNIFICATION; POST-CLOSING OBLIGATIONS
8.01 Indemnification. Subject to the other Sections of this Article
--------------- -------
VIII, Seller shall indemnify the Purchaser Indemnified Parties in respect of,
----
and hold each of them harmless from and against, any and all Losses suffered,
incurred or sustained by any of them or to which any of them becomes subject,
resulting from, arising out of or relating to (i) any misrepresentation or
breach of warranty on the part of Seller contained in this Agreement; or (ii)
any nonfulfillment of or failure to perform any covenant or agreement on the
part of Seller contained in this Agreement.
23
8.02 Method of Asserting Claims. All claims for indemnification by
--------------------------
any Indemnified Party under Section 8.01 will be asserted and resolved as
------------
follows:
(a) In the event any claim or demand in respect of which an
Indemnified Party might seek indemnity under Section 8.01 is asserted against or
------------
sought to be collected from such Indemnified Party by a Person other than a
Purchaser Indemnified Party (a "Third Party Claim"), the Indemnified Party shall
deliver a Claim Notice with reasonable promptness to the Indemnifying Party. If
the Indemnified Party fails to provide the Claim Notice with reasonable
promptness after the Indemnified Party receives notice of such Third Party
Claim, the Indemnifying Party will not be obligated to indemnify the Indemnified
Party with respect to such Third Party Claim, but only to the extent that the
Indemnifying Party's ability to defend has been irreparably prejudiced by such
failure of the Indemnified Party. The Indemnifying Party will notify the
Indemnified Party as soon as practicable within the Dispute Period whether the
Indemnifying Party disputes its liability to the Indemnified Party under Section
-------
8.02 and whether the Indemnifying Party desires, at its sole cost and expense,
----
to defend the Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this
Section 8.02(a), then the Indemnifying Party will have the right to defend,
---------------
with counsel reasonably satisfactory to the Indemnified Party, at the sole
cost and expense of the Indemnifying Party, such Third Party Claim by all
appropriate proceedings, which proceedings will be reasonably, vigorously
and diligently prosecuted by the Indemnifying Party to a final conclusion
or will be settled at the discretion of the Indemnifying Party (but only
with the consent of the Indemnified Party in the case of any settlement
that provides for any relief other than the payment of monetary damages or
that provides for the payment of monetary damages as to which the
Indemnified Party will not be indemnified in full by reason of Section
--------
8.03). The Indemnifying Party will have full control of such defense and
-----
proceedings, including any compromise or settlement thereof; provided,
--------
however, that the Indemnified Party may, at the sole cost and expense of
-------
the Indemnified Party, at any time subsequent to the delivery of a Claim
Notice to the Indemnified Party and prior to the Indemnifying Party's
delivery of the notice referred to in the first sentence of this Section
-------
8.02(a)(i), file any motion, answer or other pleadings or take any other
----------
action that the Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests; and provided further, that if
-------- -------
requested by the Indemnifying Party, the Indemnified Party will, at the
sole cost and expense of the Indemnifying Party, provide reasonable
cooperation to the Indemnifying Party in contesting any Third Party Claim
that the Indemnifying Party elects to contest; and provided, further, that
-------- -------
the Indemnified Party may choose separate counsel at the sole cost and
expense of the Indemnified Party in the event that a conflict of interest
arises between the Indemnified Party and the Indemnifying Party. The
Indemnified Party may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this Section 8.02(a)(i), and except as provided in the
------------------
preceding sentence, the Indemnified Party will bear its own costs and
expenses with respect to such participation. Notwithstanding the foregoing,
the
24
Indemnified Party may take over the control of the defense
or settlement of a Third Party Claim at any time if it irrevocably waives
its right to indemnity under Section 8.02 with respect to such Third Party
------------
Claim.
(ii) If the Indemnifying Party fails to assume the defense of the Third
Party Claim within the Dispute Period or fails to prosecute reasonably,
vigorously and diligently or settle the Third Party Claim, then the
Indemnified Party will have the right to defend, at the sole cost and
expense of the Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings will be prosecuted by the Indemnified Party
in a reasonable, vigorous and diligent manner and in good faith or will be
settled at the discretion of the Indemnified Party (with the consent of the
Indemnifying Party, which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that if
-------- -------
requested by the Indemnified Party, the Indemnifying Party will, at the
sole cost and expense of the Indemnifying Party, provide reasonable
cooperation to the Indemnified Party and its counsel in contesting any
Third Party Claim which the Indemnified Party is contesting.
Notwithstanding the foregoing provisions of this Section 8.02(a)(ii), if
-------------------
the Indemnifying Party has notified the Indemnified Party within the
Dispute Period that the Indemnifying Party disputes its liability hereunder
to the Indemnified Party with respect to such Third Party Claim and if such
dispute is resolved in favor of the Indemnifying Party in the manner
provided in clause (iii) below, the Indemnifying Party will not be required
to bear the costs and expenses of the Indemnified Party's defense pursuant
to this Section 8.02(a)(ii) or of the Indemnifying Party's participation
-------------------
therein at the Indemnified Party's request, and the Indemnified Party will
reimburse the Indemnifying Party in full for all reasonable costs and
expenses incurred by the Indemnifying Party in connection with such
litigation. The Indemnifying Party may participate in, but not control,
any defense or settlement controlled by the Indemnified Party pursuant to
this Section 8.02(a)(ii), and the Indemnifying Party will bear its own
-------------------
costs and expenses with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified Party that it
does not dispute its liability to the Indemnified Party with respect to the
Third Party Claim under Section 8.02, then the Loss in the amount specified
------------
in the Claim Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 8.02 and the Indemnifying Party (as
------------
applicable) shall pay the amount of such Loss to the Indemnified Party on
demand. If the Indemnifying Party has disputed its liability with respect
to such claim, the Indemnifying Party and the Indemnified Party will
proceed in good faith to negotiate a resolution of such dispute, and if not
resolved as set forth in Section 11.14, such dispute shall be resolved in
-----
accordance with litigation in a court of competent jurisdiction.
(b) In the event any Indemnified Party has a claim under Section 8.02
------------
against any Indemnifying Party that does not involve a Third Party Claim, the
Indemnified Party shall deliver an Indemnity Notice with reasonable promptness
to the Indemnifying Party. The failure by any Indemnified Party to give the
Indemnity Notice shall not impair such party's rights hereunder except to the
extent that an Indemnifying Party demonstrates that it has been irreparably
prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party
that it does not dispute the claim described in such Indemnity Notice,
25
then the Loss in the amount specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under Section 8.02 and
------------
the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability
with respect to such claim, the Indemnifying Party and the Indemnified Party
will proceed in good faith to negotiate a resolution of such dispute, and if not
resolved through negotiations in accordance with the procedures established in
Section 11.14, such dispute shall be resolved by litigation in a court of
-------------
competent jurisdiction.
8.03 Liability Limits. Notwithstanding anything to the contrary set
----------------
forth herein:
(a) The amount of Losses required to be paid by any party to
indemnify any other party pursuant to this Article VIII as a result of any
------------
Losses shall be reduced to the extent of any amounts actually received by such
other party after the Closing Date pursuant to the terms of the insurance
policies (if any) covering such claim.
(b) The indemnification obligations of the parties pursuant to this
Article VIII shall be limited to actual damages and shall not, except in the
------------
case of fraud or a willful breach of this Agreement, include incidental,
consequential, indirect, punitive, or exemplary damages; provided, however that
any incidental, consequential, indirect, punitive, or exemplary damages
recovered pursuant to a Third Party Claim (including Governmental or Regulatory
Authorities) against a Person entitled to indemnity pursuant to this Article
-------
VIII shall be included in the damages recoverable under such indemnity.
----
(c) No Purchaser Indemnified Party shall be entitled to
indemnification under this Agreement for any misrepresentation or breach of
warranty or nonfulfillment of or failure to perform any covenant or agreement by
Seller unless the aggregate of Seller's indemnification obligations to the
Purchaser Indemnified Parties pursuant to this Agreement exceeds Fifty Thousand
Dollars ($50,000) (the "Threshold") but in such event the Purchaser Indemnified
Parties shall be entitled to indemnification for all misrepresentations or
breaches of warranties or nonfulfillment or failure to perform covenants or
agreements to the extent such obligations exceed the Threshold subject, however,
to a maximum liability of Seller of Two Million Two Hundred Fifty Thousand
Dollars ($2,250,000) in the aggregate.
(d) Except in the case of a claim based on fraud or willful breach
of this Agreement or in the case of an equitable remedy (including, without
limitation, as contemplated by Section 8.06(c) hereof), the limitations
contained in this Section 8.03 shall apply to all rights of recovery that the
Purchaser Indemnified Parties may have against Seller.
8.04 Use of Name. From and after the Closing, Seller shall not use,
-----------
directly or indirectly, the name "Cascade" or any similar name or derivative
thereof and shall, at Purchaser's reasonable request, take all necessary action
to allow Purchaser the benefit of Seller's rights to such name.
8.05 Employee Matters.
----------------
(a) Purchaser shall have no liability in respect of any Employees for
salary, compensation, severance, health, welfare, retirement or other benefits
arising out of employment
26
with Seller. Except for those persons listed in Section 8.06(a) of the
----------------------
Disclosure Schedule, Seller shall terminate the employment of all Employees
-------------------
effective immediately prior to the Closing Date, and Purchaser shall offer
employment to such Employees to commence effective on the Closing Date or with
respect to any Employee on authorized leave on the Closing Date, to commence
effective on the date such Employee returns from authorized leave; provided that
any Employee on authorized leave returns to work within thirty (30) days of the
Closing Date, or for short term disability or worker's compensation, or Family
Medical Leave Act of 1993, as amended (and "FMLA"), on the date the Employee may
return under the provisions of Seller's short term disability plan or FMLA; and
provided further that any Employee who is on any type of leave as a result of
injury or illness (including a worker's compensation leave) shall be offered
employment only if such person can provide a medical release satisfactory to
Purchaser which evidences his/her liability to perform the essential functions
of his/her regular work, with or without reasonable accommodation.
(b) Seller shall be responsible for providing COBRA continuation
coverage to all Employees of Seller, including their spouses and dependents, who
lose coverage under any group health plan maintained, administered or sponsored
by the Seller, as a result of the transactions contemplated herein. Seller shall
indemnify and hold Purchaser harmless against any and all damages, losses and
liabilities associated with or related to the Seller's failure to comply with
COBRA.
(c) Purchaser shall be solely responsible for providing any notice
required under the Worker Adjustment and Training Notification Act (the "WARN
Act") by virtue of any actions taken by Purchaser following the Closing, and
shall indemnify and hold Seller harmless from any liability arising from any
failure of Purchaser to fully comply with the requirements of WARN Act. Seller
shall be solely responsible for complying with any applicable provisions of the
WARN Act with respect to any actions taken by or prior to and in connection with
Closing and will indemnify and hold Purchaser harmless from any liability
arising from the failure of Seller to comply with WARN Act.
(d) For a period of at least 12 months after the Closing Date,
Purchaser shall provide, to the Employees, employee benefits that are no less
favorable in the aggregate than those Benefit Plans provided by Seller to such
Employees immediately prior to the Closing Date. With respect to any employee
benefit plans, contracts and arrangements that are sponsored, maintained or
contributed to by the Purchaser or its Affiliates and in which an Employee
becomes eligible to participate after the Closing Date ("Purchaser Benefit
Plan"), Purchaser shall provide, and shall cause its Affiliates to provide, each
Employee with eligibility and vesting credit (not benefit accrual credit) equal
to the amount of service credited by Seller and its Affiliates to such Employee
prior to the Closing Date. With respect to each Employee under a Purchaser
Benefit Plan, Purchaser shall (i) waive, and shall cause its Affiliates to
waive, all limitations (that are not applicable to such Employee on the Closing
Date) as to preexisting conditions, exclusions and waiting periods that
otherwise would become applicable to such Employee (and his or her covered
spouse and dependents), and (ii) provide such Employee (and his or her covered
spouse and dependants) with credit for any co-payments and deductibles paid by
such Employee prior to the Closing Date in satisfying any such Purchaser Benefit
Plan's deductible or out-of-pocket requirements.
27
8.06 Covenants Against Competition.
-----------------------------
(a) In order to induce Purchaser to enter into this Agreement and
consummate the transactions contemplated hereby, Seller agrees that it will not,
without the prior written consent of Purchaser, for its own account or jointly
with another, directly or indirectly, for or on behalf of any Person, as
principal, agent, shareholder, participant, partner, promoter, director,
officer, manager, employee, consultant, sales representative or otherwise,
except for the benefit of the Purchaser or its Affiliates:
(i) for a period of three (3) years from the date of the Closing,
engage or invest in, or own, control, manage or participate in the
ownership, control or management of, or render services or advice to, any
business engaged, or which it reasonably knows is undertaking to become
engaged, in a Competing Business (except for: (i) its limited partnership
interest in the Purchaser, and (ii) engaging in activities the same as or
similar to the Business only with respect to skin care, hair care and wound
care).
(ii) for a period of three (3) years from the date of the Closing
solicit, or assist in the solicitation of, any Person to whom Seller sold
or provided any products or services related to the Business on, or during
the two (2) year period prior to, the date of the Closing, for the purpose
of obtaining the patronage of such Person for the purchase of any
competitive products or services (except for: (i) its limited partnership
interest in the Purchaser, and (ii) engaging in activities the same as or
similar to the Business only with respect to skin care, hair care and wound
care);
(iii) for a period of three (3) years from the date of the Closing,
solicit, or assist in the solicitation of, any Person employed by the
Purchaser (as an employee, independent contractor or otherwise), to
terminate such employment, whether or not such employment is pursuant to a
contract and whether or not such employment is at will; or
(iv) use, disclose or reveal to any Person, any Confidential
Information (as defined below) of the Purchaser; provided, however, that
the obligations of this clause (iv) shall terminate with respect to any
business information (1) that does not constitute a trade secret under
applicable Law upon the expiration of five (5) years after the date of the
Closing, (2) any information that was in the public domain prior to the
disclosure thereof; (3) any information that comes into the public domain
through no fault of Seller; or (4) any information that is required to be
disclosed by an Order or by any Law.
(b) Notwithstanding anything herein to the contrary, the covenants
described in this Section 8.06 shall apply only if the transactions contemplated
------------
hereby are consummated at the Closing. If the transactions contemplated herein
are consummated, "Confidential Information" of Purchaser shall be deemed to
include all Confidential Information of Seller related to the Business, and
Seller shall be subject to the obligations of non-use and non-disclosure
contained in this Section 8.06 with respect to all of such information.
------------
(c) Notwithstanding anything contained in this Agreement to the
contrary, Seller acknowledges and agree that Purchaser's remedy at law for a
breach or threatened breach of any of the provisions of Sections 8.06(a) would
----------------
be inadequate and, in recognition of that fact, in the
28
event of a breach or threatened breach by Seller of the provisions of Sections
--------
8.06(a), it is agreed that, in addition to its remedies at law, Purchaser shall
-------
be entitled to equitable relief in the form of specific performance, temporary
restraining order, temporary, preliminary, or permanent injunction, or any other
equitable remedy which may then be available, including but not limited to an
equitable accounting of all earnings, profits and other benefits arising from or
in connection with such violation, without posting bond. Seller agrees not to
oppose Purchaser's request for any of the above relief on the grounds that
Purchaser has not been irreparably injured or that Purchaser has an adequate
remedy at law or that such equitable relief is inappropriate. Nothing set forth
in this Section 8.06(c) shall be construed as prohibiting Purchaser from
---------------
pursuing any other rights and remedies available to it for such breach or
threatened breach.
8.07 Further Assurances; Post-Closing Cooperation.
--------------------------------------------
(a) At any time or from time to time after the Closing, at
Purchaser's request and without further consideration, Seller shall execute and
deliver to Purchaser such other instruments of sale, transfer, conveyance,
assignment and confirmation, provide such materials and information and take
such other actions as Purchaser may reasonably deem necessary or desirable in
order more effectively to transfer, convey and assign to Purchaser, and to
confirm Purchaser's title to, all of the Business and the Assets, and, to the
full extent permitted by Law, to put Purchaser in actual possession and
operating control of the Assets and to assist Purchaser in exercising all rights
with respect thereto, and otherwise to cause Seller to fulfill their obligations
under this Agreement and the Operative Agreements.
(b) Effective on the Closing Date, Seller hereby constitutes and
appoints Purchaser the true and lawful attorney of Seller, with full power of
substitution, in the name of Seller or Purchaser, but on behalf of and for the
benefit of Purchaser: (i) to demand and receive from time to time any and all
the Assets and to make endorsements and give receipts and releases for and in
respect of the same and any part thereof; (ii) to institute, prosecute,
compromise and settle any and all Actions or Proceedings (other than those
within the Excluded Assets) that Purchaser may deem proper in order to collect,
assert or enforce any claim, right or title of any kind in or to the Assets;
(iii) to defend or compromise any or all Actions or Proceedings (other than
those within the Retained Liabilities) in respect of any of the Assets; and (iv)
to do all such acts and things in relation to the matters set forth in the
preceding clauses (i) through (iii) as Purchaser reasonably shall request.
Seller hereby acknowledges that the appointment hereby made and the powers
hereby granted are coupled with an interest and are not and shall not be
revocable by it in any manner or for any reason.
8.08 Third-Party Consents. To the extent that any contract, lease,
--------------------
license or other agreement included in the Assets is not assignable or
transferable without the consent of another party, this Agreement shall not
constitute an assignment or an attempted assignment thereof if such assignment
or attempted assignment would constitute a breach thereof (an "Unassigned
Item"). Seller shall use commercially reasonable efforts to obtain the
necessary consent to the assignment or transfer of all Unassigned Items, and
Purchaser shall cooperate in those efforts. The beneficial interest in and to
each Unassigned Item shall in any event pass to Purchaser at Closing, and Seller
covenants and agrees to cooperate with Purchaser in any reasonable arrangement
to provide Purchaser with Seller's entire interest in the benefits under each
29
Unassigned Item. If and only if such reasonable arrangement can be made,
Purchaser agrees to accept the burdens and perform the obligations under such
Unassigned Item. Furthermore, if the other party's consent is subsequently
obtained (without any modification thereto which is adverse to Purchaser),
Purchaser shall at such time agree to assume all liabilities and obligations
thereunder at which time such Unassigned Item shall become an Asset. If and to
the extent that such arrangement cannot be made, Purchaser shall have no
obligation pursuant to Section 1.02(a) or otherwise with respect to any such
---------------
Contract. The provisions of this Section 8.08 shall not affect the right of
------------
Purchaser not to consummate the transactions contemplated by this Agreement if
the condition to its obligations hereunder contained in Section 5.06 has not
------------
been fulfilled.
8.09 Except as set forth in Sections 8.11 and 8.12 below, Seller shall
be solely responsible for all Taxes relating to the Assets and the Business for
all periods (and portions thereof) ending on or before the Closing Date, and
shall indemnify and hold harmless Purchaser with respect thereto.
8.10 Any income Tax (federal, state and foreign) consequences to
Seller arising from the consummation of the transactions contemplated by this
Agreement are for the sole benefit or account of Seller.
8.11 All transfer, documentary, use, stamp, registration and other
such Taxes and fees (including any penalties and interest) incurred in
connection with the transfer of the Assets to Purchaser shall be paid in equal
parts by Purchaser and Seller when due. The Purchaser and the Seller shall
cooperate to obtain all available exemptions from the foregoing Taxes. All real
and personal property Taxes imposed on or with respect to any Assets (other than
on or with respect to the Excluded Assets, which real and personal property
Taxes shall be the sole responsibility of the Seller) shall be prorated between
the Seller and the Purchaser. The Seller shall be liable for all real and
personal property Taxes payable in the calendar year 2000. Purchaser shall be
liable for all real and personal property Taxes payable the calendar year 2002
and thereafter. Real and personal property Taxes payable in the calendar year
2001 shall be prorated based on the number of days in the calendar year 2001
before and after the Closing Date. The Seller shall be responsible for the same
proportion of such real and personal property Taxes as the part of the calendar
year 2001 prior to the Closing Date bears to the whole of the calendar year
2001. The Purchaser shall be responsible for the remainder of such real and
personal property Taxes payable in the calendar year 2001. If an amount is owed
to one of the parties pursuant to the proration of the real or personal property
Taxes, the party to whom it is owing shall give notice to the other party, and
such other party shall have thirty (30) days from such notice to make payment.
If such amount is not paid within thirty (30) days of such notice, such amount
shall accrue interest at eighteen percent (18%) per annum until paid in full.
Notwithstanding anything in this Agreement to the contrary, the amount of a
party's obligations under this Section 8.11 shall not be limited (including
shall not be limited by Section 8.03(c) hereof).
8.12 All Taxes and assessments or installments thereof that are a lien
upon the Assets, or which otherwise relate to the Assets and are due and
payable, as of the Closing Date shall be paid by the Seller on or before the
Closing Date.
30
8.13 Purchaser shall pay and duly perform all the liabilities, related
to the Assets and their operation, that accrue or arise subsequent to the
Closing Date.
8.14 License to Seller. On the Closing Date and subject to Seller's
-----------------
fulfillment of its duties, obligations, representations and warranties to
Purchaser under this Agreement, Purchaser grants to Seller a royalty-free, non-
exclusive, worldwide license in and to the Intellectual Property in existence on
the date hereof that is used on the date hereof by Seller in the conduct of the
Retained Business (the "Licensed IP"), to use the Licensed IP only in the
conduct of the Retained Business. This Section 8.14 shall not reduce Seller's
obligations (or Purchaser's rights) under, or otherwise modify, Section 8.06
hereof. During the three (3) year period following the Closing, Seller shall not
sublicense or otherwise transfer any rights, title or license in, to or under
any such Licensed IP, unless such sublicensee or transferee, as applicable,
expressly agrees to observe the same restrictions and obligations of Seller
pursuant to this Section 8.14. Upon any noncompliance with the immediately
preceding sentence, all of Seller's (and its assignees') right, title and
interest in, to and under the Licensed IP shall immediately and automatically
terminate, otherwise the license granted under this Section shall be perpetual.
PURCHASER DISCLAIMS, AND SELLER UNCONDITIONALLY WAIVES, ALL IMPLIED GUARANTEES
AND WARRANTIES (INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF (I)
MERCHANTABILITY, (II) FITNESS FOR A PARTICULAR PURPOSE, WHETHER OR NOT ANY
PURPOSE HAS BEEN NOTIFIED TO THE LICENSOR, OR (III) NON-INFRINGEMENT) RELATING
TO OR ARISING OUT OF THE LICENSED IP. Other than as expressly set forth herein,
Purchaser retains all right, title and license in and to the Licensed IP, and no
license granted pursuant to this Section 8.14 shall restrict, impede or
otherwise limit the rights, title, and licenses granted to Purchaser pursuant to
this Agreement or otherwise.
8.15 Chemical Removal. Seller shall, no later than the expiration of
----------------
thirty (30) days following the date hereof, fully (and in complete compliance
with all applicable Laws) and at Seller's sole cost and expense, remove and
dispose of all of Seller's metallic salts, solvents, chlorides, and other
chemicals (collectively, "Seller Chemicals") that are located on the date hereof
on the "Subleased Premises" (as such term is defined in the Sublease),
including, without limitation, all Seller Chemicals located on the date hereof
in the storage cabinets in the research and development laboratory of such
Subleased Premises.
ARTICLE IX
DEFINITIONS
9.01 Definitions.
-----------
(a) Defined Terms. As used in this Agreement, the following defined
-------------
terms have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding, arbitration or
Governmental or Regulatory Authority investigation or audit.
31
"Affiliate" means any Person that directly, or indirectly through one of
more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person whether by Contract or otherwise.
"Agreement" means this Asset Purchase Agreement and the Exhibits, the
Disclosure Schedule and the Schedules hereto and the certificates delivered in
accordance with Sections 5.03 and 6.03, as the same shall be amended from time
------------- ----
to time.
"Annual Financial Statement Date" means the last day of the most recent
fiscal year of the Business for which Financial Statements were filed with the
Securities and Exchange Commission.
"Annual Financial Statements" means the Financial Statements for the most
recent fiscal year of the Business that were filed with the Securities and
Exchange Commission.
"Assets" has the meaning ascribed to it in Section 1.01(a).
---------------
"Acquisition" means the purchase and sale of the Assets pursuant to this
Agreement.
"Assignment Instruments" has the meaning ascribed to it in Section 1.04.
------------
"Associate" means, with respect to any Person, any corporation or other
business organization of which such Person is an officer or partner or is the
beneficial owner, directly or indirectly, of ten percent (10%) or more of any
class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar capacity and any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person.
"Assumed Agreements" has the meaning ascribed to it in Section 1.01(a)(vi).
-------------------
"Assumed Liabilities" has the meaning ascribed to it in Section 1.02(a).
---------------
"Assumption Agreement" has the meaning ascribed to it in Section 1.04.
------------
"Assumption Instruments" has the meaning ascribed to it in Section 1.04.
------------
"Benefit Plan" means any Plan established by Seller, or any predecessor or
Affiliate of Seller, existing at the Closing Date or prior thereto, to which
Seller contributes or has contributed on behalf of any Employee, former Employee
or director, or with respect to which Seller has or may have any Liability, or
under which any Employee, former Employee or director of Seller or any
beneficiary thereof is covered, is eligible for coverage or has benefit rights.
"Xxxx of Sale" has the meaning ascribed to it in Section 1.04.
------------
"Books and Records" of any Person means all files, documents, instruments,
papers, books and records relating to the business, operations, condition of
(financial or other), results of operations and assets and properties of such
Person, including without limitation financial statements, Tax Returns and
related work papers and letters from accountants, budgets, pricing guidelines,
ledgers, journals, deeds, title policies, minute books, stock certificates and
books, stock transfer ledgers, Contracts, Licenses, customer lists, computer
files and programs, retrieval programs, operating data and plans and
environmental studies and plans.
32
"Business" has the meaning ascribed to it in the forepart of this
Agreement.
"Business Books and Records" has the meaning ascribed to it in Section
-------
1.01(a)(ix).
-----------
"Business Day" means a day other than Saturday, Sunday or any day on which
banks located in Seattle, Washington are authorized or obligated to close.
"Claim Notice" means written notification pursuant to Section 8.02(a) of a
---------------
Third Party Claim as to which indemnity under Section 8.01 is sought by an
------------
Indemnified Party, enclosing a copy of all papers served, if any, and specifying
the nature of and basis for such Third Party Claim and for the Indemnified
Party's claim against the Indemnifying Party under Section 8.01, together with
------------
the amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such Third Party Claim.
"Closing" means the closing of the transactions contemplated by Section
-------
1.04.
----
"Closing Date" has the meaning ascribed to it in Section 1.04.
------------
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"Competing Business" means a business engaged in providing specialty
chemical and quality control, product and process development, validation,
analytical chemistry services or lyophilization for biotech and pharmaceutical
companies (excluding the development or production of metallic peptides).
"Condition of the Business" means the business, condition (financial or
otherwise), results of operations, assets, properties and prospects of the
Business.
"Contract" means any agreement, lease, license, evidence of Indebtedness,
mortgage, indenture, security agreement or other contract (whether written or
oral).
"Disclosure Schedule" means the record delivered to Purchaser by Seller
herewith and dated as of the date hereof, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein by Seller pursuant to this Agreement.
"Dispute Period" means the period ending thirty (30) days following receipt
by an Indemnifying Party of either a Claim Notice or an Indemnity Notice.
"Employee" means each employee, officer or consultant of Seller engaged in
the conduct of the Business.
"Employment and Non-Competition Agreements" shall mean those agreements
evidencing the employment relationship between Purchaser and Xxxxxxx X. Xxxxxxx.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" has the meaning ascribed to it in Section 1.01(b).
---------------
33
"Financial Statements" means the Annual Financial Statements and the
Interim Financial Statements.
"GAAP" means generally accepted accounting principles.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision.
"Indebtedness" of any Person means all obligations of such Person (i) for
borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnified Party" means any Person claiming indemnification under any
provision of Article VIII, including without limitation a Person asserting a
------------
claim pursuant to Section 8.02(c).
---------------
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article VIII, including
------------
without limitation a Person against whom a claim is asserted pursuant to Section
-------
8.02(c).
-------
"Indemnity Notice" means written notification pursuant to Section 8.02(b)
---------------
of a claim for indemnity under Article VIII by an Indemnified Party, specifying
------------
the nature of and basis for such claim, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in good faith, of
such claim.
"Intellectual Property" means all patents and patent rights, trademarks and
trademark rights, trade names and trade name rights, domain names, service marks
and service xxxx rights, service names and service name rights, brand names,
inventions, processes, methods, designs, devices, tools, specifications,
techniques, algorithms, formulae, improvements, copyrights and copyright rights,
trade dress, business and product names, logos, slogans, trade secrets,
industrial models, computer programs, software (whether in source or object
code) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registrations of patents, trademarks, service marks and copyrights.
"Interim Financial Statements" means the Financial Statements for the most
recent period of the Business that were filed with the Securities and Exchange
Commission.
"Interim Financial Statement Date" means the last day of the most recent
period of the Business for which Financial Statements were filed with the
Securities and Exchange Commission.
"Inventory" has the meaning ascribed to it in Section 1.01(a)(i).
------------------
"IRS" means the United States Internal Revenue Service.
"Knowledge" means in the case of an individual that he will be deemed to
have Knowledge of a particular fact or other matter if: (a) such individual is
actually aware of such fact or other matter; or (b) a
34
prudent individual in his position would reasonably be expected to be aware of
such fact or other matter in the course of performing his duties in a customary
manner.
"Knowledge of Seller" or "Known to Seller" or "Seller's Knowledge" means
the Knowledge of Xxxx X. Xxxxxxxx, Xxxxx Xxxxxxxxxx and Xxx Xxxx.
"Laws" means all laws, statutes, rules, regulations, ordinances and other
pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other liabilities of
a Person (whether absolute, accrued, contingent, fixed or otherwise, or whether
due or to become due).
"Licenses" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security interest, lease,
lien, adverse claim, levy, charge or other encumbrance of any kind, or any
conditional sales Contract, title retention Contract or other Contract to give
any of the foregoing.
"Loss" means any and all damages, fines, fees, penalties, deficiencies,
losses and expenses (including without limitation interest, court costs, fees of
attorneys, accountants and other experts or other expenses of litigation or
other proceedings or of any claim, default or assessment).
"Operative Agreements" means, collectively, the Note, the Sublease, the
Service Agreements, the Employment Agreements, the Assignment Instruments, the
Assumption Agreement and the other Assumption Instruments and any other
agreements to be entered into in connection with the Acquisition.
"Order" means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case whether preliminary
or final).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Benefit Plan" means each Benefit Plan, which is a pension benefit
plan within the meaning of Section 3(2) of ERISA.
"Permitted Lien" means (i) any Lien for Taxes not yet due or delinquent or
being contested in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP, (ii) any statutory Lien
arising in the ordinary course of business by operation of Law with respect to a
Liability that is not yet due or delinquent, (iii) any minor imperfection of
title or similar Lien which individually or in the aggregate with other such
Liens does not materially impair the value of the property subject to such Lien
or the use of such property in the conduct of the Business, and (iv) any Lien
created by Purchaser.
"Person" means any natural person, corporation, general partnership,
limited partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority.
35
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, including, but not limited to, any "employee
benefit plan" within the meaning of Section 3(3) of ERISA.
"Pre-Closing Tax Period" means any Tax period (or portion thereof)
ending on or before the close of business on the Closing Date.
"Purchase Price" has the meaning ascribed to it in Section 1.03(a).
---------------
"Purchaser" has the meaning ascribed to it in the forepart of this
Agreement.
"Purchaser Indemnified Parties" means Purchaser and its officers,
directors, partners, employees, agents and Affiliates.
"Qualified Plan" means each Benefit Plan that is intended to qualify under
Section 401 of the Code.
"Representative" means a Person's directors, officers, employees, agents,
consultants, advisors or other representatives, including legal counsel and
accountants.
"Retained Liabilities" has the meaning ascribed to it in Section 1.02(b).
---------------
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" has the meaning ascribed to it in the forepart of this Agreement.
"Sublease" means that certain Sublease Agreement dated the date hereof
between Seller and Purchaser.
"Tangible Personal Property" has the meaning ascribed to it in Section
-------
1.01(a)(ii).
-----------
"Tax Returns" 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.
"Taxes" 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 Sec. 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.
"Third Party Claim" has the meaning ascribed to it in Section 8.02(a).
---------------
(b) Construction of Certain Terms and Phrases. Unless the context of
-----------------------------------------
this Agreement otherwise requires, (i) words of any gender include each other
gender; (ii) words using the singular or plural number also include the plural
or singular number, respectively; (iii)
36
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; and (v) the phrases "ordinary
course of business" and "ordinary course of business consistent with past
practice" refer to the business and practice of Seller in connection with the
Business. Whenever this Agreement refers to a number of days, such number shall
refer to calendar days unless Business Days are specified. All accounting terms
used herein and not expressly defined herein shall have the meanings given to
them under GAAP.
ARTICLE X
TERMINATION
10.01 Termination. This Agreement may be terminated:
-----------
(a) by mutual written consent of Purchaser and Seller;
(b) by Purchaser, if the conditions set forth in Sections 5.01 and
-----------------
5.02 shall not have been complied with or performed and such noncompliance or
----
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Seller on or before July 31, 2001, provided that
Purchaser is not in material default under this Agreement; or
(c) by Seller, if the conditions set forth in Sections 6.01 and 6.02
----------------------
shall not have been complied with or performed and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Purchaser on or before July 31, 2001, provided that
Seller is not in material default under this Agreement; or
(d) by either Purchaser or Seller in the event that Closing has not
occurred on or before July 31, 2001 (provided that this right shall not be
available to any party whose failure to fulfill any obligation hereunder has
been the cause of or resulted in the failure of the Acquisition to occur on or
before such date).
10.02 Effect of Termination. In the event of the termination of this
------------------------
Agreement pursuant to Section 10.01, this Agreement shall forthwith become void
and there shall be no continuing obligation on the part of any party hereto or
any of its affiliates, directors, officers or shareholders except the provisions
of Sections 11.04 and 11.05 shall survive. Notwithstanding the foregoing,
------------------------
nothing contained herein shall relieve any party from liability for any breach
hereof.
ARTICLE XI
MISCELLANEOUS
11.01 Notices. All notices, requests and other communications
-------
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
37
If to Purchaser, to:
Emerald Pharmaceuticals, L.P.
"Emerald Suite"
0000 000xx Xxxxxx, X.X., Xxxx. X
Xxxxxxx, XX 00000-0000
Attn: President
Fax:_______________
If Seller, to:
ProCyte Corporation
0000 000xx Xxxxxx, X.X., Xxxx. X
Xxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Coie LLP
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxxxxxxxxxx Xxxxx
Fax: (000) 000-0000
All such notices, requests and other communications will (a) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (b) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt and up sender's answer-
back confirmed, and (c) if delivered by mail in the manner described above to
the address as provided in this Section, be deemed given upon receipt (in each
case regardless of whether such notice, request or other communication is
received by any other Person to whom a copy of such notice, request or other
communication is to be delivered pursuant to this Section). Any party from time
to time may change its address, facsimile number or other information for the
purpose of notices to that party by giving notice specifying such change to the
other party hereto.
11.02 Bulk Sales Act. The parties hereby waive compliance with the
--------------
bulk sales act or comparable statutory provisions of each applicable
jurisdiction. Seller shall indemnify Purchaser and its officers, directors,
employees, agents and Affiliates in respect of, and hold each of them harmless
from and against, any and all Losses suffered, occurred or sustained by any of
them or to which any of them becomes subject, resulting from, arising out of or
relating to the failure of Seller to comply with the terms of any bulk sales act
or comparable statutory provisions of each jurisdiction applicable to the
transactions contemplated by this Agreement.
11.03 Entire Agreement. This Agreement and the Operative Agreements
----------------
supersede all prior discussions and agreements between the parties with respect
to the subject matter hereof and thereof between the parties, and contain the
sole and entire agreement between the parties hereto with respect to the subject
matter hereof and thereof.
38
11.04 Expenses. Except as otherwise expressly provided in this
--------
Agreement, whether or not the transactions contemplated hereby are consummated,
each party will pay its own costs and expenses (including without limitation all
broker's or finder's fees) incurred in connection with the negotiation,
execution and closing of this Agreement and the Operative Agreements and the
transactions contemplated hereby and thereby.
11.05 Confidentiality. In connection with the negotiation of this
---------------
Agreement, a party hereto (the "Disclosing Party") may disclose Confidential
----------------
Information to one of the other parties hereto (the "Disclosee"). Each party
---------
agrees that if the transactions contemplated herein are not consummated, it will
return to the Disclosing Party all documents and other written information
furnished to it. Each party further agrees not to use, except for purposes of
accomplishing the transactions contemplated herein, and not to disclose or
reveal to any other Person any of the Disclosing Party's Confidential
Information (other than to such party's Affiliates and Representatives who have
a need to know such information in connection with the transactions contemplated
herein and who have been instructed to treat such as confidential); provided,
however, that the foregoing obligations shall not apply to (a) any information
which was known by the Disclosee prior to its disclosure by or on behalf of the
Disclosing Party; (b) any information which was in the public domain prior to
the disclosure thereof; (c) any information which comes into the public domain
through no fault of the Disclosee; or (d) any information which is required to
be disclosed by an Order or by any Law. If a Disclosee becomes compelled by an
Order or by a Law to make any disclosure that is prohibited or otherwise
constrained by this section 11.05, the Disclosee will promptly provide
Disclosing Party with notice of such request so that it may seek an appropriate
protective order or other appropriate remedy. Subject to the foregoing, the
Disclosee may furnish that portion (and only that portion) of the Confidential
Information that, in the reasonable opinion of its counsel reasonably acceptable
to the Disclosing Party, the Disclosee is legally compelled or as otherwise
required to disclose or else stand liable for contempt or suffer other material
censure or material penalty. The Disclosee shall bear the burden of
demonstrating the applicability of one or more of the foregoing exceptions. For
purposes of this Agreement, "Confidential Information" shall mean, with respect
------------------------
to any Person, any and all technical, business, and other information of such
Person which derives value, actual or potential, economic or otherwise, from not
being generally known to the public or to other Persons, including, without
limitation, technical or nontechnical data, compositions, devices, methods,
techniques, drawings, inventions, processes, financial data, financial plans,
product plans, lists of actual or potential customers or suppliers, information
regarding the acquisition and investment plans and strategies, business plans or
operations of the Person or its Affiliates. Confidential Information of a Person
includes information of third parties that such Person is obligated to keep or
treat as confidential. The provisions of this Section 11.05 shall survive any
-------------
termination of this Agreement for any reason and shall continue indefinitely;
provided, however, that the restrictions contained in this Section 11.05 shall
-------------
terminate with respect to any Confidential Information that does not constitute
a trade secret under applicable Law after the third anniversary of the date
hereof.
11.06 Waiver. Any term or condition of this Agreement may be waived at
------
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any
39
one or more instances, shall be deemed to be or construed as a waiver of the
same or any other term or condition of this Agreement on any future occasion.
All remedies, either under this Agreement or by Law or otherwise afforded, will
be cumulative and not alternative.
11.07 Amendment. This Agreement may be amended, supplemented or
---------
modified only by a written instrument duly executed by or on behalf of each
party hereto.
11.08 No Third Party Beneficiary. The terms and provisions of this
--------------------------
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Article VIII.
------------
11.09 No Assignment; Binding Effect. Neither this Agreement nor any
-----------------------------
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except (a) for assignments and transfers by operation of Law
and (b) that Purchaser may assign any or all of its rights, interests and
obligations hereunder (including without limitation its rights under Article
-------
VIII) to (i) a wholly-owned subsidiary, provided that any such subsidiary agrees
----
in writing to be bound by all of the terms, conditions and provisions contained
herein or (ii) any post-Closing purchaser of the Business or a substantial part
of the Assets but no such assignment shall relieve Purchaser of its obligations
hereunder. Subject to the preceding sentence, this Agreement is binding upon,
inures to the benefit of and is enforceable by the parties hereto and their
respective successors and assigns.
11.10 Headings. The headings used in this Agreement have been inserted
--------
for convenience of reference only and do not define or limit the provisions
hereof.
11.11 Invalid Provisions. If any provision of this Agreement is held
------------------
to be illegal, invalid or unenforceable under any present or future Law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
11.12 Governing Law; Jurisdiction. This Agreement shall be governed by
---------------------------
and construed in accordance with the Laws of the State of Washington applicable
to a contract executed and performed in such State, without giving effect to
conflicts of laws principles requiring the application of the law of another
State. Each party hereby irrevocably submits itself to the jurisdiction and
venue of the Superior Court of the State of Washington for King County and the
United States District Court for the Western District of Washington for the
purpose of any suit, action or proceeding arising out of or relating to this
Agreement and hereby waives and agrees not to assert any claim that such party
is not personally subject to the jurisdiction of the above-named courts or that
such courts provide an inconvenient forum.
40
11.13 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
11.14 Dispute Resolution. In the event a dispute arises between the
------------------
parties regarding the interpretation of any provision of this Agreement, the
dispute shall be submitted for good faith negotiation for a period of thirty
(30) days by the respective chief executive officers or chairmen of the boards
of the parties. Prior to the end of such thirty (30) day period, no party shall
initiate any other remedies with respect to such dispute.
[SIGNATURES ON FOLLOWING PAGE]
41
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officer of each party as of the date first above written.
PROCYTE CORPORATION
By:___________________
Xxxx X. Xxxxxxxx
Chairman and Chief Executive Officer
EMERALD PHARMACEUTICALS, L.P.
By: Emerald Management LLC, its General Partner
By:___________________
Name:__________________
Title:______________
